Venture Hacks has great commentary on Adam Smith’s letter to Y Combinator companies.
Y Combinator is a mini-incubator that focuses on getting very early-stage companies access to seed money, technical and business advice, and other things that help raise the probability of getting to market.
One particularly enlightening part of the post included the discussion of traunching. While I don’t know the correct definition, it seems a lot of term sheets are written with the ability for an investor to re-price their investment later. That would suck…
"Tranches are generally stupid. They have zero upside and catastrophic downside.At best, tranches give your current investors a right to invest at
yesterday’s valuation if your company is doing well. If your company is
doing poorly, your investors will figure out how to get out of their
obligation to invest."