And Now Spotify

A few days after Dropbox filing for an IPO, here is Spotify. Their F-1 can be found here. The data from the filing document is not exhaustive enough for me, many pas financing rounds are not described but the Luxembourg register of commerce helps too.


Spotify founders Martin Lorentzon and Daniel Ek

Just like for Dropbox, this is a filing only, so the price per share is tentative and the valuation is not fixed yet. The price per share could probably go from €20 to €100…

The start-up of You by Reid Hoffman

I have never been a big fan of “How to” books, sometimes called “personal development”. Even if Reid Hoffman is a brilliant entrepreneur, he did not really change my mind with his Start-up of You. His book which sometimes look like an ad for LinkedIn and which is strangely written with four hands, one saying I (Reid) and the other, He (Ben Casnocha) is still a good description of what it requires to look at improving a career:
– know thyself,
– be adaptable,
– network,
– look for opportunities,
– assess risks.

He also has beautiful ideas. When he quotes authors such as Jonathan Franzen – “Inauthentic people are obsessed with authenticity” – or David Foster Wallace – “There is no experience you have had you are not the absolute center of”. (Pages 93-94) I assume Hoffman knows Franzen and Wallace were great friends until the death of the second – strong ties in networks.

He also prones diversity in networks. If people know each other too well, there is not enough diversity, if they do not each other well enough however, trust is tougher to build. You need both old blood (trust) and fresh blood in a team. (Page 118)

But a team is only as good as its members. team quality requires individual quality. Look below at the famous Paypal mafia(Page 159)

Even if Hoffman gives good advice t the end of each chapter, he is not over-analyzing. For example, when talking about risks: Of the voluminous research on risk, remarkably little of it actually analyzes how real businesspeople make real decisions in the real world. An exception is a study done by professor Zur Shapira in 1991. (…) What he found likely came as a disappointment to architects of fancy decision trees. The executives surveyed didn’t calculate the mathematical expected value of various scenarios. They didn’t draft long lists of pros and cons. Instead, most simply tried to get a handle on a single yes-or-no question: could they tolerate the outcome if the worst-case scenario happened?


Impressive panel @ESPCI_Paris #SiliconValleyinParis with @reidhoffman @tfadell @Hemaisphere, Sebastian Amigorean and Stephen Quake moderated by @APapiernik

You could ask me why I decided to read that book. In the end, it shows entrepreneurs are really good at action, less at analysis… The truth is I went to Paris to listen to him at a great event called Silicon Valley comes to Paris. I wanted to approach him, network! Without knowing I applied some his advice and also made some of the mistakes he is describing. My main mistake was not knowing his interest about European start-ups. In fact he has not invested in Europe, he does not know EPFL. It makes you humble and willing to network even further. Reid, would you come back in Europe and inspire aspiring young entrepreneurs?

Silicon Valley 2018 : The Libertarians Have Replaced the Hippies

While Trump and Harari were in Davos, I visited Silicon Valley for the nth time. Even more than during my last trips in 2014 and 2016, I could feel the gap that has been created between the Silicon Valley that I discovered and loved in the late 80s and the one that exists today (and that I still love).

As one of my interlocutors mentioned, the Hippie generation – which Leslie Berlin describes in her Troublemakers and which until Brin and Page tried to democratize technology – has been replaced by the Libertarian self-interest of social networking that even Reid Hoffman will have a hard time to balance (see It’s time to change the culture of Silicon Valley). The skyscrapers climb in San Francisco, the poor had to leave or live in tents all over the bay, the venture capital funds do not perform as one might think, the unicorns might disappear one after the other, it takes 3 hours to drive from Berkeley to Palo Alto at 6am, one finds more founders than entrepreneurs according to Leslie Hook, and even Steve Blank is looking at a little less at startups and focuses more on innovation of government organizations.

This is a bit the “Querelle des Anciens et Modernes” and I am not sure Steve Jobs would pass the baton to this new generation when he said in 2005 [death] clears out the old to make way for the new. Some think that Silicon Valley is reaching its limits, but AnnaLee Saxenian said the same thing … in 1979. Will we live old enough to have the answer?

