miércoles, 29 de julio de 2015

Going to work for a startup? Let's talk equity

Equity is one of the most important aspects of working for a startup, but it's often confusing. Here's what you need to know about equity before joining a startup. 
equity.jpg

Equity compensation is one of the defining aspects of employment at a startup company. It is attractive not only for its perceived monetary value, but for the sense of ownership it gives employees.

"I think that people go to work at early-stage startups because they want to have an impact and they want to shape the direction of a company," said Aaron Harris, a partner at Y Combinator.

Equity programs such as stock options have been a part of Silicon valley and the greater startup landscape for a long time, and have been a generally successful way of rewarding employees and founders. As of late, however, high company valuations have piqued the conversation around equity and its impact.

Once you've settled on going to work for a startup, it's important to learn how equity works and what it will mean for you as an employee. If you're new to this, it can be an intimidating topic.

Here's what you need to know about equity when you decide to work for a startup.

There are different types of equity

Equity, at its basic level, is an ownership share in a company. Shares are issued in a series and are typically either labeled as common or preferred.

Employees are typically granted common stock, which is different from preferred stock in that it carries no preferences, which are add-on perks that accompany the shares. I'll go more into it later, but this basically means preferred shareholders get paid first.

Equity is distributed to employees from an "option pool," a set amount of equity that can be distributed among employees. There is no hard and fast rule for how large or small an option pool may be, but there are some common numbers.

For example, LaunchTN CEO Charlie Brock said that he typically advises founders to provide minimum of 10% equity to the pool, as it gives enough allocation to attract quality people. However, he said, 15% option pools give the flexibility needed to make strong key hires because it gives founders more equity to offer potential employees.

Preferred stock usually goes to investors, as it has certain rights that come with it, said Jeff Richards of GGV Capital. For example, those rights or "preferences" may give a board seat to the shareholder, voting rights for major company decisions, or liquidation preference.

A liquidation preference is a guarantee of return on investment to a specific multiple of the amount invested. Most often, Richards said, you'll see a 1X liquidation preference — which means that in the event of liquidation, like if the company is sold, those shareholders are paid back at least the same amount they invested.

This can spell problems for employees if the company doesn't ever reach its expected potential value, because the founders are still obligated to pay back the liquidation preference to preferred shareholders.

In the event of an IPO, the playing field is leveled, to a certain degree.

"If a company goes public, all the shares convert into common," Richards said.

How equity works

Although there are a variety of ways to get equity as a startup employee, the most common way is through stock options. A stock option is the guarantee of an employee to be able to purchase a set amount of stock at a set price regardless of future increases in value. The price at which the shares are offered is referred to as the "strike price," and when you purchase the shares at that price, you are "exercising" your options.

Exercising stock options is a fairly common transaction, but Harris said there are some additional rules among startups that could present problems.

"There's a rule that if you leave a company your options expire in 30 or 60 days if you can't buy them right then and there," Harris said.

While there are arguments in favor of that rule, Harris said it penalizes younger employees who don't have the capital to exercise options and deal with the tax hit at the time.

Outside of stock options, Richards said that a growing trend is the issuing of restricted stock units (RSU). These stock units are generally awarded directly to the employee with no purchase required. But, they carry different tax implications, which I will address later on.

Shares in a startup are different from shares in a public company because they are not fully "vested."

"Vesting of equity means that your equity is not immediately owned outright by you, but it instead 'vests' or becomes owned 100% by you over time, and the company's right to repurchase it lapses over time," said Mark Graffagnini, president of Graffagnini Law.

You'll see this often referred to sometimes as a vesting schedule. For example, if you are granted 1,000 shares at four-year vesting, you would receive 250 shares at the end of each of the four years until it was fully vested. Richards said that a four-year vesting period is pretty standard.

In addition to a vesting schedule, you'll also be dealing with a cliff, or the probationary time before the vesting will begin. A traditional cliff is six months to one year. You will not vest any shares before you hit the cliff, but all of the shares for that time will vest when you do hit the cliff.

For example, if you have a six month cliff, you will not vest any equity in the first six months of your employment, but at the six month mark, you will have vested six months worth of your vesting schedule. After that, your shares will continue to vest per month.

The implementation of a vesting schedule and a cliff are both done to keep talent from leaving the company too soon.

