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CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

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Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#51

Post by mbreese »

mikeryan wrote: post #13
not_that_noob wrote: post #5

Earlier quoted context omitted.

This. Founders are better served maximizing traction at the lowest outside investment possible. If it doesn't become big, then you still hold a large chunk of a small company. And if does, then you hold a fairly large chunk of a large company.

I don't know it seems to me that Silicon Valley is littered with folks who've made a shit ton of money by founding companies and taking chunks off the table during funding rounds. Kevin Rose/Digg come to mind. This way if you become huge you still get a payday but even if it doesn't you're still a millionaire (and maybe an angel investor in companies that do become huge, Kevin Rose/Digg comes to mind).

I don't know all of the history, but I was under the impression that this was a relatively recent phenomenon. Does any one have any examples prior to Rose?

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#53

Post by nostrademons »

not_that_noob wrote: post #30
rrhyne wrote: post #25

Earlier quoted context omitted.

Founders need to balance the amount of time it takes to acquire traction on the cheap, vs. via through the acceleration having a larger marketing and dev budget provides. Stagnation can kill and smaller founder equity is better than dead.

That's a false dichotomy encouraged by VCs. More money does not necessarily accelerate. It's making sure you're getting the max value for every dollar spent, something that's quickly forgotten when you raise millions of dollars.

Some of the more savvy and founder-friendly VCs actually say the opposite, eg. "Keep the team as small as possible until you reach product/market fit" (Andreesen) or "Perhaps more dangerously, once you take a lot of money it gets harder to change direction" (PG).

I think the overall point is not to never take outside investment, it's to carefully consider where you are in your product's lifecycle and what your market actually looks like before you take outside money. Refusing VC money if your market is huge means that someone else will take it and eat the whole market. Taking VC money when your market is small will kill your company just the same, because you won't be free to make the trade-offs necessary for a small company to succeed in a niche market.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#54

Post by pyrrhotech »

psychometry wrote: post #39
pyrrhotech wrote: post #12

And the average engineer who thought they'd be rich, probably owns 0.0002%. Have fun with your 200k! Startups are such a scam for the employees.

I'm curious what kind of warped perspective allows someone to scoff at a $200,000 windfall and where I can acquire such a perspective.

are you serious? How much do you make? Remember we are talking $200k pretax. So maybe $120k after taxes. That's less than half a down payment on a shit house in this area. That's maybe one year of market value cash compensation for an engineer with 5 years experience.

I'm not saying it's nothing, but remember that we are talking about this being one of the rare startup equity "success stories" that you hear about so often in the media.

Of course, I'd take a $200k windfall and be happy for a few days, but it's hardly a life-changing amount of money. I save that much money every 18 months (remember pretax). I wouldn't consider myself wealthy unless I had 50x that amount in the bank

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#55

Post by btrautsc »

mikeryan wrote: post #13
not_that_noob wrote: post #5

Earlier quoted context omitted.

This. Founders are better served maximizing traction at the lowest outside investment possible. If it doesn't become big, then you still hold a large chunk of a small company. And if does, then you hold a fairly large chunk of a large company.

I don't know it seems to me that Silicon Valley is littered with folks who've made a shit ton of money by founding companies and taking chunks off the table during funding rounds. Kevin Rose/Digg come to mind. This way if you become huge you still get a payday but even if it doesn't you're still a millionaire (and maybe an angel investor in companies that do become huge, Kevin Rose/Digg comes to mind).

This can happen for multiple reasons - but more often (IMO) is being driven by investors who know they need super outsized results, and at some point will come shopping for the portfolio company.

So investors are willing to give founders significant liquidity so they are comfortable (or locked in to) "going all the way" (snapchat comes to mind [1]).

Remember, investors need billion dollar returns to return a fund. So giving founders a few million to pad their pockets, reduce their own risk, and extend their companies timeline is occasionally a simple decision.

1. http://www.businessinsider.com/snapchats-founders-pocket-10-...

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#56

Post by nostrademons »

psychometry wrote: post #39
pyrrhotech wrote: post #12

And the average engineer who thought they'd be rich, probably owns 0.0002%. Have fun with your 200k! Startups are such a scam for the employees.

