Rovio, the Finnish start-up creator of the famous Angry Birds game, will fly to the Helsinki Stock Exchange next week. Apparently it should be a success as the offer is oversubscribed and has just been closed despite the recent challenges the start-up had to face, as the next figure shows.
I will not comment more but just add my usual capitalization table.
‘What are hopeful monsters?’ I said ‘They are things born perhaps slightly before their time; when it’s not known if the environment is quite ready for them.’
Hopeful Monsters, by Nicholas Mosley [P. 71]
Hopeful Monsters could have been startups, but it is a novel, a marvelous novel written in 1990 and that I am reading again these days. I had read it in another century, when there were only books in paper and independent bookstores still existed. I had bought it in the late Black Oak Books in Berkeley, California.
Bruno held out his hands to the flames and talked to them in an unintelligible language. Minna said ‘What do you say to the fire?’
Bruno said ‘I say “Come on up! Do as I say or I’ll punish you!” ’
Minna said ‘And does it?’
Bruno said ‘If it wants to.’
The first 3 chapters begin this way:
Chapter I – if we are to survive in the environment we have made for ourselves, may we have to be monstrous enough to greet our predicament?
Chapter II – if we are talking about an environment in which the acceptance of paradoxes might breed, then this can happen in an English hot-house, I suppose, as well as in a melting-pot of Berlin streets.
Chapter III – if, for the sake of change, old ground has to be broken up, one or two seeds lie secret – what terrible opportunities there were during those years!
I had never read a novel which mixes philosophy and science with beautiful story-telling. Not an easy read. Not sure it is a masterpiece either, though…
I should not like “Don’t f**k it up”. Just because I am not a big fan of “how to” books in high-tech entrepreneurship. There is another reason why I should not like, i.e. the subtitle: “How Founders and Their Successors Can Avoid the Clichés That Inhibit Growth”. Usually I think foudners should not have successors. But I did not hate les Trachtman’s book at all. The reason is Les gives good advice to founders, the main one being “Trust and Empower”.
Let me give you examples:
I know that every founder believes his company is special, exceedingly complex, and unique. I can assure you that the challenges confronting you are just not that different. Ninety-five percent of your problems are shared by other founders, which is good news because it means your problems are solvable. They’ve been seen and handled many times before—all that is required is the smarts and the courage to address them. [Page 2]
“Employees who are taught to mistrust their own instincts are not very likely to trust their colleagues’ instincts, either.” Fear of failure can easily poison a company culture. Team-building efforts are useless when everyone’s first imperative is CYA — cover your ass. [Page 12]
The process of building a team is not that different from raising a healthy, self-sufficient child. […] You want them to learn from their mistakes and the
resulting painful consequences. [Pages 15-16]
Micromanaging can often be an excuse for not developing and committing to mid-range and long-range goals. It can also serve as an excuse, changing your mind about what’s most important from one day to the next. A lot of founders run small companies that way, and they never scale those companies because it’s impossible to run a larger company on the basis of what the founder is feeling that particular day. [Page 20]
and his advice to foudners is to give more and moe importance to strategy by [Pages 31-33]:
1. Track your time.
2. Decide what not to work on, and stick to it.
3. Plan for the unexpected.
4. Write down your goals and revisit them quarterly.
More in another post…
“La libertad es como un número primo.” Roberto Bolaño, Los Detectives Salvajes
Michael Harris’ mathematics without apologies, I said it elsewhere, is a must-read if you are interested in mathematics. And probably even more, if you are not. But again, it is not an easy reading.
After the claim in his Chapter 3 that mathematics was “Not Merely Good, True and Beautiful”, Harris goes on with provocative and thoughful arguments about the relations that mathematics have with Money (Chapter 4 – Megaloprepeia), with the Body (Chapter 6 – Further Investigations of the Mind-Body problem), with Foundations (Chapter 7 – The Habit of Clinging to an Ultimate Ground) and even with tricks (Chapter 8 – The Science of Tricks), Harris finally comes back to Apologies after a personal chapter about inspiration and work (Chapter 9 – A Mathematical Dream and Its Interpretation).
