Presentation on Fairshare Model made by Karl Sjogren on Oct. 14, 2014 to Silicon Valley chapter of Nat'l. Asso. for Business Economics.
The Fairshare Model is a performance-based capital structure for companies that raise venture-capital via a crowdfunded IPO
Fairshare model fintech presentation 05.28.15Karl Sjogren
The Fairshare Model is a performance-based capital structure for companies that seek to raise venture capital via a public offering. It balances and aligns the interests of investors and employees.
Fairshare Model presentation to Mayer Brown law firm 9.10.20Karl Sjogren
Presentation on Fairshare Model to the Capital Markets group of Mayer Brown. Mayer Brown has more than 1,500 lawyers and by revenue is the 19th largest law firm in the world. Slides added to list opportunities for clients to use Fairshare Model and major legal issues to explore.
Material used in the Entrepreneurship course (Bachelor in Management) at the Toulouse Business School (Barcelona Campus)
November 2017
Brief review of the different stages in the life of a Start Up company, type of investors, valuation methods, the importance of growth management
Fairshare model fintech presentation 05.28.15Karl Sjogren
The Fairshare Model is a performance-based capital structure for companies that seek to raise venture capital via a public offering. It balances and aligns the interests of investors and employees.
Fairshare Model presentation to Mayer Brown law firm 9.10.20Karl Sjogren
Presentation on Fairshare Model to the Capital Markets group of Mayer Brown. Mayer Brown has more than 1,500 lawyers and by revenue is the 19th largest law firm in the world. Slides added to list opportunities for clients to use Fairshare Model and major legal issues to explore.
Material used in the Entrepreneurship course (Bachelor in Management) at the Toulouse Business School (Barcelona Campus)
November 2017
Brief review of the different stages in the life of a Start Up company, type of investors, valuation methods, the importance of growth management
Entrepreneurship and Financing Options for InnovationSerdar Torun
The presentation outline is:
- Entrepreneur and Entrepreneurship in Turkey
- Financing Stages
- Financing Options (4Fs, Micro-credits, Business Angels, Corporate Venture Capital, Venture Capital, Public Capital Markets)
- Joint R&D
- Spin-Offs
Introduction to Venture Capital and Private Equityguest89b446
I was invited to speak at the HR College of Commerce in Mumbai today as part of their "Corporate Dialogue" lecture series. This deck introduces freshman and sophomore students in commerce, economics and finance to venture capital, private equity and entrepreneurship. It also presents a primer on career options in finance for college graduates in India.
Envisage. Stratigize. Execute: IDEA to BUSINESSAnjana Vivek
Coming up with a brilliant idea for your venture is just the beginning, taking it forward is where many people flounder. Session at Eximius, the Entrepreneur Summit at IIMB on how to go about implementing your idea.
Impress the Angels: How to Make It Into "Startup Heaven"Palo Alto Software
What is an angel investor? How do they invest? What's the difference between an angel investor and a venture capitalist?
This presentation answers all these questions, and also includes tips from actual angel investors on what you can do to impress an angel.
VC, PE, Angel, HNI, Seed Investor, Incubator, Accelerator, Corporate Investor, Strategic Investors, 3 Fs .. how do you distinguish between them? What is the homework you need to do before you approach an investor? How will you stand out from the clutter and demonstrate you can create value? How will you crack the exam of getting investors into the company, assuming you have a great idea, product, service or solution?Should you think of Plan B? Should you revisit your Business Model?
Start ups challenges for funding optionsAnjana Vivek
How do you choose from this range of investors and more: HNIs, informal and formal Angel groups,Seed Funds,Venture Capital, Private Equity, Banks, Strategic Investors, Corporate Funds; (Family) Business Groups, Indian & Global, Government supported funds, Impact Investors, Incubators, Accelerators, Crowd funding, Online funding platforms
To be able to distinguish among the five forms of entrepreneurial capital
To consider how to attract financing from your family and how to bootstrap a business
To identify how informal investors differ from other parts of the funding community
To differentiate between debt and equity as methods of financing
To examine commercial loans, social lending and public stock offerings as sources of capital
To understand the stages of venture investing
To study the market for venture capital and to review venture capitalists’ evaluation criteria for new ventures
To discuss the importance of evaluating venture capitalists for a ‘best fit’ selection
To discuss private placements as an opportunity for equity capital
To examine the business angel market
To describe new forms of entrepreneurial capital beyond financial capital
To be familiar with Islamic finance and micro-credit
To understand the criteria used by impact investors
To appreciate the need for raising natural capital as part of an entrepreneurial venture.
