Web Start-Up Business Partners – Dividing Equity Between Founders and Investors
How to figure out who gets what percentage of the business when investors come on board
Q: I founded a company with two partners, and we’re currently looking for a venture capital firm to invest in us. How will the equity be divided among us and the VCs?
A: One of the most common questions I get is about how equity should be distributed. I’ll warn you in advance: There are no hard and fast rules. Equity is negotiated on a case-by-case basis, which makes it hard to give any generalizations. I’ll try to give some thoughts on what to consider when you give out equity.
Dividing Equity Among Founders
Founders receive equity for what they bring to the table. How much of the company they own as a result of their contribution is purely up to the group to decide. There are several factors that need to be considered, however.
•Timing, size and duration of contribution: The earlier, bigger or longer the contribution to the company, the more equity a founder should receive.
•Power: Equity conveys voting power and control over the business. Generally, founders who intend to stay with the business long-term should retain the most control. I have heard it recommended that one individual own at least a 51 percent of the company, to provide consistent decision-making when resolution is needed. Equal partners, while great in theory, can destroy a company when the partners don’t agree and have no way to resolve fundamental disagreements.
•Money: Early money is a contribution for equity. Money has the side effect of valuing the company. If you give 10 percent of the company for someone contributing $50,000, it implies a company value of $500,000. If you try to raise money immediately thereafter, that valuation could hurt your negotiating ability. But if substantial infrastructure has been built in the meantime–if customers have been acquired or if more of a team has been built–then a higher angel/VC valuation is justified.
•Kind of contribution: A founder may contribute in many ways. Some bring patents or product ideas. Some bring business expertise and ongoing work to build the business. Some bring capital. Some bring connections. Some may bring big names or reputations which convey credibility with VCs and/or clients. One big name that provides instant credibility may, in fact, be worth more to the company than a founder who actually puts in the work to build the business. Make sure to understand what each founder’s contribution is and value it appropriately.
We Have Five Founders–What Do We Do?
Negotiate, big-time. Too many founders can be a big problem. As the company reaches for outside funding, you make many decisions about equity, contribution and dilution. The more equity-holders, the more negotiation has to enter into each of these decisions.
Having several founders makes it hard to keep everyone adequately compensated. By the time of harvest (IPO or acquisition), the founding group can expect to own about 20 to 30 percent of the company. With one founder, that can mean riches. With several founders, that may mean splitting the pie into so many pieces that no one is happy with the value of his or her piece.
In short, fewer major equity holders are better. If you’ve already got several, make sure to tie each founder’s vesting to the contribution you’re expecting from him or her.
How Much Will Investors Expect to Own?
The basic formula is simple: If you need to raise $5 million, and an investor believes the company is worth $15 million, you will have to give them 33 percent of the company for his money.
Different investors value companies in different ways. Some look at the quality of the idea, assets, market size and management team. Some rely on financial projections. Some simply look for “big ideas” and determine their percentage ownership purely through negotiation.
I asked a couple VCs, some entrepreneurs who recently received funding and an angel investor how much of a company is typically given up in the first round. While one VC had seen investments as low as 5 percent, the majority thought that first-round investors usually take between 25 and 45 percent of the equity.
One entrepreneur remarked: “The better thing to ask is, how much should management and founders try to hold onto before the IPO? Answer: as much as possible, but no less than 25 percent.”
The entrepreneur has an important point. If it comes down to the money (as it often seems to, these days), what matters is percentage ownership at harvest multiplied by the valuation at harvest. Owning 1 percent of a company with a billion-dollar valuation is still more interesting than owning 10 percent of a company with a $50 million-dollar valuation.
What Equity Should Part-Time Contributors Expect?
Not very much. The reality of the situation is that start-ups usually require 150 percent commitment by everyone involved. Venture capitalists insist equity be given in return for ongoing commitment. Even founders who stay with the company have a multiyear vesting schedule. Many VCs will not allow equity to be given to part-time employees or contractors.
There is a one-time contribution for stock that is routinely made: giving capital itself. A cash investment for stock lets the investor own the stock free and clear, with no further contribution required. Having part-time contributors purchase stock outright may be the best way to include them in the deal.
What Does Ownership Look Like After the First Round?
According to Ann Bilyew of Advent International, a typical first round is:
•Founders: 20 to 30 percent
•Angel investors: 20 to 30 percent
•Option pool: 20 percent
•Venture capitalists: 30 to 40 percent
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If you enjoyed this post, contact Rosa Najera. If you have any questions or specific things that you want me to cover or create tutorials send me a comment or an email. Those of you who subscribe to my channel, thank you very much. It means a lot to mean.
