Founder Friendly Standard v1.0 has been updated today. The new version of the standard is 1.1. Here is a description of the change:
Section 2.4 – clarifying language (in bold) has been added for companies outside of the United States. The section now reads: Due to potentially devastating tax consequences, the company tells individuals receiving sweat equity in the United States to consult with a tax professional about making an election under Section 83(b) of the Internal Revenue Code. Founders who live or pay taxes outside the United States are similarly advised to consult tax professionals about applicable local and national taxes.
Grays Sports Almanac for Venture Capital proposes a new risk management strategy for venture capital. In this book, I outline why a venture fund might beat the odds by purchasing 2,208 to 4,416 warrants on startups. Startups would operate under a governance framework called the Founder Friendly Standard, which gives entrepreneurs control of their companies. In exchange, the venture fund would have the option to exercise warrants for 15 years—purchasing discounted equity only in the startups that become successful.
In 2017, Forbes published an article called, “Group of White Men in Patagonia Vests Confused for VC Fund, Raise $500 Million.” It took a while for me to realize the article was satire. A year later, researchers from Harvard, IESE, and Yale unintentionally corroborated the Forbes story with the finding that luck and past success are the winning factors for startup investors—not skill (Nanda et al., 2018). Luck and past success can cause venture capitalists to become overconfident and tinker with their portfolio companies. This can be a problem for entrepreneurs and for limited partners (often pension funds and family offices) who trust venture capitalists to invest wisely.
I own a single share in a handful of public companies. Each share gets me into the annual shareholder meeting where I can ask questions to Fortune 500 CFOs, CEOs, and board members. 2018 is my second year going to the meetings, and the strategy is effective at putting me in a room of 15 difficult-to-access people for 30 minutes. Anyone can follow this strategy. If you’re interested in replicating it, check out my portfolio here.
At last week’s shareholder meeting for a major consumer products company, I ran into a former CEO that once worked with a colleague of mine. This CEO was highly focused on the customer and led a Fortune 500 company through a significant growth period—all the way to an acquisition. Now, he’s on the board of several Fortune 500 companies. We’ll call him Mike.
My colleague and I planned a question for Mike about how to keep a company focused on the customer as you transition from an operator (CEO) to an advisor (board member).
I imagine you landed on this page because you read the Ray Dalio interview in the Tony Robbins book, Money: Master the Game, and you’re trying to remember what percentage (%) of stocks, treasury bonds, gold, and commodities are in the All Weather Portfolio – adapted for individual investors.
How the startup struggles of three entrepreneurs inspired Founder Friendly Standard
What follows is the story of the startup struggles that inspired Dan, Adam, and me to write Founder Friendly Standard in 2017 to help other entrepreneurs avoid our mistakes. The story is called, “I’ll be the Sean Parker to your Mark Zuckerberg.” It was originally written as a speech about entrepreneurship I delivered one time at Southern Methodist University (SMU) on March 2, 2018.
When I was in my 20s, I met Gk Parish-Philp, a co-founder of DivX. I asked him how to get investors for my startup. He said, “You don’t want investors. They’ll take too much control.”
“That can’t happen to me,” I thought.
Years later, when I was getting forced out of a successful company that I started, I realized Gk was right.
Three weeks ago, I told a teacher of mine that I was working on a thought leadership project. “What makes a thought leader?” he asked.
His challenge led me to search for a common thread. I studied titans like the IBM Institute for Business Value, Think with Google, and the US Federal Reserve. Then, I discovered what they had in common. Each changed a predominant question in their field.
Lowell McAdam, the CEO of Verizon, told analysts, “This is going to be one of those if-you-build-it-they’ll-come moments…” He was explaining at the JP Morgan Technology, Media and Telecom conference why Verizon plans to keep investing in microcells and attaching them to buildings.
It’s the same reason John Donovan told analysts at the Citi Technology, Media and Telecommunications Conference why AT&T was boosting its network capacity. When network speeds get faster, new technologies spring up to consume that speed. According to Donovan, “5G is different because its performance is so much better that it’s going to enable a whole bunch of new-to-the-world use cases, whether it’s live maps, autonomous cars, virtual reality.” We are indeed witnessing an if-you-build-it-they’ll-come moment for telecom.
Can entrepreneurs make great employees? Randy Skattum, Global Marketing Communications Director for Celanese – a Dallas-based, Fortune 500 diversified materials company – thinks so.
I sought Randy’s advice about integrating my entrepreneurial skills into a big company. Here’s what Randy had to say about my career pivot.
Eisaiah: Great to meet you, Randy. What has been your experience with entrepreneurship?
I started my career in strategic consulting. In that business, you have to be an entrepreneur. You are selling yourself as a solution to colleagues and clients.
Your intellectual capital is your product – your skills, your network, and your experience. You put that capital to work – and if successful – you continue to grow in your capabilities across projects and leverage your investments in yourself with new opportunities.
Only a few Dallas drivers follow at a two-second stopping distance. Maybe this is why I crawl past two and three accidents every day on my way to work.
Generally, my blog is about designing business-to-business (B2B) marketing that shortens the customer journey. This takes focus and mental energy. Accident-related traffic erodes mental energy. Today at Toastmasters, I raised the issues of following too closely and distracted driving.
My assignment from the competent communication manual was Speech 2: Organize Your Speech. Below is the transcript.
Thank you for that warm introduction, Mr. Toastmaster.
Good morning! Last week, I left my house at 6:15am to drive to our meeting. Five minutes into my drive, brake lights lit up all around me.
A firetruck was blocking the fast lane on the 30. Ambulance and police lights flashed. There was a car wreck. I got onto the 635 freeway. Five minutes on the 635 freeway and the scene repeated itself. I passed the second accident. As I was taking the off-ramp, I found myself admiring a dark green, sleek Jaguar – as it cut me off.
I pulled into the parking lot here at Denny’s and breathed a sigh of relief. This story happened last Wednesday, but it happens every day in Dallas.