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#InTheNews | From Dream Launch to Nightmare: Startup Accelerator's Fall Leaves Founders in Debt. «The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer.» #StartupNightmare #FounderStruggle #InvestorBeware #FundraisingFail #EquityAuction #FounderRightsMatter #LeadershipLessons #StartupLeadership #StartupEcosystem #InnovationBetrayal via TechCrunch https://lnkd.in/dF-77Gsc

"Wait, What"?👀 They thought they were joining an accelerator — instead they lost their startups! Lacey Hunter thought all was well as she put her startup through the three-month Newchip accelerator. Then the organization filed for bankruptcy in May 2023. Things went from bad to worse later that year when she discovered warrants of her company — rights to buy an ownership stake — had become part of the proceedings, which ultimately forced her to shut down her company. In 2022, Hunter started TechAid, an AI smart-matching tool for humanitarian aid, and was just beginning the accelerator’s curriculum when Newchip filed for bankruptcy. “I made a few friends, but functionally, got nothing from Newchip,” Hunter said. “I was shooting to have the curriculum done by August, but in May, the website went down.” The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer. Founders are outraged — including some, like Hunter, who have actually lost their companies as a result. Wait, what 🙆♂️? #startups #accelerators #entrepreneurship https://lnkd.in/d4P94kFZ

Lacey Hunter thought all was well as she put her startup through the three-month Newchip accelerator. Then the organization filed for bankruptcy in May 2023. Things went from bad to worse later that year when she discovered warrants of her company — rights to buy an ownership stake — had become part of the proceedings, which ultimately forced her to shut down her company. In 2022, Hunter started TechAid, an AI smart-matching tool for humanitarian aid, and was just beginning the accelerator’s curriculum when Newchip filed for bankruptcy. “I made a few friends, but functionally, got nothing from Newchip,” Hunter said. “I was shooting to have the curriculum done by August, but in May, the website went down.” The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer. Founders are outraged — including some, like Hunter, who have actually lost their companies as a result. TechAid fought the sale of the warrants prior to closing the company. Hunter tried to buy them back herself from Newchip, but the organization’s lawyers declined her offer, she told TechCrunch. She had lined up a grant from a bank to help fund her offer, but it ultimately told her no because it was too risky for them to be involved with an unknown warrant holder on her cap table. So Hunter felt she had no choice but to shut TechAid. “There was no path,” Hunter said. “I knew I was not going to be able to raise money. I mean, I couldn’t even get a no-strings-attached grant. I totally get that, but it still sucks.” Newchip’s fall from accelerator grace Newchip started out as an aggregator of top deals from “various equity-based crowdfunding platforms,” according to Silicon Hills News, and later evolved into an accelerator that promised to help startups grow their companies and meet investors — for a hefty fee. https://lnkd.in/es-icyvJ

Lacey Hunter thought all was well as she put her startup through the three-month Newchip accelerator. Then the organization filed for bankruptcy in May 2023. Things went from bad to worse later that year when she discovered warrants of her company — rights to buy an ownership stake — had become part of the proceedings, which ultimately forced her to shut down her company. In 2022, Hunter started TechAid, an AI smart-matching tool for humanitarian aid, and was just beginning the accelerator’s curriculum when Newchip filed for bankruptcy. “I made a few friends, but functionally, got nothing from Newchip,” Hunter said. “I was shooting to have the curriculum done by August, but in May, the website went down.” The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer. Founders are outraged — including some, like Hunter, who have actually lost their companies as a result. TechAid fought the sale of the warrants prior to closing the company. Hunter tried to buy them back herself from Newchip, but the organization’s lawyers declined her offer, she told TechCrunch. She had lined up a grant from a bank to help fund her offer, but it ultimately told her no because it was too risky for them to be involved with an unknown warrant holder on her cap table. So Hunter felt she had no choice but to shut TechAid. “There was no path,” Hunter said. “I knew I was not going to be able to raise money. I mean, I couldn’t even get a no-strings-attached grant. I totally get that, but it still sucks.” Newchip’s fall from accelerator grace Newchip started out as an aggregator of top deals from “various equity-based crowdfunding platforms,” according to Silicon Hills News, and later evolved into an accelerator that promised to help startups grow their companies and meet investors — for a hefty fee. https://lnkd.in/dd56Th89