Equity and taxes

When you're granted equity by a startup, it may be taxable. The type of equity you receive, and whether or not you paid for it play into the question, Graffagnini said.

"For example, a stock option granted to an employee with a strike price equal to fair market value is not taxable to the employee," Graffagnini said. "However, a grant of actual stock is taxable the employee if the employee does not purchase it from the company. "

Standard stock options are known as incentive stock options (ISOs) by the IRS. Brock said that ISO do not create a taxable event until they are sold. So, when you exercise an ISO no income is reported. But, when you sell it after exercising, it is taxed as long-term capital gains. So, keep that in mind if you're thinking of selling.

In the rare event that you have non-qualified stock options (NSOs or NQSOs), Brock said, those are taxed both at the time of exercise and at the time you sell them.

What your equity is worth

Determining the true dollar value of your equity is very difficult. Usually there is a range and it is dependent on the exit opportunities the company is pursuing.

The concept of value is further complicated by the potential legal and HR issues that arise around the conversation of equity value that founders could have with their employees. Richards said that most counsel will advise a founder to be very careful about having that conversation.

"They don't want them to imply that there is any intrinsic value to those stock options when there is not," Richards said. "You're getting an option in a privately held company — you can't sell that stock."

Still, most founders will try be as transparent as possible about what you're getting yourself into. Just understand that they might not be able to disclose all the details.

At the end of the day, it is an investment decision and a cash salary doesn't always line up equally against equity, so it's up to you to determine what risk you're willing to take. Just remember, if the startup isn't acquired or doesn't go public, your shares may be worth nothing.

"In the end, they might have been much better off choosing higher pay over equity in that case," Graffagnini said. "On the other hand, your startup just might be the one that hits it big, and it might be the best investment of your life."

Look out for red flags

Because equity compensation packages are different for each company at each individual stage, it can be challenging to vet the deal. But, there are some red flags you can look out for.

"A basic red flag would be is there anything that's not standard," Richards said. For example, does the company have six year vesting with a two year cliff? That could be an issue.

Another red flag could be how much equity you are being offered. If you're a very early employee and the opening offer is five basis points (0.05%), Harris said that could be indicative of a bad situation. Or, if the exercisability of grants differs wildly from employee to employee.

The ultimate red flag, Harris said, is "if the person making you the offer is unwilling to sit down and explain to you what it means."

Keep in mind that the founder, especially if it is his or her first startup, might not have all the answers, so be willing to work through it with them. Also, Harris said, know that you have the right to negotiate even if it's your first job out of school.

Do your research. Talk to your friends at similar stage companies and compare the offer they have with what you have on the table.

"Make sure, no matter what it is, you feel as if it's fair, [and] that you are being fairly compensated," Harris said.

lunes, 27 de julio de 2015

Three solutions for the mobile worker, triple the effectiveness (Sprint).

Maximize value and productivity for your employees with connected mobile workforce management sets, exclusively from Sprint.


martes, 21 de julio de 2015

Microsoft releases new license terms for Windows 10: Biggest surprise? No gotchas


Sorry, conspiracy theorists: The new documents are simple and straightforward, with absolutely no gotcha

You can put your tinfoil hats away now.

Two weeks ahead of the global launch of Windows 10, Microsoft has finalized the terms of its license agreements for the new operating system. I've had several days to study the documents in detail, and I can report that there are no surprises, no gotchas, and no hidden subscription traps waiting to be sprung in two or three or four years.

Sorry to disappoint you, conspiracy theorists.

Microsoft has consistently said that its new "Windows as a service" model doesn't change the basic licensing terms for Windows. Based on these documents, that's still true.
windows-10-eula.png

In fact, the new license agreement is simpler and written more clearly than any similar document I've reviewed in 20 years of examining Windows license agreements. There are a few noteworthy changes, which I'll outline in this post, but every one of those changes has previously been disclosed.

Like I said: No surprises.

Instead of publishing separate agreements for each edition (Home and Pro) and each distribution channel (OEM and retail), the Windows 10 license agreement is a single document that applies to all editions, with the only changes being variations in the "Limited Warranty" section at the end of the document.

