Equity as a competitive advantage


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Sam Altman wrote a great piece a few days ago on founder equity. He has some excellent points around exercising options and tax treatment structure that deserve more discussion, but I want to talk about the percentage of a company that goes to non-founders. 

Specifically, non-founders should be getting more equity. As Fred said, perhaps the market will slowly adjust to this. But if I were starting a company today, I would use my option pool as a competitive weapon. 

Over the last five years we’ve seen valuations of startups go up. According to Pitchbook, valuations are up 14% at the seed stage, and 12% at A rounds, in just last year alone. Valuations are at a 10 year high, but the amount carved out for an employee option pool has stayed relatively static for the last 15 years at 10-15%. Meaning that the spoils are going Continue reading “Equity as a competitive advantage”

Equity as a competitive advantage


This post is by nabeel hyatt from nabeel hyatt


Click here to view on the original site: Original Post




Sam Altman wrote a great piece a few days ago on founder equity. He has some excellent points around exercising options and tax treatment structure that deserve more discussion, but I want to talk about the percentage of a company that goes to non-founders. 

Specifically, non-founders should be getting more equity. As Fred said, perhaps the market will slowly adjust to this. But if I were starting a company today, I would use my option pool as a competitive weapon. 

Over the last five years we’ve seen valuations of startups go up. According to Pitchbook, valuations are up 14% at the seed stage, and 12% at A rounds, in just last year alone. Valuations are at a 10 year high, but the amount carved out for an employee option pool has stayed relatively static for the last 15 years at 10-15%. Meaning that the spoils are going to the founders. 

If the market is driving valuations up, so be it, but I don’t believe it benefits either the Founder or the employee to have an order of magnitude higher compensation in just one level of company hierarchy. While we are starting to see some very minor adjustments, someone who is aggressive could likely take advantage of the general timidity of founders to give up their equity. 

To get ahead of the issue, a founder would have to have the stomach to not play small ball and simply increase their option pool by a couple percentage points. If I were starting a company today I’d consider an option pool of 25%, 35%, or even 50%. Would that be incredibly dilutive to the founder? Absolutely, and I don’t profess it’s for everyone in every startup situation. But in the right one, it could be a great recruiting tool and even culture building message.

I don’t want to overstate equity. I personally believe the cause, not the compensation, should be the first reason you are picking anything. But highly competitive hiring usually involves talking to someone who has a couple options that they are weighing. And if they are inclined to believe in you, then at the very least there would be a pretty clear message about how much faith you are putting in them. 

The unique lessons of Oculus


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The news broke today that Oculus is joining Facebook for $2 billion, and we couldn’t be happier for Palmer, Brendan, Nate, Laird and the amazing crew over at Oculus. These guys are the kind of people, and a mission, that startups are all about. As Santo wrote about, we fell for this company hard from the first moment we saw them.

There will be lots of stories about what this means for Facebook, Oculus, and the world of virtual reality but I think mostly about how this team has executed so incredibly well while carving a very unique path every step of the way. 

These guys are the epitome of a missionary company trying to bring a truly amazing product to the world. That missionary nature has allowed them to ignore much of the standard startup ethos and follow their hearts in several ways that defy convention. 

1. Don’t be afraid to be small – Oculus started as an ambitious hobby project, and they have fought hard to not lose those roots. A lot of startups try to look bigger than they are, but Oculus has taken a different track by just being transparent about their position.

For instance they don’t have a launch date because, simply, they don’t know when the consumer product will be good enough. They have been remarkably open and blunt about the technical hurdles needed to bring the product to market. And they initially started raising on Kickstarter because that was the stage of the business at that time even though some said it would send the wrong message.

If you spend all your time trying to be as polished as Apple or Sony then you are also setting expectations that you are going to execute your first product like them. And that, unfortunately, leaves absolutely no room for error.

