Just saw this great talk by Fred Wilson, principal of Union Square Ventures, about employee equity.
It's a bit long but if you are building a company try to put an hour aside to watch this.

The video of the entire talk is embedded below, and here's a link to Fred's post about it.



There are useful tips and best practices scattered across the entire talk so it's worth listening to, but if you don't have the time/patience here are the highlights.

The high level concept of the entire talk is that "if anybody goes to the pay window, everybody goes to the pay window". Meaning that everybody in the company should be an integral part of the ride and be compensated accordingly in the case that the entrepreneur and founders get their payday by selling the company, IPO, etc...

At the beginning of the talk (minute 3:37-10:40) Fred explains the basics of dilution, giving an example of a common scenario where a founder brings on a founding team, then some seed investors who also get equity, an employee equity pool, and a VC investment. The example shows how the founder gets diluted as more people get a bite of the pie (as do everybody else along the line).

He then goes on to explain various tax implications of options vs. stock and different vesting plans for employees, founders, and the founding team.

In my opinion, the most important part of the talk starts at minute 32:50 where Fred discusses a technique that he uses for how to calculate how many shares to give a specific employee (it goes till about minute 42:00).

Here's how to determine how much stock to give a specific employee:

First of all you need to put down your own real valuation of your company. This is not an official number or something that a 409A firm comes up with (more on that in the beginning of this video, if you're interested), it's how much you really think your company is worth at that point in time. In his example it's $25M.

Next you need to bucket your employees into 4 buckets and their multipliers:

• Senior team (CFO, CMO, CPO... executives who report to the CEO): 0.5x - 1x
• Junior VP level/directors (people who report to the senior team): 0.25x - 0.5x
• Key hires (engineers, designers,... people who are hard to hire and hard to retain): 0.1x - 0.25x
• Everybody else: 0.05x - 0.1x

The multiplier ranges are so you can tune it according to your specific market and how competitive/hard to find certain people it is. Geography also affects what multiplier to use.

Now determine the market cash compensation for these people, not what you're gonna pay them, what they would get paid at a competing or big company. In his example it's a CFO who would make $250K annually (you're paying him $175K but he could make $250K on the market).
You then take that number and multiply it by that person's matching multiplier. In this case he used 0.75 which gets to $187,500 which is the dollar value of the equity that you're gonna give the CFO.

All you need now is to see how many shares you have outstanding, and divide. In his example he used 10 million outstanding shares. So you divide the valuation you came up with by the number of outstanding shares to get the price per share (in his example, $25M/10M=$2.5 per share).
Now just divide the equity dollar value that you calculated for that employee by the share price to get how many shares to grant that person. In this example, $187,500 / $2.5 = 75,000 shares (Fred has a calculation error on the board in the class).

Note that the price per share that the employee actually gets will not be the number you used for this calculation, it will be the 409A valuation which is hopefully much lower than the valuation you came up with (you want your 409A valuation to be as low as possible for tax reasons).


At minute 50:15 there is also a part about retention grants. Fred recommends giving retention stock grants 2 years after hiring so that people have unvested stock that will keep them with the company (otherwise they can just leave with their entire stock pool after the 4 year vesting is up).

The formula he recommends for retention grants is one half of what the sign on grant would be for that employee, if the employee was hired today, every 2 years.

So in the CFO example above, he originally got 75,000 shares. Two years later, the company is now worth $50M (twice as much), so his sign on grant would be 37,500. So his retention grant should be 18,750 shares (half of 37,500), vested over 4 years.


That's it, that's the gist of what you need to know about giving your employees stock so that everybody on board is motivated to make the company a success and compensated accordingly.

We recently changed the name of our company and one of the implications was that we needed to create a new logo for the company.
The name of the company is iglloo (igloo.com was taken, big surprise, but we managed to grab iglloo.com) and when we chose that name I immediately envisioned us having some kind of cute logo, although nothing specific came to mind.
For some reason, we thought it would be pretty easy to create the imagery that goes along with the values what we want our brand to represent (in a nutshell we build apps, primarily for iPhones and iPads), but we quickly learned that creating something "real" out of our vague thoughts, was not an easy task.