Here's what's new:
  • Activation and licensing status when upgrading from a non-genuine copy of Windows. As usual, the license agreement allows the right to install and run Windows on a single licensed device. It also requires activation, a process that is automatic on most devices from large OEMs. The new agreement adds this clause: "Updating or upgrading from non-genuine software with software from Microsoft or authorized sources does not make your original version or the updated/upgraded version genuine, and in that situation, you do not have a license to use the software."
  • Transfer rights. I heard some observers speculate that the new terms would limit Windows 10 transfer rights. Nope. The new license agreement preserves the longstanding transfer rights: OEM copies are locked to the device on which they're sold, retail copies can be transferred to a different device as long as the old copy is removed first. (The Windows 10 EULA includes a specific exception for PC buyers in Germany, who are allowed to transfer OEM software thanks to a court ruling.)
  • Downgrade rights. As with all recent Windows releases, buying a PC with a Professional version of Windows installed by the OEM includes the right to downgrade to either of the two earlier versions, in this case Windows 7 Professional or Windows 8.1 Pro. The new agreement specifies an end date for those downgrade rights, which are valid "only for so long as Microsoft provides support for that earlier version." Under the 10-year Microsoft support lifecycle , that means downgrade rights for Windows 7 end in January 2020, and the clock runs out on Windows 8.1 in January 2023.
  • Automatic updates. For consumers and small business, Windows 10 delivers automatic updates, with no option to selectively delay or reject individual updates. "The software periodically checks for system and app updates, and downloads and installs them for you. ... By accepting this agreement, you agree to receive these types of automatic updates without any additional notice." Business customers have additional management options through the Windows Update for Business program, and enterprise customers can assign mission-critical devices to the Long Term Servicing Branch, which includes only security fixes and not feature updates.
  • No Commercial Use Rights for Office products. Some Windows 10 editions will include Microsoft Office programs. As with Windows RT, those products are limited to personal and noncommercial use. Businesses need to have an Office 365 Business subscription or assign a perpetual Office license to the device.

And that's it.

Surprised? You shouldn't be. As Windows boss Terry Myerson has stated repeatedly, the company's "Windows as a service" model represents a new way of delivering updates and upgrades, but it doesn't change the fundamentals of how Windows licensing works.

The release of the new EULA terms still leaves a few loose ends to be tied up in the next two weeks. Microsoft still has to update its product lifecycle for Windows 10. That will be an interesting challenge, because the traditional 10-year support lifecycle is inconsistent with the entire idea of "Windows as a service."

One thing I am certain you won't see is a demand from Microsoft that Windows 10 users begin paying for updates after a few years. The idea that Microsoft is giving away a billion copies of Windows 10 in the world's largest bait-and-switch operation is laughable on its face. But that's a topic for another day.

lunes, 20 de julio de 2015

At 20, Amazon Continues to Defy Predictions (BusinessWeek)

On the company’s 20th anniversary, Amazon’s success is still confounding industry watchers
Jeff Bezos
Bezos, chief executive officer of Amazon.com.
 

You’ve got to hand it to Steve Ballmer. On Oct. 22, Microsoft’s ex-chief executive officer appeared on Charlie Rose and threw some serious shade at Amazon.com, his former crosstown rival. “They make no money, Charlie,” Ballmer said. “In my world, you’re not a real business until you make some money.”

Ballmer’s record as a technology forecaster is not good. (See: “There’s no chance the iPhone is going to get any significant market share.”) But this time, Mr. Contrarian Indicator may have outdone himself. Until that day, Amazon stock was down 27 percent on the year as investors worried about slowing growth and its inability to make money.

Improbably, Ballmer’s prognostication coincided with the exact bottom of Amazon’s fortunes. Since he spoke, the stock has risen 42 percent on rebounding revenue growth and even some meager quarterly profits. In its cloud services unit, Amazon Web Services, a Google-initiated price war actually boosted Amazon’s fortunes by pushing more chief information officers to take a look at the public cloud, in which Amazon offers the most comprehensive mix of services. AWS is now set to bring in around $5 billion in 2015, with a healthy 17 percent operating margin. It looks, in other words, very much like a real business.

This is not to meant to pick on Ballmer, who cuts an exceedingly poor contrast with Amazon CEO Jeff Bezos. (One is still a tech king who steered his company into new markets; the other has moved on to basketball, as the owner of the Los Angeles Clippers, after missing a decade of important trends.) Rather, it's a good way to mark the impending 20th birthday of Amazon on July 15, an occasion the company is celebrating with something called Prime Day, a panoply of deals meant to draw attention to the site’s low prices (nothing to see over here!) and to its two-day shipping service.

