Monthly Archives: July 2007

Allocation of Shares at Company Formation

A new entrepreneur recently asked me about how to allocate shares at the company formation stage. I asked around and here are some highlights on what I found:
In talking with my lawyer and some entrepreneurs, you could start with 10MM total but it’s not uncommon to create more upon formation, like 20 or 30MM. The reason for doing this is to not have to file additional paperwork (and incur legal fees) in creating more shares when you need them.
Also, you don’t usually allocate the whole bunch of shares at the outset. Note that the existence of shares does not mean ownership, but only those you allocate. So if you have 3 founders and each has 1MM shares out of a total pool of unallocated 30MM shares, you have officially created 3MM shares but still hold 27MM in reserve. Thus, the 3 people officially own the company at 33% a piece; the additional 27MM does not come into play until they get allocated.
As for allocating a bunch for additional employees, people have allocated about 10-20% of the total for employees and the options pool. As for sheer number, that could be upwards of 4MM set aside for employees, advisors, and board of directors, which is pretty large for an early stage company.
So if you go with 10MM total shares and you want 20% of total for the options/employee pool and let’s say you have 2 founders who want to own the company at 50/50, then you would have 10 MM shares allocated, 4 MM goes to both founders for 50/50 ownership split at 8MM shares total, and then the rest at 2MM (20%) reserved for hiring key people.
FYI – advisors jumping in at this stage typically get .1% to 1 or even 2-3% as options depending on their level of involvement.
Early employees coming in really early stage could get multiple-100s of thousands of options, which rachets down dramatically as the product gets built and time goes on. Certainly this balances with whether or not they get market rate salary or not.
Still, the message is “don’t be greedy”. Incent your employees to get the job done and reward them. Don’t try to hold on to too much or else you may run into trouble later. Same goes for the financing stage. Be prepared to give up part of the company for monies received, but don’t try to hold on to too much or else you may never get funded. On the flip side, be realistic and don’t give away the farm, which could land you in trouble the other way.

Day 12: iPhone Dies…and Lives Again!

ACK! In an attempt to get my iPhone syncing with both my Mac and PC, I tried a restore of the software which hosed my iPhone. Ugh! I set it updating over night and then in the morning, it’s just sitting there in the dock, locked up. I try a few things and then the screen shuts off…seemingly permanently.
I hold back the tears welling up in my eyes and pack it up, determined to exchange it for one that worked.
I walk into the Apple Store on University Ave in Palo Alto and tell the guy that my iPhone is way dead. He looks skeptical and we walk to the Genius Bar desk where he tells me about an IMPORTANT UNDOCUMENTED function called REBOOT. You press both the round “return to Main menu” button and the top small Wake/Sleep button together for a few seconds, and the thing reboots itself. Thankfully, this brings it out of its locked-up/dead state!
I boot up my PC (which I have with me) and then sync my iPhone with it, restoring the software and IT LIVES AGAIN!
It’s beyond me why REBOOT isn’t in the user manual. But for now, I am glad to have my iPhone up and working again. Just give me my MMS please and everything will be PERFECTO.

Day 11: iPhone Adventure Continues…

Living with my iPhone has been a real joy. I think I like about 80-90% of it, but it is not quite there to make me toss my SLVR and Treo 680 just yet.
Some more discoveries:
1. According to the message boards, it seems that others have gotten music/video syncing on one machine and syncing calendar/contacts on a PC. I still haven’t gotten this to work. More experimentation required…
2. Where is copy/cut and paste? Geez.
3. I need arrow keys on the keyboard! Trying to make edits by moving the cursor around with your finger is maddening.
4. Personally I hate the auto-complete. It’s wrong a lot of the time and I have to teach myself to look at it constantly to tell it not to insert a word when I hit space.
5. I LOVE THE AUTO SWITCH FROM WIFI TO THE AT&T NETWORK. When I go in my house, the WIFI automatically connects. When I walk into a Starbucks, I auto-connect to T-Mobile. COOL!
6. Browsing on Safari is so cool. It really makes things easier.
7. Need Notes syncing to Outlook. I don’t understand why this wasn’t built in. So strange.
8. Getting faster on the keyboard.
9. I tried out a few widgets. It’s ok for now, but definitely a problem when offline. Also, loading widgets over the EDGE network is totally slow. Forget any heavy AJAX site like Meebo.
10. Definitely need dedicated iPhone apps. Safari based widgets works for some things, but nothing beats dedicated apps on the device.
11. Need MMS!!!! Emailing photos just doesn’t cut it.
I can’t wait for software updates to make this baby work better!

