Tag Archives: Equity

Zalando files to go public

Zalando, one of the very visible European start-up should become a public company on October 1st in Germany. It’s not so much the numbers which I found of interest, but how difficult it was to get them. As usual, Europe is showing less transparency. Finding the prospectus was not easy, and I am not sure I could have found it without claiming I live in Berlin. And still, I have no clue how much the company has raised, at which price and when. This is not in the prospectus – I just have all capital increases dates and shares number, it does not help much.

Rubin Ritter, David Schneider and Robert Gentz

I could still build my usual cap. table and here is what it gives. Revenues are impressive, as well as losses. Founders have been diluted, btu given the capital increases and losses it is not so surprising…



The (sad) state of high-tech IPOs on the Paris Stock Exchange

I just read an excellent article in the newspaper Le Monde: Investors get tired of IPOs.

The first reading could suggest positive news, as shown in the following charts:
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I looked in more detail at the IPO prospectus of 11 of these strat-ups. For reference, the 11 companies studied are:
Ask http://www.ask-rfid.com
Awox http://www.awox.com
Crossject http://www.crossject.com
Fermentalg http://www.fermentalg.com
Genomic Vision http://www.genomicvision.com
Genticel http://www.genticel.com
Mcphy energy http://www.mcphy.com
Supersonic Imagine http://www.supersonicimagine.fr
Txcell http://www.txcell.com
Viadeo http://fr.viadeo.com/fr/
Visiativ http://www.visiativ.com
and here I let you discover the 11 capitalization tables.

I show you here the two most successful and Supersonic Viadeo:

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Why did I feel the need to use the term “sad” situation? Because:
– Valuations do not exceed €200M
– Amounts raised do not exceed €50M
With such numbers, neither entrepreneurs nor investors can not be compared with their U.S. counterparts. (I refer you to my summary of U.S. IPOs, if you are not convinced).

And if you’re still not convinced, I refer you to an excellent debate on France Culture including Osamma Ammar, founder of The Family: Is France heaven or hell for start-ups? Osamma Ammar describes the historical weaknesses of the French system, too much government intervention, IPOs (like those Viadeo rightly) that are so low that they would not take place in the USA (whereas a French start-up such as Criteo could be quoted on the Nasdaq). There is much to say from the 11 IPOS, but I leave you to think about what they mean …

GoPro proves start-ups can be hardware and successful

GoPro just filed to go public (check here its SEC S-1 document). Its founder Nick Woodman is so unconventional that he is called the Mad Billionaire.


But what is really unconventional is the fact that a hardware company can still go public in the social media era. There are other unconventional features, particularly in the shareholding. Its founder and his father own together more than 40% of the company. The first developer still owns about 5%. Of course, the investors do not have as much… Silicon Valley is also known for the network strength so how is it a surfer could get the attention of the region? Because the GoPro cameras are great! Well this might not be all… Irwin Federman is a legendary VC, shareholder in GoPro… and Woodman’s stepfather…

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Swiss Founder’s Dilemmas

Following my recent post about Wasserman’s book, The Founder’s Dilemmas, let me react about recent (and less recent) events related to Swiss start-ups and founders. Do we have here the same dilemmas Americans face, that is building a company which is either control-oriented or wealth-oriented? If you do not know what I mean, read the blog or let me just add that there is this binary model of either slowly creating value with your customers and partners with not much investor money or taking the risk of fast growth with investors, in anticipation of customer demand.

The ultimate example of this in Wasserman’s book is Evan Williams who founded Blogger, Oddeo and then Twitter, with diverse strategies. Paul Graham addresses the issue often (for example in Startup = Growth or in How to Make Wealth) and for a young entrepreneur, getting a million can be very important. At the macro-economic level, there is also a debate which I honestly never really understood. I think an ecosystem is (or should be) interested in fast growing companies, and slow growth should be less of a focus, not because it would not be important, but because it has always existed and will continue to exist with or without public support… However, because there are many SMEs in Switzerland, the support to small firms seems to be important. So is the situation very different from what I know in the USA? Let me try a simple description.