Angel investing is a great way to participate in the growing trend of entrepreneurship. Responsible investing is very important for the health of your portfolio and for your relationships with founders. Don't invest without understanding a few simple things. Equity investments are long term relationships. Investors must do their part to be good investment partners.
Have a great idea, but not sure how to get funding to turn it into a business? This presentation highlights the many ways to find funding and focuses on the pros & cons of using venture capital to launch.
making syndicated angel investments is proven to lower the risk especially when making the first angel investment.
Bill Payne will share his wide experience on this fiels and give his best practices to find a balanced solution.
More information: www.fiban.org/billpayne
Fairshare model cannabis presentation 11.19.15Karl Sjogren
Cannabis investor webcast presentation on The Fairshare Model: a performance-based capital structure for companies that raise venture capital via a public offering
Fairshare Model HWZ Swiss presentation 6.19.19Karl Sjogren
Presentation on The Fairshare Model made on June 19, 2019 in San Francisco by Karl Sjogren to a cohort of visitors from HWZ Zurich University of Applied Sciences in Business Administration.
Entrepreneurship and Financing Options for InnovationSerdar Torun
The presentation outline is:
- Entrepreneur and Entrepreneurship in Turkey
- Financing Stages
- Financing Options (4Fs, Micro-credits, Business Angels, Corporate Venture Capital, Venture Capital, Public Capital Markets)
- Joint R&D
- Spin-Offs
Introduction to Venture Capital and Private Equityguest89b446
I was invited to speak at the HR College of Commerce in Mumbai today as part of their "Corporate Dialogue" lecture series. This deck introduces freshman and sophomore students in commerce, economics and finance to venture capital, private equity and entrepreneurship. It also presents a primer on career options in finance for college graduates in India.
Envisage. Stratigize. Execute: IDEA to BUSINESSAnjana Vivek
Coming up with a brilliant idea for your venture is just the beginning, taking it forward is where many people flounder. Session at Eximius, the Entrepreneur Summit at IIMB on how to go about implementing your idea.
Impress the Angels: How to Make It Into "Startup Heaven"Palo Alto Software
What is an angel investor? How do they invest? What's the difference between an angel investor and a venture capitalist?
This presentation answers all these questions, and also includes tips from actual angel investors on what you can do to impress an angel.
VC, PE, Angel, HNI, Seed Investor, Incubator, Accelerator, Corporate Investor, Strategic Investors, 3 Fs .. how do you distinguish between them? What is the homework you need to do before you approach an investor? How will you stand out from the clutter and demonstrate you can create value? How will you crack the exam of getting investors into the company, assuming you have a great idea, product, service or solution?Should you think of Plan B? Should you revisit your Business Model?
Start ups challenges for funding optionsAnjana Vivek
How do you choose from this range of investors and more: HNIs, informal and formal Angel groups,Seed Funds,Venture Capital, Private Equity, Banks, Strategic Investors, Corporate Funds; (Family) Business Groups, Indian & Global, Government supported funds, Impact Investors, Incubators, Accelerators, Crowd funding, Online funding platforms
To be able to distinguish among the five forms of entrepreneurial capital
To consider how to attract financing from your family and how to bootstrap a business
To identify how informal investors differ from other parts of the funding community
To differentiate between debt and equity as methods of financing
To examine commercial loans, social lending and public stock offerings as sources of capital
To understand the stages of venture investing
To study the market for venture capital and to review venture capitalists’ evaluation criteria for new ventures
To discuss the importance of evaluating venture capitalists for a ‘best fit’ selection
To discuss private placements as an opportunity for equity capital
To examine the business angel market
To describe new forms of entrepreneurial capital beyond financial capital
To be familiar with Islamic finance and micro-credit
To understand the criteria used by impact investors
To appreciate the need for raising natural capital as part of an entrepreneurial venture.
Angel investing is a great way to participate in the growing trend of entrepreneurship. Responsible investing is very important for the health of your portfolio and for your relationships with founders. Don't invest without understanding a few simple things. Equity investments are long term relationships. Investors must do their part to be good investment partners.
Have a great idea, but not sure how to get funding to turn it into a business? This presentation highlights the many ways to find funding and focuses on the pros & cons of using venture capital to launch.
making syndicated angel investments is proven to lower the risk especially when making the first angel investment.
Bill Payne will share his wide experience on this fiels and give his best practices to find a balanced solution.
More information: www.fiban.org/billpayne
Fairshare model cannabis presentation 11.19.15Karl Sjogren
Cannabis investor webcast presentation on The Fairshare Model: a performance-based capital structure for companies that raise venture capital via a public offering
Fairshare Model HWZ Swiss presentation 6.19.19Karl Sjogren
Presentation on The Fairshare Model made on June 19, 2019 in San Francisco by Karl Sjogren to a cohort of visitors from HWZ Zurich University of Applied Sciences in Business Administration.
