Posts from entrepreneurship

Dream It And Code It

A few months ago, I posted about a student coding contest called Dream It Code It Win It. I attended the awards contest last night at The Great Hall at Cooper Union. I love that space. You feel the history when you walk into the room.

The majority of the event was a panel event which in my opinion was a waste of time. I wanted to see the students present their projects. Which sadly did not happen. But the students were invited up onto the stage to collect their awards.

In the high school category, almost half of the participants were women. That is a fantastic stat and hopefully a sign of things to come with women and coding.

I was super excited to see a team from The Academy For Software Engineering win one of the awards. That is a great accomplishment for a school that hasn’t yet completed its second year. Here is the team from AFSE getting its award.

afse students

 

It was also really fantastic that The Young Women’s Leadership Academy (an all girls high school in NYC) fielded a winning team. I’ve heard great things about that school.

Not surprisingly Stuyvesant High School had three winning teams. The Stuyvesant CS program has been around for almost twenty years and its leader Mike Zamansky is one of the unsung heroes of the NYC tech scene.

Mike sent me videos last night after the event for the three winning teams from Stuy. One of them is so good, I think it would easily get funded on AngelList. It’s called Cartwheels (great name) and here’s the video.

These kids eat at food carts every day, they dreamed of a better way, they built it, and they won it. That’s awesome.

The Pied Piper Effect

I’ve said many times on this blog that I like to give away bitcoin. I have my Coinbase wallet on my phone (yet another great reason to use a phone that allows you to do what you want with it). I’ll be out at dinner with friends or wherever, and I will take out my phone and send some bitcoin to a friend. It is amazing to see the effect of owning bitcoin on people. They go from being dismissive to being fans pretty fast when they own some bitcoin.

So it was with great joy that I read that every MIT student (all 4,528 of them) is going to get $100 in bitcoin to use however they wish. This is like giving every MIT student a laptop thirty years ago. That didn’t happen, but I had to make some kind of comparison. I can’t imagine a better group of students to infect with bitcoin religion than the MIT students. This will encourage them to get into bitcoin, understand it, and build stuff on top of it.

I don’t know the two MIT students who are doing this, but I do know their largest funder. I have reached out to him this morning in hopes that I can join the funding group behind this bitcoin giveaway. It is awesome. I love it.

Options and Offer Letters

A CEO of one of our portfolio companies sent me a question about process in making offers and equity grants. I sent him a reply. And I thought, “this reply is a blog post”. So here is the reply with the specifics redacted. I hope folks will find this useful.

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It is a Board’s responsibility to approve all option grants. Most boards do this at the start of the Board Meeting. It is usually just a formality, but it is good governance to do that.

The management team obviously can’t wait for the Board Meetings to make offers. So most companies make offers that are contingent on board approval, but that approval is assumed that it is going to be there. Otherwise the management will be in a tough spot having made a promise they can’t keep.

What I generally suggest is that management have a standard options grant. It could be as simple as “everyone gets at least 1000 shares when they join, important role players get 5000 shares, directors get 10,000 shares, software engineers get 10,000 shares, senior software engineers get 20,000 shares, VPs get 50,000 shares. C level gets 100,000 shares”

I just made that up. You should make one that makes sense to you.

Then you get the Board to sign off on the standard grants. Then you can make offers with standard grants in them knowing that they will be approved.

If you want to go wildly off the standard grant for a special situation (relo, super star, etc), just shoot the board an email and get buy-in before making the offer. You will still want to get formal approval at the next Board Meeting.

I also suggest building an options budget. To do this you take your standard grant schedule, and then map it to your hiring and retention plan (I suggest granting options to current employees every two years as part of a retention plan) and then you will have an options budget for the next few years. That is a great thing to have.

For many of you, this is all obvious stuff. But you would be surprised how confusing all of this is to many entrepreneurs. So I figured I would put it out there.

Employee Equity: Too Little?

Sam Altman, who is now running YC, has a good post on employee equity that has been making the rounds this weekend.

He makes four observations about employee equity:

– employees don’t get enough

– the requirement to exercise quickly upon leaving is painful

– the tax treatment of options is closer to salary than stock

– companies don’t tell employees enough about their stock and related information

I generally agree with the latter three points. But I am not sold on the first point. We have seen some of our portfolio companies make very large grants to early employees and that ends up hurting the founder’s stake because investors factor all of the shares that have been issued into the valuation they offer.