Sensirion is a very succesful Swiss start-up which is a good illustration of the debate. In an article written in 2008, its co-founder, Felix Mayer wrote about “How to finance the Growth? Being somewhere in the middle between the “US American” who is shooting for the moon and the Swiss who develops his technology on the cash flow of a one man company we did not choose the classical venture capital path to finance the first growth phase of the company but were able to find a private investor. In Switzerland, if you look for private investors, you may find experienced entrepreneurs who are willing to invest into a promising business. They are also known as “business angels”. It took quite a while to get from a prototype to a product family or from 1 to 10 to 100 as described before. You need knowledgeable and patient partners to survive this phase with many ups and downs. Usually, it takes longer than you expect. Nevertheless, at the end of the day, you have to get to the point where you generate growth by your own cash flow, which Sensirion reached 6 years after its incorporation. Since then, we generate enough cash flow to finance our yearly growth of around 30%-40%. In order to manage this growth we are of course continuously looking for excellent people!”

Is Sensirion a different model? I went to the Swiss register of commerce and looked at Sensirion financing (the Canton of Zurich is offering very detailed information). It was not an easy exercice and I am not sure about the accuracy (You will see the figures differ slightly!). I tried also to show the dilution of founders over time:


and here is Sensirion employee growth since its inception


Sensirion is clearly a success story, but is it that different from the US model? There might be no VC, but the private investor(s) have put a total of CHF13M with a valuation of CHF190M at the last round. The growth was as fast as many VC-backed start-ups, so I am not sure the investors were more patient and the exit might be less of a priority. This is very similar to many US start-ups… But Sensirion is often mentioned as an example that start-ups would not need venture capital (hence investors). There is not that much difference between a private investor and a VC (or is there?)

Now it is true that many of the Top 100 Swiss Start-ups raise very little money with business angels In the order of CHF1-2M. Recently EPFL’s Jilion has been acquired by Dailymotion for an undisclosed amount and the local press mentions Jilion had raised about one million. Optotune in Zurich is a similar model with 200’000 raised according to the register of commerce. Techcrunch was concerned recently about BugBuster (small) CHF1M A round. Dacuda raised about one million too at a CHF7M valuation. LiberoVision raised CHF200k with Swisscom at a CHF2.5M value before being bought for about CHF8M (it might have been more with upsides). Netbreeze was acquired by Microsoft after raising about CHF5M from one group of investors which owned 80% of the company. Wuala was acquired by LaCie 2 years after its creation and it was totally self-funded. And the list is nearly endless.

But there are also fast growing companies. Covagen, GlyxoVaxyn, GetYourGuide, InSphero, Molecular Partners, Nexthink, TypeSafe, UrTurn have raised a lot of money with VCs. And people who would say Switerland is about health related firms will see it is more diverse…

Company Field Money raised Latest valuation Investors
Covagen Biotech 56M NA Gimv, Ventech, Rotschild
GetYourGuide Internet 16M 50M Highland
GlycoVaxyn Biotech 50M 37M Sofinnova, Index, Rotschild
InSphero Biotech 4M 16M Redalpine, ZKB
Molecular Partners Biotech 56M 115M Index, BB Biotech
Nexthink Software 15M NA VI, Auriga
Sensirion Electronics 13M 190M Undisclosed
TypeSafe Software 16M NA Greylock
UrTurn Internet 12M 36M Balderton


And of course, the founders have been diluted. I will not specifically show the dilution in each company but anonymously illustrate this with the data I could found online (non confidential data).

