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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%

#71

Post by ganeumann »

mbesto wrote: post #59
pptr1 wrote: post #31

Earlier quoted context omitted.

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...

From the S-1:

Prior to the completion of this offering, we had two classes of common stock...identical except with respect to voting...

Upon the completion of this offering...All currently outstanding shares of our Existing Class A common stock, Existing Class B common stock and redeemable convertible preferred stock (including shares to be issued upon the exercise of the Net Exercise Warrant immediately prior to the completion of this offering) will convert into shares of our new Class B common stock.

After the offering there will only be one type of shares, not two as at Facebook.

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

#72

Post by ChuckMcM »

FireBeyond wrote: post #61
ChuckMcM wrote: post #22

Earlier quoted context omitted.

To add to this, so what if it is "$200K" ? Basically that is enough to completely cover one kids education at a state school, put down 20% on a million dollar house, or seed fund your next "big thing" for easily 6 to 18 months. On top of that you've been working for a salary that probably paid all your existing living expenses so you were not accumulating debt. That is a pretty cool thing. Further, if you continue to…

"put down 20% on a million dollar house" - maybe, or maybe not. Your bank might still look at it as a gift, and you still run into issues. For example, Mike Davidson (founder of Newsvine) describes in a blog about building a $1.1M home after he sold to MSNBC ( http://www.ahousebythepark.com/journal/archive/category/fina... ): "My credit is great and I have a strong cash position, but even so, getting a jumbo loan is…

I made the down payment on my first house selling my ISO shares, and then when we sold that house and moved to a slightly larger house my wife and I both sold shares we had in ISOs to make a larger downpayment. Neither time did the bank consider it a 'gift' (nor did the IRS, they took their pound of flesh too)

During the dot.com boom there was an interesting series in the newspaper about people who took their IPO proceeds and immediately sold them and bought a house. The question was "Gee, look at all the future growth they are giving up by converting hot stocks into stodgy real estate."

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

#73

Post by pyrrhotech »

FireBeyond wrote: post #66
pyrrhotech wrote: post #54

Earlier quoted context omitted.

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…

Except I also read in other threads that you comment on spending $5/day on food. And not living in SF because you can't or won't afford to. So it is entirely possible that you are min-max'ing your life goals in an outlier fashion (which is your perfect right, don't mistake me).

I don't make 250k, but I am pretty frugal overall. I'm not a foodie, so I'd rather spend that money elsewhere. I cleared just under $200k with bonus last year

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

#74

Post by ChuckMcM »

FireBeyond wrote: post #65
rahimnathwani wrote: post #62

Earlier quoted context omitted.

No. The point of the down payment is to reduce the loan-to-value ratio which, in turn, reduces the risk taken by the bank (as the property value would have to fall by more than the amount of the down payment before the loan collateral is worth less than the loan). This risk reduction is why the bank will give you a loan at y% rather than 1.5y%. This reduces your monthly payments to an amount you can afford each month…

As I mentioned down thread, it's not that easy. Mike Davidson, who sold Newsvine to MSNBC and had enough liquid cash to (more than) cover his mortgage that day in its entirety still went through hoop after hoop even refinancing his loan. Risk is only a part of the equation here.

I would be really really cautious about taking anything from Mike Davidson's blog, for one if you notice the dates it was during the worst Mortgage Meltdown in history (july 2008, and may 2009) and he was attempting to get a construction loan which is an entirely different sort of transaction than simply buying a house that already exists.

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

#75

Post by ChuckMcM »

rahimnathwani wrote: post #62
thaumasiotes wrote: post #35

Earlier quoted context omitted.

Using an unrepeatable windfall as the down payment on a loan seems wildly inadvisable. The point of the down payment is that you're able make good on the loan.

No. The point of the down payment is to reduce the loan-to-value ratio which, in turn, reduces the risk taken by the bank (as the property value would have to fall by more than the amount of the down payment before the loan collateral is worth less than the loan). This risk reduction is why the bank will give you a loan at y% rather than 1.5y%. This reduces your monthly payments to an amount you can afford each month…

This is exactly correct, loan to value differences change both your APR and whether or not you need private mortgage insurance (PMI). If your loan to value allows the bank to give you their best rate and waive PMI (which they do because they believe if you default they can sell your property at a profit) then you will save a tremendous amount of cash over the lifetime of the loan.

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

#76

Post by sjg007 »

crystaln wrote: post #37
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.

Startups that pay employees well are not scams for employees. Startups that give >0.1% are not scams. Anyone getting 0.0002% expecting to get rich is not being scammed, they are being stupid.

So many startups don't even give out the % your options are..

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

#77

Post by danielha »

cromwellian wrote: post #21

I view this as being smart. Box is under heavy competition not just from Dropbox, but from Google and Microsoft. 4% of $250 million is better than 50% of $0. The landscape is littered with founders who drank the koolaid and thought they were going to billions and ran their companies into the ground. Maybe Levie won't own 50% of Box, but maybe he will own 4% of a viable company with a real business going forward. And…

They'd be raising $250mm in the IPO. That wouldn't be the valuation of the company. Presumably, it'd be >$2B which was the value of their last private round.

Your point stands in that 4% of that isn't too bad either.

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

#78

Post by ChuckMcM »

ryanobjc wrote: post #38
ChuckMcM wrote: post #22

Earlier quoted context omitted.

To add to this, so what if it is "$200K" ? Basically that is enough to completely cover one kids education at a state school, put down 20% on a million dollar house, or seed fund your next "big thing" for easily 6 to 18 months. On top of that you've been working for a salary that probably paid all your existing living expenses so you were not accumulating debt. That is a pretty cool thing. Further, if you continue to…

Good point! Although, you didn't really talk about what the engineer gave UP to work at the company. Depending on the time, $200,000 over 4 years is not a really good reward. In the mean time you have forgone: - better healthcare (if you have a family this ups the cost a lot) - lower stress job - better bonuses at 'big companies' - better options at public companies Remember, that a great sr engineer, the kinds that…

It is a fair point that you have to consider the null hypothesis. My experience, and granted its really only about a dozen startups where I actually know the full details of the deal, are either a "huge" win over an established (already public) company or a "huge" loss (the go out with no additional value). And I happen to know that in this specific case folks that were senior engineers at Google and are now senior engineers at Box, and at least one of them is happy they didn't choose to stay at Google. But like anything, Box could IPO and fall through the floor like Zynga (I doubt it, but it could) or GroupOn. Or it could do a Facebook and fall for a while and then recover quite nicely. So the play isn't over yet as they say. In my own experience if Google hadn't repriced everyone's ISO shares I would have made very little money on them after they had vested and I exercised them.

The key though is that its really really hard to compute the expected value of a share, even with Black-Scholes, such that you know what the right answer is :-)

I will say that I have not yet met anyone driving their life based on expected value of their choices who is really happy. I find that strange sometimes because when it is a conscious choice you would think they would be happy to be doing what they want, but so far haven't found anyone.

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