The folks at Oculus were mission driven from the core, which let them have the courage to say you should believe in them not because they were the most polished company but because they cared more than anyone else and they were your best shot. That meant that even when an order page went down, or first developer units made some people nauseous, instead of complaining everyone was on their side. For all the press attention on Oculus every week, they have spent most of their life actually looking smaller than they really are.

2. The best marketing is a mission – There is no Chief Marketing Officer at Oculus, there is not even a VP of Marketing. Despite the tremendous amount of Oculus press that happens every week there is basically no playbook. That isn’t to say they aren’t amazing at Continue reading “The unique lessons of Oculus”

Hallway Chat #18 with Nabeel Hyatt (@nabeel) and Bijan Sabet…


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Hallway Chat #18 with Nabeel Hyatt (@nabeel) and Bijan Sabet (@bijan)

Today’s show: “What does Sony’s entry to VR mean for Oculus? Plus Calendars, Secret, and Reed Hastings latest moves.”

We recorded this show Friday afternoon but finally had a chance to post it today. Please send us your feedback and suggestions on topics  you would like us to cover on our next episode!

Hallway Chat #18 with Nabeel Hyatt (@nabeel) and Bijan Sabet…


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Hallway Chat #18 with Nabeel Hyatt (@nabeel) and Bijan Sabet (@bijan)

Today’s show: “What does Sony’s entry to VR mean for Oculus? Plus Calendars, Secret, and Reed Hastings latest moves.”

We recorded this show Friday afternoon but finally had a chance to post it today. Please send us your feedback and suggestions on topics  you would like us to cover on our next episode!

“I started out as an actor, where you seek to understand yourself using the words of great writers…”


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“I started out as an actor, where you seek to understand yourself using the words of great writers and collaborating with other creative people. Then I slid into show business, where you seek only an audience’s approval, whether you deserve it or not. I think I want to go back to being an actor now.”

Alec Baldwin on ending his public life as an actor, although it could be said about many a startup life. It’s easy to get distracted from what matters when the light is so bright.

“I started out as an actor, where you seek to understand yourself using the words of great writers…”


This post is by nabeel hyatt from nabeel hyatt


Click here to view on the original site: Original Post




“I started out as an actor, where you seek to understand yourself using the words of great writers and collaborating with other creative people. Then I slid into show business, where you seek only an audience’s approval, whether you deserve it or not. I think I want to go back to being an actor now.”

Alec Baldwin on ending his public life as an actor, although it could be said about many a startup life. It’s easy to get distracted from what matters when the light is so bright.

Postmates


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I was sitting at The Creamery coffee shop a couple months ago with a friend, who without much segueway started raving about a local company called The Juice Shop. “Have you tried their A+ Deep Green juice? Life changing!” I was of course open to try it but their nearest location was in Cow Hollow, and so I resigned myself to likely forgetting this recommendation by the next time I was in the neighborhood.

Not to be deterred, my friend whipped out his phone and 10 minutes later a Postmate walked into the coffee shop where we sat and delivered our juices. I’ve been a regular of The Juice Shop since then.

When people talk effusively about Postmates it’s often stories like this. From the point of view of the customer this is another example of your phone as a “remote control to the physical world,” much like Uber or HotelTonight. Postmates is also often described as Kozmo, probably the most beloved of the late 90s flameout startups, only with a business model.

For a firm like Spark where we guide ourselves by the product, the strength of the experiences Postmates generates is incredibly compelling. We’ve seen the type of businesses those reactions can build. But the long term effects on the supplier side are actually just as interesting.

The Juice Shop gained a new loyal customer that day, leaning on a local logistics infrastructure for growth even though they have no formal relationship with Postmates. They did not have to hire a van and a driver, open a website or buy Facebook ads, and it did not disrupt their business, it just augmented it.

Commerce on the Internet has always had two stories to tell. There have been marketplaces that enable smaller companies (Ebay, Etsy, Storify, Storenvy) and those that run centralized services (Amazon, Walmart). This isn’t a value judgement, I love my Amazon Prime and I’m a regular buyer at Etsy as well.

