Some Thoughts about Selling at Startups. Many MBA programs still cater too much to the needs of large, corporate management jobs or prepare students to enter big consulting companies or investments banks.
If you haven’t read Adam Lashinsky’s awesome new book about Apple, you should. It takes on many of the lessons MBA programs and Corporate America have been teaching about business for the past 50+ years and questions whether lessons from Apple might be more applicable in thinking about the future. It is with this backdrop that I was really happy to learn from my friend Ethan Anderson (HBS alum & founder of RedBeacon) about an awesome program at HBS run by Tom Eisenmann called Launching Technology Ventures. Here is a sample of the reading list for the course that gives you a flavor for just how modern and practical this course is. And that leads me to today’s post. I got an email recently from my friend & fellow VC, Jeff Bussgang from Flybridge Capital Partners in Boston. Erin’s main points: Specifically, Understanding How Dilution Affects You At A Startup.
Editor’s Note: This is a guest post by Mark Suster (@msuster), a 2x entrepreneur, now VC at GRP Partners.
Read more about Suster at his Startup Blog, BothSidesoftheTable. Everybody knows that when you raise money at a startup your ownership percentage of the company goes down. The goal is to have the value of the startup go up by enough that you own a smaller percentage of a much larger business and therefore your total personal value goes up. The simplest way to think about this is: If you own 20% of a $2 million company your stake is worth $400,000.
If you raise a new round of venture capital (say $2.5 million at a $7.5 million pre-money valuation, which is a $10 million post-money) you get diluted by 25% (2.5m / 10m). But understanding how you’re likely to get diluted over time is a more difficult concept. I’ve had to simplify a bit, but to make it easier to understand I’ve teamed up with Jess Bachman at Visual.ly. And Jess is awesome at his trade. The Illusion Of Social Networks. Editor’s note: Guest contributor Semil Shah is an entrepreneur interested in digital media, consumer internet, and social networks.
He is based in Palo Alto and you can follow him on twitter @semilshah. The world is full of illusions. Magicians use a cascade of mirrors, smoke, and misdirection to trick their audiences into believing the unbelievable. In the process, they mystify them, capturing their attention. Whether it’s David Copperfield cutting his lovely assistants in half with a saw, or David Blaine wowing street audiences by levitating himself, these types of artists rely on illusions to thrill, captivate, and influence in their followers. None of these magicians, however, hold a candle to the illusions provided by the characters who dance on television channels. Even criminals and mass murders try to create these illusions. Surely, the benefits of participation are well-documented, but there are costs, too. Well, life is full of illusions. Image by Alex Clark.