Fairshare Model presentation for F50's SVE Demo Night @ Google Karl Sjogren
July 30, 2019 presentation by Karl Sjogren, author of the book "The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings."
Most of the time VCs have one or more discrete reasons for saying “no.” Although it would be ideal if they relayed them to founders clearly and openly, they sometimes feel pressure to take the less confrontational path and say vague things “this is too early for us” when the truth is more difficult to hear. VCs have a code around rejection language that often leaves founders scratching their heads to interpret, but candor is usually better for both parties long-term. Truthfully, the reason for the “no” often has little to do with the founder or the details of the business, but lots to do with that VC’s personal interests, portfolio, or history.
What is venture capital, and how does it work?MyCareCrew1
Discover how venture capital works, its risks & rewards, and its role in fueling startup growth. Learn how venture capital firms work & their impact on startups.
Exploring Abhay Bhutada’s Views After Poonawalla Fincorp’s Collaboration With...beulahfernandes8
The financial landscape in India has witnessed a significant development with the recent collaboration between Poonawalla Fincorp and IndusInd Bank.
The launch of the co-branded credit card, the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card, marks a major milestone for both entities.
This strategic move aims to redefine and elevate the banking experience for customers.
What website can I sell pi coins securely.DOT TECH
Currently there are no website or exchange that allow buying or selling of pi coins..
But you can still easily sell pi coins, by reselling it to exchanges/crypto whales interested in holding thousands of pi coins before the mainnet launch.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and resell to these crypto whales and holders of pi..
This is because pi network is not doing any pre-sale. The only way exchanges can get pi is by buying from miners and pi merchants stands in between the miners and the exchanges.
How can I sell my pi coins?
Selling pi coins is really easy, but first you need to migrate to mainnet wallet before you can do that. I will leave the telegram contact of my personal pi merchant to trade with.
Tele-gram.
@Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the telegram contact of my personal pi merchant to trade with
@Pi_vendor_247
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the Telegram username
@Pi_vendor_247
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how can I sell pi coins after successfully completing KYC
Fairshare Model presentation
1. Fairshare Model
A performance-based capital structure for
companies that raise venture capital via a
public offering
Karl M Sjogren (book expected in early 2015)
NATIONAL ASSOCIATION FOR BUSINESS ECONOMICS
SILICON VALLEY CHAPTER
OCTOBER 14, 2014
Hofstadter's Law
It always takes longer than you expect, even when
you take into account Hofstadter's Law.
2. Target audience for the book
• Thinkers. People who:
• Have expertise in capital structures
• With potential interest in investing in, or working for, an emerging growth company (start-up).
• Want practical insight into how to spur economic growth and job creation.
• Are open to new perspective on how to reduce income inequality.
• Are open to a fresh sense of how capitalism could work, if only market forces are brought to bear in
capital markets.
• The horns of my dilemma--write for experts (small #) or novices (big #)? How to do both?
• I want to enhance your ability to contribute thought-provoking ideas with those who consider
themselves informed about micro & macro economics.
• Squirm questions: “What was the valuation of the company?” and “Why does that make sense?”
3. Think of a Capital Structure as Art
Look at it from different angles.
• How is it constructed?
• Are voting rights concentrated by class?
• Stock-based compensation: concentrated or broad participation?
• Who benefits from unusual features?
• Do deal attributes fit the company’s stage of development?
• Valuation; what does it say about how the company views investors?
• Is it earned based on performance or the passage of time?
4.
5. Vision, Goals and Perspective
Vision
Middle Class investors will be able to make venture capital investments…
…. on terms comparable to those that professional investors get
Goals
1. Expand entrepreneur access to capital.
2. Offer liquidity to wealthy angel investors who support private companies.
3. Create an attractive option for middle class investors to be “mini angel” investors
Perspective
Public investor-centric (vs entrepreneur-centric or private investor-centric)
Robust appreciation for everyone who participates in the entrepreneurial process
Game-theory: Pareto-optimality vs Zero-Sum
6. The Fairshare Model Begins Here
ENTREPRENEUR:
I have an idea but need money
INVESTOR:
How much of your company do I
get if I give you the money?
7. Target Companies for Fairshare Model
Companies that have raised a round or two of funding from angel investors
Need $5M+ in venture capital.
The Fairshare Model is an alternative to a round from a venture capital fund.
◦ There is no limit on the amount that can be raised.