Leslie Berlin strikes again with Troublemakers

I had read a few years ago the great The Man Behind the Microchip by Leslie Berlin. After the biography of Robert Noyce, one of Intel’s cofounders, Berlin comes now with Troublemakers, a description of “How Generation of Silicon Valley Upstarts Invented the Future”.

The title is a reference to a famous Apple advertisement: The crazy ones. The misfits. The rebels. The troublemakers. One of the great merits of the book is to focus on 7 individuals (2 women and 5 men) which are relatively unknown compared to the stars of Silicon Valley. Will you recognize them on the following image? (The answer is at the end of the post).

The book is not only great storytelling. It describes the dynamics of Silicon Valley from the late 60s to the early 80s and how “five major industries — personal computing, video games, biotechnology, modern venture capital, and advanced semiconductor logic — were born”. You can also listen to Leslie Berlin here:

The close-to-400 page book also has more than 80 pages of rich notes. It is really a must read for anyone passionate or just interested in Silicon Valley. Here are a few quotes:

Indiana Jones: I’m going after that truck.
Sallah: How?
Indiana Jones: I don’t know. I’m making this up as I go.

“We didn’t want to be considered part of the flock. Eagles don’t flock, was our joke.” (Tom Perkins when asked why KP was not initially on Sand Hill Road – Page 192)


Let me make a short parenthesis. While reading this book, I read a very interesting article in the FT entitled Silicon Valley’s founder factory ‘Silicon Valley is lacking in one core area — a sense of entrepreneurial hustle’ (Leslie Hook – Jan 2018): “When I moved to San Francisco four years ago, I noticed something odd about the start-up founders I met: many of them resembled each other. Not just physically, though most were men under 35. But also in the way they spoke about their companies. They had PowerPoints at the ready, and big numbers on the tips of their tongues. Everyone seemed to know exactly what the total addressable market of their start-up was, even if they hadn’t yet made a single dollar of sales. […] By contrast, while there are a lot of founders in Silicon Valley, I have found relatively few entrepreneurs. The founders are smart and hard-working. But many are simply products of a system, which is why they all seem vaguely the same.” Interesting food for thought in comparison to the 70s…

As my personal contribution, here are 4 of my “usual” cap. tables. Ask Computer, ROLM, Cetus and Atari are companies from the 70s mentioned in the book that I had not studied yet… Ask was one of the first software companies and Cetus the 1st biotech company…


Ask Computer cap. table


ROLM cap. table


Cetus cap. table


Atari cap. table

Well to show the complexity of the exercise, here is a second Atati cap. table based on its S-1 IPO Filing…

In her final pages, Leslie Berlin also mentions another company founded by Mike Markkula, Echelon Corp. Echelon had the ROLM founders as well as Arthur Rock and Larry Sonsini as stakeholders. Here is a 5th table:


Echelon cap. table

Answer to the quiz, the seven troublemakers, from left to right:
Top row: Sandra Kurtzig, Mike Markkula, Fawn Alvarez, Niels Rimers.
Bottom row: Bob Taylor, Al Acorn, Bob Swanson.

Google is not Stanford largest license revenue anymore

Until early this morning, I thought that the Google license (i.e. the rights Stanford University had granted the startup on the PageRank patent) was the largest generator of licensing revenue for the Californian university. I was wrong! If you read the annual reports of OTL, its Office of Technology Licensing, for example the pdf of the 2016 Annual Report, you may notice that the largest royalty revenue generator had another source: intellectual property/patents about functional monoclonal antibodies. Here are what these reports say of the largest amount of revenue in a given year from a single invention:
2016: $64M
2015: $62.77M
2014: $60.53M
2013: $55M
2012: $51M
2011: $44M
2010: $45M
2009: $38M
2008: $37M
2007: $33.5M
2006: $29M
These numbers give a total of $363M and another book mentions $125M cumulatively before 2006. But a more recent powerpoint document shows that the total cumulative revenue is … $613M!!

