Jerry Yang’s ignominious resignation as CEO of Yahoo this week further underlined for me what’s broken about the venture capital model.
I’m not referring to the slidedeck presented by Adeo Ressi to Harvard Business School faculty earlier this month, i.e. I don’t really care to cover what’s wrong with the investments made by VCs or the reasons they were made.
I’m talking about using the equity model for startups. By now, everyone has a working knowledge of the usual financial path a startup takes, assuming it successfully stays in business:
- Incubate an idea and stay self-funded as long as possible.
- Take small infusions from family and friends to keep the equity spread across people you trust and who trust you and have faith in you and your idea.
- Seek angel investment, further diluting the equity.
- Close a round of venture capital with probably a single firm, further shrinking equity.
- Retain employees by offering equity options in the event of a liquidity event.
- Close x number of additional venture capital rounds, adding more firms, possibly reupping an existing investor, all the while spreading equity to more parties.
- Contemplate a liquidity event, which requires the addition of an investment bank to the equity pool.
- Add more stakeholders when you close the liquidity event, typically in the form of publicly traded shares of your own company or of another company, i.e. in the event of a merger or acquisition.
What you end up with at the end of this path is a whole mess of people who, rightfully, demand to have a voice in your precious company’s affairs. Read More


I’ve mentioned Portland-based 
Here’s some more iPhone goodness, and a teaser to whet your appetite.

love my TiVo.
Steven Chan
I’m going to try an experiment on all of you.
I saw this 
Mix
I found this nugget in Paul’s Google Reader Shared Items 