It is designed to raise public capital for a venture-stage company.
8. What is a “Venture-Stage” Company?
A company with these risk factors:
• Market for its products/services is new/uncertain
• Unproven business model
• Uncertain timeline to profitable operations
• Negative cash flow from operations
• In other words, it requires investor cash to operate
• Little or no sustainable competitive advantage
• Execution risk; team may not build value for investors
Many public companies list such risk factors in their disclosure documents
9. Fairshare Model
• Two classes of stock, Investor Stock and Performance Stock.
• Both vote, only Investor Stock can trade (registered with SEC).
• Performance Stock can never trade.
• Based on performance, Performance Stock converts to
Investor Stock.
Approval from each class of stock for:
• Board member election
• Change to conversion criteria.
• Compensation plans involving Investor Stk.
• Changes to capital structure.
• Acquisition matters.
10. Premise:
IDEAS ARE JUST A MULTIPLIER OF EXECUTION
Value of an Idea Value of Execution
Awful Idea = -1 No Execution = $1
Weak Idea = 1 Weak Execution = $1,000
So-So Idea = 5 So-So Execution = $10,000
Good Idea = 10 Good Execution = $100,000
Great Idea = 15 Great Execution = $1,000,000
Brilliant Idea = 20 Brilliant Execution = $10,000,000
To make a business, you need to multiply the two.
The most brilliant idea, with no execution, is worth $20.
The most brilliant idea takes great execution to be worth $20,000,000.
Tip of the hat to:
Derek Sivers www.sivers.org
11. But, that doesn’t seem to explain the
valuation of venture-stage companies
When a conventional capital structure is used, what drives
the increase in valuation that often occurs as a company
approaches its IPO?
Is it performance…
…. or is it something else?
13. What is a “conventional cap structure?”
John Kenneth Galbraith coined “conventional wisdom.”
It is often promulgated by experts and media pundits.
There is conventional wisdom about how to organize (and value) the ownership interests in a
corporation.
I refer to it as a “conventional capital structure” or “conventional model.” And, the terms of the
sale of stock using such a structure as a “conventional deal.”
Two characteristics of a conventional cap structure:
1. A value for future performance must be set when a company issues new stock, and
2. If there is complexity, its purpose is to favor pre-IPO shareholders (over public shareholders).
He uses it to describe a convenient and comfortable point of view that is often false.
16. Fundamental problem--valuation
Achilles’ heel: At the time of an equity financing, it requires the issuer and investors to set a
value for future performance.
For venture stage companies, this is hard to do in a rational manner.
The need to value undelivered performance is the fundamental problem of a conventional capital structure.
Key difference between a conventional model and the Fairshare Model;
How they deal with uncertainty
In equity finance, uncertainty can’t be eliminated, it can be moved
17.
18.
19. VCs Side-Step the Valuation Problem
VCs sidestep the valuation problem by securing “anti-dilution provisions”
Price protection
(a valuation cushion)
If later investors buy in at a higher valuation, all is well.
If the valuation doesn’t rise enough, investors with price protection get additional shares for
the money they initially put in (i.e. their buy-in valuation is retroactively reduced).
Risk of overpaying for
future performance
20.
21. You may ask yourself…
“What explains this valuation discrepancy?”
Is it performance? Lower risk?
More buyers competing for shares?
Less savvy buyers?
An IPO is not a controlled experiment on value;
it does not compare what wealthy pre-IPO
investors feel the company is worth to what
wealthy public investors feel it is worth.
A new, active ingredient is in the mix; investors who have been unable to invest earlier.
They effervesce the valuation because:
1. They are generally valuation unaware
2. They are enthusiastic
Price inelasticity
22. Two Explanations for Valuation Discrepancy
1. The Next Guy Theory of Valuation
2. Market Forces
23. Next Guy Theory of Pricing
For an investment, the price is no more than what the buyer believes the Next Guy will pay,
less a discount.
27. Market Forces
Next Guy Theory applies to items that have utility (food, clothing, etc.) and to those without
utility (investments).
For items with utility, a wholesale/retail price difference exists.
Apply the concept it to capital formation
• “Product” = equity in a venture-stage company
• “Manufacturer” = issuer
• “Wholesale customers” = pre-IPO investors
• “Retail customers” = public investors
28. Comparable product, different pricing?
No, the products are not comparable, they have important differences.
The product that is sold at wholesale to pre-IPO investors, the institutional ones at least, is much
better than the retail version.
• The stock that VCs get have price protection and other features.
The product sold to public investors lacks such features.
So, the retail buyer gets an inferior product and pays more for it!
Can you think of another market—a competitive market—where that happens?
