As we get closer and closer to the 3rd edition of Seedhack, our very own hackathon, we would like to start rolling out the excitement that has been going around Campus for the past few days. We’ve been putting all the pieces together and preparing everything to the last detail to set the stage for three days of full-time hacking.
The whole event takes place at Campus London. On Thursday evening we’ve invited the selected participants to come meet each other over casual drinks and start coming up with ideas. The real event will kick off on Friday evening where we will have some great speakers and API presentations followed by a full weekend of hacking. On Sunday afternoon the teams will have the chance to present what they have been working on to the audience and a panel of top judges.
Our gratitude goes to the Seedhack sponsors who are making the whole event possible: HarperCollins, Net-A-Porter, Marks & Spencer, Domain.Me and Yammer.
We have some great API presenters who will be showcasing their technologies that can be incorporated into the fashion and online retail startups, including:
We also have some great mentors coming to help the teams work on their ideas including experienced mentors from the Seedcamp network and from companies such as Amazon, ASOS, HarperCollins, Net-A-Porter, and Seedcamp teams such as BRANDiD, Nuji and Poq Studio.
We would also like to thank Rackspace who will be providing the drinks on Thursday evening.
Today we are hosting the Seedcamp London Demo Day; the five winners from Seedcamp London yesterday are presenting along with ten previous Seedcamp winners. Our gratitude goes to Thomson Reuters for hosting us in their office.
Meet the teams presenting, here:
http://www.seedcamp.com/demoday
We’re kicking 2013 off with a big bang! Next Wednesday and Thursday we are back in London for the first Seedcamp event of the year and it’s twice as big as before. Applications closed at a new all time high, hundreds of startups from across the globe eager to be part of the Seedcamp Family.
We have over 70 of our best UK and international mentors signed up to attend and mentor the teams on Wednesday. The winners of the event will join current Seedcamp companies on the Thursday at Demo Day where they will have the opportunity to present to a room full of investors.
One of the key points of mentoring is the identification of techniques and approaches that can help improve the day to day of building products, shipping code, and building a business. With that in mind, we are proud to have Devin Hunt of Dex.io and Lyst share his insights in a Masterclass on “Sketching Better Products”.
Please meet the teams that will be taking part in Seedcamp London and take a look at the great companies they are building:
Our gratitude goes to our event partner, Thomson Reuters, for their support and for hosting us in their office on Demo Day. We would also like to thank our event sponsor, SoftLayer, who are sponsoring the drinks on Wednesday and of course not forgetting our yearly sponsors; Google, Microsoft BizSpark, Qualcomm Ventures and Paypal.
Be sure to follow our blog, Twitter and Facebook accounts to follow the event on the day!
Like in the movie ‘The Matrix‘, don’t we all wish we could just download ‘kung fu’ into our heads just when we needed it?
Our Seedcamp Academy days, do just that.
Whilst there is a benefit to the more traditional forms of academic instruction, namely, ‘the traditional three month startup program’, we believe that by learning the right skills at the right time, we maximize the likelihood that a founder is learning skills he or she can apply and remember when it is needed.
Seedcamp Academy days happen throughout the year. They are open to all of our companies, even the ones we invested in back in 2007. Once family, always family. The format, held over three to four days, is usually to cover topics that have surfaced to the top as needed by most of the startups at that point in time in a workshop-type style. Topics in the past have ranged from how to manage an M&A process to UI/UX. Other topics we have covered include pricing your product, lean development, analytics for startups, corporate governance, and legals to name a few; all led by specialists in the field and including well known thought leaders such as Ryan Carson from TreeHouse and Eric Ries, author of The Lean Startup.
As I’m writing this we are just kicking off this month’s Seedcamp Academy Days.
First up is Andy Budd, CEO of Clearleft, a leading UX and Design firm, covering what to keep in mind when designing your product. After, we are looking forward to covering actionable metrics, marketing & biz dev, objectives & key results, and concluding with pitch training.
And the best part of it all? It’s having the great comments and real-world experience added to the discussion by our attending founders, many of whom, are notable experts of their own, and can help their fellow Seedcamp companies with personal experiences and how they solved their own challenges.
