
CEO Aaron Levie Will Only Own 4.1% Of Box When It IPOs, Investor DFJ Owns 25.5%  - heidijavi
http://techcrunch.com/2014/03/24/hotshot-ceo-aaron-levie-will-only-own-4-1-of-box-when-it-ipos-investor-dfj-owns-25-5/?utm_campaign=fb&ncid=fb
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nostrademons
IIRC PayPal was very similar - it was sold for $1.5B, but Max Levchin's share
was only about $30M, and Elon Musk's was only about $100M. By comparison, many
early Web 2.0 darlings (Del.icio.us, Blogger, Flickr) sold for only $20-40M,
but their founders had only taken small seed rounds, and so the vast majority
of the purchase price went to the founders. 75% of a $40M acquisition = 3% of
a $1B acquisition.

Something for founders to think about when they're taking funding. If you look
at the gigantic tech fortunes - Gates, Page/Brin, Omidyar, Bezos, Zuckerburg,
Hewlett/Packard - they usually came from having a company that was already
profitable or was already well down the hockey-stick user growth curve and had
a clear path to monetization by the time they sought investment. Companies
that fight tooth & nail for customers and need lots of outside capital to do
it usually have much worse financial outcomes.

~~~
not_that_noob
This. Founders are better served maximizing traction at the lowest outside
investment possible. If it doesn't become big, then you still hold a large
chunk of a small company. And if does, then you hold a fairly large chunk of a
large company.

~~~
mikeryan
I don't know it seems to me that Silicon Valley is littered with folks who've
made a shit ton of money by founding companies and taking chunks off the table
during funding rounds. Kevin Rose/Digg come to mind. This way if you become
huge you still get a payday but even if it doesn't you're still a millionaire
(and maybe an angel investor in companies that do become huge, Kevin Rose/Digg
comes to mind).

~~~
nostrademons
You typically need leverage to do this too. Zuckerburg was famous for
popularizing the practice, but he could only do it because Facebook was taking
off like a rocket ship and everybody wanted in. It's very rare that a startup
without traction could successfully negotiate founder cash-outs.

~~~
midas007
Another SV thing.. being able to fire your board: priceless.

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pyrrhotech
And the average engineer who thought they'd be rich, probably owns 0.0002%.
Have fun with your 200k! Startups are such a scam for the employees.

~~~
psychometry
I'm curious what kind of warped perspective allows someone to scoff at a
$200,000 windfall and where I can acquire such a perspective.

~~~
pyrrhotech
are you serious? How much do you make? Remember we are talking $200k pretax.
So maybe $120k after taxes. That's less than half a down payment on a shit
house in this area. That's maybe one year of market value cash compensation
for an engineer with 5 years experience.

I'm not saying it's nothing, but remember that we are talking about this being
one of the rare startup equity "success stories" that you hear about so often
in the media.

Of course, I'd take a $200k windfall and be happy for a few days, but it's
hardly a life-changing amount of money. I save that much money every 18 months
(remember pretax). I wouldn't consider myself wealthy unless I had 50x that
amount in the bank

~~~
FireBeyond
Except I also read in other threads that you comment on spending $5/day on
food. And not living in SF because you can't or won't afford to.

So it is entirely possible that you are min-max'ing your life goals in an
outlier fashion (which is your perfect right, don't mistake me).

~~~
pyrrhotech
I don't make 250k, but I am pretty frugal overall. I'm not a foodie, so I'd
rather spend that money elsewhere. I cleared just under $200k with bonus last
year

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fidotron
This sets alarm bells off for me, of the kind saying the large investors are
looking to claw as much back as possible via IPO because the core business
isn't as viable as they thought. Demonstrating profitable quarters in the run
up to IPO is highly valuable, so if they aren't doing that . . . yuck.

DropBox, for better or worse, appear to have cleaned up on the consumer front,
and you'd have to be blind to not notice the trend these days is consumer tech
getting into enterprise IT, and not vice versa. GDrive isn't too hot, yet, but
I'm sure they'll eventually get there. Then MS probably have the biggest
motivation to chase the enterprise market.

Sorry Box, I just don't see this working out at all. Something smells bad.

~~~
sfall
i have started to see it used in the construction industry, when the general
contractor already has some infrastructure typically on a windows domain. that
is where they are going to push for further and further integration for
business and project mgmt

~~~
us0r
But MS is pushing their product now and is in a war with Google to basically
give this stuff away for free.

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klochner
Not surprising given they raised 11 rounds, including series A-F, and have
cumulatively raised over 400M

~~~
ares2012
Exactly. If you raise that much money and are still have net losses higher
than your revenues, you won't own much equity.

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vqc
Is it possible that he's already cashed out some of his shares privately? (Get
himself some liquidity prior to an exit.)