Amazon has been making observers like Ballmer look foolish for two decades. It was 20 years ago that Bezos and a few early employees, working from a small office near the former Kingdome stadium in Seattle, opened their text-heavy bookselling website to the world. People first said they would fall quickly to Barnes & Noble, then that they would run out of cash and perish in the dot-com bust, and then that they would get steamrolled by Wal-Mart Stores. Later, they insisted that Amazon had no business running a retail portal in the age of Google search, or competing in hardware against a resurgent Apple.

Bezos has not made it any easier on observers, keeping plans and perspectives close to his chest. Even on this anniversary, the company is doing and saying little to reporters. As far as I can tell, Bezos has granted no special interviews. (Next week, Amazon will host a celebration for employees headlined by Macklemore, and the Head and the Heart. For Amazon's 10th birthday, there was a free Bob Dylan concert.) Even as Amazon pushes deeper into our lives, it’s getting more opaque. The company prefers to make noise by speaking to consumers with enticements such as Prime Day, which prompted Wal-Mart to issue its own set of competing deals.

Ballmer’s mistake was to think about Amazon in conventional terms. Amazon has never been a conventional company. Its older businesses, such as its North American retail arm and third-party e-commerce marketplace, are highly profitable, but the company sinks those profits into new businesses, like its Prime Now two-hour delivery service or Amazon Fresh groceries. And it is voraciously opportunistic. When it sees such potentially big markets as original online video, or new technologies like drones, it jumps in headlong and starts hiring experts, even when it has no natural expertise in an area.

Amazon has had its share of messy failures that can cloud the eyes of observers. The Fire Phone launch last year was embarrassing, in large part because Bezos himself drove that bus, and Amazon’s decade-long misadventure in China was expensive and ultimately, futile.

But Amazon has always been willing to change course. When its foray in China failed, it pushed into India. With its ambitions in smartphones curtailed for now, Amazon has pioneered devices for the smart home, such as the quixotic but well-reviewed Echo, a wireless cylinder that plays music and listens to and responds to spoken queries. Amazon is the ultimate either-or company. You can be a Prime subscriber or just an occasional customer; buy an Amazon Fire tablet on its website or an iPad; read a physical book or buy a Kindle copy; rent a new movie, a la iTunes, or stream an old one, a la Netflix.

Amazon at 20 has pulled back on some of its more aggressive behavior. It now collects sales tax in most U.S. states, and it is changing its tax collection practices in Europe. In its fulfillment centers, Amazon offers tuition reimbursement to full-time workers and a path to full-time employment to part-timers (unlike Uber and other on-demand companies, which often make contract work the only option). After a tense standoff with New York book publishers over the last few years, Amazon finally bowed to demands and now lets big publishers set their own prices for e-books.

Amazon still faces pressure. After a wave of critical coverage, Amazon's presumptive partners in the literary world continue to fear it; they recently petitioned the Department of Justice to open an antitrust investigation into how the company uses its extraordinary power in a market where it sells one-third of all new print books. Beyond that, Amazon now faces a litany of well-funded new competitors such as Jet, Instacart, and maybe, one day, Uber, that treat existing stores like fulfillment centers and can avoid the expense of operating big warehouses.

Perhaps more important, Amazon still lags behind Google and Apple in the race to design and sell mobile devices, the new gateways to the media world. This may be Amazon’s real existential threat: fending off the companies that seek to siphon away its customers. Or maybe that’ll turn out to be just another bad Amazon prediction in a long list of them.


lunes, 13 de julio de 2015

The 16-Year Legal Battle Over This $16.5 Million Ferrari (BusinessWeek)

The bizarre and tumultuous history of a ‘car worth fighting for’

Wanted: one caring owner for a cherry-red 1954 Ferrari racer; current proprietorship heavily contested.

When an eccentric U.S. Army engineer who worked on the Manhattan Project during World War II bought a burned-out Ferrari chassis for $2,500 in 1958, he had no idea that it would become the most fought-over car on the planet.