Last March we held the 2nd edition of our Seedhack hackathon where we brought together top-notch hackers with big players from the financial services industry to create innovative solutions in FinTech. The results of Seedhack FinTech surpassed our expectations and motivated us to keep on going. We’re excited to announce that we’re back with the third Seedhack on the 8th, 9th and 10th of February and again we’re ready for disruption!
This time the hacking will focus on fashion and online retail as we are seeing a lot of innovation in this area and are sure the teams will start building some great companies over the weekend. The Seedcamp Family already includes disruptive teams in these areas such as EDITD, BRANDiD, Nuji, Poq Studio, Sayduck and ERPLY who will be sharing their knowledge and experience at the event.
We’re bringing together many more big and innovative players from the fashion and online retail industries to speak, provide their APIs and help hone ideas to jumpstart the projects so keep an eye out for further announcements coming soon.
As you might have read on TechCrunch recently, hackathons are a great testing ground to get ready for pitching VCs. Seedhack’s goal is building new companies so a great place test your ideas and turn them into viable companies over a weekend.
The idea behind Seedhack is to create new companies. As such, we are looking for people to come up with ideas over the weekend, rather than pitching an existing company’s idea. All roles are needed to build a successful company so we’re not just looking for developers but also for designers, marketeers, product managers and biz dev folks to enable the startups to be formed.
The whole event is free and open to anyone interested in hacking fashion and online retail. We do however need to make sure that we have the correct ratio of skills so you can complete this form to express your interest in attending. We’d love to have everyone attend but unfortunately space is very limited so sign ups will be accommodated on a first-come-first-served basis. If we can’t accommodate you, we’ll let you know over email as we approach the date.
Seedhack will run from the evening of Friday the 8th until Sunday the 10th of February at Google Campus in London and will be a whirlwind weekend of brainstorming, hacking and product creation. We’ll be bringing together hackers, companies and API experts with the aim of solving real world problems to create real companies. The schedule of events will be further clarified at a later date, however the rough outline is as follows:
Are you a brilliant hacker with a penchant for showing off your skills, but no ideas? Maybe you’re from a company with a real industry problem that has hit a wall? Or perhaps you’re a business person interested in fashion or online retail? If you answered yes to any of the above, then you need to register here for Seedhack and start thinking of ideas!
Any existing companies interested in being involved as mentors, sponsors or providing their API can get in touch with us here.
We would like to wish you all a fantastic 2013 – hopefully you are all set and ready to grow your startup in the next year. If you’re an ambitious founder, what better way to kick off 2013 than to apply to Seedcamp London – and take the chance of joining the Seedcamp family to get your company to the next level.
Seedcamp London will be held on the 30th and 31st of January and will be bigger than ever and spread over two days. The first day will be full of mentoring sessions with Europe’s best entrepreneurs, product and design folks, and marketers. We already have a very impressive list of our best international mentors signed up to attend. The second day will be a Demo Day where new and existing Seedcamp companies will have the opportunity to Demo and present their progress to top investors.
From the applicants, 20 of the most promising early stage tech startups will be selected to attend the event. The winners will be the first of 2013 to join the Seedcamp family and will benefit from our huge network, investment and the Founders’ Pack worth over €150K. This is also the last chance to join the Seedcamp family prior to our annual USA trip taking place mid February where you’ll be meeting key players in New York, Boston, San Francisco and Silicon Valley.
Tom Allason, CEO – Shutl Kevin Brown, General Partner – Reed Elsevier Ventures Paul Burmester, SVP & GM – MobiTV Mike Butcher, European Editor – TechCrunch Liam Carroll, Corporate – ASOS.com Simon Cross, Head of Developer Relations – Facebook Gil Dibner, Principal – Index Ventures Anil Hansjee, Angel Rob Jonas, VP EMEA – InMobi Thomas Jones, Partner – Charlotte Street Capital Tom Fleming, Partner – Venrex Renaud Visage, CTO – Eventbrite
Are you building an awesome startup? Do you want to be a part of this great event? If so, be sure to get your team’s application submitted on time. Applications close at 11:59pm on the 8th January. For more information about our process, see here.
