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.

One of the annoying things about Twitter is that things that you tweet just vanish into the ongoing flow of tweets and disappear forever, never to be seen again by a human being (and Twitter's horrible search engine makes that problem even worse).

I recently ran across a great service that addresses this problem - Twylah.
Twylah analyzes the content that you put on Twitter and automatically generates a site for you which gives your readers a beautiful summary of who you are and what you tweet about.
That page is also optimized for SEO which is a great way for you to drive new traffic back to your content.

So basically, instead of sending people to your boring old Twitter page (which may be filled at the moment with irrelevant tweets because you just happen to be in an ongoing conversation with somebody on Twitter about the latest episode of Beavis and Butthead), you send people to your Twylah page.

That page will show them your personal trending topics and what you are all about.
My Twylah page, for example, currently shows that I tweet about Twitter, iPhone, Apple, Games, and Nike (I recently ran in a Nike run so I've been tweeting about it).

Look at the difference between a regular Twitter page to the Twylah page generated from it:

It's much easier to understand what kind of stuff you tweet about and it looks much better.

I assume Twylah is mainly targeting brands to use this but I see no reason why any individual who is on Twitter wouldn't want to use it.

Check out my Twylah page and you can request a beta invite to get your own.

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...

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

Once again, it's the time of year for reflection and predictions. I always enjoy reading what others thought about the past year and what they're expecting from the year ahead. With so many interesting happenings in technology in general, and specifically in the Internet space, it's a fun task.

2010 – Year of the Consumer

2010 could be termed the Year of the Consumer with vendors introducing consumers to location-based services (Foursquare, GoWalla), social couponing (Groupon), and a vast array of apps. Apple's iPad changed the game for apps on both web and mobile devices, creating incredible consumer demand. Coupled with the mainstream evolution of smartphones, this demand has launched an explosive market opportunity.

On the development side, there has been a lot of noise about HTML5 and CSS3. All the big guys are behind this, and Adobe even has a tool that converts Flash to HTML5. The popularity and compatibility of HTML5 is increasing every day, but there is still a ways to go before it becomes mainstream.

And let's not forget cloud computing. For the past few years, the technology for cloud computing has been maturing and slowly adopted by many companies. Evidenced by the new TV commercials, cloud computing is now an accessible infrastructure that enables web companies of all sizes to scale relatively easily. And pretty much everybody is using it now.

Top Predictions for 2011

If 2010 was the Year of the Consumer, 2011 will see the inevitable market impact of this shift. New technologies will emerge, and only those with the best user interfaces and marketing strategies will survive. I expect that app mania will continue and businesses of all sizes will expand their footprint on mobile and web platforms.

My Top Ten predictions are:

1. HTML5 in action. Browser support for HTML5 is getting better (in both desktop and mobile browsers), so we will start seeing HTML5 and CSS3 more and more in mainstream Web applications. Life for Web developers will finally be (a bit) easier, and user experience across platforms will converge and improve, although not fast enough.


2. Tablet wars will get serious. Apple currently has 95% of the market, but that's because they have been the only real player in the market. That's changing fast with Samsung and others debuting their own tablets. Who will dominate in 2011? Still Apple, especially if/when they launch iPad 2. Dell, Samsung, and HP will be the other major players there.


3. Android will gain more market share and close the gap with iPhone, but will not overcome it. They aren't doing enough to appeal to the non-techies.


4. Mobile and web platforms will continue to converge. The web has become ubiquitous so there will be less of a fine line between web and mobile. This has already started with the iPad (is it a mobile device?) and will crossover to other devices like Google's Chrome OS notebook (which still has a ways to go before it can become popular).


5. The number of app platforms will expand: smartphones, e-readers, televisions, Blu-ray players. I'm not sure we'll see apps in the fridge or washing machine in 2011, but who knows... I look forward to CES in January.


6. More of our information will be stored in the cloud, and streaming services will increase in popularity. This includes photos, documents, music, and maybe even videos. The pricing will need to become more competitive to make this prediction come true.


7. Social analytics. We need easier ways to measure and analyze people's interactions in social networks (person-to-person and person-to-brand). This year, we'll start seeing some successes and standardization in this area (which will probably lead to Google acquiring the leader).


8. Richer TV experiences. Google TV, Apple TV, and Boxee are all working hard to create richer television experiences for us. These products may not yet become mainstream, but will no longer be novelties reserved for hardcore geeks, either. 3D television will not become more popular as some people are expecting.


9. We will start to see actual adoption of peer-to-peer micro payment systems (Square, for example). It will become more and more popular to just pull out your cell phone when you want to pay for a cup of coffee. This year, though, there probably will be more people accepting payments than people actually paying, but that's the first step towards replacing our old-school credit cards.


10. Maturing of the location-based application market. Foursquare, Gowalla, Loopt, My Town (Booyah), SCVNGR, Facebook Places, Google Places, Yelp, and Groupon are all about the places that people go for deals in their business and personal locales. I think some big players will stay on top (Groupon, and Living Social with the help of Amazon). We'll see some co-operations/mergers, and smaller players will go off to silently die in a corner somewhere. Groupon clearly intends to dominate after sending Google packing.

I'll wind down 2010 playing Angry Birds, which for the record, I predict will expand this year and become a major Pokemon-like brand (only cooler).

Happy New Year!