“It’s a car worth fighting for... It’s an important car”

Now, after 16 years of lawsuits and ownership claims from Paraguay to Switzerland, the fate of the roadster, which Victoria’s Secret founder Les Wexner thought he bought last year for 10.7 million pounds ($16.5 million), is finally coasting toward resolution in a London court. Ferrari made just five 375 Plus models that year and only four of those gleaming symbols of motor racing’s golden age remain. Fashion designer Ralph Lauren and candy billionaire Giorgio Perfetti have two of them. 

“This vehicle, along with a number of others, has entered into the realm of fine art,” Dave Kinney, publisher of the Hagerty Price Guide for classic cars, said by phone from Great Falls, Virginia.

Wanted: one caring owner for a cherry-red 1954 Ferrari racer
 

The move toward closure of the case, or curse, of the racecar, which can clock 280 kilometers (174 miles) per hour, comes amid a surge in the value of vintage Ferraris. A 1962 250 GTO fetched $38.1 million at auction last year, the most ever for a car. 

Hagerty’s Ferrari Index of 13 models has more than tripled since 2010, peaking at $5.4 million in May.

The last undisputed owner of the 330-horsepower 375 Plus was Karl Kleve, the army engineer-turned designer, artist, serial tinkerer and author - of a book linking baldness to blood circulation.

Trailer Heist

Kleve, who died in 2003 at the age of 90, bought the car’s damaged body from the heir to the Kleenex tissue fortune, Jim Kimberly, to add to his collection. It languished on a trailer outside his home near Cincinnati, Ohio, for three decades before it was stolen sometime between 1985 and 1989, according to court documents. That’s when things started to get weird.

Shortly thereafter, the Italian machine, or at least part of it, turned up in Antwerp via Atlanta, where it had been acquired by a Belgian trader. Customs officials there impounded the car to determine its ownership after Kleve reported it stolen, but authorities sided with the trader. Once cleared, it was sold to another Belgian, Jacques Swaters, a Ferrari dealer and former racing driver, for an undisclosed sum.

“This vehicle, along with a number of others, has entered into the realm of fine art

Not knowing it had been purloined, Swaters, who considered Enzo Ferrari, the automaker’s late founder, a close friend, spent years restoring the car and its barchetta-style aluminum bodywork to racing form. In 1999, after Kleve located the vehicle and confirmed his ownership by its chassis number, 0384M, Swaters agreed to pay $625,000 to keep it.

‘An Important Car’

“It’s a car worth fighting for,” John Collins, owner of U.K. Ferrari dealer Talacrast, said by phone Thursday. “It’s an important car.”

A decade later, after both Swaters and Kleve died, a daughter of Swaters filed a suit in Ohio arguing that Kleve violated the sales agreement by withholding some of the car’s parts, according to court documents. That claim of ownership was followed by two others -- one by a fellow Ohio resident and the other by a U.S. citizen living in Switzerland.
“It’s a car worth fighting for”
In 2013, the four parties jointly agreed to “extinguish all claims and counterclaims” and allow Bonhams, one of the world’s oldest auction houses, to sell the roadster so they could split the proceeds. And so last June, after an extensive marketing campaign, it was sold to Wexner, the lingerie billionaire, at an auction at the historic Goodwood Festival of Speed in the British countryside.

But the bickering didn’t stop there.

Paraguayan Dealer 

Wexner sued Bonhams after the sale, claiming the auctioneer had failed to inform him of unresolved ownership disputes and demanding a full refund plus damages. Bonhams, for its part, sued Kleve’s daughter, Kristine, for allegedly breaching the terms of their settlement deal prior to the sale.

And that’s not all: Bonhams is also suing a Paraguayan car dealer for deceit. The dealer, the company said in a complaint, sent a letter three days before the auction claiming ownership of the Ferrari. The auction house, anxious to avoid canceling the centerpiece of the Goodwood Festival, allegedly paid him 2 million pounds, according to the documents.

All four lawsuits related to the roadster in London have been folded together so a judge can settle the disputes once and for all. The next hearing is scheduled for September.

Average cost of vintage Ferraris

Lawyers for each party involved either declined to comment or didn’t respond to e-mails seeking comment.

While Kleve may not have foreseen the extent to which people would one day go to possess his once-battered chassis, he certainly would have appreciated the passion behind it.

He started his collection in 1939 with his mother’s black 16-cylinder 1936 Cadillac, according to an obituary in the Cincinnati Enquirer. By the time his Ferrari was stolen, the collection was so vast that his neighbors had started to complain, prompting a court to order him to clear his yard.