We tried a few concepts but the designs that we got were too literal. We kept getting images of igloos.
Things like this:

I actually really liked the concept (I guess I'm just in love with my own ideas) but the problem was that it doesn't scale. At small sizes that little igloo image is totally not clear.

After about 2 months the logo issue came up again and I went back to 99designs to see the old submissions, maybe looking at them again would give a different perspective. Still nothing spectacular.

Since 99designs offer a refund if you don't pick a winner, I sent them an email and asked how I get the refund. They replied that they can only refund within 60 days and that more than that had passed.

They did offer to reopen our contest and basically start over. So we reopened the contest, again for 1 week.
This time we got WAY fewer submissions. I'm not really sure why (I asked their support and they didn't have any good answers). They also offered to give us their PowerPack for free which basically gets you better listings in their directory along with a few other tweaks so it stands out (usually $85).
The PowerPack didn't make any difference, we just got a few random submissions, nothing even close.

Then while looking at all the different submissions I suddenly ran across this design from the original contest:

The meaning of the icon according to the designer

Ok, I can live with that.

We then went back and forth playing around with different fonts and stylings, these were among them:

So do I recommend using 99designs?
To an extent. While looking around there at different projects (I was looking to target designers who created things I like) I saw some pretty good designs.
My feeling is that it's kind of a crapshoot, with relatively good odds.
You may be able to get something really good for not a lot of money but you may leave disappointed.

If you can afford $299 then I would give it a try.
I think logos are particularly difficult to design (the story behind the Conduit logo is quite long too) but if you are looking to design a website you'll probably be able to get good results (although 99designs may be a bit more expensive than just buying a template and customizing it a bit).

After nearly seven amazing years at Conduit, I have decided to leave the company and pursue other ventures.

This journey started in a room with a small group of all engineers that quickly grew to an outstanding company with over a quarter of a billion (that's right, with a b) of monthly users and a network of hundreds of thousands of publishers. A dream come true for anybody trying to create something online.

Over the years I've had the privilege of being involved with many different aspects of the company at different stages: from hands on technical roles, to dealing with our very first customers and users, marketing to the long tail, managing support, product definitions, meeting new prospective publishers, leading product, and the list goes on and on.

This experience has been life changing and gave me the rare opportunity to accompany a company from it's inception, throughout the different stages, the ups and downs, up to a huge success story with hundreds of millions of users and a multi million dollar revenue stream.

I would like to thank all the great people who I've worked with over the years at Conduit and am sure that they will continue to make this company a true game changer.


What now you ask?
(ok, maybe you didn't ask but I'll tell you anyway)
Over the past few years, we've all seen the explosion in the mobile web space. Instead of saying "here's an idea for a startup" people now say "here's an idea for an app" (I even unknowingly tweeted this a few months ago http://bit.ly/l8I6Jm). With the easily accessible platforms and infrastructures we currently have, I believe there is a lot of potential for solving problem with the mobile Internet, and that's what I plan on doing.

I've partnered with Shai Wolkomir, a serial entrepreneur but most importantly an old friend, and together we plan to change the world. Or at least have fun trying to do so.
We've assembled a small but very capable team that will give us the ability to try out our ideas and quickly see what works, what needs refining, and what should be thrown out.

The first product to hatch out of our nest is Props which is a way for people to give recognition to people for things they are good at and get the respect they deserve.

So far it's getting a lot of great responses from the people who saw it at TechCrunch Disrupt and we have a lot of plans for it.

So without any further ado: go install it and let me know what you think :)

Cheers,
Guy

This is a repost of an article that I originally wrote for Technorati and was published there.

The startup scene in Israel is booming, and a(nother) testament to that is the Techonomy3 conference, which just wrapped up not long ago.
The format is simple: 6 startups presented to about 400 attendees in the room (and probably a few thousand viewing via the live video stream from around the world).
A panel of respected, well-known judges gave their comments after each presentation, and the audience voted on the winner, American Idol style.

