Let’s Go Crazy

1. Let’s Go Crazy

2. Agenda • Signing on with a startup • Starting a company

3. Negotiating with a Startup

4. Big companies Formal training Long career path Corporate fun systems Full of drones Stable income Startup Massive responsibility Battlefield promotions Intense friendships Full of freaks Hey, you won’t be unemployed long… Big Companies vs. Startups

5. A Few Interview Tips • “Generate the offer” (then decide) • Ask for your interviewers’ names & Google • If you like the company say so (hate its competitors) • Use –ed words: focus on accomplishments • Let the beast out: talk about your passion • Answer questions directly & be brief • Understand the question (why is she asking?) • Good answers start with yes, no, a number • Say what you came to say, too • Go back & correct yourself if you screwed something up • “Wait, there’s one thing you missed about me…”

6. Negotiating an Offer • Generate demand • Communicate needs • Gather information • Understand terms • Decide where you want to work • Prepare for the negotiation • What do you care most about • What are you willing to accept • An offer is never revoked • Sometimes it’s good to leave money on the table (then ask for a six-month review)

7. Understand All the Terms • Salary • Stock options • Vacation • Insurance • Benefits

8. What Is An Option • The right to buy stock at a low price • Strike price: • Term: usually 10 years, or 30 – 90 days after you quit • Vesting schedule • One-year cliff: you get nothing if you leave in less than a year • Four-year or five-year vest: 1/4th then 1/48th every month • Acceleration in vesting for senior employees is possible • Example • Grant: 10,000 options to buy Grover.com’s stock at $1.00 • Vesting: you work at Grover.com two years  5,000 options • By then Grover.com stock is worth $6.00 • Your profit: $30,000 - $5,000 = $25,000 • Bonus: taxes likely lower on stock sale vs. salary

9. Types of Stock • Preferred stock • Liquidation preference • Anti-dilution protection • Participation rights • Voting rights • Common stock

10. When Stock Becomes Valuable • The company goes public • Stock bought & sold in a public market (NASDAQ) • Usually the company has profits, $100M in revenues • The company is acquired by a public company • The company is acquired for cash

11. Valuing Options: What’s My Percentage? • Percentage of company you could own is your grant divided by… • Preferred stock owned by investors • Common stock owned by employees • Options on common stock granted employees • Options on common stock reserved for future employees • Anticipated dilution: future financing, option pool replenishment • Example: grant of 10,000 shares • Investors own 500,000 shares • Founders own 250,000 shares • Employees granted 250,000 options: 150,000 already granted, 100,000 reserved • You own 10,000 divided by 1 million, or 1% • Company expects one more round of financing: 20% dilution, 250,000 shares sold • You will own 10,000 divided by 1.25 million, or .8%

12. Percent Ownership: Rough Ranges • < 10 employees: .2% • < 25 employees: .1% • < 100 employees: .05%

13. Valuing a Company • Value of company: the numbers • Valuation at last round of financing • Valuation on acquisition: $1M - $2B • Valuation on IPO: $100M+ • Value of company: what really matters • Team • Market • Product • Competition

14. Questions You Should Ask Any Start-Up Employer • How should I think about the value of these shares? • How many shares and options are out there? • What was the company valued at in its last round of financing? • If the company is sold is the money split between investors and employees according to the number of shares they own? • How many rounds of financing will it take to build the company? How many more shares do you expect to have to sell? • Are you losing money now? • How much per month? • When do you run out of money? • What has to change for the company to start making money? • When will that happen? • How big can this company be? What’s the market size? • What keeps you up at night?

15. Questions You Should Ask Yourself • Do I believe in these people? • Have they been successful before? • Would I avoid them in a mall? • Are they coin-operated? • Are they trying to do anything meaningful • Is it a gimmick? • Is it kind of small & pathetic? • Would I use this product? Do I know anyone who would? • Will I make a difference to these people? Is that what I want?

16. Starting a Company

17. Year -2: Go Crazy or • “Can I turn the light on?” “No.” • Nerd greeting: “hey homey!” • “Is it sweet?” • “You are a cost center.” • “Gold help you if you are the weakest link.”

18. Year -1: Stop Being Miserable • “All of you should be fired.” • “If today were the last day of my life, would I want to do what I am about to do today?”

19. Year Zero: “Let’s do the Big Thing” • “A VC” (Fred Wilson) on entrepreneurs • Smartest person in the room • Engaging, compelling, social personalities • Insatiable passion for creating things • Expertise & focus on the product • Ability to mediate between the market & development • Hungry for the big hit • Flair for PR & marketing • Ability to listen to & really hear what others are saying • Only crazy people start companies

20. The Idea • “Write what you know” • “We’ll figure it out” • Keep it simple • Every airplane has something wrong with it

21. Roll Up Your Sleeves Two types of entrepreneurs… “What’s your prediction for the fight?”

22. Pitch: keep it simple & short Lots of people will pay for it Special sauce: we can build it better There’s a way to get to $100M & profits Customer validation Presentation Wiffy’s: keep moving Don’t leave without the ball http://www.sequoiacap.com/ http://blog.guykawasaki.com/ “My fucking ears are lying on the fucking floor” “I don’t know” Year One: Raise Money

23. Don’t Screw Up • Undue concern over dilution, loss of control • COO, CFO, GC, BD: your friends • A large office, an assistant • Patented business models • The pogo stick, the futon • “It’s complicated” • Big-company DNA • Go straight down the middle

24. Year Two: Build a Team • Don’t be a lonely freak • Build it & sell it • Find the maniacs • Be generous with shares • Hire slow, fire fast: bozos replicate “You want to win a World Series? Give me nine players in their contract year.”

25. Year Two, Continued: Build the Product • A picture: worth a thousand words • 1st & 2nd moments of customer delight • What can we do that they can’t? • Keep it simple (XP programming) • “Work will set you free.”

26. Year Three: Street-Fighter • Radical openness: the truth will set you free • Make the rules: don’t try to sound grown-up • Think like a journalist • Two beers & a friend • Write the headline, imagine the story • Start something • Standards body • Trade-show • Magazine • Blogging • Speed kills: what don’t they want me to do? • MOVE! MOVE! MOVE!

27. Year Four: Build a Culture • Everyone is a leader • We are excited by ideas • We value speed in everything we do • Everyone sweeps the floors • Everyone is respected • We never say “I” • We put the customer first • We do the right thing

28. Your Five: Grace • “I don’t know.” • “You don’t have to have the job.” • “Be desireless.”

29. Year Six: Manage Others • “Do you have a minute?” • Keep your door open; be available at consistent times • Plenty of sleep: No Incredible Hulk • Be on time, no e-mail or cell • Go to them • Gather information, make decision • Little-league rule • Shackleton rule • “Do you trust me?” • When Ray Lane walks into a room, everyone feels better

30. Year Seven: Endurance • It’ll always be hard work • “I don’t know how to do anything else” • “Give, control, sympathize”

31. Year Eight: If You Lose, Lose Nothing • “Do the right thing.” • “The operative word is, I think, love” • “There the fault lies all in the not-done, all in the diffidence that faltered.”