“Do you know anyone in America who’s limited to two cars?” Kleve asked the judge in 1990, according to the newspaper. “Especially one who loves cars? Cars are my life.”

viernes, 10 de julio de 2015

Why NC startup Malartu is banking on equity crowdfunding

Malartu wants to use the crowdfunding model to help startups get funding in exchange for equity shares. Here's how plan want to democratize startup financing. 

malartu.jpg
Malartu co-founders Jon Spinney and Sean Steigerwald.
To say that crowdfunding is gaining momentum would be a serious understatement. According to a study commissioned by the World Bank, crowdfunding could be a $96 billion market by 2025 — larger than the venture capital industry itself.

A typical crowdfunding campaign works like this: A company posts a campaign for a fundable product or idea and users pre-purchase an item or donate to the cause in order to fund its development. Users help a company get the funding it needs and receive a reward in exchange, such as discount pricing, early release of a product, or their name listed as a backer.

But, what if you could use crowdfunding to purchase shares in a company?

That's the idea behind equity crowdfunding, a relatively new concept where startups crowdfund their company on a crowdfunding platform in exchange for equity shares in their company. North Carolina startup Malartu, a new competitor in the space, wants to be the go-to place for new investors to get their feet wet working with startups.

Malartu is Irish Gaelic for "exchange," and co-founder Jon Spinney said that it represents how he and co-founder Sean Steigerwald see the investment space.

"That summarizes how we feel investments should happen, especially in the early stages," Spinney said. "We're big advocates for democratization of investment."

The pair met at NC State where Spinney was studying economics and entrepreneurship. At the time they were both working on their own, separate startups and began to get frustrated with the fundraising process. After meeting with a professor of theirs (and now co-founder), Lewis Sheats, they decided to create a platform to provide easier access to fundraising for startups.

They figured out that the platform they wanted to build was beyond the reach of their technical abilities, so they partnered with Raleigh's Smashing Boxes to build the platform. Malartu was built with a custom Ruby stack.

Companies complete a due diligence process in order to raise money through Malartu. Spinney said Malartu sits down with a company for a few weeks or a month and go through the business and their corporate documents to make sure everything is in order. At the same time the company builds out their profile on the site.
Then, Malartu builds out a separate fund for the company's financing. Spinney said they use a fund model so they can aggregate investors into one entity. This allows the company to take a single check instead of many checks, which also helps keep their capitalization tables cleaner.
Investors log in to the site to view 506 (b) and 506 (c) investment offerings, and they can also view founder videos and see the corporate documents and diligence materials for the company. Malartu is also working on multiple company funds to allow diversification for investors to invest a single amount and have it split across multiple companies.
According to Spinney, the Federal JOBS (Jumpstart our Business Startups) Act in 2012 set the stage for equity crowdfunding with legislation that allowed for investments to take place online and for investors to be able to purchase shares of a company through online portals.
Most of the platforms for equity crowdfunding, including Malartu, are targeting accredited investors only. As I wrote previously on TechRepublic, an accredited investor is someone who "has a net worth of $1 million, or they had an individual income of $200,000 each of the last two years and an expectation of the same for this year, or they and their spouse had a combined income of $300,000."
That is the biggest challenge facing equity crowdfunding, that not all states have an exemption for unaccredited investors, and there isn't a federal exemption either. So, unless you're worth $1 million, you probably can't invest.
Dan Roselli is the co-founder of Charlotte startup hub Packard Place and an advisor to Malartu. Roselli said that local congressman Patrick McHenry helped write some of the language into the JOBS act, calling it the "democratization of wealth creation." It seemed that the goal was to open up startup investing to people who weren't previously wealthy. While there is still a pause on non accredited investors, Roselli said, that still seems to be the long-term vision of the act.
More and more companies are trying to solicit investments through online platforms, and Spinney said that another big part of equity crowdfunding is who the startups can raise capital from.
"The Federal JOBS Act allows for general solicitation of investment," Spinney said. "What that means is you can actually contact any individual through the internet and see if they're interested in participating in your fundraise."
Formerly, Regulation D 506 (b) stated that companies could not use general solicitation and that investors must be contacted by someone they already knew. It was initially put in place, Spinney said, to protect people from the "snake oil salesmen of the day." So anyone who was fundraising would have had to know the person previously and know that they were accredited before they solicited an investment. That is not the case with equity crowdfunding.
There are bigger implications for the kind of work Malartu is doing with equity crowdfunding. Roselli said that he believes the equity crowdfunding model will level the playing field for smaller markets, such as North Carolina, and give startups in those areas better access to capital.
"Any time the rules of the game change, there's opportunity to reshuffle the deck," Roselli said.
Malartu recently went through their soft launch, and Spinney said they are coming up on their full launch soon. The platform successfully funded its first beta client and wants to hit its full launch with six live offerings.

