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On Sat, 18 Jul 1998, Suzanne Lainson wrote:

> 
> I'm wondering if there is really any downside for company founders when
> taking an internet company public? Seems to me that even if the stock drops
> if the company is unsuccessful, the founders will still have pocketed a
> great deal of money. I guess if the stock collapses and they haven't been
> able to sell any of their shares, then they will have made nothing. But
> this seems unlikely.
> 
> Over the years I have read the literature on taking a company public. And
> there were always the cautions that once you are public, you give up
> considerable control.

This "considerable control" is not to be underestimated. Of course, If you
are starting a company because you don't really care about / believe in
it, you just want to legally swindle some $-eyed bankers and media
dinosaurs by capitalizing (ha ha what a pun) on ignorance and excitement,
sure, you won't be upset when you get hit by a few class action lawsuits
by orphans and widows who are shocked, shocked that a stock trading at 100
times earnings took a nosedive when Microsoft announced it was moving into
the same business, so a lawyer probably as opportunistic as you rounds
them up and sues you and your company.You won't be upset because you'll
have that non-liquid, non-diversified pool of money.  Once the lawsuits
get wrapped up in a few years, after Internet stock prices return to
Earth, assuming the market hasn't crashed, you'll probably have millions
of dollars to compensate you for about eight years of nonstop stress. 

If, on the other hand, you founded a company because you actually care
about its product more than its profits, you'll be very upset. You'll be
upset that "your" company is no longer yours. You no longer work for
yourself, which may have been the best thing about founding a company.
You'll be working for mutual fund managers and pension plan administrators
and junior analysts at banks and everyone else who makes a market in your
stock. You'll be working for the people who write articles in the Sunday
New York Times about the odd paradox that AMZN's market cap dwarfs BKS's.

But yeah, you'll have some money to make your sulking silky. Plus, maybe
you can be in a Fortune ad if John Doerr likes you.

-dave




 


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