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Boards are dangerous to founder/CEOs

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Re: Boards are dangerous to founder/CEOs

#221

Post by jiveturkey »

redshirtrob wrote: post #206
jiveturkey wrote: post #185

Earlier quoted context omitted.

well to be fair, you should never exercise if it isn't early exercise. the odds are very much against you. I mean, by the odds you shouldn't early exercise either but at least you don't get hit by the AMT bullet.

That's certainly not true. You should evaluate the investment just like any other investment and decide if you can afford to lose the money and stomach the risk. Part of your evaluation should be consulting a tax professional to determine if there are any immediate, negative tax consequences. You're not guaranteed to get hit by AMT just because you exercise some stock options.

If you aren't getting hit by AMT, the company is not growing fast enough and you should not exercise. If you are getting hit by AMT, the chances are you are out the exercise cost plus the AMT.

Re: Boards are dangerous to founder/CEOs

#222

Post by redshirtrob »

hinkley wrote: post #216
redshirtrob wrote: post #206

Earlier quoted context omitted.

That's certainly not true. You should evaluate the investment just like any other investment and decide if you can afford to lose the money and stomach the risk. Part of your evaluation should be consulting a tax professional to determine if there are any immediate, negative tax consequences. You're not guaranteed to get hit by AMT just because you exercise some stock options.

> You should evaluate the investment just like any other investment Except it's not like any other investment. It's an investment that you are too close to. You can't think 100% objectively about an investment that you're too close to. For many people the solution is unambiguous: If I can't be objective about a decision then the answer is automatically 'no'.

There are lots of things I'm close to that I need to think objectively about. Maybe I don't hit your ideal of 100%, but I do my best. Investments is one area. The health and well being of my children is another. You can never have perfect objectivity. You do the best you can. GP's advice is too rigid and therefor not very good.

FWIW, I'm speaking from experience. Had I taken GP's advice and "never exercise unless it's early exercise" then I would have missed out on a lot of money.

The other thing to keep in mind is you don't have to exercise 100% of your vested options. If you're too nervous or don't trust your own judgement, maybe go for 10%, or whatever makes you comfortable. There's a lot of room between 0 and 100 here. Go ahead and explore it.

Re: Boards are dangerous to founder/CEOs

#223

Post by coldtea »

WastingMyTime89 wrote: post #62
anthropodie wrote: post #26

Earlier quoted context omitted.

“A group experience takes place on a lower level of consciousness than the experience of an individual. This is due to the fact that, when many people gather together to share one common emotion, the total psyche emerging from the group is below the level of the individual psyche. If it is a very large group, the collective psyche will be more like the psyche of an animal, which is the reason why the ethical attitude…

Of course, I invite readers to treat Carl Jung quotations as having a credibility proportional to the amount of efforts he made during his life to properly prove and establish the facts he was enunciating: not much.

Not all insights come as ready-for-consumption statistics and prepared-for-you facts wrapped in a nice red bow, nor they always come with numbers and figures attached.

Often, the most interesting insights come from experience and reflecting upon it. You know, old fashioned thinking.

Re: Boards are dangerous to founder/CEOs

#224

Post by [deleted] »

streetcat1 wrote: post #128
bluGill wrote: post #116

Earlier quoted context omitted.

That isn't always good advice. Often the money from going public is required to make it. You either go public, or someone else will take your idea, go public and use the money from it to eat your lunch and then you get nothing. Good ideas are easy. Unique good ideas are so rare as to be non-existent. Nearly all good ideas are obvious to anyone who knows the field and what can be done.

The market today is so big that many competitors can live side by side . At least in B2B. I mean there are hundreds of CRM companies. You can have other companies eat your lunch. All you need is to get into a default alive state. I.e. have 5-10K MRR. The rest is nice to have. It should be possible in any billion dollar market.

[deleted]

Re: Boards are dangerous to founder/CEOs

#225

Post by cormacrelf »

tomp wrote: post #183
javajosh wrote: post #179

Earlier quoted context omitted.