~~~
zaidf
He's almost certainly cashed out partially. You don't get to Series F without
cashing out.

~~~
changdizzle
tagline for the future Box tell-all movie?

------
refurb
Random question: When a company finally IPOs, how much equity are the top guys
expected to hold onto?

I know it's common for founders to be allowed to cash out some of their equity
during financing rounds, usually enough to make them comfortable (a few
million).

The reason I ask is if you're Aaron Levie and Box IPOs, are you expected to
not sell much of your remaining stake unless you leave the company? It just
reminds me a little of the investment banks where partners understood that it
was frowned upon if they sold their equity. Many of them lost everything when
the banks collapsed (some would say rightfully so).

~~~
drewvolpe
Here's data on equity ownership at the time of IPO for 258 companies:
[http://www.slideshare.net/lebret/equity-in-258-high-tech-
sta...](http://www.slideshare.net/lebret/equity-in-258-high-tech-start-ups-
lebret-mar2014)

The average overall was 7.6%, but it varies a lot, from close to 0% (Zipcar)
up to 28% (Amazon).

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dasickis
4% for a company like Box is pretty consistent (maybe slightly higher).

[http://www.bothsidesofthetable.com/2011/10/14/understanding-...](http://www.bothsidesofthetable.com/2011/10/14/understanding-
how-dilution-affects-you-at-a-startup/)

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cromwellian
I view this as being smart. Box is under heavy competition not just from
Dropbox, but from Google and Microsoft. 4% of $250 million is better than 50%
of $0. The landscape is littered with founders who drank the koolaid and
thought they were going to billions and ran their companies into the ground.
Maybe Levie won't own 50% of Box, but maybe he will own 4% of a viable company
with a real business going forward. And if all else fails, he'll walk away
with $10 million.

That's a "problem" I'm sure many of us would like to have.

~~~
danielha
They'd be raising $250mm in the IPO. That wouldn't be the valuation of the
company. Presumably, it'd be >$2B which was the value of their last private
round.

Your point stands in that 4% of that isn't too bad either.

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ycmike
I agree with the article that since startups are pass/fail, the founders must
due whatever they have to do to succeed. Marc Andreesen says to even take that
highly diluted fourth round to get to product/market fit and increase your
chances of success.
[http://www.stanford.edu/class/ee204/ProductMarketFit.html](http://www.stanford.edu/class/ee204/ProductMarketFit.html)

~~~
rodgerd
"Venture capitalist says you should always follow his business plan" non-
shocker.

~~~
ycmike
What he says is you should get to product/market fit. If you don't get there
then whatever business plan you have will fail and so will you. When Aaron
dilutes himself massively he does so to buy time to get to product/market fit.
Only by dong so can he later turn on the growth engine and know that users
will stay and love the product. A top VC knows that he can never trick a
founder into making him a large exit. The founder just needs the "right" plan,
not "his" plan.

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chrisgd
He could have had more if he wanted to scale slower, but he wanted to get as
big as possible as quick as possible.

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bthomas
How much does Mark Cuban have now? (350K as only Angel)

~~~
changdizzle
cuban sold his shares to DFJ during their series A in 06 due to disagreements:
[http://pando.com/2014/01/31/box-is-the-unicorn-that-mark-
cub...](http://pando.com/2014/01/31/box-is-the-unicorn-that-mark-cuban-let-
get-away/)

~~~
tristanz
The Cuban comment in that thread is interesting:

"I didn't miss a thing. When a company raises hundreds of millions of dollars
I would have been diluted to nothing. But the bigger issue is that I'm not a
fan of situations where you have to raise hundreds of millions of dollars to
do tens of millions in sales. It's a lesson learned from the tech bubble

It was one thing when the valuation as a multiple of sales was in stock. It's
a bigger thing when that multiple is my cash."

~~~
midas007
Box needs to monetize on enterprise add-ons. There's a huge pile of cash there
if they hustle ahead and steal Dropbox's lollipop.

Further, nurturing and gobbling up feature plays. Gotta pull off a "Siri."

Finally, tons more integrations (other apps, more language sdks and some
videos showing off some neat use-cases at open source conferences).

~~~
ssijak
advice pulled out of from where the sun does not shine... really, give talks
at open source conferences, that would raise value how much? or library for
brainfuck?

~~~
midas007
Having dev evangelists presenting cool shit gets people aware of your platform
and it's free marketing, the best kind.

Further, Java, Python, Ruby, Obj-C, Android and C# isn't complete. [0] JS for
browser front-end and node back-end is clearly missing or third-party. A
somewhat smaller shop, Segment.io, has all of those and PHP and Clojure. And a
metric ton of integrations comparatively. [1] [2]

[0] [http://developers.box.com/sdks/](http://developers.box.com/sdks/)

[1]
[https://segment.io/libraries/analytics.js](https://segment.io/libraries/analytics.js)

[2]
[http://blog.box.com/tag/integrations/](http://blog.box.com/tag/integrations/)

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maaku
Remind me again why entrepreneurs invite VC's in?

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michaelochurch
"If you have a gun, you can only rob a bank. If you have a bank, you can rob
everyone."

------
jordhy
He got totally Goxxed.