HM Revenue & Customs at Mevagissey Harbour (Photo credit: Cross Duck)
How do you issue the right number of shares/options to an employee or an advisor? by Carlos Eduardo Espinal @cee
Most founders have desire to share their equity with people that helped them along the way, both as a thank you, but also as a motivation tool. However, how to share is always a big question mark for every Founder. The two most frequently asked question is, “How much equity should I assign an advisor?”, which is shortly followed by “How do I know when to issue shares to new employees and how much do I give them?”.
So, let’s take step back and look at why we are doing this in the first place.
Motivating employees and or advisors is a key part of having a productive workforce. One key element to unlock this productivity is by creating a culture of fairness. In his book titled ‘Drive’, Daniel H. Pink talks about how an employee’s productivity can be binary provided that the right results-oriented work environment is created AND they are treated fairly from a compensation point of view. Effectively, if you don’t create a feeling of fairness in terms of compensation, relative to the market, employees will simply not be ‘open’ to be fully motivated as they will feel slighted. It’s a simple concept on paper, harder to implement in practice.
Therefore, the word ‘fairness’ is what’s important here.. how do you define the fairness culture in your startup?
Let’s start with advisors:
Advisors need to commit some time to your company to ‘earn’ their equity. The first thing to do is to define what kind of role this advisor is going to take. Is he going to provide board-level feedback and help or just operational help (marketing, for example). Is she going to meet with you once a week or once a month?
Then, define a time period for this relationship before you review it for extension. As in, Joe, your marketing advisor, will work with you once a week for 9 months, at which point you can review your working relationship to see if he is needed any further or if it is working out.
It’s really quite simple, find someone that can help you, narrowly define expectations you have of each other and for how long, and then find an equity amount that is in line with the market and that makes them happy.
For the USA, the Founder Institute has come up with some guidelines on numbers, and you can read about those here: http://techcrunch.com/2011/09/22/free-startup-docs-how-much-equity-should-advisors-get/
They also include an agreement you can sign with your advisor to narrowly define the engagement. For the UK, I’ll be linking to one soon… stay tuned.
Onto Employees (which is a bit trickier and I’ll include the topic of valuations as a bonus):
Back to the topic of Fairness… Fairness is defined by having the total compensation of your employee meet his or her expectations as defined by the market. As such, you need to think of your employee’s total compensation (cash + equity) as something that is within the boundaries of the market norm for his or her role. Deviate too much and not only is hiring hard(er), but you will have inherently unmotivated employees. Total compensations at startups usually have low or no salary, so that fairness is established by assigning equity.
So in order to quantify the value of the equity portion of the total compensation of an employee, one important thing to consider is that the total value of the option package issued, is a function of both the total number given, but also the strike price they have. The two go hand in hand.
But before we go any further, a quick definition check on Strike Price:
An option’s strike price is the fixed price assigned to an option for the purchasing of the underlying share (typically ordinary shares) in the company. In effect, you have to pay the [strike price x the options] you’ve been granted, to exercise your right to buy the underlying shares. Once you’ve ‘exercised’, you own the shares.
Pricing strike prices is a bit of a pain. In the USA, you have to do 409A valuations. More on that from Fred Wilson here: http://www.avc.com/a_vc/2010/11/employee-equity-the-option-strike-price.html
Pricing in the UK is both simpler and more difficult. More difficult because it isn’t as clear as the USA, but simpler, because there is more flexibility.