In a new world of mobile local commerce there are also two models emerging. After all Postmates is hardly the only company trying to deliver goods to your home, and companies like Amazon Fresh, FreshDirect, Instacart, and Google Shopping Express are all in various early states of success. In attempting to compare them you could talk about who is growing the fastest and has the largest fleet, in this case that would be Postmates. Or you could simply say they have a different selection or target audience. But more importantly they have taken fundamentally different approaches to the supply side of their business.

While Amazon and others are using a centralized resource and distribution model, much like their offline approach, Postmates delivers from local Continue reading “Postmates”

Postmates


This post is by nabeel hyatt from nabeel hyatt


Click here to view on the original site: Original Post




I was sitting at The Creamery coffee shop a couple months ago with a friend, who without much segueway started raving about a local company called The Juice Shop. “Have you tried their A+ Deep Green juice? Life changing!” I was of course open to try it but their nearest location was in Cow Hollow, and so I resigned myself to likely forgetting this recommendation by the next time I was in the neighborhood.

Not to be deterred, my friend whipped out his phone and 10 minutes later a Postmate walked into the coffee shop where we sat and delivered our juices. I’ve been a regular of The Juice Shop since then.

When people talk effusively about Postmates it’s often stories like this. From the point of view of the customer this is another example of your phone as a “remote control to the physical world,” much like Uber Continue reading “Postmates”

This week on our “Hallway Chat” podcast Bijan and I…


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This week on our “Hallway Chat” podcast Bijan and I talk about the 30th anniversary of the Mac, Facebook Paper, Android, and Tivo. 

We also had a lively discussion about the tension in growing a venture firm, but unfortunately due to audio issues I had to cut it out. Hopefully we will revisit the topic next time.

Click to play, or you can always subscribe to Hallway Chat via iTunes here as Apple still hasn’t kicked us off. 

The VC – CEO relationship


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I’m in the process of closing a new investment right now and getting to know this CEO has been a particular joy. There is a long road ahead, but it’s a great sign when we can start off just being honest with each other.

As an entrepreneur I got terrible advice on how to relate to investors from fellow founders. One CEO described his “attachment method” of overly communicating to create the sense of ownership that would make a VC keep giving them money. Then another would tell me to never give the slightest detail of the business because it just gave them the ammo to think they can control you. The problem with these approaches is that they assume there is some formula for how to win at managing an investor.

A CEOs relationship with an investor is exactly that, a relationship. And just like there is no “paint by numbers” template on how to interact in a marriage there is not a single right way for the CEO – VC relationship.

Many VCs are pretty terrible, but that doesn’t mean the goal should be to cynically “manage them.” Some of the best companies happen to have extremely strong partnerships that form with a board member. There is a reason that so many CEOs and investors reacted so strongly to the photo of David and Bijan after the Tumblr sale. They know how good those relationships can be when they happen. 

I’ve had overly nervous VCs that were regularly disruptive, and I’ve had the benefit of true loyalty from real partners. I’ve had largely passive investors that were there when I needed them, and very involved investors that were a huge help. As a founder I tried to not get cynical about investors, and I fight to have that same approach on the other side now. 

As my friend and entrepreneur turned investor Keith Rabois says, it’s easier to get divorced than get rid of an investor, so you might as well treat this as a relationship worth getting right. There’s a person across the table, they aren’t perfect, but they are family now. 

I’m excited about this new company, but also about the people I’m going to be partnering with. Speaking from experience, when it is right the CEO – investor relationship can be one of the most rewarding relationships in business.

bijan: On Friday, 12/13, @nabeel and I recorded our latest…


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bijan:

On Friday, 12/13, @nabeel and I recorded our latest edition of Hallway Chat.

Show notes:

  • Review of the new Nest Protect, Xmas drones & our surveillance state
  • Fred Wilson’s post & the future of capitalism
  • Twitter’s #1 ranking on Glassdoor & the nature of building a world class company culture
  • And a question for everyone on a company communication tools we should try

As always, thanks for listening and feedback welcome!