The Entrepreneur’s Bill of Rights (EBR) Article 1: The right of the founders and team to own more than 50% of your company December 3, 2009Posted by Lawrence Lenihan in Uncategorized.
I figured that I would start out with the most controversial! Yes, you the entrepreneur and your team should own a majority of your company. There are those of you out there wondering why if this is a right, does it happen so rarely. You are also probably thinking that it is the VC’s fault for the dilution because we drive too hard of a bargain on pricing. To some extent, that is true (see VCBR Article 1 below), but that is not why the entrepreneur loses so much of his/her equity.
We are at an incredible time in history for entrepreneurs: never before can you launch a company for so little capital and connect with so many customers so rapidly. At FirstMark, we have done a number of back-of-the-napkin calculations that show it is 1/10 to 1/100 as capital-intensive to launch a company today as it was in 2002. But, not only is it less costly to start a company, now, with cloud computing, most of your technology infrastructure costs are completely variable! Where, back in the day, you had to buy servers and required software for tens or hundreds of thousands of dollars (or more), now you can build a complete infrastructure, virtually, through Amazon, Rackspace, etc and pay only for the compute resources you need and use! Any entrepreneur that does not launch his/her company on one of these platforms is out of his mind. It is the equivalent of raising money to purchase a coal-fired generator to put out back so you can turn your lights on! With virtual workers through sites such as Elance (a shameless shill for one of our portfolio companies), never before has an entrepreneur been able to do more sooner with far less and, thus, own more of his/her company.
So, if you are starting a company now, and you and your team don’t end up owning more than 50%, you have to blame yourselves, not us, the VC. Or as Ice-T once said: “don’t hate the playa, hate the game…”