Company Founders Seed A B & Later ESOP
1 9% 26% 65%
2 30% 33% 31% 6%
3 34% 32% 33%
4 40% 7% 12% 41%
5 43% 47% 10%
6 35% 11% 27% 28%

I am not sure, with all this data, that Switzerland is qualitatively that different… I will finish with an interview of Daniel Borel, the co-founder of Logitech: “The only answer that I may provide is the cultural difference between the USA and Switzerland. When we founded Logitech, as Swiss entrepreneurs, we had to enter very soon the international scene. The technology was Swiss but the USA, and later the world, defined our market, whereas production quickly moved to Asia. I would not like to look too affirmative because many things change and many good things are done in Switzerland. But I feel that in the USA, people are more opened. When you receive funds from venture capitalists, you automatically accept an external shareholder who will help you in managing your company and who may even fire you. In Switzerland is not very well accepted. One prefers a small pie that is fully controled to a big pie that one only controls at 10%, and this may be a limiting factor”

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The Founder’s Dilemmas – The Answer is “It depends!”

The Founder’s Dilemmas is at the same time a fascinating and frustrating book. Fascinating because it’s providing very seldom seen (and mostly unknown) data about founders and high-tech start-ups. Frustrating because it is also seldom providing answers to the dilemmas founders may face. It took me the full reading of the book to finally understand that the answer Wasserman provides is that there is no best solution for a founder facing a problem, but that if he knows all possible situations, he might better decide based on his own motivation and … personality. So she or he might decide, not on rational criteria but more because of his personal inclinations!


The best illustration of this is Evan Williams who was a founder of Blogger, and then of Odeo (and then after the book was designed of Twitter). Williams had a very different behavior with the two start-ups. He was “control-oriented” with Blogger, hiring people in his close network, taking friends and family (and close network) money only and keeping management control to the point of firing everyone including his former co-founder and girlfriend. With Odeo, he had initially a “wealth-oriented” attitude, taking VC money and having a different hiring strategy. His inclination made him however buy back his investor’s stake, as he needed to control his start-up again.

Wasserman shows that the “3Rs” (Relationships, Roles & Rewards) are key features for decisions about the key dilemmas founders may experience. These dilemmas are classified according to the chapters of the book: Career, Solo-vs.-Team, Weak vs. Network, Positions, Compensations, Hiring, Investors, and Succession. Wasserman explains (or better-said describes) the various dilemmas founders face when taking decisions and shows that their decisions are very often dependent upon their motivation. Do they want to be Kings (power or control-oriented) or Rich (wealth oriented)? He does it with anecdotes (not so good and quite well-known) and with statistics (very good and not so well-known)

In summary I saw it more as a book for academics than for entrepreneurs and founders who apparently will not take better decisions after reading this book as they will be driven by their motivations, not their experience! At least they will be aware of it. It may be another illustration that youth and enthusiasm are as important as experience and rational behaviors!

One interesting puzzle Wasserman addresses is why individuals decide to become entrepreneurs, often thinking that they will become wealthy whereas this is entirely wrong. This has to do with control vs. wealth. You will need to read Wasserman if you want to know more.

Here are some more notes taken when reading. The next table is probably an essential part of the control-vs.-wealth dilemma.

Table 1.2 (& 11.1) – Wealth-versus-Control Dilemmas

Wasserman has many more interesting data and let me show a small sample:
– There are no real pattern in becoming a founder (age, experience, childhood influences, personality, family status, economic status), however early influences and natural motivations seem to be important.
– About age, he has seen a wide variation with an average of 14 years of work experience before becoming a founder (higher in life sciences). There is a specific group of founders with 0-4 years of experience.
– The main motivations are either control or wealth, but having an impact counts.
– Wasserman shows strong differences related to gender correlated with age. This is a must read but too long to be explained here…or are they, let me try [pages 33-35]

Tables 2 – Motivations of male and female entrepreneurs

Ethnic homogeneity occurred 46 times more often than not (and still 27 times more often to control for family ties). And it diminishes conflicts risks, they are therefore more stable.

