31 posts categorized "July 2011"

Paternal Indulgence

At the corner of Summit Avenue and East John - and shielded from that major thoroughfare between Capital Hill and downtown, Olive Avenue, by a big box Starbucks - there's a pea patch and park run by Seattle Parks and Recreation, called Summit Slope Park.

A year ago the space used to be an unimproved, gravel parking lot.

It's a civic oasis now. Taking advantage of the slope of the property, the park is terraced, with benches and strips of lawn for relaxing. At the top is a huge, industrial strength picnic table and the kind of iron grill you'd find in a state park. People picnic and read and sunbathe when Seattle weather permits, but gardeners are always there. The bulk of the space is a pea patch, bearing lettuces and cucumbers and flowers already.

2011-07-30_09-50-30_571At the base of the park is a paved space intended for skaters.

The city's built a long, concrete "seat wall" into which a metal beam has been recessed to form the bench's edge.

Kids skate there but at the time of this picture (before 10am yesterday morning), in spite of the sun, only the gardeners had arrived.

The City has to worry about liability, too, of course, so there's this sign.

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I like the sign. It reminds me of a parent babbling the things an adult is supposed to say. The point isn't to influence behavior so much, not in the near term anyway. But you do what you can to plant the thoughts and you hope you influence the way things look in retrospect.

Joe's New Blog Design (And a Note on "Bad Actors")

Joe Wallin has revamped the design of his blog and it looks great.

It's easier to read, and the design now pulls you into Joe's opinionated writing, which is what you're there for.

Screen shot 2011-07-28 at 8.42.56 PMNot that he's always right! His post this week about the SEC's proposed "bad actor" disqualifications raises a perfectly valid concern - one I share - that the new rules could do to Rule 506 to Reg D, what, well, 409A did to startups wanting to issue options to early employees. That is to say, in an effort to chill bad behavior in other, later stage, better capitalized sectors of the economy, regulators could write rules that, as applied to startups, are sheer overkill.

Keeping "bad actors" out of 506 offerings is a good idea. It's one of the mandates of Dodd-Frank and, as Joe knows, it's one of the reforms that were part of the Angel Investor Amendment that saved 506 from (then Senate Banking Committee Chair, now MPAA lobbyist) Christopher Dodd's initial, indiscriminate attack on startups and angel financing.

So I support the bad actor exclusion. Even as I applaud Joe for bring up the concern that the proposed rules are trending to overkill as applied to startups.

The "bad actor" disqualifications should be as easy to comply with as startups today comply with the accredited investor standard. Ideally, a questionnaire filled out by the appropriate persons should do it. And if it takes everyone some time for everyone to learn what the "bad actor" definitions are, I think that's okay. The integrity of Rule 506 is really important! If we're fortunate to get reform (elimination) the general solicitation prohibition, then it's probably even more important to keep scamming middlepersons out of the financing process.

Pictured: detail from Joe's new blog design. I like the buttons that navigate by making different use of the right hand column, without switching the page.

Initial Thoughts re Trover

Trover is a new social network and (incredibly) one more innovative company backed by the (what is the word for "prolific" as applied not to writing but to birthing startups) Rich Barton. John Cook wrote about it yesterday in GeekWire.

Photo (2)Trover is grabbing me right away, because it seems committed to using a visual rather than textual approach to sorting, reporting and sharing.

It also feels to me like Trover's design privileges immediacy. If I'm right in that suspicion, Trover might eventually echo and represent an alternative to the new and terribly powerful "explore" feature of Foursquare.

As John points out, there is no shortage of photo sharing apps. I don't know most of them, but I use and like Path and I'm now motivated to try Instagram. (I declined to jump in on the Instagram hype because it seemed at first to be about aestheticizing photos for their own sake; I had other tools to master in that category). But Trover feels first and foremost like an information and location sharing app. The photos are functional.

