Happy Friday.
A YC Nonprofit’s Next Chapter
New Story, one of YC’s earliest nonprofits, helped more than 5,000 households secure better housing. Now co-founders Brett Hagler and Enrique Mezo are taking those lessons into a for-profit venture. The nonprofit evolved from donated homes toward land ownership and financing. That work exposed an underserved group: working families who could afford payments but could not find a decent home near their jobs. Their new company, Hometown Equity, combines titled land, home construction and financing in communities of about 500 homes. The potential for greater impact comes from the business model. Investment capital can help fund expansion, while ongoing financing gives the company a stake in whether families thrive after moving in. The bet is that commercial returns can attract more capital to a problem philanthropy helped prove was solvable. Backed by a $6.5 million seed round, Hometown aims to build 100 hometowns across Latin America in 10 years. The nonprofit’s work becomes the foundation for a business designed to reach many more families. We’re proud of the work Hometown is doing and excite to be working with them on this next phase of impact. Praxis Press (11 minutes)
Pixar’s Cheap Story Tests
Pixar tests a movie before spending the money to animate it. More than 4,000 drawings become a rough story reel with temporary dialogue, and the team typically revises that version about eight times. The expensive production pipeline comes afterward. The point is to discover whether the story works while changing it is still cheap. Toy Story nearly failed that test: Woody became so mean in an early version that Disney stopped production in 1993. Pixar asked for a few weeks, rewrote the story and got the film moving again. The process keeps testing the story through modeling, layout, animation, shading, lighting and rendering. Technical polish never becomes an excuse to stop asking whether the film works. As John Lasseter put it, “If it’s not working in story reels, the animation won’t save it.” Acquired Briefing (11 minutes)
OpenAI’s Distribution Strategy
a16z’s case for OpenAI rests on creating new customer behavior and building durable distribution. Its framework has four levers: 1) Get people to do something new. 2) Reach lots of users. 3) Price the product to capture value. 4) Make switching costly. Models remain easy to swap, and price competition is intense, so the argument concentrates on the first two. ChatGPT helped turn unfamiliar capabilities into everyday behavior. A broad customer base then exposes the company to more problems, helping it discover useful building blocks for developers. Partnerships can deliver users quickly, but the partner controls the customer relationship and much of what gets learned. A platform takes longer to build, while letting others create applications its maker could never anticipate. a16z argues that this learning loop could ultimately produce better models and products because of distribution, reversing the usual assumption that technical leadership alone creates distribution. a16z (12 minutes)
Founder FAQ: Why Shouldn’t You Ask Your Startup Lawyer for VC Intros?
A lawyer who sells you investor access may have a reason to go easy on the investor’s terms. VCs send law firms repeat business, and a practice that depends heavily on a few investors can become captive counsel. The conflict shows up when your lawyer should push back on an oversized option pool, restrictive protective provisions or a participating liquidation preference. Good startup lawyers know investors. The red flag is making those relationships the reason to hire them. Your lawyer should explain what’s market, help you decide which terms matter, prepare the company for diligence and run the closing. An occasional investor introduction can be helpful when it fits and comes without strings. For fundraising connections, start with founders those investors have backed, accelerators and your own network. Hire counsel for independent judgment when the negotiation gets difficult, rather than the promise of getting you into the room. Westaway (3 minutes)
Startup Funding Guides
I’ve put together a series of guides to equip founders to excel at fundraising. These guides break down the deal term by term and give you negotiation tips so that you can speak to investors with confidence.
Convertible Note: Guide / Video
An Innovative Law Firm?
Being listed among Fast Company’s “Most Innovative Companies” is an honor for our law firm, yet we believe innovation matters if it actually produces better outcomes for startups. Here’s how we’ve innovated to better serve startups: 1) Clear Pricing. Traditional billable hours can lead to misaligned objectives and unexpected fees. We’ve replaced this with straightforward, flat-rate pricing. 2) General Counsel. Most entrepreneurs want a trusted legal partner, but they hate surprise legal bills. At Westaway, we take care of your startup’s legal needs for a fixed, monthly fee so you can control your costs and focus on scaling your business. 3) Automation and Artificial Intelligence (AI). We’ve streamlined our operations through automation and AI (where appropriate), ensuring efficient, high-caliber results. If you’re an innovative startup looking for an innovative law firm, let’s talk.