How to think about cash vs. equity compensation. It’s among the most-asked questions on startup forums, and an issue we’re dealing with right now at WPEngine as we bring on new employees: How do you decide how much equity (shares) to give a new employee or partner?
Especially when the company is young and according to typical financial assessment the shares are “worth nothing?” The question is further complicated when the new hire is getting a salary. Typically the salary is less than market with the balance given in the form of equity, but again how do you compute that when the stock is, today, of no value? With WPEngine recently I had yet another question to answer: “What if I took $X/mo salary, then how much equity would you part with?
Here’s a simple framework for how to come up with those numbers. When someone works for less salary than they deserve (meaning: what they could make elsewhere), I think of that as a cash investment they’re making in your company. Financially, these two scenarios are identical, therefore P must equal Q. Top 20 Articles On How To Assemble A Startup Team. Must Read Books for Startup Founders.
Business Models on the Web. Business models are perhaps the most discussed and least understood aspect of the web.
There is so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means. In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.
Some models are quite simple. Internet commerce will give rise to new kinds of business models. Business models have been defined and categorized in many different ways. The basic categories of business models discussed in the table below include: The models are implemented in a variety of ways, as described below with examples. Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent.
Hear the podcast: Audio | Transcript Things to read: _preview.pdf (application/pdf Object) What’s A Startup? First Principles. Success consists of going from failure to failure without loss of enthusiasm.
Winston Churchill Everyone knows what a startup is for – don’t they? In this post we’re going to offer a new definition of why startups exist: a startup is an organization formed to search for a repeatable and scalable business model. A Business ModelOk, but what is a business model? A business model describes how your company creates, delivers and captures value. Or in English: A business model describes how your company makes money. Think of a business model as a drawing that shows all the flows between the different parts of your company.
While this is a mouthful, it’s a lot easier to draw. Drawing A Business ModelLots of people have been working on how to diagram and draw a business. Alexander Osterwalder's Business Model Template (At Stanford, Ann Miura-Ko and I have been working on a simplified Silicon Valley version of this model. But What Does a Business Model Have to Do With My Startup? Stay tuned.