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Wizards of the Coast, Equity Distributions: Part 1

peteradkison.com

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Re: Wizards of the Coast, Equity Distributions: Part 1

#21

Post by bennyg »

patio11 wrote: post #4
cperciva wrote: post #3

Can someone explain to me how this is even possible? I mean, when a corporation is created, before it takes any investment, someone has to own it, right? How is it possible for the founders to not start out owning 100%?

It's more clear if you read his follow-up to the post. ( http://www.peteradkison.com/blog-entry-3-wizards-of-the-coas... What probably happened is that they (on the basis of really, really, REALLY bad advice) started with something like 1,000 shares of the company, valued at $0.50 apiece. They did genuinely own 100% at that time. Then as they raised the 300k they issued additional shares , at valuations between $0.50…

> A tech company which only exists as a napkin held between two hungry young men with no asset other than a gleam in their eye gets a notional value of $250k+ on day one.

Here's what I don't understand. Why?

Re: Wizards of the Coast, Equity Distributions: Part 1

#22

Post by patio11 »

bennyg wrote: post #21
patio11 wrote: post #4

Earlier quoted context omitted.

It's more clear if you read his follow-up to the post. ( http://www.peteradkison.com/blog-entry-3-wizards-of-the-coas... What probably happened is that they (on the basis of really, really, REALLY bad advice) started with something like 1,000 shares of the company, valued at $0.50 apiece. They did genuinely own 100% at that time. Then as they raised the 300k they issued additional shares , at valuations between $0.50…

> A tech company which only exists as a napkin held between two hungry young men with no asset other than a gleam in their eye gets a notional value of $250k+ on day one. Here's what I don't understand. Why?

There's a market between sellers of equity in early stage companies and buyers of equity in early stage companies, and sellers in that market largely will not transact with you below $250k, because they'll have better offers for their scarce product. (This assumes, naturally, that the founders appear to have a credible chance of bringing a technology product to market.)

Re: Wizards of the Coast, Equity Distributions: Part 1

#23

Post by contingencies »

I've started one business and had options in two. In the end, one of those businesses (not the one I started) wound up paying me some lump sum. Presently I distrust futures of any kind; to put it simply, I am more interested in present-day pragmatism than greed.

I think the author comes from a similar line of thinking, as his tone seems to suggest. I'm not rich but I do fine. I'd recommend: do what you love; money comes and goes, someone with more flexible morals or risk affinity will certainly make more of it, but in the end you won't regret it.

Re: Wizards of the Coast, Equity Distributions: Part 1

#24

Post by bennyg »

patio11 wrote: post #22
bennyg wrote: post #21

Earlier quoted context omitted.

> A tech company which only exists as a napkin held between two hungry young men with no asset other than a gleam in their eye gets a notional value of $250k+ on day one. Here's what I don't understand. Why?

There's a market between sellers of equity in early stage companies and buyers of equity in early stage companies, and sellers in that market largely will not transact with you below $250k, because they'll have better offers for their scarce product. (This assumes, naturally, that the founders appear to have a credible chance of bringing a technology product to market.)

I have a great product, have quite a few people that use it, and would kill to have $250k in venture money to take it to the next level. I'm just in Alabama - and that's why $250k seems like such a high number for a napkin idea (I can't tell you how many napkin ideas I have). $250k is a TON of money if you don't need to hire anybody.

Re: Wizards of the Coast, Equity Distributions: Part 1

#25

Post by patio11 »

bennyg wrote: post #24
patio11 wrote: post #22

Earlier quoted context omitted.

There's a market between sellers of equity in early stage companies and buyers of equity in early stage companies, and sellers in that market largely will not transact with you below $250k, because they'll have better offers for their scarce product. (This assumes, naturally, that the founders appear to have a credible chance of bringing a technology product to market.)

I have a great product, have quite a few people that use it, and would kill to have $250k in venture money to take it to the next level. I'm just in Alabama - and that's why $250k seems like such a high number for a napkin idea (I can't tell you how many napkin ideas I have). $250k is a TON of money if you don't need to hire anybody.

You don't get $250k in exchange for the napkin. You'll be able to possibly convince someone to pay $25k for ~9% of the napkin, contingent on you devoting the next months/years of your life to exploring napkin-like directions until it either burns or blossoms. (If you already have a product with revenue/traction, there's plenty of reasons to counsel AGAINST taking the money at those terms, by the way. Or any terms, for that matter.)