29. “What explains the valuation increase in the
product as company approaches an IPO?”
Four hypothetical drivers
1. It is considered “normal”
- But, many things that were once considered normal are no longer
The Next Guy Theory provides insight into the dynamics, but what are the drivers?
2. A bigger neighborhood
- More Potential Buyers = Higher Potential Demand = Higher Potential Price
3. Competitive market forces are weak
- If strong, issuers would compete for investors by offering lower valuations
4. VC value-add (knowledge, connections, ability to write a big check quickly)
- Challenge for companies that crowdfund – “How to replicate VC value-add?”
- How much is the VC value-add worth to public investors?
30. When sellers compete for buyers
Buyers get better deals
• Food and over the counter drugs: generic or private label vs. branded
• Books: Amazon vs. book stores
• Real Estate: web-listings vs. the Multi-Listing System limited to broker-dealers
• Clothing: designer knock-offs vs. designer labels
• Stores: Factory outlet vs. department stores, or, warehouse (Costco) vs. traditional retail
Can a similar dynamic be applied to stock in venture-stage companies? Lower valuations, better investor
protections?
Yes, if the SEC requires all issuers of equity securities to disclose their valuation and how they
rationalize it. This information would strengthen market forces lead to Better Capitalism.
31. Problem of a conventional cap structure
for Public Investors
1. The basis for a high valuation is shaky.
2. They assume most of the risk that it is too high.
Interlaced foundations of the problem
• Public investors pay “retail” but don’t know it.
• They are not offered a better deal because
sellers see no advantage to offering one
(buyer: “what’s valuation?”).
• Don’t demand a better deal because
they are not valuation savvy.
• Not valuation savvy because the SEC doesn’t
require valuation disclosure.
32. The Fairshare Model bargain for investors
If the company performs, investors will be diluted on a percentage basis—their slice of the
ownership pie will be reduced.
On an economic basis, however, if the performance translates into a higher valuation, investors
should not suffer dilution.
VCs like to say “I’d rather own a small slice of a big pie than a large slice of a small pie”.
Same principle.
33. The Fairshare Model bargain for employees
In addition to the typical forms of compensation--salary, benefits, bonuses and stock options
on its Investor Stock-- employees have an interest in its Performance Stock pool.
• Performance Stock is priced like founder’s stock; its only value is its ability to
vote and its potential to convert into Investor Stock.
As the team performs well enough to meet the conversion criteria, employees have another way to
earn stock that they can sell (or hold).
Huge Potential: A company that adopts the Fairshare Model could have a competitive advantage
with respect to recruiting and managing human capital
34. Balance & Align Interests
Entrepreneurs have an incentive to offer public investors a low valuation.
Equity incentives tethered to collective operational performance
Investors have an interest in helping the company meet goals
Cooperation as a competitive model
VS.
35. 1st challenge for the Fairshare Model
Establish that there is a critical mass of investors with interest in the Fairshare Model
We Are Here!
We Are Here!!
We Are Here!
We Are Here!!!
BEFORE companies think about how to make the Fairshare Model work for them…
….A LOT of you need to make a little bit of noise like the tiny residents of Whoville.
With each of your small voices you need to create buzz.
You can cause others to take note and join in.
People who like the Fairshare Model must combine their small voices and shout….
36. 2nd challenge for the Fairshare Model
Debug and shake it down. This will largely be done by experienced entrepreneurs, attorneys,
accountants, angel investors and others.
Conventional cap structure Ponderables
• Does it scale…downward? Its
approach to valuation works for
established companies, but, does it
work well for public venture-stage
companies?
• Can the interests of investors and
employees be better aligned as the
valuation climbs?
The “Ponderables”:
• How might performance be defined?
• Who should define performance?
• How might it be measured?
• Who should measure it?
• How should rewards of performance be allocated?
• Who should administer the rewards of performance?
• What are the tax and accounting implications of the Fairshare Model?
37. 3rd challenge for the Fairshare Model
Time and experience. Sustaining goodwill between the providers of capital and labor is the
central challenge.
38. Better Capitalism…the
new frontier
This is the construction of the Fairshare Model.
It’s mission: to explore new relationships
between labor and capital,
to help entrepreneurs finance companies with
public venture capital,
to boldly go where no capital structure has
gone before!
39. Let me know what you think!
www.fairsharemodel.com
Under Resources tab, first chapter available.
Each month, I’ll add another, up to about five.
Target is about 300 pages & 20 chapters.
Plan A: e-book in Q1 ‘15, then crowdfund a print version.
Email me: karl@fairsharemodel.com
Meanwhile, Talk About the Fairshare Model!