Productive Social Media Campaigns – Part 1
Whether you have stayed in-house or gone with an outside agency for your social media campaign, finding it broken down along the side of the road is never a good feeling.
Given the explosion of social media in the workplace in recent years, it behooves small businesses to have a credible and well thought out social media plan in its possession. For some, however, their social media game plan is about as good as a businessman trying to sell air conditioners in the middle of winter.
Connect with Your Audience
Having a successful social media plan revolves around several factors, most importantly of which is connecting with your audience. If your campaigns are falling on deaf ears, you’re not being very social, are you?
In order to have the best chance at a successful social media campaign, keep these factors in mind:
Make sure you are goal oriented – It is important for your company’s social media campaign to have a goal from the start. Too many companies do social media just because others are doing it, yet they don’t enter the fray with a game plan. If you’re not yet in the social media game, don’t get in just for the sake of it, come ready and able;
Put your ears to the ground – One of the most important rules of any productive social media effort is listening to what your customers or potential clients are saying. Whether it is comments left on a Facebook fan page or responses to your tweets, get the message and respond to it;
Find the right market – Another problem companies end up with is preaching to the choir. Make sure your target audience is just that, the audience you really want and should be talking to. Just throwing a lot of stuff out there in hopes some of it will stick isn’t going to get the job done;
In-house our out of house? – Another key point is will the campaign be done in-house with staff or outsourced to an agency? The advantage to staying at home is you have individuals who know your products, etc. The advantage to going outside is it takes one major project off your plate;
Fresh breath or canned content? – One of the worst things you can do to a social media campaign is recycling old content. Your social media content needs to be fresh and enticing. If you’re just retweeting stale stuff or sharing old news, good luck getting followers and friends;
At the end of the day, your social media efforts should go towards more than just campaigns. Not only do you want your customers being active community participants, but you want them spreading the word of your products and services, actually being in effect extra salespeople.
Engage your audience through your social media efforts, but don’t have a social media presence just for the sake of having one.
If you’re on the fence with social media, get your act together before you come down.
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If you enjoyed this post, contact Rosa Najera. If you have any questions or specific things that you want me to cover or create tutorials send me a comment or an email. Those of you who subscribe to my channel, thank you very much. It means a lot to mean.
Copywriting Research for Beginners – What You Need to Know
There’s no mystery about it: If you’ve never taken a writing course you can become a copywriter fairly quickly – especially with the plethora of basic copywriting guides out there cutting out the esoteric stuff and going straight for the jugular (i.e. what clients want).
How successful or reputable a copywriter you become, however, depends on whether or not you “own” the basics – and there’s no shortcut for that. So before I deliver those 7 meaty offline research tips I promised in the last post, let’s tackle the often glossed-over subject of basic research…
The first thing any journalist is trained in…
The Difference Between Primary Research and Secondary Research
If you sit down and Google subjects, you’re indulging in Secondary Research. That’s reading and working from material others have written about a subject.
“Primary research” means getting to the source:
•Talking to the subject, product creator or certified industry expert (“talking to” sounds so much less intimidating than “interviewing”)
•Reading the actual, original material that people on the net have never seen but are quoting (and misquoting)
•Testing or handling physical materials, products and methods yourself
For example, let’s say you wanted to write an article about popular horse “whisperer”, Pat Parelli. If you contact Parelli yourself and interview him, you’re doing primary research: If you look up articles online about him, you’re dealing with secondary research.
Which type do you think is more likely to help you to:
•Make more impact with authenticity and authority?
•Reveal facts others don’t know?
•Be truly unique?
Yup. Primary research. Every time.
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If you enjoyed this post, contact Rosa Najera. If you have any questions or specific things that you want me to cover or create tutorials send me a comment or an email. Those of you who subscribe to my channel, thank you very much. It means a lot to mean.
Copywriting Research Secrets – 5 Proven Steps for Consistently Landing Interviews
Here’s my most successful method of landing interviews and quotable expert responses, boiled down to 5 simple steps…
1. Keep your request short and to the point. (The subject really isn’t interested in your life history… or how much you loved their latest book.)
2. Ask more than one expert. Don’t pin your hopes on just one authority figure you’d like to quote – ask at least three. That way, if you only get one “yes”, you’ve still got great, quotable material.