Re: Wizards of the Coast, Equity Distributions: Part 1

#26

Post by napoleond »

cperciva wrote: post #13
bigiain wrote: post #12

Earlier quoted context omitted.

Perhaps a little less cynically, I wonder if there's a market for "Enterprise sales as a service"? How many Tarsnap-like services are there, which with the right salespeople and a 5,000+% markup could be sold into "The Enterprise" - which would be a completely non-competitive demographic to the developer/startup trying to sell at Patrick, iterested in going 50:50 partners in BEMTBS? (Bigiain's Enterprise Managed Tars…

Patrick: Please say yes. Seriously, I'd love to see people reselling Tarsnap. This is the main reason I provide accounting details in CSV format. As long as you pay me for your / your customers' usage, I don't care how much you charge your customers.

I've often considered the ways I could pack up Tarsnap for Windows users, and/or make a pretty GUI for Linux/OS X. It's encouraging to hear that you'd be supportive of that!

Re: Wizards of the Coast, Equity Distributions: Part 1

#27

Post by cperciva »

napoleond wrote: post #26
cperciva wrote: post #13

Earlier quoted context omitted.

Patrick: Please say yes. Seriously, I'd love to see people reselling Tarsnap. This is the main reason I provide accounting details in CSV format. As long as you pay me for your / your customers' usage, I don't care how much you charge your customers.

I've often considered the ways I could pack up Tarsnap for Windows users, and/or make a pretty GUI for Linux/OS X. It's encouraging to hear that you'd be supportive of that!

Very much so. Windows support is something I may be able to do myself, but a GUI is definitely something I don't have the expertise for; at some point I may end up hiring someone to write one, but if someone writes one on their own, all the better.

Re: Wizards of the Coast, Equity Distributions: Part 1

#28

Post by citadelgrad »

cperciva wrote: post #5
patio11 wrote: post #4

Earlier quoted context omitted.

It's more clear if you read his follow-up to the post. ( http://www.peteradkison.com/blog-entry-3-wizards-of-the-coas... What probably happened is that they (on the basis of really, really, REALLY bad advice) started with something like 1,000 shares of the company, valued at $0.50 apiece. They did genuinely own 100% at that time. Then as they raised the 300k they issued additional shares , at valuations between $0.50…

The fundamental problem here is grossly misvaluing the company (i.e. the total value of 100% of the shares) at the time new shares were issued. Aha, that makes much more sense. So the problem wasn't that they didn't have founders' shares, or that they didn't have enough shares; but rather that they were selling off shares at ridiculously low prices. Tarsnap Backup Inc. officially has 100 Common shares outstanding, bu…

Create a heroku app that offsites our db backups for $10-20 a month and I'll be happy to pay to have redundancy to heroku's free backup.

Re: Wizards of the Coast, Equity Distributions: Part 1

#29

Post by caoimhin »

patio11 wrote: post #6
cperciva wrote: post #5

Earlier quoted context omitted.

The fundamental problem here is grossly misvaluing the company (i.e. the total value of 100% of the shares) at the time new shares were issued. Aha, that makes much more sense. So the problem wasn't that they didn't have founders' shares, or that they didn't have enough shares; but rather that they were selling off shares at ridiculously low prices. Tarsnap Backup Inc. officially has 100 Common shares outstanding, bu…

I would certainly not suggest giving away those 100 common shares for picodollars because that would compromise your business results and make it affirmatively more difficult for sophisticated investors to join you, leaving your company to only receive investment from worse investors. By the way, I signed up for Tarsnap and am using it "in anger" for Appointment Reminder. My predicted bill for this month is something…

On a certain level they would be right to complain. Tarsnap has a flaw: buses.

The problem is that Tarsnap is one person. If Colin dies suddenly (in the sysadmin world, the primary cause of theoretical death is buses), you have a problem. Say your account is down to €10 and you have 100G of data stored in there when when the #10 express mows down Colin. You might not be able to get it back since you can't top up your account now unless your method of payment is fully automated on his side.

Looking over his website, I don't see if there is a Colin-backup plan anywhere. There should be. Until then Tarsnap should be one of your backup systems - not the only one.

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