America (well, Israel actually), here are your top 6:

• Hitpad - an iPad app that automatically gives you highlights of what's going on today by analyzing different online sources and giving you trending topics with drill downs of topics you're interested in. Very cool.
• Dapsem - an iPhone app to give your friends virtual fist bumps as a sign of appreciation. The concept of giving recognition to people you know is great and has huge potential.
  From what I've seen, Props are the ones to keep your eyes on in that space.
• Magisto - a web app (remember those? :) that automatically detects interesting content in your videos for creating professional looking edits of your videos. Like Animoto but with zero effort.
• Tingiz - a platform for creating mobile microsites for products. Manufacturers of physical products can create a mobile microsite for their products and connect them via a QR code. The product microsites will show things like product videos, information, Facebook page, etc...
• Jumboard - a large plastic PC keyboard with big red, yellow, blue, and green buttons that let little kids easily interact with Flash apps on Jumboard.com. This gives young kids an interface they can easily use to start interacting with games/applications and parents get feedback on the progress of their kids. Kinda like a modern incarnation of the Comfy keyboard.
• TVtak - an iPhone app for easily getting information about TV shows. All you do is take a picture of your TV while watching a show and TVtak will recognize what you are watching and give you information about that show (and let you share it with your friends). Very much like Shazam does for music.

Based on the reactions of the crowd and the live Twitter board (which was on fire during the event), Techonomy was a huge success for everybody involved.

And without any further ado... the winner of Techonomy 3 is.....
Magisto!

Congrats to the winners and to the organizers of this conference, they put on a great show.
And to the losers: "it's an honor just being nominated", or in this case, just being on stage.

Here's a video of my talk from the last Casual Connect conference in Hamburg, Germany.

The topic was next generation platforms.

My part starts at about minute 11:30.

This is a repost of an article that I originally wrote for Technorati and was published there.

South By Southwest Interactive is (finally) over and we can all get back to our normal lives (unless it's normal for you to go out every night, meet hundreds of people, and get free food and drinks everywhere you go).
For those who don't know, South by Southwest (SXSW) is a set of interactive, film, and music festivals and conferences that take place every spring in Austin, Texas.

Here's the rundown for this year's SXSW highlights, disappointments, winners, and losers. These are all based on both my personal experience there and on feedback that I got from talking to tons of other geeks and techies there.

Highlights

• Klout party - Klout rented a house, had food, drinks, and a live band (Audio Runner). But what made it stand out was that they had a good crowd and the timing: noon on Saturday, which is kind of a downtime in terms of events. Just a good time talking to cool people on a Saturday afternoon.
• 140conf party - Tons of great people at the Lanai + open bar = great time. Jeff Pulver really knows how to draw in a crowd and everybody enjoyed themselves.
• Lean Startup party - SXSW is all about people, people, people. Dave McClure and Eric Ries got a great group of people together, that's what this event was about. After a few hours at the Lean Startup party, the group I was with that night actually left to go to the foursquare party, and then came back to the Lean Startup event since it was so much better.
• Conduit pool party - obviously I'm totally biased here so I didn't want to include Conduit's party in this list. The only reason I decided to include it was because other people kept saying it was one of their highlights. So for those who missed it, Conduit had a pool party BBQ on Sunday afternoon. The setting was quite different from other events: it was held at the pool of the prestigious Ashton Austin condos. The setting, timing, food and drinks were great and lots of people actually got in the pool despite the cloudy skies.
• SVB - SVB packed the two floors of the Parkside on 6th with top notch people. Everything from investors like Tim Draper to bankers and entrepreneurs were there. And they had a live 80s cover band, great dinner, and surprise show by Andrew Mason (CEO of Groupon) playing the piano to top it off.
• Pud meetup - this relatively small meetup (probably about 30 people) was organized by Phillip (pud) Kaplan founder of Blippy (among a ton of other things). Forget the pizza and hotdogs, just chatting with cool people like Alex from Million Dollar Homepage, Aaron founder of Urban Dictionary, and Bram from Bittorrent was awesome.
• Foo Fighters surprise show - for those who got in (the lines were LOOONG) was a fun way to end the SXSWi craziness.