I'm curious what kind of warped perspective allows someone to scoff at a $200,000 windfall and where I can acquire such a perspective.

Silicon Valley.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#57

Post by us0r »

sfall wrote: post #44
fidotron wrote: post #36

This sets alarm bells off for me, of the kind saying the large investors are looking to claw as much back as possible via IPO because the core business isn't as viable as they thought. Demonstrating profitable quarters in the run up to IPO is highly valuable, so if they aren't doing that . . . yuck. DropBox, for better or worse, appear to have cleaned up on the consumer front, and you'd have to be blind to not notice…

i have started to see it used in the construction industry, when the general contractor already has some infrastructure typically on a windows domain. that is where they are going to push for further and further integration for business and project mgmt

But MS is pushing their product now and is in a war with Google to basically give this stuff away for free.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#58

Post by ensignavenger »

_delirium wrote: post #50
nostrademons wrote: post #2

IIRC PayPal was very similar - it was sold for $1.5B, but Max Levchin's share was only about $30M, and Elon Musk's was only about $100M. By comparison, many early Web 2.0 darlings (Del.icio.us, Blogger, Flickr) sold for only $20-40M, but their founders had only taken small seed rounds, and so the vast majority of the purchase price went to the founders. 75% of a $40M acquisition = 3% of a $1B acquisition. Something f…

Wal-Mart might be the most extreme example of this, though their IPO was many moons ago. I can't find a solid number for what percentage Walton owned at the time of IPO (in 1970), but his heirs, 44 years later, still own a combined ~50% of the company. Unless nobody has sold anything in the decades since, I would guess he must've owned in the 70+% range at the IPO. edit to add: This is an interesting equation though,…

I remember reading about the Walmart IPO in Sam Walton's autobiography (an excellent book!) but I don't think he gave specific numbers. I think he owned pretty close to all of the company, but was in a lot of debt. He wrote that he was very worried about what his wife was going to say when she found out after he signed the deal to do the IPO :). There may have been a few store managers that had a small interest in the company, though.

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#59

Post by mbesto »

pptr1 wrote: post #31
nostrademons wrote: post #2

IIRC PayPal was very similar - it was sold for $1.5B, but Max Levchin's share was only about $30M, and Elon Musk's was only about $100M. By comparison, many early Web 2.0 darlings (Del.icio.us, Blogger, Flickr) sold for only $20-40M, but their founders had only taken small seed rounds, and so the vast majority of the purchase price went to the founders. 75% of a $40M acquisition = 3% of a $1B acquisition. Something f…

It also means Aaron Levie could be fired from Box anytime if Box's stock fails to perform. It adds a significant amount of pressure and sort of handicaps him from taking some risk. In my view this devalues the long term value of the company. However, they could kill it at enterprise and introduce some game changing product or service,

Are you sure? There is a difference between different types of stock and I'd be surprised if he didn't hold a majority in some form of preferred stock.

i.e. Zuck has majority control over Facebook: http://blogs.wsj.com/deals/2012/02/01/at-facebook-governance...

Re: CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%

#60

Post by jpmattia »

mbreese wrote: post #51
mikeryan wrote: post #13

Earlier quoted context omitted.

I don't know it seems to me that Silicon Valley is littered with folks who've made a shit ton of money by founding companies and taking chunks off the table during funding rounds. Kevin Rose/Digg come to mind. This way if you become huge you still get a payday but even if it doesn't you're still a millionaire (and maybe an angel investor in companies that do become huge, Kevin Rose/Digg comes to mind).

I don't know all of the history, but I was under the impression that this was a relatively recent phenomenon. Does any one have any examples prior to Rose?

> I don't know all of the history, but I was under the impression that this was a relatively recent phenomenon.

It is. It used to be seen as a sign of lack of confidence in your company that you would take money out, because if you believed that your company was heading for the moon you would want every share possible. BTW, the same was true for earlier investors: Non participation was the kiss of death.

FD: Info from about 10 years ago.

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