One of my companies – Quova – just had a month where they served over 2 billion queries from their customers. That’s 64m queries / day (or 750 / second) – a huge milestone (double what 1 billion was <g>) and actually represents less than half of the actual queries since this only counts customers of Quova’s that have query logging turned on. Real time IP geolocation matters to a lot of people.
Non-financial numeric milestones are fun to track and always highly motivating for the team. I remember clearly the day Raindance did more than 1 million of conferencing minutes and then several months later broke the 1.5 million mark. There are patches where the growth curve becomes non-linear for a while and understanding what drives this (and all other growth dynamics) is very helpful to determining what to do to maintain and continue growth.
As a member of a quarter Jewish, half Atheist, and a quarter Theraveda Vipassana Buddhist household (there’s only two of us in my household – me and Amy – you figure out the math), I found the following email on Zen Judaism hysterical. I post it as an ode to my favorite Buddha loving retired VC, Jerry Colonna.
If there is no self … Then whose arthritis is this?
Be here now. Be someplace else later … Is that so complicated?
Drink tea and nourish life. With the first sip, joy. With the second, satisfaction. With the third, peace … With the fourth, a danish.
Wherever you go, there you are … Your luggage is another story.
Accept misfortune as a blessing. Do not wish for perfect health or a life without problems … What would you talk about?
The journey of a thousand miles begins with a single “oy.” … And a lot of travel arrangements.
There is no escaping karma … In a previous life, you never called, you never wrote, you never visited. And whose fault was that?
Zen is not easy. It takes effort to attain nothingness. And then what do you have? … Bupkes.
The Tao does not speak. The Tao does not blame. The Tao does not take sides. The Tao has no expectations. The Tao demands nothing of others … The Tao is not Jewish. The Tao is also not your mother.
Breathe in. Breathe out. Breathe in. Breathe out … Forget this and attaining Enlightenment will be the least of your problems.
Let your mind be as a floating cloud. Let your stillness be as the wooded glen … And sit up straight. You’ll never meet the Buddha with such rounded shoulders.
Be patient and achieve all things … Be impatient and achieve all things faster.
To Find the Buddha, look within. Deep inside you are ten thousand flowers. Each flower blossoms ten thousand times. Each blossom has ten thousand petals … You might want to see a specialist.
To practice Zen and the art of Jewish motorcycle maintenance, do the following … Get rid of the motorcycle. What were you thinking?
Be aware of your body. Be aware of your perceptions … Keep in mind that not every physical sensation is a symptom of a terminal illness.
The Torah says, “Love thy neighbor as thyself.” The Buddha says there is no “self.” … So, maybe you are off the hook.
The Buddha taught that one should practice loving kindness to all sentient beings … Still, would it kill you to find a nice sentient being who happens to be Jewish?
Though only your skin, sinews, and bones remain, though your blood and flesh dry up and wither away, yet shall you meditate and not stir until you have attained full Enlightenment … But, first, a little nosh.
Having watched Federer magically survive the onslaught of Rafael Nadal and eventually demolish him in the fifth set yesterday at the Nasdaq-100 Open (ok – I watch a little TV – usually tennis or 24 with Amy), it was with great delight that I saw Dave McClure’s post on Federer and Agassi fooling around a gazillion feet in the air on the worlds highest tennis court. Jeff Clavier kindly added a comment with a link to Tiger Woods doing the same, but with a golf club. Wow.
Several people have recently asked me variants on the question “How should I compensate a board member in my young private company?” I’ve experienced this question from all sides, having been the entrepreneur with an early stage company, a board member of an early stage company, and an investor / VC in companies that had board members at early stages, so hopefully my answer is balanced and a function of the law of large numbers (I probably have over 100 direct data points at this point in my life).
In general, I have a set of simple rules for board member compensation:
Following is a detailed explanation of each item.
0.25% to 1.00% vesting annually over four years: While the ask from sophisticated board members will vary widely here, I’ve found that most people will accept the argument that they are getting between 25% and 50% of what a typical VP will receive (1% – 2%). It’s always better to grant more options that vest over a longer period of time then to do annual grants early in the life of the company – that way the board members’ incentives are aligned with all shareholders (presumably they are getting the options at a low strike price and will be motivated to increase the value of the stock while minimizing dilution over future financings). These options should come out of the employee option pool and should be thought of equivalently to the employee base (e.g. if there is an option refresh due to a down round financing, the board member should be included in the refresh).
Single trigger acceleration on change of control: Acceleration on change of control is often a hotly negotiated item in a venture financing. I’ll discuss it in greater detail in a future post in the term sheet series. I rarely think single trigger acceleration in change of control is appropriate, but I’ll always accept it with regard to board members since 100% of the time they will not be part of the company post acquisition. By providing 100% acceleration on change of control, you eliminate any conflict of incentives in an M&A scenario.