As a side note, in 2005, the Google patent gave proceeds of $336M following the company IPO. The 2004 and 2003 reports do not say the amount of the largest source of income whereas in 2002, it was “an unexpected $5.8M in one-time royalties” and in 2001, “for the first time in over 20 years, a physical science invention – an optical fiber amplifier – generated the most income”.

As Lita Nelsen from MIT said (see my previous post), “Even nationwide, you can show that tech transfer is, at best, a lottery if you want to make an ability to influence [a university’s financial position]. The primary winners—not 100 percent of them, but damn close—are single pharmaceuticals. Because if a pharmaceutical hits the market, it’s going to be in the multi-billon dollar [range]. The equity is seldom worth a lot, unless of course you can follow up with preferred investments. But that’s not what we’re in the business of doing. Any university that counts on its tech transfer to make a significant change in its finances is statistically going to be in trouble.” Google was a big exception with the equity proceeeds whereas the patent around monoclonal antibodies or the Cohen Boyer patent are about pharma. Have a look at the next figure from the same powerpoint document.

Interestingly enough I am reading a very interesting book (more when I am finished) which describes the early days of Silicon Valley and in particular the creation of the office of Technology Licensing by Niels Rimers.

In Troublemakers, author Leslie Berlin extensively describes the Cohen Boyer patent. In note 32 (page 450), she describes the terms of the Cohen-Boyer license. You can also find them in Lessons from the Commercialization of the Cohen-Boyer Patents: The Stanford University Licensing Program.

73 companies has signed for the initial $10k upfront payment, but “ten companies alone provided 77% (US$197 million) of the total licensing income” and 3 (Amgen, Genentech and Lily) provided close to 50% of the total. All this is well-known but I thought it would be interesting to blog about it today.

MIT’s Lita Nelsen Perspective on Academic Technology Transfer

I just read an excellent interview of Lita Nelsen who has recently retired as head of MIT’s Technology Licensing Office. You should read the full Exit Interview: Lita Nelsen on MIT Tech Transfer, Startups & Culture. I was used to say that MIT was more conservative than Stanford just like the Boston Area has been known to be more conservtaive than California, but things change. So let me just mention a few extracts.


Lita Nelsen (Formerly head of MIT Technology Licensing Office)

About patents:

Patents are needed because the whole idea is if you’re going to get somebody to invest a lot of time and a lot of money, if you succeed you don’t want the other guy, the bigger guy, saying, “Well, thank you very much. Now that you’ve shown the way, get out of the way.” We are primarily using patents as an incentive for investment.

About universities having an investment fund:

[The Technology Licensing Office helps] start about 25 or 30 companies a year. God knows how many [other companies started on campus] go out the back door. No one fund could put that amount of sweat equity into all of them. Now imagine we have MIT’s fund, and I invest in company A, but don’t have the resources to do B, or maybe not C. Then I go with C to [an outside venture capital firm] and say, “How would you like my leftovers?” There’s a negative selection bias there for what we don’t invest in. So, better to let a level playing field for anybody who wants to play.

But one thing any institution doing it has to decide is, are we primarily in it for return on investment? Or are we primarily in it for getting companies started that wouldn’t otherwise get started? You usually get a mixed message if you ask people which it is. And as everybody knows, when you get mixed missions, things get very hard to manage.

About equity in licensing:

How much equity does the Technology Licensing Office usually take when it spins out a company? Usually in the lower single digits, maybe a little higher if you have a software spinout. And it’s common shares.

If it’s research-intensive stuff—biotech, things that take multiple rounds of funding—[our stake] usually gets demoted down to [tiny] portions. You make a little money; you don’t make a lot. Except in cases when the Wall Street bubble is totally irrational. Even nationwide, you can show that tech transfer is, at best, a lottery if you want to make an ability to influence [a university’s financial position]. The primary winners—not 100 percent of them, but damn close—are single pharmaceuticals. Because if a pharmaceutical hits the market, it’s going to be in the multi-billon dollar [range]. The equity is seldom worth a lot, unless of course you can follow up with preferred investments. But that’s not what we’re in the business of doing. Any university that counts on its tech transfer to make a significant change in its finances is statistically going to be in trouble.