This issue is getting particularly visible in silicon valley where the value of a top software engineer has risen considerably in recent years. Let’s say that you want to hire a top software engineer and are competing with equity grant offers from Facebook and Google where the value of the grant is $1mm. If you have a current valuation on your company of $10mm, then you have to offer 10% of the company to compete for that engineer. I am not saying the engineer isn’t worth it. She is. I am just pointing out how dilutive employee equity is becoming in silicon valley. We are seeing similar things happening in NYC and I imagine they are happening elsewhere.

Since I started in VC, the percentage of a company that non-founder employees owned was always in the 15-20% range after the team is fully built out. In recent years, I have seen that number creep up to the 20-25% range and if you extrapolate current trends out a few years, it could easily be 30%.

So I guess what I am saying is that this is a market we are participating in. And this market is becoming very competitive and a lot more transparent. The benefits of both of those things are accruing to the employees and they are getting more and more equity as a result. Sam may be looking in the rear view mirror with this first assertion. I think like many things, the market will take care of this problem. It already is.

Video Of The Week: Jeff Lawson on Software People

Jeff Lawson is the founder and CEO of our portfolio company Twilio.

We had the pleasure of watching him present at a USV event yesterday. Jeff has this notion of “software people” that is a big part of what his vision is for Twilio and it was a big part of his talk yesterday.

So I thought I’d share a video from last summer where Jeff talks a lot about this notion of “software people”. It’s good.

Video Of The Week: Gary Vaynerchuck

I had lunch this week with my friend Gary Vaynerchuck. He’s got such great energy and hustle. It made me think “I should post a Gary video this weekend”

So I watched a bunch of them on YouTube and I liked this one the best. It’s about 40mins long.

Video Of The Week: Value For Many

Praveen sent me this TED talk by R.A. Mashelkar from TED India 2009. I just watched it and I agree with Praveen that its an important talk and an important concept. The video is, in typical TED fashion, only 20 minutes long.

Fun Friday: Which web or mobile services most inspire you?

It’s time for another community powered day at AVC. Someone, I can’t recall who, suggested this to me. One of the two questions we ask people who are applying for our analyst position at USV is “Which web or mobile services most inspire you?”.

So let’s discuss that question here at AVC today.

For me, it is always those services that allow for emergent behavior, like this woman Anna Todd writing a serialized novel, to date 278 chapters long, called After that has more than a million readers. Or a 19 year old young man raising almost $2.5mm to make virtual reality goggles. Or designing an incredible 3D maze that can be 3D printed and purchased by anyone. These are the kind of services that inspire me.

How about you?

A Founder’s Notebook

One of my favorite things to do on the Internet is curate. I do that on my tumblr and also at usv.com. I find good stuff around the Internet and I grab it and share it with others.

So when I see others doing a great job with curating, I like to acknowledge it and point others to it. And that’s the subject of today’s post. David Jackson is the founder of Seeking Alpha, a community of stock market investors. He’s been curating management advice from around the Internet on a blog called A Founder’s Notebook for a while now. It’s really good.

My only complaint is that its not on Tumblr, where it would be an instant and easy follow. It takes more work to follow a blog when its on the open Internet (when you don’t use RSS. i don’t). However, there is a subscribe via email option on the right sidebar which is how I get his updates.

Anyway, if you are a  founder and like reading advice from around the web on management, product, and strategy, I recommend A Founder’s Notebook. It’s really well done.

Ageism

There has been a lot of chatter recently about ageism and the old vs young debate in tech. The New Republic has a post up today on the topic. And last week the New York Times Magazine featured a long article on the topic.

There is no doubt that tech is a young person’s game to some extent. And there is no doubt that VCs are biased towards younger founders and against older ones.

However, it’s not an absolute thing. I’ve written about this before here at AVC. At USV, we have backed founders in their teens, 20s, 30s, 40s, and 50s. I think we would back a founder in her 60s or 70s too but we have not yet had that opportunity in an investment that made sense to us. The Gotham Gal recently backed a founder in his late 60s. I am pretty sure that will be a good bet.

I saw this graphic on Tumblr today. It made me happy. Ray Kroc started McDonalds when he was my age (52).

founders over 35

 

My point is this. Yes tech is biased toward younger people. To some extent, USV may be biased in that direction. We have not done a distribution of the ages of the founders we have backed but I suspect it would weight a bit toward the younger ages. My bet is that the median age of the founders we have backed would be mid 30s.

But as this graphic shows, you are never too old to start a company. And I promise you that USV will consider any investment in our sweet spot (large software based networks) regardless of the age of the founder. Age is a two way street. Youth brings some positives. But age brings experience. And that is a pretty valuable thing.