Biggest Disappointments

• The conference itself - most people I know didn't even bother to try to go to the sessions. A surprisingly large amount of people actually didn't go pick up their badges. The best parts were all the events around the conference, the actual conference was not an attraction.
• Fousquare party - tough time getting in so you'd expect it to be killer (and lots of people were talking about it) but checking in here was not worth it.
• Mashable Billiards - a lot of noise around this one. The people at the door were REAL a#@holes. Not what you'd expect from Mashable
• Twitter retreat - this was a weird one. Expected it to be big and fancy since Twitter was hosting. Was very small, secluded, and not that interesting.
• Facebook developers garage - a bunch of people I know tried to find this event but couldn't. Either they canceled last minute or Google maps is WAY off, because nobody I know managed to find/hear anything about this (and we looked a lot).

Winners

• Hashable - forget business cards, Hashable is the way to go when you meet somebody new. I would say 3 out of 5 people I met at SXSW were using Hashable, especially people from NYC. Hashable rocks but I do agree with what my friend Nate Lustig wrote, the only downside is that Hashable strips the personality of your business cards into about 100 characters available in a Hashable tweet. I enjoy seeing the creativity in business cards each year at SXSW.
• GroupMe - there were tons of group messaging apps trying to push themselves at SXSW. For some reason GroupMe caught on. If you managed to get on the right GroupMe group you'd get insight to where the hot spots are (and get a lot of junk messages).
• Plancast - one of the hardest things at SXSW is to know about all the different events. Plancast are awesome at tracking where people are planning to go and letting you follow people that are in the know.
• Foursquare - another method of tracking where everybody is going: just follow the right people on foursquare and see where they checkin. Gowalla were surprisingly quiet even though they are based in Austin.

Best Giveaways

• Squarespace - free food. Good food. Every day.
• Sobe - had an outside bar with both cocktails based on Sobe and just free Sobe lifewater drinks. Lifesaver. Plus always a nice crowd there.

Best Hangout
Driskill Hotel lobby - at the end of every night (and beginning actually) the Driskill lobby was always packed with TONS of very interesting people. Really can't beat that.

Biggest Pain

• Cellphone battery life - With all the checkins, Hashable, Google Maps, Plancast, etc… you'd be lucky if your iPhone lasted through (free) lunch. Some companies tried to help by giving away free battery packs but only a small elite group managed to get those.
• Craziness - just trying to keep up with all the craziness was hard. So much going on there was no way to really keep track. And forget about trying keep up with the real world and answer emails.

One thing is for sure though: see you next year South By...

I happened to run across Tony Hsieh's (CEO of Zappos) presentation from SXSW '09.
Awesome stuff there, here are some of the highlights that I think are relevant for pretty much any technology startup, especially b2c companies (but definitely not only).

Just like Donald Norman said in his presentation at Business of Software, Tony basically says: it's all about the experience (after all he's only selling shoes, it could have easily become a boring, Al Bundy style, online shoe store that most likely would not have succeeded like Zappos did).

"People may not remember exactly what you did or what you said, but they will always remember how you made them feel."

Zappos' core values are what made it a success both in terms of it's actual business, in terms of employee satisfaction and attracting talent, and actually selling the company to Amazon a few months ago.

Here are their core values:

1. Deliver WOW Through Service
2. Embrace and Drive Change
3. Create Fun and a Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships With Communication
7. Build a Positive Team and Family Spirit
8. Do More with Less
9. Be Passionate and Determined
10. Be Humble

Some other interesting tidbits from his presentation:

Interviews & performance reviews are 50% based on core values & culture fit.

He introduces 7 steps to building a brand that matters:

1. Decide - if you want to build a long term brand
2. Figure out your values & culture
3. Commit to transparency (twitter is a great tool for this)
4. Vision - "Whatever you're thinking, think bigger." Chase the vision, not the money...
   He adds a nice quote from Puff Daddy: "Don't chase the paper, chase the dream."
5. Build relationships - (not networking) Be INTERESTED rather than trying to be INTERESTING
6. Build your team - "If you want to go quickly, go alone. If you want to go far, go together." (Al Gore quoting African proverb)
   Hire slowly. Fire quickly.
7. Think long term - There is no "get rich quick" formula. "Overnight" successes are years in the making

In the end he actually offers a copy of the Zappos culture book to whoever wants one and tours of their offices when you’re next in Las Vegas (they'll even pick you up from the airport or your hotel in a Zappos Shuttle!).

How's that for service?