About accelerators:

“Does MIT have an incubator?” And my classic answer has been, “Yes, it’s called the city of Cambridge.”

The problem with accelerators is the definition has become as broad and varied as incubators, which range from science parks to little projects within universities, so you don’t know what the word means until you dig in. But some of them are putting money into product development. Some of them are venture funds expecting ROI. Some of them are [funded] through donations, as we did with Deshpande and Harvard did with their accelerator.
It’s going to be interesting to look at the mechanisms that people are trying. Because the problem is there: How do we get from the stage of which the university has done its research and maybe even gotten on the cover of Science magazine, to where somebody is going to invest in that ripening process before it actually turns into true product development, short-term product development? How do you get from the petri dish to full-scale clinical trials? You’ve got to get pretty far along before pharma’s going to do that for you. So people are looking both within universities and outside of universities as to how you fill the gap.

About teaching entrepreneurship:

now MIT, with its emphasis on innovation, is investing officially in training students in innovation and entrepreneurship, along with, not separate from, their intense technical educations. It’s not “you go and learn how to be an entrepreneur,” it’s you learn biology or chemistry or electrical engineering or computer science, but you also learn how entrepreneurship and innovation and moving technology out into the marketplace works—rather than having to learn that after you graduate.

The Tinkerings of Robert Noyce – again

I read again The Tinkerings of Robert Noyce for reasons which are not directly related to Silicon Valley or Start-ups. A few days ago, I blogged about an extremely good article from the New Yorker – Our Town by Larissa MacFarquhar. The author illustrates some universal values of humankind through a small community in Iowa. And this reminded me of Tom Wolfe article written for Esquire Magazine in 1983. I found it again online here. It begins with : “In 1948 there were seven thousand people in Grinnell, Iowa, including more than one who didn’t dare take a drink in his own house without pulling the shades down first.” Robert Noyce studied at Grinnell College then left to MIT then to what would become Silicon Valley. Grinnell College was quite advanced in electronics. Tom Wolfe claims: “But MIT had proved to be a backwater… when it came to the most advanced form of engineering, solid-state electronics. Grinnell College, with its one thousand students, had been years ahead of MIT.” And later Grinnell College would invest in Intel, making its endowment unusually successful.

I was about to blog here about Wolfe’s article and (re)discovered, shame on me, that I had blogged about it in 2012! I had mentioneed the piece about the Wagon Wheel bar. Here it is again.

Or else he would leave the plant and decide, well, maybe he would drop in at the Wagon Wheel for a drink before he went home. Every year there was some place, the Wagon Wheel, Chez Yvonne, Rickey’s, the Roundhouse, where members of this esoteric fraternity, the young men and women of the semiconductor industry, would head after work to have a drink and gossip and brag and trade war stories about phase jitters, phantom circuits, bubble memories, pulse trains, bounceless contacts, burst modes, leapfrog tests, p-n junctions, sleeping-sickness modes, slow-death episodes, RAMs, NAKs, MOSes, PCMs, PROMs, PROM blowers, PROM burners, PROM blasters, and teramagnitudes, meaning multiples of a million millions. So then he wouldn’t get home until nine, and the baby was asleep, and dinner was cold, and the wife was frosted off, and he would stand there and cup his hands as if making an imaginary snowball and try to explain to her… while his mind trailed off to other matters, LSIs, VLSIs, alpha flux, de-rezzing, forward biases, parasitic signals, and that terasexy little cookie from Signetics he had met at the Wagon Wheel, who understood such things.

Here is another piece about stock options, which I discussed in another recent post: Rewarding Talent – A guide to stock options for European entrepreneurs by Index Ventures.

