

VCs & Starter Stock - Why & How to Ask for "F Shares" - eladgil
http://blog.eladgil.com/2010/03/vcs-starter-stock-why-how-to-ask-for-f.html

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pg
I'm in favor of letting founders cash out partially as the company grows. We
did, and it worked well for everyone. But I should point out that asking for
FF shares spooks a lot of investors, and VCs in particular.

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mos1
It's kind of disheartening that an investor wouldn't recognize that having a
huge gap between their utility function and the founder's utility function is
a bad thing.

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rms
I assume you read Less Wrong? The median founder and VC probably never think
about the concept of the personal utility function.

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mos1
Nope, haven't read it. Can you give me a thumbs up/down on it?

I picked up the utility concept from my financial background.

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rms
Oh, Less Wrong is awesome. It's a group blog running on a rather cool hack of
the Reddit source code. The founder and most prolific and frequently upvoted
blogger is Eliezer Yudkowsky. My favorite single piece by him is probably That
Alien Message: <http://lesswrong.com/lw/qk/that_alien_message/>

If you want to read more of Eliezer's writing, his book will come out
eventually, but until then it is organized here.
<http://wiki.lesswrong.com/wiki/Sequences>

His sci-fi novella, Three World's Collide is great sci-fi and serves as a not
too hard to read introduction to the general values of Less Wrong.
<http://lesswrong.com/lw/y4/three_worlds_collide_08/>

The kinds of posts that make it to the front page of Less Wrong now are often
esoteric and boring. Most of the value in the site is in the archives. Note
though, that the comments on Less Wrong are interesting because the level of
discourse is _ridiculously high_. You cannot say things that are wrong;
someone will downmod you and call you out on it. It's really hard to comment
on Less Wrong. Learning how to keep up with the discourse and be able to reply
to comments without getting downmodded feels like it has made me a lot
smarter.

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netcan
This writer seems to be implying that the otherwise founders are living on
savings (dwindling bank account). Wouldn't founders of companies at the stage
were they can sell these shares be earning a good salary already?

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eladgil
Fair point. The issue is more that life events happen (you have kids, need to
buy a house etc.) and may not have the capital to do it...

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pw0ncakes
Any investor who would be against letting a founder draw because he wants the
founder to remain "hungry" is a manipulative asshole. I hope these don't exist
in the post-Google era.

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gyardley
Hope is not a strategy, unfortunately.

The counter-argument to 'hungry' is to stress that hungry entrepreneurs
generally want to take smaller acquisition offers than their VCs - and if the
VCs block a life-changing deal for the entrepreneur, they'll be stuck with an
angry and demotivated executive team.

Certain VCs are quite receptive to this argument. One of our own investors
often complains that one of their investments exited too early, and that they
should've just given the founder(s) a million each so they could buy a house.

