Since time is money, why is there so little thought about how to diversify our investment in time. The average person takes a job. They may get some stock options. Options are inherently risky, especially for a company that's not yet public. Clearly, options have other purposes as well, but from an investment point of view it's pretty risky. What if the company goes belly up? Then you've not only lost your job, but your investment in stock options (even if you didn't exercise the option, you've made a time investment in them) is lost too.
There are, perhaps, a few strategies to deal with this now. You can do free lance work for a combination of fees and drips and drabs of equity across multiple client firms. You can liquidate your stock options as soon as they vest (assuming a liquid market) and immediately put that cash in to other stocks. You can start a side business (comes with great tax benefits): sell antique chess pieces on eBay or write restaurant reviews and earn money through Google AdSense. Serial startups: if my pet food business doesn't take off in a year, I'll cut it and try importing furniture from Indonesia.
What else could be done? Let's brainstorm for a moment...
If you're in a VC funded company, instead of taking options in your company, take options in a pool provided by the VCs which consists of startups at a similar stage. Presumably the VC has done some due-diligence for the companies they're investing in. This one is a little unrealistic as the member companies are unlikely to approve of their VC diversifying the options. They want their employees to be heavily invested in their work. This is the point of giving out the options in the first place. Theoretically, though, a third party could "buy" your options (or rather, a contract with you granting the right to the proceeds from exercising that option at some point in the future as a way around the legal restrictions on options) in exchange for options in a "fund". These scenarios are further complicated by the difficulty in valuing a non-public company.
That one's tricky. Let's explore some other ideas. If you are a founder... you could swap a small chunk of equity in your company for equity in a pool. The members of the pool have equity stakes in each other's company and therefore a vested interest. So their may be some collective bargaining power and stronger impetus to strike mutually beneficial business development and marketing deals (e.g. link exchange, affiliate programs, co-reg, cross-promotion, and other deals/partnerships). The members of the pool might also serve as an additional, in-formal board of advisors (since there is an actual equity stake, perhaps the pool members even nominate an actual board member).
Of course, this leaves all sorts of questions open. For starters, how do you choose the right pool to join with. I wouldn't want to co-mingle my fortunes and future with just anyone... the point is to limit risk, but still maintain the best possible return. One answer would be to choose 5 (for example) entrepreneurs that you've had some interactions with and start the 5 businesses in the pool together, from scratch. This way you know who you're working with and the companies are all starting at the same stage.
Clearly, each idea is fraught with a number of big questions and impediments. I don't have the answers. My goal at this point is just to start discussing the topic. Some people might say that a good entrepreneur should believe in their idea enough so that none of this matters. But, I'm convinced that diversification is always a sound strategy. And if you're not a 20 year old kid with nothing to lose (maybe you have a family to support) risk will always be one of your concerns.
Another solution that's been discussed elsewhere, is the idea of a parallel entrepreneur. Here's a good quote, from Scott Rafer from an interview for the San Jose Mercury news. I can't find a working link to the original story on mercurynews.com (perhaps they don't support permalinks):
"Basically, everyone I know is involved in five or six projects right now," said Scott Rafer, 38, former CEO of the search engine Feedster and now CEO of blog tracker MyBloglog.com, co-founder of Mashery.com, a stealth-mode company aiming to help Web developers, and chairman of WiFinder.com, a WiFi hotspot directory. "VCs spread their risk across numerous companies," said Rafer. "Why shouldn't we?"
And here are some good concerns about the parallel thing from Dharmesh Shah. And another parallel entrepreneur article with a more positive spin.
I 'd like to try this route myself, with a set of ideas that have low-start-up costs. A few of strategies to mitigate the dangers:
1. Only have one business in serious implementation phase at one time. Other phases are more forgiving for deadlines.
2. Outsource and delegate as much as possible. Decide what's really necessary to do myself.
3. While the point here is to hedge, I can always look for opportunities to leverage as well.
4. Find partners to work for equity. You're short on time, but you have "extra" equity (extra because you have two or three start-ups).
5. Much of the sage advice from 37Signals: Ignore Details Early On, It's a Problem When It's a Problem, It Just Doesn't Matter
I'll post more on the ideas and how they are coming along as I make progress.
0 comments:
Post a Comment