HelgeSeetzen

Have a look at our portfolio (at tandemlaunch.com). It includes two of companies listed in the article - wrnch and fluent.ai - as well as 20+ others all working on pretty interesting technical challenges in computer vision, AI, sensors, robotics, etc..

Regarding pay, Montreal has a pretty low cost of living so wages aren't huge. If you are looking for Valley-style salaries then you are simply out of luck. But if you are looking for "paying well" in the Canadian/Montreal context then some of our older companies might fit the bill. Airy3D, Aerial, SportlogiQ and a few others have all raised Series A or beyond in funding so wages are fairly competitive. If you are looking for equity stakes instead then of course the younger ones might be a fit for you.

I build startups and teams in Vancouver and the valley, so here is my perspective on Montreal for what it's worth:

Great city to live in. French is a wonderful personal gain but not a professional necessity. Taxes aren't a big deal - especially with the tax holidays for foreign technologists - compared to the social benefits that you are getting. The winter is rough but survivable with the right clothing. The startup scene is growing in leaps and bounds. Super exciting to watch all the progress everywhere.

Overall, I would give it a shot :).

As the previous reply kindly indicates, I am talking about more fundamental technology development. Basically the R of R&D and not just development. For example, our portfolio includes companies like Stratuscent which is using tech from NASA to develop an "electronic nose" using machine learning, Aerial which extracts people's position/activities by analysing wifi signals, Airy3D which is developing a novel image sensor that can capture 2D/3D/lightfield all in one package, etc..

We work with 50+ universities across the globe on the fundamental research and then incorporate the results in new tech companies like those above. Great fun :)

Thanks for the response Kristy. You are absolutely correct that there are ways to fix these problems if you have good lawyers (and leverage). But in my experience this rarely happens. Conversely, I see the default conversion into the same new share class all the time (as a result of negotiation leverage or just because nobody involved knows any better). How does that compare to your observations with your obviously much larger portfolio? For example, what percentage of yc companies using SAFE did the pref+common conversion that you described?

Of course the other concern is that you actually have to be cognisant of this issue - or have a lawyer who is - to catch it. Maybe the SAFE could just mandate the pref+common conversion?

As somebody who has been on both sides of the investment table, I can confirm that very few founders understand the complexities of convertible notes (SAFE or otherwise). But I think the authors of both the pro and con argument are covering only one of the points. Yes, first time founders often don't intuitively understand the impact of convertible notes on their cap table. But that's not that hard to model. Much harder to understand are the secondary impacts of convertible notes. I have raised, led and participated in dozens of rounds and, frankly, still get caught out by those.

In general, the problem is that most benefits that investors enjoy are properties of their shares rather than the money that they invested. For an equity round this is one and the same. Not so much for convertible notes. A simple example:

An entrepreneur raised a $1M convertible note with a $5M cap. Ignore discount, interest and other factors for now. She then raises a $5M round at a valuation of $20M. That yields a dilution of 20% for the round plus a "hidden" dilution of ~17% for the note conversion (1/6). That's the blurry issue that both authors discuss. But if anything the share rights are even blurrier. Let's say that the equity round came with what is commonly referred to as a 1x liquidation preference (non-participating). So they would get $5M back before other shareholders get anything. Even though I just worded that as matching the money that they put in, it is generally a property of the share class that the investors hold. For example, their $5M might have bought 5M shares at $1/share that each says "redeemable for $1 or convertible to common shares". Our note investors also hold those shares now. But instead holding one per dollar, they now hold four per dollar (since they pay 1/4 the price for such a share). Suddenly, they have effectively a 4x liquidation preference benefit and the company has to return a full $9M before common shareholders/founders see a penny of payout (despite only having $6M in the bank).

Interest rates, pre-round ESOP increases, and many other factors in convertible notes make this problem worse. And it affects just about all aspects of the cap table including voting rights, protective provisions, redemption rights, etc.. Basically, the bigger the gap between the cap and the eventual round, the bigger the privilege the note investors pick up. Not just in economic benefit where you would expect it, but also in power/insurance/protections/etc. where it isn't obvious at all. Nowhere in your term sheet for the note or equity round will it mention 4x liquidation preference. Doing so would cause instant rejection of the deal by even the most inexperienced founder! But that's exactly would is going to happen once all the conversion mechanics are executed. And that can catch even seasoned entrepreneurs off guard (and seasoned investors, including plenty of note holders who never understood that they would get these benefits).

Convertible notes - SAFE or otherwise - have a role to play in venture financing. But they are complex instruments and should be use carefully. Anything else is just a recipe for pain in the long run.

Give us (TandemLaunch) a ring if you want to do "real tech". We admittedly don't spend much time in the coffee shops, but we most certainly do about as deeply technical work as you are going to find anywhere. Hundreds of people working on world-class problems in AI, CV, robotics, sensors, etc. in collaboration with dozens of top universities across the globe. You won't be disappointed :)

TandemLaunch (www.tandemlaunch.com) is a close proxy, though still oriented to ultimately build technology companies (but still very deep tech focused). We are obviously not in the same scale league as yc, but we are in Canada :).

Ahmed, I am assuming that you are following this discussion.

Based on the article, your life probably doesn't feel so good right now. Sorry to see a bright person in such a situation.

Give me a ring if you are looking for an internship, job or start-up experience in Montreal. We are in town (walking distance from Dawson actually). By the nature of our business, we also have good connections with academia if that can help (www.tandemlaunch.com).

My login is my name so you can reach me at [firstname].[lastname]@tandemlaunch.com