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Displaying Category 'Online Media Reviews'

Enter to Learn

Suster on “Earn or Learn”

Posted by Al Doan under Online Media Reviews, Reactions to Mentors

23

May
Hard Knock MBA (Personal MBA)

Just read this post called “Earn or Learn” by Mark Suster that I’d had open in my reading browser for a while.  I found it worth sharing for one reason; it removes the ambiguity around startup earnings.  He addresses the situation that young people often stumble into – “I’m going to work at company X and they’re giving me stock!”  Suster dives right in -

Yet I often hear people asking about these types of opportunities express their questions to me whether I think this company is going to be a big hit.  It’s clear to me that many people confuse learn with earn.  I will do a simple calculation for them that goes like this.  OK, you would own 0.25% of the stock.  They raised $5 million in their B round.  Let’s assume that the company raised it at a normal VC valuation, which means it gave up 33% of the company and thus $5 million / 33% = $15 million post-money valuation.  If you never raise another round of venture capital (a big if) and if your company is sold for the normal venture exit ($50 million on average for 200 or so annually that get sold) then what is your stake?  $125,000.  Yup.  Simple math would have solved that but people rarely do the calculations or think about it.

And let’s say that it took 4 years to exit – that’s $31,250 / year.  Now … these are stock options and not restricted stock so you’ll likely be taxed at a short-term capital gains rate (see comments section for why).  In California that averages around 42.5% so in my state after tax you’d make an extra $18,000 / year and that’s in a positive scenario!  BTW, this ignores liquidation preferences which actually mean you’ll earn less.

I had a friend get a job offer with a startup recently that had received some funding , they explained that they paid a slightly lower salary but that he got stock options with the company, his question to me was how do I know if it’s a good idea?  I thought about for a minute, and I didn’t exactly know how to decipher the startup charade into an actual number either.  We ended up just asking the CEO directly, but knew there had to be a simpler breakdown of what was actually going on in such a situation.  Mark does a great job of doing just that.  Give it a read, and don’t be intimidated by the intentionally confusing chaos.

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Hard Knock MBA (Personal MBA)
Hard Knock MBA (Personal MBA)

Be better at failing

Posted by Al Doan under Online Media Reviews

6

May
Hard Knock MBA (Personal MBA)

So I had this come across my inbox the other day, and I finally got around to reading it.  I generally will glance over a blog like this in about 10 seconds to decide if I want to read it, but this post leads out with the title - Business Lessons from the Land of Hard Knocks and the opening paragraphs

I wrote this three years ago  after burning through my family’s life savings in a failed startup, but never posted or published it – as frankly it hurt too much.

After all, no one ever dreams at the end of the ride, they’ll be wondering whether they should put a bullet in their head so their family can collect the life insurance to pay the bills – or that they’ll be forced to rip their family from Sunny San Diego and relocate to the mid-south.

I was obligated to read.  And to be quite honest, I feel like the rest of his post didn’t do his lead in justice, I was expecting some very raw emotional story, but instead he gives us a list, which is also nice, just not as dramatic :)

The list is really about failure, and getting better at it.  I think someone who fails well, will ultimately succeed.  Failing can make you shrewd, smart, and insightful, and as an entrepreneur / business person, you need those skills.  Frankly, that’s why there is so much value in entrepreneurship, there is rarely a safety net or a nice big hug at the end of a failure, you get the lesson in its most raw form.  It’s kind of like golf, where when you get to the end, and you look back and you failed, there may have been some circumstances that didn’t help, but in the end, you can only blame yourself.  It was, after all, your business.

So go read Kevin Mireles’ list of 7 things he learned, and be better, because while failure is valuable, it still hurts.

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Hard Knock MBA (Personal MBA)
Hard Knock MBA (Personal MBA)
   
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