Is it bad if cofounders split a company evenly, but one cofounder provides all the seed capital?

Chris Barsness, Lead experience getting startups off the ground…

Not exactly sure how you mean skew the split, but here are the issues I see:

If you are both putting in something of major value to the company and those values are somewhat similar, that may be okay to split it as you discuss.  It depends upon your business and finance plans to some extent as well, e.g. how much more will be needed in terms of capital and how involved he will be in the business operations.

If he is just supposed to be a passive investor, what are the terms of conversion and when does that occur because when it does and it sounds like he gets 50% equity, how will a voting tie be handled?  You need to look to state law and your bylaws or articles of incorporation to see what voting percentages are needed for certain corporate actions to be taken.  A lot of M&A and funding (i.e. equity issuances) require certain majority voting of shareholders of the corporation (sometimes simply majority over 50%, sometimes more), so you need to understand how voting percentages can affect you down the road.

If you bring a lot of value and leadership to the company, you should probably try to bring the balance to your favor so you won't lose control of majority voting rights.  Also, can you pre-pay the note prior to conversion to buy him out if you bring in further rounds?  These can all be issues to consider in answering your question; however, cash is king and sometimes you can't cover all possible future strategic issues, so just getting the money in the door may be the most important thing right now.

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Once at a startup, how if at all can an employee increase his/her options or total equity ownership?

Chris Barsness, startup, finance, law, and tech nerd

I have put in performance based vesting of restricted stock units, straight stock grants, or stock options, but these equity grants typically need board approval or at least put into a board approved stock option or equity inventive plan.  That is sometimes difficult to draft into a grant since determining if someone hit those performance metrics is not always black and white.  The board and management are typically constrained by the terms of any approved plan, state and federal securities laws, and considering what others in the company will say if one person gets substantially more than someone else.

To answer your question, the typical equity or stock option incentive plans set aside a pool of a certain number of shares and when one person leaves, they usually have a short period of time (often 30 to 90 days post termination) to exercise any option rights they had.  If they don't exercise it, they lose it and that grants goes back into the pool for other employees.  You can ask for performance reviews for possible further equity or option grants if you hit certain performance targets every year, quarter, etc.  That is pretty fair to both the company and employee most of the time.

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Facebook shows lots of cash and revenue, high valuation

In Facebook’s S-1 registration statement, the most recent rounds of funding over the last year or so were sold at a price of $20.85 per share of Series A common stock. This places the valuation used for those raises somewhere in the neighborhood of making Facebook worth $86 billion, without taking into account any convertible preferred shares or option exercises. Some other items of interest are the consolidated financials. Facebook shows that as of 12/31/2011, it has close to $1.5 billion in cash, cash equivalents, and marketable securities. In addition, it also lists net income of $1 billion for 2011. Clearly companies have learned since the dot-com era on how to have real revenue recognition from an online company.We will have to see where the investment community puts for the initial share price, but I have heard rumors of somewhere in the $30 range putting the market cap well over $100 billion. To put that into perspective, that could approach or go beyond the valuations of Google and General Electric. It is funny to see reports on the news about all the “instant millionaires” or billionaires after the IPO. Anyone familiar with securities knows that it is not that easy. There are SEC rules, federal and state laws, as well as contractual restrictions on the ability to sell any stock that someone at Facebook may own. It appears the terms of any lock up and market standoff agreements exempt Mark Zuckerberg, but most executives, officers, directors, and employees will be restricted in when, how, and how much stock can be sold off. In addition, Mr. Zuckerberg still has to comply with securities laws when selling any stock. So, yes, there will be instant millionaires on paper, but someone has to own a large number of shares and be able to sell them to realize the status of a millionaire. That being said, more than likely, some founders, venture capitalists, early investors, and early key employees will do very well off their early involvement in the company.

Facebook Files $5B S-1 Registration Statement (Ticker: FB)

Today, as was much anticipated, Facebook filed its S-1 registration statement with the SEC. Their proposed ticker symbol for trading is requested to be “FB”. For a link to the actual S-1 filing, click here.The filing is for a public sale of up to an unknown number of shares of common stock for a proposed maximum raise of $5 billion. Their listed corporate strategies are: Expand Our Global User Community. We continue to focus on growing our user base across all geographies, including relatively less-penetrated, large markets such as Brazil, Germany, India, Japan, Russia, and South Korea. We intend to grow our user base by continuing our marketing and user acquisition efforts and enhancing our products, including mobile apps, in order to make Facebook more accessible and useful. • Build Great Social Products to Increase Engagement. We prioritize product development investments that we believe will create engaging interactions between our users, developers, and advertisers on Facebook, across the web, and on mobile devices. We continue to invest significantly in improving our core products such as News Feed, Photos, and Groups, developing new products such as Timeline and Ticker, and enabling new Platform apps and website integrations. • Provide Users with the Most Compelling Experience. Facebook users are sharing and receiving more information across a broader range of devices. To provide the most compelling user experience, we continue to develop products and technologies focused on optimizing our social distribution channels to deliver the most useful content to each user by analyzing and organizing vast amounts of information in real time. • Build Engaging Mobile Experiences. We are devoting substantial resources to developing engaging mobile products and experiences for a wide range of platforms, including smartphones and feature phones. In addition, we are working across the mobile industry with operators, hardware manufacturers, operating system providers, and developers to improve the Facebook experience on mobile devices and make Facebook available to more people around the world. We believe that mobile usage is critical to maintaining user growth and engagement over the long term. • Enable Developers to Build Great Social Products Using the Facebook Platform. The success of our Platform developers and the vibrancy of our Platform ecosystem are key to increasing user engagement. We continue to invest in tools and APIs that enhance the ability of Platform developers to deliver products that are more social and personalized and better engage users on Facebook, across the web, and on mobile devices. Additionally, we plan to invest in enhancing our Payments offerings and in making the Payments experience on Facebook as convenient as possible for users and Platform developers. • Improve Ad Products for Advertisers and Users. We plan to continue to improve our ad products in order to create more value for advertisers and enhance their ability to make their advertising more social and relevant for users. Our advertising strategy centers on the belief that ad products that are social, relevant, and well-integrated with other content on Facebook can enhance the user experience while providing an attractive return for advertisers. We intend to invest in additional products for our advertisers and marketers while continuing to balance our monetization objectives with our commitment to optimizing the user experience.

TARP will continue to haunt taxpayers

<p>No one hears much about TARP anymore, but a recent report shows a gloomy picture for the next 5 years.  The US can spend up to another $51 billion on various programs.  Taxpayers are still owed over $130 billion and own over 70% of AIG and 30% of GM.  </p>
Who knows how long it will take to pay back all those funds and get things back to normal, but in my opinion, the economy has not shown any signs that you can spend your way out of a depression.