jueves, 9 de julio de 2015

Three financial best practices for startups

Navigating the financial landscape for any business is difficult, but especially so for startups. Here are some financial best practices to keep you on the right track. 

stfinance.jpg

Running a startup is a balancing act. You're in charge of handling every aspect of the business, hiring the right people, and keeping everything on the right side of the law.

One of your most important jobs as a startup founder is money manager. Capital is the lifeblood of a startup. If you don't learn to manage your money early, your company will die.

Properly handling finances can extend your runway and give you more time to work on your business. Here are three financial best startups to help you make better moves with your money.

Separate business and personal finances

As an entrepreneur, you're probably brimming with excitement about your new idea. In that excitement, though, make sure you do not make careless mistakes with your money. One of the biggest mistakes you can make is to mix up the financials of your startup with your personal cash. This isn't to say you can't use existing capital to partially fund the business, but you should open a dedicated checking account for the business itself and conduct all transactions through that account.

If you fail to properly separate your personal and startup finances, you could deal with potential tax problems depending on how you incorporated and could face trouble raising funds later on. At the very least, it will probably create a giant mess.

For example, Rick Coplin, vice president of Community Partner Ventures, used to work with an entrepreneur who hired a programmer and a designer for website development that she paid for out of her personal checking account. For the first couple years, he said, the entrepreneur even used her social security number on the tax forms instead of the business ID.

"We caught this early enough to avoid serious complications in terms of investment, but she had to spend time and resources to correct two years worth of personal and business tax returns."

Think harder about equity

Equity is not just about value. It is also about control.

When it comes to funding, startups commonly exchange equity for capital, giving partial ownership of the company to an investor or investment firm. There's absolutely nothing wrong with raising capital this way, but you have to be sure it's the right move.

These days, there are more ways than ever to secure financing for your startup, and not all of them come with an equity price tag, such as grants and SBA loans. Michael Hardy, a certified financial planner at Mollot & Hardy, Inc., said that many of the startups he works with can get started and operate on a smaller budget than what's generally expected.

"My advice is to use a chunk of your own resources until it's absolutely necessary to get a loan or sell shares of the company," Hardy said.

Another point at which equity comes into play is in exchange for services, or to hire a key executive. Equity is one of the biggest enticements for potential employees, but it shouldn't always be a given.

"A better course of action may be to establish an employee pool with 10-15% of the company equity," Coplin said. "New employees can participate in a program based on their position and potential contribution."

Study the business

This may seem like common sense, but creating a habit out of studying some of the key business metrics of your startup can help prevent issues from arising in the future. Keep detailed records and be sure to consistently review your financial statements.

"Understand the components. Engage a CPA to learn how to look at a balance sheet and be disciplined about going through them on a regular and frequent basis," said Liz Sillay of Waller Lansden Dortch & Davis, LLP.

You're a business, and the goal of a business is to make money. So, start by taking a look at just how much money is coming in — your revenue. But, don't stop there. Think about your revenue in terms of your profitability, or how much money you have after accounting for operating expenses.

"Revenue is the most common number used when describing the financials of a business and for attracting the interest of investors, however, it only tells part of the story of the financial aspects of a business," Coplin said.

Now, if your business is losing money — don't panic yet. You're likely to lose money, especially in the early days. And, investors understand that, Coplin said, but they also expect that, at a certain point, your revenue will pass your costs, and you'll be profitable. Then, hopefully, the profit margin will continue to grow showing that your business is scalable.