Summary: Lacey Hunter, founder of TechAid, went through the Newchip accelerator in 2022 and was blindsided when the organization filed for bankruptcy in May 2023. The bankruptcy court is auctioning off the warrants held by Newchip in over 1,000 startups, causing outrage and forcing some companies to shut down. Newchip had a tumultuous history, facing criticism for its CEO's leadership style and ultimately filing for Chapter 11 and 7. Key takeaways: Many startups paid thousands of dollars to go through the Newchip accelerator, giving the organization the right to buy shares in their company at a future date. Now, the bankruptcy court is auctioning off these warrants, causing distress and in some cases, leading to the closure of startups. Newchip's founder and CEO, Andrew Ryan, faced criticism for his leadership style and reportedly fired a manager in front of the entire company as a "test" of loyalty. The bankruptcy revealed that Newchip had missed keeping track of some companies that had exited or raised money, potentially causing the organization to miss out on millions of dollars in potential upside. Counter arguments: Newchip may argue that their bankruptcy was due to unforeseen circumstances and was not a #vc #startups #accelerators

Dear US-based startup founders and investors. Can anyone explain to me (like I was Autistic) how an early-stage startup can operate in your legal system without constant fear and developing PTSD?  I thought it would only become an issue when we decide to operate in the US. Now, I see that your courts want to democratize access to trauma for all founders in the global startup ecosystem. Let me start from the beginning. As founders, we constantly receive invitations to apply to different accelerators and startup programs. One of them is the Newchip Accelerator, whose representatives have approached us a few times in recent years.  They advertised as "#1 Online Accelerator 🌍 2,500+ Portfolio Companies 📈 $2.2B+ Raised by Alumni" and had TechCrunch exposure. We never had time to complete the program until early 2023, when we finally had some time and a bit of spare cash to actually invest in such an initiative.  We passed the recruitment, and during the "Newchip: Acceptance Status" meeting, we got accepted just a few days before the start of the next batch.  During our "Acceptance Confirmation!" meeting, where we were supposed to sign the papers, something seemed off. My spidey sense took off straight into an ultrasound internal scream.   I've asked them to postpone the signing for an additional 24 hours. This evening, I've done a deep dive to discover why my nervous system objects to joining them. I found that the number of negative comments about the accelerator has grown in the last few months. The next day, on March 30, 2023, I told them that we would not sign anything or pay anything and would not be joining the program.  On 13 May, newspapers published a memo stating, "Newchip Enters Into Bankruptcy Liquidation" (filed for Chapter 11 bankruptcy protection on March 17).  I was sure that we'd dodged a bullet. At least until early May 2024... A few weeks ago, we received 83 pages of legal documents from the US BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF TEXAS.  I can summarize that bullshit by "trustee wants to sell rights to your shares and needs your financial statements to elevate the price; you must obey or else...".  My first thoughts were: "WTF?!" (17x times) I checked the documents quickly, and there were 1316 more startups on their list! Spread across the whole world! Even more "WTF?!" kicked in. I'm glad that there is interest in trading OUR shares. However, as a founder, I prefer to sell my shares on agreed-upon terms to someone I can trust. Not to some random warrant bearer.  We've wasted weeks of precious growth time, weeks of our lawyers' time, and a lot of our hard-earned startup cash.  All that is just to prove to some random dudes on the other side of the planet that they have NO RIGHT to sell anything related to our company!  Why do we even need to prove that?  In any decent legal system, the plaintiff must prove that he has rights to their claims. How can one operate in a system like that and sleep well at night?