Here is the exact language from HMRC (http://www.hmrc.gov.uk/shareschemes/emi-new-guidance.htm#10):
If EMI options in an unquoted company are granted the company can, if it wishes, agree the market value of the shares with HMRC Shares and Assets Valuation (SAV). To agree a market value with them the company will need to propose a value for the shares and provide background information to support the proposal. It will need to complete form Val 231 for EMI options. The form outlines the information needed to support the proposed valuation. When it is complete, it should be sent it to HMRC Shares and Assets Valuation (SAV). If the form is not used or the company does not supply all the information requested, it may be asked to supply the missing information before a valuation can begin. This could delay the agreement of the valuation. When HMRC Shares and Assets Valuation (SAV) receive your completed form, they will tell you within ten working days if they need any further information. Asking HMRC to agree a valuation is not the same as:
This language does give you some flexibility on how you want to value and define your company’s value at the time you are setting the strike price. Book an appointment with someone like http://www.completeaccountingsolutions.co.uk/ to discuss how you might go about setting this, or with your lawyers. Getting this right is important because if you don’t get it right, it will have serious tax implications for your employees or any other option recipients.
So back to strike pricing and its effect on the value you give to your employees:
If you have a very high strike price, you affect the employee’s total return on an exit. In a simplified equation (that isn’t designed to give you the present value of your options (Black–Scholes), but rather just the mechanics of cashing out), the value of the options will be:
(Share Price at Exit * Options you have) – (Strike Price you have * Options you have) = value to employee in cash at exit
You can see where to match employee 100, who comes in when the company is worth a lot more, with employee 10, who came in early, you’d have to issue employee 100 many more shares to ‘equal’ the same given to Employee 10. Try explaining all that to your hundredth employee and also to your first few, who might feel slighted that someone has more ‘shares’ than they do for the same job function.
Also, here is an interesting point to consider: different exercise prices for fully vested employees will cause them to behave differently. An employee who has 100 shares to buy, but only at $1 each will act differently (buy the shares and be a passive shareholder) vs an employee that has 100 shares at $100 (more likely to make a calculated decision as to whether to exercise (or not) the options upon a departure). Remember, if you set an exercise period after someone leaves the company, the question is, do you want them to keep the shares as a bet (low price) or only keep them if they really believe in the company (high price)? Again, no right answer as you balance between equity you give out.
So how much equity to give them?
After the above exercise, you see the challenge between articulating fairness mathematically, but also in terms of how employees chat between themselves and can sometimes get the wrong impressions based on not having all the facts.
Transparency is very useful in the early stages of a business, but as you grow, you may choose to just share the basic information of your company’s equity buckets, or strata. It’s really up to you and how you want to stratify the different kinds of employee equity issuances, for example: director level, supervisory level, and admin level.
The trick here, is really in how to ‘define’ who is what. I’d say that the important strata are:
Then, you define what’s a fair total comp bucket value for each of these, and then use the math equations to give you the relative values of equity for each strata.
As with most things of this nature, however, there are more than one way to slice the onion.
Fred Wilson’s post below on what to issue each strata is useful as a guide for both an equation to calculate absolute numbers, but also to help understand the different tiers of employees. http://www.avc.com/a_vc/2010/11/employee-equity-how-much.html
And here is Guy Kawasaki’s suggested split (via @brandid): http://blog.guykawasaki.com/2006/03/nine_questions_.html
Lastly, here is another version of how to divide things ‘fairly’ between everyone (via @gosimpletax): http://answers.onstartups.com/questions/6949/forming-a-new-software-startup-how-do-i-allocate-ownership-fairly
Once you’ve chosen your preferred method, one mistake to avoid is to promise early employees ‘percentages’. Meaning, don’t say, I’ll give you 2%, but rather say, I’m giving you 2,000 shares which represent 2% of our current cap table. The reason is that if you leave it verbally at 2%, you may inadvertently make them believe that at the next round the will continue to have 2%. Don’t assume all employees understand the mechanics of financing rounds and/or dilution.
Another mistake to avoid is not including a vesting period. Without a vesting period, your employees have full access to what you’ve promised them, whether they’ve spent time to ‘earn it’, it is dangerous for the company to not have one. Read here an explanation of why that’s important: http://www.seedcamp.com/2012/11/seedhack-founders-collaboration-agreement-version-2-0.html
In the end, this is more of an art, and you will get it wrong at least once, and don’t be afraid to experiment, but as long as you have a process, I believe you will have less issues going forward, particularly when the company grows larger, than if you leave things entirely open-ended.
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