3. Always include these 5 details in your request:
• Who you are: (“I am a freelance writer specializing in equestrian articles…”)
• What type of vehicle your request is for: (E.G.: “I’m writing an article entitled “Natural Horsemanship: Hoax or Holy Grail” that I hope to sell to Horse Sport magazine”) – Be honest and up front about this if you’re writing on spec.
• Why you think they’re the ideal choice to answer your question. (“I know you’ve long been a proponent of the Tellington-Jones method and your insights on the equine parasympathetic nervous system are well known…”)
• What sort of interview you have in mind: (“I’d like to arrange a 15-minute telephone interview focusing on your method of natural horsemanship…” or “I would love to quote your answer to one specific question about natural horsemanship…”)
• Your actual question or main focus for the interview: (“I would appreciate it if you could comment on why you stated you don’t endorse the Parelli method at your clinic in Newmarket, last Friday…”)
End it simply “Thanking you for considering my request”…
And one more obvious but crucial point…
4. Remember to include your contact details! The fuller, the better: Someone who doesn’t have time to respond in print might just pick up the phone and call you on the spot. (TIP: Highly proactive, wealthy or A-Type personalities are particularly prone to doing just that, so never leave out your telephone number, assuming they won’t!)
If a potential interview subject doesn’t respond, don’t assume they hate your guts. They may simply not have received your request, or an assistant may have not gotten around to the pile of email in your expert’s inbox, or they may be out of town or 110% engrossed in preparing for an important event. (Good research on your subject before asking can help prevent this latter scenario).
Finally – and this is what will get you repeat interviews, every time…
5. Make sure you follow up!
If a potential interview subject responds, send a prompt “thank you” letter. If their response is to make arrangements for an interview, send another thank you letter when the interview has concluded.
One extra that’s especially important if your expert is an online personality, such as an internet marketer: Do get to know your potential subjects well ahead of time. Friend them on Facebook, follow them on Twitter, comment on their posts if you have something valuable to say, let them see your profile photo attached to your name.
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If you enjoyed this post, contact Rosa Najera. If you have any questions or specific things that you want me to cover or create tutorials send me a comment or an email and I will address it. Those of you who subscribe to my channel, thank you very much. It means a lot to mean.
The Rules of Web Page Sizes
Web Page Sizes:800 x 600, 1024 x 768, 1280 x 1024 Make 100% width and height
SEO Building Blocks
Search Engine Optimization (SEO)
The process begins with effective selection of basic building blocks for your organic search engine optimization campaign – your keywords, and then goes on to apply those keywords at all strategic onsite and offsite places for a wholesome website optimization. That’s why we made it a stand-alone service.Â
Our search optimization services are designed to get your website noticed when potential buyers are looking for the products and services you offer. All major relevancy-based search engines use a unique methodology, algorithm or formula to determine a website’s significance to keyword queries.
At a time where billions of global websites struggle to come up in search rankings, this area of internet marketing has become a battlefield. You need to grow your website constantly, always measuring its performance.
Our SEO experts can achieve this by targeting the internet’s major search properties in order to drive self-qualified prospects to your site, and these organic visitors are the specific audiences looking for your products and/or services and are more likely to convert.
How to Remove Friends on Facebook
Want to delete a friend on Facebook? There are many reasons you want to remove friends on Facebook? For starters, when you opened your Facebook account, you didn’t put too much thought into how you wanted to share information or the purpose of the Facebook page. In trying to understand the differences, the best way to think of this is you may want a Facebook page only for family and friends. Then, you can open another Facebook page for business only. If you’ve mixed the two, their are things you may not want to share with your clients, like family comments….
So the best thing to if this happens to you, this quick guide will show you how to do it.
Once you have logged in to Facebook, on the top right of the page, click on the Account tab and then select the Edit Friends option, which is the one highlighted in the next image:
Once you have done that, you will be directed to a new page. Click on the large button that says “Recently Interacted,” located right above your list of friends, and select “All friends” in the appearing menu. This way you will see the list of all your Facebook friends.
Now you just have to click on the big X at the right side of each friend you want to remove. Facebook will ask you if you are sure, and you will have to click on the button that says “Remove from Friends” to confirm the action.
Although this way you will remove one friend at a time, this method is also the most comfortable way to remove multiple friends on Facebook.
What Exactly Is Viral Marketing
Quick review
Viral marketing, viral advertising, or marketing buzz are buzzwords referring to marketing techniques that use pre-existing social networks to produce increases in brand awareness or to achieve other marketing objectives (such as product sales) through self-replicating viral processes, or analogous. It can be delivered by word of mouth or enhanced by the network effects of the Internet.