You Asked Me About Yahoo!…

In the last few weeks, I’ve been asked what I think of the recent events at Yahoo!. As an once insider, people think I’ve got some inside knowledge and insight into whether the changes are good or not. To be honest, I do still have some connections with Yahoos, but they get more tenuous each passing day. Still, it’s been interesting polling both insiders and outsiders about Yahoo! and its future.
Since the announcement of Jerry Yang becoming CEO (and Sue Decker becoming President) and Terry Semel leaving, I have thought a lot about what this means for Yahoo!. I also went around and talked to ex-Yahoos and current Yahoos about what they think. It’s been an interesting experience hearing what they’ve had to say.
I have found an amazingly wide range of opinions but there seem to be some trends:
1. Those who just joined Yahoo seem more optimistic than those that have been there for a while. Some guesses as to why this is so:
a. They joined at the current state of affairs, so they must be bullish on the company or else why would they have joined up?
b. They must be bullish or else they would quit. This could be real or self-delusional. Who knows. But they must make themselves bullish or else they would lose all psych in their job, which they arrived at not too long ago.
2. Veterans seem to have mixed opinions. Why:
a. They have more experience in the company and know what works and what doesn’t. They’ve been through change before at Yahoo and can be both optimistic and pessimistic.
b. It seems that this is highly dependent on position and location in the company (see next item).
3. Higher level employees unanimously are bullish on the company. This is not strange; they have signed on to be an exec in the new regime and have to like it. Otherwise, they would leave. And politically they can’t express any fears; it would scare the troops. So it’s been hard to pin down what they REALLY think about the new Yahoo.
4. Pockets of bliss exist. In many small, local areas, people are doing really great work and getting lots done. The opposite is also true, that there are also many areas of despair as well. These folks cite all the typical stuff, like growing politics, impossible to get stuff done, no direction from leadership, etc. etc.
What do I think about Jerry being CEO?
I totally think he should have been CEO a long time ago.
I think that in order for someone to run a company effectively, you must have instinctual knowledge about the industry. We would not put a DOW chemical exec in charge of GM. Likewise, for someone to run an Internet company, you must have some great resonance with the Internet and are in tune with what people want and like.
Who out there could qualify for this? Larry and Sergei are two. Filo and Jerry are another two. I actually think Dan Rosensweig could have done it. He used to run ZDNet and thus had a lot of knowledge about the Internet as well as executive experience. Well, we’re not going to get Larry or Sergei, and Dave Filo is still working on engineering issues. So who is left. Jerry Yang.
Can he turn the ship around?
While I think Jerry is the right person, I also think he has an enormous task before him. Think of trying to turn the TItanic by pushing on it with your hands. In certain crazy and inventive situations, I bet you could actually turn the Titanic that way, ie. if you were Superman, you could do it – this is sort of like answering one of those famous interview questions in a Microsoft interview. So I believe that turning the Yahoo ship can be done, but it remains to be seen whether or not there is so much inertia and momentum that it resists turning fast enough.
One possible consequence of turning the Yahoo ship will be some down revenue quarters over the next year, potentially two years, as restructuring plans take hold, removal of waste, taking down sites that shouldn’t be worked on, etc. etc. However, it will be amazing if revenue can be kept growing in the midst of such change.
Only time will tell. My money is definitely on Jerry Yang to bring Yahoo into its next stage of evolution.