Size of founders’ teams


Founding with friends…
– 40% of teams had prior professional relationships and 17% family ties.
– Each such relationship added a 30% likelihood of founder departure.
– As a summary

“A friendship built on business can be glorious, while a business built on friendship can be murder.” [Page 104]

Jobs and Wozniak is a good example: they did not clarify crucial issues and “he got paid one amount, he told me he got paid another. He wasn’t honest with me, and I was hurt… But you know… he was my best friend, and I feel extremely linked to him.” They eventually parted ways. [page 109]

About decision making: “Two people at the wheel is the worst way to drive. You end up going straight when either a right or a left would be better.” A reason why being three might be good.

Equity sharing

Woman compensation
There is a much greater gap in the preponderance of women than in their compensation. Only 10% were C- or VP-level (17% in life sciences) and 3% and 7% were respectively CEO. But the compensation was 5% below.


On BAs vs. VCs, Wasserman shows the usual dilemmas. Dick Costolo about too many BAs: “It was a recipe for disaster. I had 13 people who, now that they had $20’000 invested, wanted to call me and ask about […], taking 45 minutes of the CEO’s time when he should be running the business.”


Succession of CEO



Wasserman strangely mentions here: “What is entrepreneurship? A widely used definition is a process by which individuals pursue opportunities without regard to the resources they currently control”. It sound even romantic, but it has a dark side: founders are 60 times more likely to be resource-constrained than have all the resources they need. Lack of resources lies behind all the dilemmas described. [Page 333]

Founders who had kept control held equity stakes which were [half] as valuable as those held by founders who had given up both CEO position and board control.


There are hybrid paths, compromises between control and wealth, using “second-tier” solutions (hiring, investors) but Wasserman shows it is even riskier. Consistent decisions give a higher likeliness of desired output (either control or wealth).
So the answer to dilemmas is “it depends.” Be knowledgeable about options and consistent in your choices!

Wasserman opens new directions for research:
– Who are these special animals which obtain both control and wealth (Gates, Ellison, Jobs 2.0…)
– Serial entrepreneurs: they receive larger equity stakes, remain CEOs longer, negotiate better investment terms and might be more successful. Are they?!! (cf Serial entrepreneurs: are they better?)
– How often is a control-oriented founder able to sell a start-up for which he owns 100%, for $5M and how often is a wealthe-oriented founder able to sell for $100M a company of which he owns 5%…
– Wasserman is aware all this is specific to high-tech and the USA. What about outside these boundaries?

“Any honest model of a complex human phenomenon has to acknowledge many unknowns”

I plan to come back on the Founder’s Dilemmans with a look at recent Swiss start-ups situation…

How much Equity Universities take in Start-ups from IP Licensing?

How much equity universities take in start-ups for a license of intellectual property? It is sometimes not to say often a hot topic and information is not easy to obtain. However there are some standards or common practice. I have already published posts on the topic: University licensing to start-ups in May 2010 followed by a Part 2 in June 2010.

To oversimplify, I used to say that the license was made of 3 components:
– first, universities take about 5% post-series A (a few million $) or similarly about 10% at creation (investors often take half of the company at round A,)
– second, there is also a royalty based on sales of products using the licensed technology, about 2% but the range might be 0.5% to 5%. A minimum yearly amount is usually asked for, like $10k or more.
– third, a small but important detail: start-ups pay for the maintenance of the IP from the date of the license.

I decided to look at data again through the S-1 documents, which start-ups write when they prepare their Initial Public Offering (IPO), usually on Nasdaq. I found about 30 examples of academic spin-offs which gave details about the IP license. Here is the result.

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A couple of comments:
This was not an easy exercise and I would not claim it is mistake-free. You should read it as indicative only, hopefully it is mostly accurate! Assuming the data is accurate, universities own about
– 10% at creation or
– 5% post–series A (average: $5M)
– Universities keep a 1-2% equity stake at exit,
– Worth a few $M (Median is $1M)
With an average of $70M VC investment and market value in the $1B range (Median is $300M)
(Median values are as important as Averages).
Royalties are in the 1-4% range.
All this is consistent with information given in my prior posts!