Viral marketing may take the form of video clips, interactive Flash games, advergames, ebooks, brandable software, images, or text messages.
The goal of marketers interested in creating successful viral marketing programs is to create viral messages that appeal to individuals with high social networking potential (SNP) and that have a high probability of being presented and spread by these individuals and their competitors in their communications with others in a short period of time.
The term “viral marketing” has also been used pejoratively to refer to stealth marketing campaigns—the unscrupulous use of astroturfing online combined with undermarket advertising in shopping centers to create the impression of spontaneous word of mouth enthusiasm.
Browsersearch.org (yahoo) overrides my Chrome preferences
Annoying plugin hi-jacking your browser? This is one of many annoying plugins that can attach themselves to your browser and you can feel hopeless at times not knowing what to do, so you let it slide a few days, then a few weeks. It’s still there. Each and everytime you begin a new search. How do I get rid of http://www.browsersearch.org/ (yahoo) and return to Google?
This is a dodgy plugin you have installed when you installed another program. Most likely you got it from XVid, like I did. I know because I allowed it to be installed when I was installing the software. I didn’t think much of it so I clicked on the “next” button. I was very busy and just wanted the software installed. If you have already experienced this annoying plugin and want to get rid of it, do the following:
This tutorial is for Google Chrome. Go to your “Customize and control Google Chrome” (wrench icon)
Step 2. Go To “Tool” > “Extensions:
Step 3. Select uninstall the “Veehd” plugin
Step 4. A message will pop up “do you want to uninstall” and click the uninstall.
That’s it! I can honestly say I was hijacked and it doesn’t feel good. Hope this tutorial helped.
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If you enjoyed this post, contact Rosa Najera. If you have any questions or specific things that you want me to cover or create tutorials send me a comment or an email and I will address it. Those of you who subscribe to my channel, thank you very much. It means a lot to mean.
What To Say In A Video Resume
Video resumes are becoming popular with job candidates as a method to stand out from the crowd. It is an opportunity to demonstrate that you are a professional candidate with good verbal communication skills. Recruiters and employers are more likely to remember what they see than what they read in a text resume. Another benefit to having video in your resume is that they are recorded, and can easily be forwarded to hiring managers, posted on web sites, or links shared on Twitter, Facebook, LinkedIn, and other social media sites. After the value of a video resume is understood, a natural question is: What do you say in the video?
A video resume must tell the viewer why they should hire you. Start with “Hello”, your first and last name and the type of position you are seeking. Provide an overview of your skills, your experience, and what you bring to the table. State your greatest strength and provide a real work example of how you used that strength to achieve specific results. The first 30 seconds of the video are critical to gaining the attention of the viewer. You need to give the viewer a reason to keep watching.
Briefly provide a few examples of major accomplishments for which you are most proud. Rather than saying you were responsible for this function or that function, tell the viewer what you accomplished in terms such as cost savings, sales results, product launches, or specific and quantifiable improvements you made. Mention your educational background, relevant certifications, and special awards you have won. Everything you say in the video resume needs to reinforce what you can do that can benefit a new employer.
Close the video resume by summarizing in one sentence why you are a good candidate. Thank the viewer for watching your video, and invite them to contact you for a live discussion. The complete video should take no more than 1 or 2 minutes. Remember that a video resume does not replace the text resume and you do not need to read your resume to the camera. The purpose of the video resume is to verbally expand upon the text, and show a little personality and interest that cannot be seen in text.
If you are camera shy, consider recording an audio resume. The script you use will be identical to a video resume, but you will not have to worry about what you are wearing, your background, eye contact, and all the other visual cues. No matter if you are using an audio resume or a video resume, be sure to focus on your professional life. A resume is no place for personal information, or making jokes. Many of the tips in the article Make a Great Impression in Your Video Interview will apply to making a video resume, so be sure to read the article.
General Tips. Write a script of what you want to say and practice several times until you feel comfortable. Try to keep each sentence relatively short. Run-on sentences are just as cumbersome in video and audio as they are in text. Keep your statements relevant to the job, company, or industry you are targeting. When recording a video resume look directly into the camera. Dress as if you are in a live interview, be careful that the background on your video is professional, and be sure to have a quiet environment. Lastly, remember that the purpose of any resume (text, audio, or video) is to sell yourself to your viewer.
MyStage Marketing believes in the value of video resumes in helping job candidates stand out from the field. Please let us know your thoughts and comments by emailing rnajera@mystagemarekting.com.
