[Mikho]

The 4% participation right in the priced round—if YC decides to exercise it—doesn't change anything since it will be a normal equity investment along with a new investor. It means that this new investor gets 96% share of the round and YC gets the remaining 4% of the round. This doesn't influence the founders' ownership in any way—the main number the scenarios compare. In other words, if the priced round results in a 10% share of a start-up given to new investors and YC exercises the 4% participation right, YC gets additional 0,4% and new investor gets 9,6% of this start-up. It doesn't matter for the founders' share what the split of the 10% be.

I'll update the option pool numbers. Thanks.

[robocat]

Ahhhh, right, thank you for the correction.

Note there is a good article on the previous two types of YC SAFE which makes some other points: https://siliconhillslawyer.com/2019/05/01/startups-shouldnt-... Does the YC 7% SAFE get more than $125k liquidation preference when converted?

Also, does it help to add in the legal fees which are usually paid by the company e.g. $30000 is 1% of your example cash, and I don’t think YC charges for legal?

YC definitely sell a good story that being founder friendly is their long-term strategy; however: https://siliconhillslawyer.com/2019/02/18/relationships-and-...

Disclaimer: I am a newbie investor and still trying to understand some of the nuances.

[Mikho]

Thanks. Good read. I'd say legal fees don't influence the cap table and, hence, founders' share unless founders pay them with equity. So, it's a matter of the way the investments are spent, not the cap table structure. But definitely spending relatively big chunk of money on legal at an early stage leaves less money to use for the primary purpose and later dilutes founders' share with inevitable new financing.