Unlike Twitter, Foursquare and other social media platforms birthed from text, only later to accommodate and then slowly get smarter about images in the stream, Trover seems committed to organizing navigation primarily around the information that can be "read" in a picture.

Or such does it seem in the early glow of playing with it.

A note on the screenshot: Thai Tom features really prominently in reports on Trover from Seattle's U-District, which speaks well for the platform.

The Voice of Authority

I may regret forever that I broke down last night and went searching for the guy who reads the ads on NPR.

He has a name! Frank Tavares.

For months - years - I've recognized his un-attributed voice as the epitome of sagacity. Ironic, because all he ever talks about are NPR's underwriters. But everything he really says is in how he says it.

Fourteen or so years ago I wrote a book of sonnets using the anti-Petrarchan diction of the information economy. Ever since, I've "assigned" different sonnets in the cycle to different famous, familiar voices. In my mind's ear, Will Lyman, the voice of the PBS Frontline shows, reads the definitive rendering of Up Against It, which begins, "And when it came time to reach for the stars / Or to pass out free, parks department lunches . . . " Bill Clinton reads another. When I get around to realizing this, my greatest life ambition, Frank Tavares (I now know his name) will record most of them.

While searching I found this wry, four minute clip where Tavares gamely makes fun of his relentless neutrality. "Do you know Raymond James," Brian Unger asks him. "You say their names like you know them." "No, no I don't," he replies.

One Google After Another

Among the perils of writing fiction set in the near future, novelist Charles Stross said last night in Seattle, are that you can mistakenly refer to technologies that were launching when you were writing, but have cratered by the time the book is out.

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Google Wave is one such example, he admitted, in answering a question that questioned his reference to a Wave-like product in "Rule 34," the new novel from which he read at the University of Washington bookstore.

But Wave could come back! He noted that Google had turned it over to Apache, and that a not-too-distant future could be more receptive to what Wave has to offer.

Google+ is not going to crash like Wave, nor implode at launch like Buzz. It already has essential traction in the techie crowd, more so than Quora, probably more so than Facebook (which may be able to defend its franchise among the general population; we'll see). G+ also has a shot to keep morphing and exploring what it might become, maybe for as long a period as Twitter did.

Next up: Google Government, whereby federal power is devolved to regional bodies that will unapologetically raise taxes; build public broadband and public transport; manage free schools and hospitals; and export the crazies to their own Disneyland where goverment keeps its hands off their Medicare drug benefits and armies are equipped and fed with tax cuts.

How Many Years Away is the Future?

This blog has a relatively new reader, Ellie K. She's left a slew of comments on old posts and I'm enjoying her perspective and wit. (Thank you, Ellie.)

Commenting on a post from 2009 about economist Brad DeLong's suggestion that incentive compensation on Wall Street take a page from the VC playbook, and critiquing my working conclusion that the four year vesting cycle normal for option grants represents an adequate "long term" focus, Ms. K writes:

". . . I wanted to mention that employee vesting in 401(k) and profit-sharing plans almost always requires five years of service, sometimes ten (although some companies allow partial vesting on a prorated basis each year).

"I realize you are a small company, entrepreneurial specialist, so it makes sense that you referenced the four year time frame of employee stock options. But the 401(k)/ profit-sharing plan model is much more common in the workforce in general."

Well said.

Five years is also the time the Skype option plan of 2009 contemplated that you would have to avoid quitting, should you not want your vested stock to be yanked back from you at cost.

Anticipating the author's appearance tonight at a local bookstore, I picked up "Rule 34," a science fiction novel by Charles Stross about a Scottish policemen who heads a unit dedicated to anticipating crime on the internet. This book posits that the future is in 2023, or 12 years from now.

I really like this bit from the first chapter, which cleverly anticipates how privacy laws will become a kind of evidentiary touchstone, effective, not so much at ensuring privacy in the first instance, but in mooting the effectiveness of ubiquitously gathered information in building a case against you:

"'Off the record,' he says - on the record, in the event one of your head cams is still snooping, or the householder's ambient lifelogging, or a passing newsrag surveillance drone, or God: But at least it serves notice of intent to invoke the Privacy Act - 'This'n's a stoater, boss."

