Tag Archives: Startup

Updates from Chicago Booth

How to split equity without drawing blood
By Mike Moyer – We live in a world where entrepreneurs and early-stage company participants get taken advantage of so frequently that we hardly notice. Bad equity deals are the rule, not the exception. Fairness is rare.

The intent for fairness is there in the way equity is split among business partners, but the practice of fairness is not. This is a correctable problem.

When a person contributes to a start-up company and does not get paid for her contribution, she is putting her contribution at risk with the hopes of getting a future reward. And, while the timing and the amount of the future reward is unknowable, the amount of the contributions at risk is knowable. It is equal to the fair market value of the contributions.

Because it’s impossible to know when or even if the rewards will ever come, we can never know how much people must put at risk to get the rewards. Every contribution, therefore, is essentially a bet on the future of the company, and nobody knows when the betting will end. more> https://goo.gl/F3ELyY

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Uber’s Problems Are Silicon Valley’s Problems

By Katy Steinmetz – The world’s most valuable venture-backed company is no doubt in crisis. And the story of Uber, in its extreme success and what may turn out to be extreme failures, is in some ways singular. But it also hits on issues in the technology industry that are far bigger than one company.

Silicon Valley has struggled for years with diversity and inclusion, as critics have wondered whether the industry can achieve its grand self-image: a bunch of brilliant minds set on making the world a better place, for whom no problem is too tough to solve, no status quo too established to upend.

Despite whistle-blowing at other companies about hostile office cultures and widespread acknowledgement that the industry needs to “do better” when it comes to hiring and retaining women and people of color, those problems have persisted.

The fact that Uber, the brightest product of the Silicon Valley ecosystem of the past several years, could become such an influential global powerhouse while seemingly neglecting its own workplace speaks to some of the reasons that broader progress, as many see it, has been slow.

The pressure for startups to grow fast — and the prospect of profits or an enriching “exit” for investors — can be blinding. Taking time to think about unsexy HR practices often feels antithetical to hard-charging disruption.

Company culture and bias can be hard things to see, much less change, especially if the people at the top believe they’re running a meritocracy. more> https://goo.gl/WwGncQ

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Startups’ New Money Machine

By Katie Benner – Hedge funds and mutual funds, which usually invest in publicly traded companies, have lately poured billions of dollars into hot startups.

When VCs raise money, their investors (known as limited partners, or LPs) are typically locked into the fund for five to seven years. If VC-backed companies hit a rough patch, the LPs know that they’re locked into that process. If the overall value of the venture firm’s portfolio falls, the LPs still have to tough it out.

Hedge-fund investors, on the other hand, can often take their money out of the fund every month or every quarter.

Mutual-fund investors can usually take out their money whenever they want.

The upshot is that investors can readily bail when the values of their funds go down — something that history shows they are more than willing to do. more> http://tinyurl.com/k9t9fk8

The Recipe For Building A Startup Scene In Any City

By David Lumb – There are four things that need to be in place in order to build a startup scene:

  • a venue that is cheap and central, where meetups can take place.
  • a monthly event where all of the startups gather.
  • an established hashtag everyone in the community can use to share photos and event info.
  • And, a coworking space that is open 24/7 so that when an outsider lands in the city, they have a place to go and meet tons of people in the scene.

This recipe establishes a tech community and helps them market their accomplishments to the outside world, creating a narrative of a cohesive and collaborative local scene that journalists, politicians, and investors can follow. more> http://tinyurl.com/ou5l7jg