"Entrepreneurs who focus on profitability alongside revenue growth early in the life of their business are setting the business up for success," Coplin said.

lunes, 6 de julio de 2015

Merkel to Meet Hollande as Greece Told to Make Next Move (BusinessWeek)

Merkel to Meet Hollande as Europe Plans Next Move

European officials are putting the onus on the Greek government to make the next move as Chancellor Angela Merkel heads to Paris Monday for talks with President Francois Hollande to map out a way forward for Greece.

With an emergency summit of European leaders called for Tuesday, fellow euro-region governments are preparing to wait for Greece to offer proposals that enable the country to stay in the 19-nation euro zone, according to a European government official with knowledge of the crisis strategy.

The coordinated approach suggests little appetite to bend to Greece, extending the brinkmanship that began with Prime Minister Alexis Tsipras’s January election on an anti-austerity platform and culminated in Sunday’s referendum. While official statements reacting to the “no” vote expressed respect for the choice exercised by Greek voters, they also stressed the need for Tsipras to say how he’ll resolve the uncertainty ahead.

“It’s now up to the Greek government to make proposals about how to proceed,” Austrian Chancellor Werner Faymann said in a statement on Monday.

A possible overture was made by Athens as Greece’s Finance Minister Yanis Varoufakis quit the same day citing “a certain preference” among European creditors that he no longer be involved in aid negotiations.

With the euro and stocks dropping Monday, Europe prepared for another week of emergency diplomacy to counteract one of the greatest challenges to face the common currency area.

ECB Credit

European Commission President Jean-Claude Juncker is due to hold a conference call Monday with European Central Bank head Mario Draghi and Jeroen Dijsselbloem, who heads the Eurogroup of euro-area finance chiefs. The ECB’s Governing Council is also due to talk later on Monday with a decision pending on what to do about Greek lenders that are dependent on its emergency credit.

“The result is very regrettable for the future of Greece,” Dijsselbloem, who is also Dutch finance minister, said in a statement calling a Eurogroup meeting for Tuesday. “For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities.”

Merkel will meet with Hollande at 6.30 p.m. in Paris “to jointly assess the situation after the Greek referendum and to address the continuation of Franco-German close cooperation in this matter,” according to a statement. The leaders of Europe’s two biggest economies agreed that the referendum result was “to be respected.”

Debt Load

France has consistently argued for Greece’s debt load to be addressed, whereas Merkel has been less willing to countenance further debt relief. Tsipras put forward a plan on the eve of Sunday’s referendum for a 30 percent reduction in Greece’s debt.

“I’ve always said discussions on the debt are not taboo,” French Finance Minister Michel Sapin said on Europe 1 radio. Even so, “the vote itself won’t fix anything,” he said. “This is first and foremost a problem in Greece. It’s up to Mr. Tsipras to make some proposals as quickly as possible.”

More than 60 percent of Greek voters backed the government recommendation to reject the terms of bailout aid set down by creditors. The result strengthens Tsipras and repudiates leaders including Juncker who urged Greeks to vote “yes” or risk tumbling out of the euro.
European Consequences

The outcome “carries consequences not only for Greece, but also for the people in creditor countries and for the whole European project,” Maltese Prime Minister Joseph Muscat said in a statement. “The Greek government has sought to protect its people’s interest using the method it deemed best. People in creditor countries now expect their representatives to protect their interest and the European interest too.”

By unraveling more than five years of crisis fighting, the referendum result poses an existential dilemma for Merkel and fellow leaders over how to resolve an increasingly acrimonious standoff with Greece’s Syriza-led government without alienating domestic voters in Germany and elsewhere.

Helping Greece

Ingrid Arndt-Brauer, who chairs the finance committee in Germany’s lower house, said that she had expected her committee to be summoned on Tuesday to begin the process of helping Greece with a new bailout package in the wake of a “Yes.” The “No” vote rules out any such move.

“Nobody wanted to torture the Greeks -- we’re not terrorists -- but to help them,” said Arndt-Brauer, a lawmaker with Merkel’s Social Democratic coalition partner. “A ‘Yes’ vote would have signaled a readiness to cooperate -- some reforms at least for fresh help. I see no credible basis to help Greece right now, none at all.”

Xavier Bettel, the prime minister of Luxembourg and holder of the European Union’s six-month rotating presidency, said it is up to the Greek government to make concrete proposals on the way forward.

“Europe is strong and I’m sure that we will also find solutions,” he was cited as saying in an interview with Deutsche Presse-Agentur.