A week from today, should the US default, the future may seem like yesterday!

Seize the day.

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"'A West-End London Street Scene' by Grace Golden [circa 1945]. Clearly depicting Regent Street, Golden imagines future post-war prosperity. In reality shoppers had to endure rationing in Britain into the 1950s."

Being Equitable with Employee Equity

I continue to be troubled about (a) the Skype vested equity snafu and (b) Twitter CEO Dick Costolo's comments about how employee stock sales on secondary markets have to be reined in.

Reading-mangaThe Skype stories suggest that the company played fast and loose with the term "vested." As it turned out, even "vested" shares were subject to repurchase by the company at the employee's cost, if an employee quit before 2014. In hindsight, Skype might have played more fairly if it had avoided the term "vested" until the shares had cleared the final hurdle. And yet, reading the relevant Skype documents, it does appear that the terms were disclosed in advance (assuming the documents were available to employees).

And here's both the question to, and the answer given by, the Twitter CEO, pertinent to what I want to revisit today:

MIGUEL HELF: "As the CEO of a very fast growing company that's hiring a lot of people, trying to retain a lot of people in a very competitive market, how do you see the secondary markets, the trading in private shares that your employees can engage in? Is it helpful, is it a distraction? How do you communicate to employees about it, and do you have any specific policies?"

DICK COSTOLO: "It's a distraction. I mean, the simple answer is it's a distraction. I think that we and Zynga and Facebook have had to retroactively put lots of policies in place to sort of constrain that. One of the concerns is because that's sort of a brave new world, you worry about people who might be buying through those second markets, whether they're accredited investors, what they've been told by the person who might be trying to sell them the stock, and who's going to get in trouble at the end of the day if it doesn't all work out with them. So, they're definitely a distraction, and I think that going forward private companies and their investors will do things in advance of forming the company that restrict those transactions."

What will those restrictions look like? Will they apply to founder, angel and VC equity as well? In addition to the option plan documents, essential reading now may include other corporate documents and policies that could impact the value and marketability of vested equity.

Employees and prospective employees might do well to take a crash course on employee equity and industry practices before signing up in reliance on option grants.

I might like to give such a course, or write a manual for one.

The manual I would write would have two covers. The front would read, "The Top X Things You as an Employee Should Look for in Your Company's Stock Awards." The back cover would read, "How to Keep Faith with Your Employees by Letting Them See the Company's Capitalization as You See It." You could read the book starting from the front cover, or, alternatively, Japanese style from the back, but either way you'd end up in the same middle: tools with which to uncover a sober understanding of the ground rules of the particular employee option plan hammered out between the founders, C-level management and investors of your emerging company.

I'm not talking about taking the risk out of accepting options as a material part of compensation. Whether a company is going to succeed or fail is something I'll assume an adult can guess for herself.

I'm talking instead about failing to understand how the equity plan is structured, and how awards under a given plan relate to a company's charter and other corporate documents. These documents are all written and are all available for inspection - or should be.

I'll need to work on how to organize the manual and prioritize the concerns, but here in random order is a beginning checklist:

  1. What is the liquidation preference overhang on the common stock?
  2. Is there a management incentive or retention plan for C-level execs that operates (at least from the perspective of common stock) as senior equity?
  3. How was the exercise price determined?
  4. What is the vesting schedule and how does it work?
  5. Under what circumstances might the purchase shares be repurchased?
  6. If there are repurchase rights, how is the repurchase price determined? Does it depend on the circumstances of one's departure from the company?
  7. What contractual restrictions are there on the private resale of my shares, over and above the restrictions imposed by securities laws?
  8. Do the restrictions in the trading of my shares apply equally to founders? To angels? To VCs?

More to come, I think. This is about understanding the features and restrictions of securities the way a sophisticated investor might.

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