You can also check the following Slideshare document

Why was Netscape a weird example (to me) of Equity Sharing between Founders


Marc Andreessen and Jim Clark, the founders of Netscape

You may not know I owe a lot to Nesheim’s High Tech Start Up, which cap. tables I took inspiration from. If you do not know Nesheim’s, let me just quote Steve Blank’s in his bibliography for 4 steps to the Epiphany: “High Tech Start Up is the gold standard of the nuts and bolts of all the financing stages from venture capital to IPOs”.

There was one such cap. table which was striking to me and I never mentioned it until now. Here it is now scanned from Nesheim’s book. I did not ask for authorization but I hope not to get in trouble!

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Do you see why I found it striking? If not have a look again. If not again, follow me for a few minutes. I decided to look for Netscape IPO prospectus, which I could find in two formats, an html IPO prospectus on the Internet archive as well as a pdf S-1 filing document. They give slightly different data, but I could build my own table as follows.

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And now? Well I had never understood why the two founders, James Clark and Marc Andreessen could have such a different amount of equity. How could it be a 10x difference even if James Clark was a more experienced entrepreneur (he was a former Stanford professor and co-founder of Silicon Graphics) and Marc Andreessen had no experience but was the author of Mosaic, the predecessor of Netscape as a browser. (Netscape is a sad illustration of bad relationships between a university – the University of Illinois – where a technology was developed and entrepreneurs, but this is another story.)

Well I found the answer thanks to the two documents: Jim Clark was
– first, a co-founder and both founders had 720’000 founders’ shares and
– second, a business angel: he invested $3M in the series A and then $1.1M in the series B. He got the equivalent of 9M commmon shares for his investment.

This comforts me in the general explanation I usually give about sharing equity between founders and then investors, managers, employees as you may see in Equity split in start-ups or on Slideshare. First founders split equity based on their non-cash contributions, then investments are taken into account.

After Neolane and Criteo, Supercell is the new European Success story

I had heard about Supercell first last year, then again two weeks ago, and then again yesterday. Each time, it’s when I interacted with Finnish people, who were right to be proud of their new jewel! Supercell is the latest Finnish, therefore European success story. I had mentioned Neolane (because of its $600M acquisition by Adobe) then Criteo (which just filed to go public on Nasdaq) earlier this year, both are French and software companies. Supercell is the third high-profile start-up making the news in 2013. It is developing games just like Rovio or Mojang, two other Scandinavian start-ups.


Supercell has a meteoritic history: founded in 2010, it raised $12M in 2011, $120M 6 months ago and Softbank just acquired the majority of the company this month for $1.5B. More with my usual cap. table below. (In fact the reason I was told about the Softbank deal is because my Finnish friend had liked my new update of cap. tables data on Slideshare!)

Supercell is not so much interesting for the transactions than for its unusual (for Europe) history. It was founded by serial Finnish entrepreneurs. They have an interesting organization: people work in small teams, typically 5 people, called cells therefore the name Supercell. (This reminds me of similar structures at Apple and Google). They are very demanding with the game quality so that they launch a very small number of their developments. They celebrate failure (a stopped development) with Champagne where as they celebrate a launch with beer!

They revenues and profits are also meteoritic; just have a look at the revenue table below. Interestinggly enough Mojang is similar. “The success has turned Mojang into an overnight sensation in a matter of a few years, pulling in $90 million in profit last year on $235 million in revenue.”

Supercell cap table

Twitter discloses numbers through SEC filing

Twitter finally published its S-1 document. In 2011, I had tried to make a tentative assessment in my post, If Twitter was going public, some far-fetched assumptions.

You can compare the cap. table below to the one in the post (click on the picture to enlarge image). Of course there were missing data and there are still some today. The investors shares are not described in detail. I do not have the shares of one of the founders, Biz Stone, but only those of Jack Dorsey and Evan Williams. I plan to update info when I have more. (A small detail: series A was probably $100k and not $76k for example.) Enjoy and react!

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