From the beginning Noyce gave all the engineers and most of the office workers stock options. He had learned at Fairchild that in a business so dependent upon research, stock options were a more powerful incentive than profit sharing. People sharing profits naturally wanted to concentrate on products that were already profitable rather than plunge into avant-garde research that would not pay off in the short run even if it were successful. But people with stock options lived for research breakthroughs. The news would send a semiconductor company’s stock up immediately, regardless of profits.

There would be so much more to say about this marvelous piece of Silicon Valley and American history. You should read it!

Rewarding Talent – A guide to stock options for European entrepreneurs by Index Ventures

I recently read an article mentioning a new report by Index Ventures Rémunération du risque : la France s’en sort bien ! and a few days later a student of mine mentioned a new app by Index to help entrepreneurs allocate stock options: Index Ventures Option Plan beta. Thanks Javier! I had a look, tweeted about it and then thought it was worth a blog article…

I advise you to read the full (143-page) report – link here. It includes great information at the macro (national policy) and micro (startup) level. There are minor differences with my past analyses such Equity in Startups published in Sept. 2017 or my recurrent class about Equity Split in Startups which you can find here:

What is particularly interesting, I think, is their summary:

1 European employees own less of the companies they work for than US employees. For late-stage startups, they own around 10%, versus 20% in the US.

2 Ownership levels vary much more in Europe than the US. In Europe, employee ownership in late-stage startups ranges from 4% to 20%. In the US, ownership is more consistent, as stock option allocation is driven by market forces.

3 Employee ownership correlates to how deeply technical a startup is. An AI or enterprise software startup requires more technical know-how than a straightforward e-commerce startup. These employees are more likely to seek stock options.

4 Ownership policy details adopted by startups vary between the US and Europe. For example, provisions for leavers, and accelerated vesting following a change in control.

5 In Europe, stock options are executive-biased. Two-thirds of stock options are allocated to executives, and one third to employees below executive level. In the US, it’s the reverse.

6 European employees still don’t expect stock options much of the time. US employees joining a tech startup with fewer than 100 staff would typically expect stock options straight away. This is much less true in Europe, although expectations are steadily rising.

7 European option holders are often disadvantaged. In much of Europe, employees will be paying a high strike price, and they will be taxed heavily upon exercise as well as sale. Leavers often get nothing.

8 There is wide variation in national policy across Europe, with the UK most supportive of employee ownership. Regulations and tax frameworks are radically different across Europe. The UK’s EMI scheme is most favourable, better than what is available in the US, and France is also good. Other countries, including Germany, lag behind in our opinion.

The complexity of innovation policies – the example of Malaysia

I was lucky to meet last week two economists from the International Monetary Fund who are the authors of the working paper The Leap of the Tiger: How Malaysia Can Escape the Middle-Income Trap. It is not directly linked to high-tech innovation and I am not an economist; my expertise is limied to the nano-economics of start-ups. This being said, I was very impressed by the analysis of Reda Cherif and Fuad Hasanov.

In general, I read more about developed countries and high-tech entrepreneurship, Silicon Valley, obviously, but also the example of Israel, Finland, France, Chile… Lerner, Saxenian and Mazzucato have been important authors for me. Hasanov and Cherif explain how Malaysia tried to develop its economy and relatively failed compared to Taiwan and Korea. The reasons are complex and the interested person should read their paper.

They really show the complexity of things and again the recipe needs so much fine tuning, with no guarantee of success. The addition of Chile, Thailand and Norway in their analysis, makes it really rich. I understood that a combination of strong state support (incentives, funding, sometimes protection) and competition in the private sector (so many Korean automotive firms were initially created) with an emphasis on its ability to export is very striking. Why did Nokia succeeded for some time and not Alcatel maybe explained with their arguments. They also put a lot of emphasis in the ability to innovate, a must to enable exportations.

So Mazzucato is right, the state has an entrepreneurial role, but individual initiatives seem to be also important, something I had not necessarily understood in the cased of Taiwan and Korea. The diaspora of engineers who studied and work abroad (in the USA mostly) was instrumental to the economic development and innovation once they came back (sometimes many years later) in their home country…