Day 3 iPhone iPhrenzy: Figuring Out How I Will Use It

My original thought regarding the iPhone was to somehow move completely over to the Mac. But I would definitely have to wait until Apple comes out with their much-rumored super-thin MacBook as I need to save my back from lugging laptop weight. I have a Sony T-series which seems to be the best option for lightweight computing so far. However, I will switch if Apple launches a super-thin option.
In any case, I wanted to see if I could remove one device somehow no matter what. Today, I carry a Motorola SLVR with iTunes, and a Treo 680. I do carry my iPod sometimes, but I’m not one of those people who walk around all day with earbuds in my ears, so I’m ok without music.
Comparing the Treo 680 to the iPhone has been interesting. Physically, the iPhone is much more thinner and sleek, and a joy to hold. The Treo 680 is bulky in comparison and seems so yesterday’s technology (it became “yesterday” on Friday when the iPhone launched!). However, I do like it for:
1. I am still faster on the Treo 680 keyboard. I seem to be getting better on the touchscreen keyboard of the iPhone, but the physical keys still are better.
2. I use the Treo 680 for typing out notes and the occasional blog entry. I sometimes use a folding IR keyboard which works really well if I am typing something long. Definitely Apple needs to enable Bluetooth keyboards at some point. That would really make the iPhone useful.
3. I use a program called InfoSafe which keeps all my passwords around securely. I would need to replace this if I were to get rid of my Treo 680.
4. All my silly games are still on the Treo 680. None available yet on the iPhone, but I am sure this will change soon.
So far, what I think about the iPhone:
1. I really like the touchscreen interface! I also love the interactions they put in there for scrolling and resizing.
2. It took me a while to figure out how to set things, which are located in Settings. However, some of it seems kind of dumbed down.
3. It seems to be able to open Word attachments and I haven’t tried PDFs yet. I would definitely love an industrial strength word processing program, spreadsheet, and presentation program as well, although maybe it can open them for viewing at least.
4. No MMS! I use my Motorola SLVR all the time to send occasional shots to family and friends, but can’t do that here! I hope this comes soon.
5. Email is a joy. IMAP for Yahoo! Mail really works well. I wish there was a way to mass delete emails. This could become a problem at some point for my POP accounts and overfilling my iPhone memory. I need to look at the docs to see if there is an auto-delete off the iPhone after some period of time.
6. The browser really ROCKS. It’s probably the main reason I bought it. I can now see web pages in their full glory. The browser on the Treo really blows. I’ve bought books on, checked out netvibes, did google searches. It works really well!
7. The keyboard is a bit funky at first due to my right thumb’s touchpoint. For some reason, the pad of my thumb touches down on the screen at a point that is not where my brain expects. I am off by a key! So now I am training my brain to recognize that typing with my right thumb means I have to mentally adjust it slightly to the left in order to hit the right key.
8. No cut/copy and paste! How funny that is. I think this will prevent it from being an office replacement.
9. Syncing was amazingly easy. I love the fact that you didn’t have to screw around with installing conduits and seeing if you got it all right. You just launch iTunes and hit the sync button, and it just does the sync with Outlook. One strange thing. It doesn’t sync my notes into its notebook. How strange. But calendar and contacts come over just fine. I hope they add an update to make this happen. As you have guessed, I am syncing my iPhone with my PC for now for contacts and calendar, and I will load music from my Mac Mini.
10. By the way, I did figure out how to get music and other media synced. Just a few settings in the tabs of the iPhone area of iTunes. But it seems to only let you control syncing via playlists. I will look at this more.
11. WIFI!!!! I locked onto my house network and also to T-Mobile at Starbucks. Very nice! Power drain seems to be ok, and much better than my Treo 680 which probably would have cranked down pretty quick if I had tried to go WIFI continuously with an add-on card.
12. One ridiculous thing: I have all my contacts categorized in Outlook. Those categories have disappeared on the iPhone!
So far, the one limiting factor is MMS for it to replace my Motorola SLVR and being able to type long entries means I will want my Treo 680 around. I think I will carry iPhone around separately for a while and see what updates Apple has for it. It doesn’t work too well as a replacement for a laptop but is more of a hyper-powered mobile phone. Still, I think this device is hugely cool and Palm really missed the boat by not coming out with a Palm version super-thin phone. The Motorola Q and Samsung Blackjack are also nice, but Windows Mobile just kills both those devices.