Clear understanding as to how the vesting will work if the board member leaves the board: In most cases, board members serve at the will of a particular constituency, which could range from a particular VC investor (e.g. the outside board member might be appointed by the Series A shareholders) to the entire shareholder base (e.g. chosen by a shareholder vote). As a result, a non-VC board member is typically not contractually entitled to their board seat and often leaves the board (either because they chose to due to other responsibilities), is asked to leave (because he is not contributing actively to the business), or is replaced (by the shareholder group that has the contractual right to the board seat). As a result, it should be clear – in advance – that the vesting on the options ends if the person is asked to leave the board or voluntarily leaves the board. I’ve never had an issue with this when it was discussed up front; I’ve occasionally had issues when it wasn’t (e.g. the person wants additional vesting beyond their board service, which I think is inappropriate except in the case of the acquisition of the company – see the comment on single trigger above).
No direct cash compensation: Period. If someone is asking for cash compensation for board service in an early stage company, they are not qualified to be a board member since they simply don’t get it. If the board member is also doing specific consulting for the company beyond the scope of a typical board member, you’ll occasionally see some cash comp for the consulting services. However, the bar for this should be high and well defined – a “monthly retainer” for “helping the company” is inappropriate.
Reimbursements for reasonable expenses: Board members should always be reimbursed for expenses they incur on behalf of the company. However, these should be “reasonable”, should conform to the company’s expense policy (e.g. if execs travel coach, board members should only be reimbursed for coach tickets), and board members should be respectful of cash in early stage companies (for example, if a board member travels to several companies during a trip, he should only charge a company for the segment(s) pertaining to them).
Opportunity to invest in the most recent financing: I strongly believe that all board members should be given an opportunity to invest on the same terms as the most recent VC investment. Depending on the characteristics of your most recent financing, this might be difficult (check with your lawyers) – at the minimum the board member should be invited to invest in your next round. While I always encourage this investment, I don’t view it as mandatory – I think it’s a benefit an outside board member should have for serving on a board, not a requirement.
In seed stage companies – especially pre-funding – an early board member might receive founder status depending on his involvement in the company. When I was making angel investments, I’d occasionally commit to a much higher role than simply “a board member” – occasionally I’d be chairman and/or an active part time member of the management team. In these cases, I’d typically get an additional equity grant (usually founders stock) separate from my board grant. As with other members of the founding team, I’d have specific roles and responsibilities associated with my involvement (usually financing, strategy, and partnership related) and – even though I was a board member – I was often accountable to the CEO for these responsibilities.
In addition to a board of directors, many early stage companies have an advisory board. I’ll dedicate a longer post to how to make sure these are effective (as they rarely are) – in any event, advisors typically have a much lower commitment to the company and, as a result, should receive a much lower equity grant. In addition, advisory boards tend to come and go so it’s better to compensate members on an annual basis. A good proxy for the amount is an annual grant of 25% to 50% of the four year grant you’d give a junior engineer (so 1x – 2x a junior engineer if the advisor stays engaged for four years). Obviously, there are exceptions to this, but if you want to get meaningful, sustainable involvement from an “advisor”, consider giving him a more significant role.
Finally, VCs should never get additional equity for board service in private companies. The VC has already purchased his equity and his board involvement is a function of his responsibilities associated with his investment. I’ve been on the receiving end of this and it has always felt weird. In a public company, it’s typical to compensate all board members – including the VCs – equivalently, but private companies are a different matter.
I landed in Paris today to visit Amy for a week (she’s spending six weeks over here to immerse herself in French). I usually get the sleep thing right on international flights – I screwed up this time because I was tired and crashed on the leg from Denver to Cincinnati. So – I had a nice seven hour flight to listen to music on my Bose QuietComfort 2 Headphones and read.
After my post on Warren Buffett’s Annual Shareholder Letter, one of my blog readers sent me the “Annual Letters of Buffett Partnership, Limited, 1957 – 1970.” Unfortunately (again – maybe it’s Paris) I forgot who sent this to me. I apologize – my mother taught me to always say thank you and acknowledge others. At 39, I have to write certain things down to remember them and – since I’m on a continual holy mission to revolutionize the way I interact with computers (which includes eliminating paper from my life) – I didn’t write it down. And – ironically – in this case – I printed them out (rather than tossing them in my “Inbox -> Read” folder), so I don’t have the original email. So – if you are the one, thank you – feel free to put up a comment saying “hey Brad – you buckethead – it was me.”
You’d think that at midnight Colorado time I’d finally fall asleep on the flight. But, in between finishing off a series of speeches by Buffett’s long time partner Charlie Munger (sent to me by the same person – I think <g>) and grinding through Buffett’s letters, sleep was not forthcoming.
The letters are a work of art. Buffett demonstrates his brilliance from age 25 to 39 (yikes – there’s that 39 again) – both in investing, how he operates his business, and how he communicates. They are just magnificent.
I considered posting several things from them. However, in several places, it was made clear that these letters are not for public consumption. Specifically, “while they are of great interest, and Mr. Buffet has let it be known that he has no objection to people passing them around like this, but does not care for the idea of them being posted in a public forum. Please honor his wishes. PLEASE DO NOT POST THESE LETTERS.” So – I respect that and will merely tease you with the delight I got from reading them, even if they contributed to my need to sleep from noon Paris time until 4pm today.