A cautionary tale for startups of what can go wrong when granting warrants (and other securities) to accelerators that go belly up. Dreams of funding from investors can quickly turn into nightmares in dealing with bankruptcy courts. “Accelerator operators sell dreams. But that doesn’t always mean that the accelerator will come through. And sadly, the founders who buy into those dreams can be the ones who end up paying the price.” #vc #venturecapital #accelerator #business #newchip #startup

Before you join a startup accelerator, check the fine print. Crazy story in TechCrunch explains how many startups in an Austin TX "tech accelerator" are now losing their companies b/c of its bankruptcy. The article in a nutshell: "The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program." What happened to these startups in the accelerator program is truly awful, and in an era where there is so much fine print, it's hard to keep track of everything. But there are nonetheless some lessons to learn. 1. Accelerators are sort of their own form of a startup, so vet them carefully as well 2. Pay attention to personality, including the little things, because they're still signals 3. Community matters, so collaborate with the right community Stories like these aren't fun. https://lnkd.in/ezWpdsgw

Newchip, an online accelerator that promised to help startups, filed for bankruptcy in May 2023. This event had a significant impact on the startups that were part of its programme. Newchip charged startups between a few thousand dollars and US$18,000 to US$20,000 for its training programs. In addition, startups also granted Newchip a warrant, the right to buy US$250,000 worth of shares in the company at a later date, at their current valuation. Frankly, that was unwise, and I would always caution against that. When Newchip filed for bankruptcy, the court ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator programme. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. However, the bankruptcy court, which works to restore creditors rather than equity holders, did not allow Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer. This situation has caused outrage among founders, including some who have lost their companies as a result. In startup finance, a warrant is an option to purchase a specific number of shares of a company at a set price within an established time frame. The agreement is established between two parties: the company, called the issuer. and the holder of a warrant, a lender or an investor. At the time a warrant is issued, there is no cash exchange or payment by the warrant holder. Only when a warrant is exercised, will new shares of a company be issued, thereby increasing the overall number of outstanding shares. Warrants help to offset the risk factor by creating a perceived notion of leverage to the warrant holder. They also align lender and equity investors on the valuation growth of the company by providing both stakeholders skin in the game. These warrant auctions messed up the capitalisation of thousands of startups. A capitalisation table is a spreadsheet that shows the ownership stakes in a company. It is linked to a company’s financial health and relationship with investors. It includes various types of equity ownership, such as common equity shares, preferred equity shares, warrants, and convertible equity. It helps track stock ownership, convertible securities, warrants and options, and stock compensation grants to provide a fully-diluted equity ownership. Terence Nunis Terence K. J. Nunis, Consultant Chief Executive Officer, Equinox GEMTZ

Newchip, an online accelerator that promised to help startups, filed for bankruptcy in May 2023. This event had a significant impact on the startups that were part of its programme. Newchip charged startups between a few thousand dollars and US$18,000 to US$20,000 for its training programs. In addition, startups also granted Newchip a warrant, the right to buy US$250,000 worth of shares in the company at a later date, at their current valuation. Frankly, that was unwise, and I would always caution against that. When Newchip filed for bankruptcy, the court ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator programme. Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. However, the bankruptcy court, which works to restore creditors rather than equity holders, did not allow Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer. This situation has caused outrage among founders, including some who have lost their companies as a result. In startup finance, a warrant is an option to purchase a specific number of shares of a company at a set price within an established time frame. The agreement is established between two parties: the company, called the issuer. and the holder of a warrant, a lender or an investor. At the time a warrant is issued, there is no cash exchange or payment by the warrant holder. Only when a warrant is exercised, will new shares of a company be issued, thereby increasing the overall number of outstanding shares. Warrants help to offset the risk factor by creating a perceived notion of leverage to the warrant holder. They also align lender and equity investors on the valuation growth of the company by providing both stakeholders skin in the game. These warrant auctions messed up the capitalisation of thousands of startups. A capitalisation table is a spreadsheet that shows the ownership stakes in a company. It is linked to a company’s financial health and relationship with investors. It includes various types of equity ownership, such as common equity shares, preferred equity shares, warrants, and convertible equity. It helps track stock ownership, convertible securities, warrants and options, and stock compensation grants to provide a fully-diluted equity ownership. Terence Nunis Terence K. J. Nunis, Consultant Chief Executive Officer, Equinox GEMTZ