I didn't mean iterated game in the game theory sense, because that implies both counter-parties play against each other repeatedly. It's like when you get a mortgage - it's a once-in-a-lifetime for you, and a Tuesday for them. They know exactly how to (and have mechanisms in place) enforce every part of a contract they've been using and improving for decades; you barely understand the contract because its the first t…

Yeah, the correct terms for these would probably be "diversification" and "information asymmetry". I think the main reason for these onerous terms is the fact that without them, the founders would cheat (not people like you or me, but rather, they would attract cheaters if they didn't work so hard to prevent them for succeeding)

The thing about iterated games is better known as the "repeat player advantage". They do indeed play the same game over and over, not one game that goes on and on. The information isn't specific to each case either, typically both parties are equally aware of the facts at hand, it usually means the repeat player simply has more experience and a better grasp of the same information and its implications. This doesn't necessarily involve the usual meaning of information asymmetry, which is more about being different from chess, where both players have a full view of the board.

If someone gives you a contract with an option to purchase shares, you have as much ability to analyse its risks as they do, and frankly if it is a contract to purchase X shares of a class that is so insufficiently specified that it can later refer to a diluted version of the same, then I don't know why on earth people accept them as good consideration. I don't know what laws apply to disclosures around share dilutions in the US, but it is one of the areas in which commercial law often tries to even out a noticeable information gap, just like takeover offers. But they can't save you from accepting it without knowing what it means and looking into how you can protect yourself from its risks.

Re: Boards are dangerous to founder/CEOs

#226

Post by redshirtrob »

jiveturkey wrote: post #221
redshirtrob wrote: post #206

Earlier quoted context omitted.

That's certainly not true. You should evaluate the investment just like any other investment and decide if you can afford to lose the money and stomach the risk. Part of your evaluation should be consulting a tax professional to determine if there are any immediate, negative tax consequences. You're not guaranteed to get hit by AMT just because you exercise some stock options.

If you aren't getting hit by AMT, the company is not growing fast enough and you should not exercise. If you are getting hit by AMT, the chances are you are out the exercise cost plus the AMT.

I've done exactly what you're saying I should not do and it worked out very well.

My point is that these hard and fast rules don't leave any room for nuance. Consider, as I mentioned in another comment, you don't have to exercise 100% of your options. Exercise whatever makes you comfortable. Maybe that's one under the number that would push you into AMT.

If zero is your comfort level, then so be it. But get to that conclusion by doing a little thought and evaluation, not applying an arbitrary rule.

Re: Boards are dangerous to founder/CEOs

#228

Post by snowwrestler »

I’ve got an opinion that may not be a majority here. And I can see how it could go wrong sometimes, especially from the perspective of a founder CEO.

But, IMO boards should be dangerous to CEOs. In the long run it is good, and in some cases necessary, for a company’s long-term health.

There are tons of examples where a CEO change was necessary to resolve distractions, right the corporate ship, and allow a company to pass through a crisis into a new period of growth. And whether the CEO resigns or is literally fired, the locus of pressure is almost always the board’s power to fire them.

Imagine being CEO without that—you’re in charge of everything, with no accountability or consequences for anything. There is no way to maintain perspective and focus over time. Everyone wants to please you or at least avoid your displeasure. The company gets distorted over time by your personal preferences and preoccupations.

I would argue this is the core of the problem at Facebook. That company would be much better off if there was a way to change leadership there, or at least threaten to.

Re: Boards are dangerous to founder/CEOs

#229

Post by djyaz1200 »

distribot wrote: post #207
jasode wrote: post #147

Earlier quoted context omitted.

>They don't have to value the company at $0 to fuck you over once you're gone. The current board can depreciate all of the shares by 50% and then issue themselves twice their original shares so they break even. Mark Zuckerberg tried a variation of that game to cut out Eduardo Saverin's shares when they changed the company from a Florida LLC to a Delaware Inc. Well, Saverin sued and Facebook lost that lawsuit; they se…

Anyone know how Zuckerberg avoided the same thing happening to him? Bezos was a 30 year old with a decade of experience in finance, I assume he was quite savvy. But Zuckerberg was a teen.

Shawn Fanning

Re: Boards are dangerous to founder/CEOs

#230

Post by freejazz »

ajkjk wrote: post #215
secondaryacct wrote: post #209

Earlier quoted context omitted.

But firing the CEO, even a founder, is the right of investors who paid for it... I mean what else do you sell them? If they like the business but not the guy, why should they forever be forced to have him as a parasite in their mind ? Dilution seems wrong though, because they were supposed to buy something, not steal it.

You sell them.. returns on their money. That's the whole point, right?

Then don't sell voting stock?
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