New Book: Founder’s Dilemmas

This book looks good: “Founder’s Dilemmas: Anticipating and Avoiding the pitfalls that can sink a startup”. I came across it in the “Startup Lessons Learned” Blog, which may be the best blog about leann startups.

This excerpt talks about a common scenario with startups, where the founders assume that they way they chose to split equity on day 0 will continue to work for them as time goes on:

“How should founders deal with such developments? In short, by assuming when they do the initial split that things will change, even if the specific changes cannot be foreseen, and therefore structuring a dynamic equity split rather than the static splits used at Zipcar, govWorks, and many other startups. As important as it is to get the initial equity split right—by matching it as closely as possible thefounders’ past contributions, opportunity costs, future contributions, and motivations—it is equally important to keep it right; that is, to be able to adjust the split as circumstances change.” (fromFounder’s Dilemmas: Equity Splits)

I think I will be getting the book.

p.s. not to be a scrooge, but shouldn’t the title be “Founders’ Dilemmas”?

Bubble Bubble Sign Of Trouble

The thing about a bubble is that while people worry about it, no one is actually sure whether they are in one, and especially when it will be over. The other thing about bubbles is that they keep happening because they are the result of human nature (greed and self-deception):

“Less than a decade after the dot-com bust taught Wall Street and Silicon Valley investors that what goes up does not keep going up forever, a growing number of entrepreneurs and a few venture capitalists are beginning to wonder if investments in tech start-ups are headed toward another big bust.”…

“The chief evidence, according to industry experts and analysts, is the way venture capitalists and established companies are clamoring to give money to young companies, including those with only a shred of an idea. They are piling into me-too start-ups that imitate popular Web companies that already received financing. Companies that involve social shopping, mobile photo sharing and new social networking are finding it easy to attract investors because no one wants to miss the next big thing.” (from Sillicon Valey Shows Sign of a New Dot-Com frenzy)

If you think stronger regulation is a good answer, heed Buffett

Check out this post If you think stronger regulation is a good answer, heed Buffett:

“Warren Buffett gave a three-hour interview in August. Here’s an interesting bit from the transcript:

QUICK: If you imagine where things will go with Fannie and Freddie, and you think about the regulators, where were the regulators for what was happening, and can something like this be prevented from happening again?

Mr. BUFFETT: Well, it’s really an incredible case study in regulation
because something called OFHEO was set up in 1992 by Congress, and the sole job of OFHEO was to watch over Fannie and Freddie, someone to watch over them. And they were there to evaluate the soundness and the accounting and all of that. Two companies were all they had to regulate. OFHEO has over 200 employees now. They have a budget now that’s $65 million a year, and all they have to do is look at two companies. I mean, you know, I look at more than two companies.

QUICK: Mm-hmm.

Mr. BUFFETT: And they sat there, made reports to the Congress, you can get them on the Internet, every year. And, in fact, they reported to Sarbanes and Oxley every year. And they went–wrote 100 page reports, and they said, ‘We’ve looked at these people and their standards are fine and their directors are fine and everything was fine.’ And then all of a sudden you had two of the greatest accounting misstatements in history. You had all kinds of management malfeasance, and it all came out. And, of course, the classic thing was that after it all came out, OFHEO wrote a 350–340 page report examining what went wrong, and they blamed the management, they blamed the directors, they blamed the audit committee. They didn’t have a word in there about themselves, and they’re the ones that 200 people were going to work every day with just two companies to think about. It just shows the problems of regulation.

QUICK: That sounds like an argument against regulation, though. Is that what you’re saying?

Mr. BUFFETT: It’s an argument explaining–it’s an argument that managing complex financial institutions where the management wants to deceive you can be very, very difficult.

” (from: from Newmark’s Door)

Originally posted on Oct 04, 2008. Reprinted courtesy of ReRuns plug-in.