The author made me discover, shame on me, that “apology” does not mean only praise, but also excuse or defense. Difficulty and confusion of the vocabulary, indeed a recurrent theme of Harris’ book. Let me be quite clear again. I did not understand everything and I imagined Harris could have created a new index. As you may know if you read my blog, I mention Indices from time to time, like the Erdős Index, the Tesla Index. This new Index could be 0 for Maths Giants or Supergiants, humans who could be awarded the Fields Medal, the Abel Prize or equivalent, 1 for those who can understand (everything) that has been written in mathematics by those with 0 Index; then 2, for those who can understand (everything) that has been written in mathematics by those with 1 Index, etc… I do not know where the index would stop and perhaps it already exists… I would like to believe that I was at the Index 3 but not sure! But then I made my discovery about “apology”, I put myself down at Index 5…
Harris goes even stronger than Hardy with his “No Apologies” even if he quotes him: Irony has not spoken its last word on the flight from utility [of science], even when utility is understood, with Hardy, as that which “tends to accentuate the existing inequalities in the distribution of wealth”. [Page 296] I think harris has written a very useful book about mathematics. I add another example on the nature of mathematical beauty: “there is a very high degree of unexpectedness, combined with inevitability and economy” [Page 307].
When looking for more information about harris, I found his web page which begins with the quote i give above from Bolaño. When I discovered Bolaño a few years ago, it was such a shock that I read everything I could find. Again without understanding everything. But if you read Harris’ chapter 9, you will undestand that “not understanding everything” may not be that important, compared to the impact that (apparent) confusion may create…
PS: I could have added that while I was reading Harris, a controversy arose around a new solution for the P vs. NP problem. More about this in a detailed pdf and on its author’s blog. I also should have mentioned the Langlands program and Alexander Grothendieck, whom I also mentioned here. But again Harris book is so rich…
This is the third short report I publish this summer about startups. After Startups at EPFL and Stanford and Startups, here is (I hope) an interesting analysis about how equity was allocated in 400 startups, entitled Equity in Startups (in pdf). Here is the description of the report on its back page: Startups have become in less than 50 years a major component of innovation and economic growth. An important feature of the startup phenomenon has been the wealth created through equity in startups to all stakeholders. These include the startup founders, the investors, and also the employees through the stock-option mechanism and universities through licenses of intellectual property. In the employee group, the allocation to important managers like the chief executive, vice-presidents and other officers, and independent board members is also analyzed. This report analyzes how equity was allocated in more than 400 startups, most of which had filed for an initial public offering. The author has the ambition of informing a general audience about best practice in equity split, in particular in Silicon Valley, the central place for startup innovation.
I will let you (hopefully) discover this rather short report which could have been much longer if I had decided to analyze the data in detail. I will just right here my main results. A simple look at data shows that at IPO (or exit) founders keep around 10% of their company whereas investors own 50% and employees 20%. The remaining 20% goes to the general public at IPO . Of course, this is a little too simplistic. For examples founders keep more in Software and Internet startups and less in Biotech and Medtech. There could be a lot more to add but I let the reader focus on what possibly interests her.
Additional interesting points are:
– The average age of founders is 38 but higher in Biotech and Medtech and lower in Software and Internet.
– It takes on average 8 years to go public after raising a total of $138M, including a first round of $8M in VC money.
– On average, companies have about $110M in sales and are slightly profitable, with 500 employees at IPO time. But again there are differences between Software and Internet startups which have more sales and employees and positive income and Biotech and Medtech startups which have much lower revenue and headcount and negative profit.
– The CEO owns about 3% of the startup at exit. This is 4x less the founding group and depending when she (although it is too often a “he”) joined it would mean up to 20% close to foundation (assuming the founders would keep 80% and allocate the delta to the CEO)
– CEOs are non-founders in about 36% of the cases, more in biotech (42%) and Medtech (35%) than Internet (31%) and Software (25%), more in Boston (48%) than Silicon Valley (43%) .
– The Vice-Presidents and Chief Officers own about 1% and the Chief Financial around 0.6%.
– Finally, an independent director gets about 0.3% of the equity at IPO. If we consider again that the founders are diluted by a factor 8x from their initial 100% to about 12%, it means a director should have about 2-3% if he joins at inception.
– In the past universities owned about 10% of a startup at creation in exchange for an exclusive license on IP. More recently, this has been more 5% non-diluted until significant funding (Series A round).