20: Tech Startup

Britain Election Winner’s First Problem: Fix a Stagnant Economy After more than a decade of deep budget cuts, slow growth and weak productivity, the country has struggled to overcome years of uncertainty and underinvestment......... lawmakers in the opposition Labour Party have already warned that — should they win — they will inherit a hobbled economy with little room for bold changes.

End Legal Slavery in the United States Today, a majority of the 1.2 million Americans locked up in state and federal prisons work under duress in jobs that cover the entire spectrum, from cellblock cleaning to skilled manufacturing, for wages as low as a few cents per hour or, in several states, for nothing at all. ....... Labor that people have no meaningful right to refuse and that is enforced under conditions of total control is, unquestionably, slavery. It’s a different model from the chattel slavery over which the Civil War was fought, but by all norms of international law, it is a violation of fundamental human rights. ....... The nation that deigns to teach the rest of the world lessons in liberty should ban this practice on its own shores rather than integrating its products into the economy. For those who want to work while serving their sentence, we should guarantee fair pay for their labor. ......... The prisoner rights movement of the late 1960s and early ’70s called for raising prisoners’ hourly pay. One of the top demands during the 1971 Attica uprising was to “apply the New York State minimum wage law to all state institutions.” More radical Black nationalists saw the nation’s overcrowded penitentiaries as akin to modern slave ships and argued that even if they were to offer prevailing wages, collective bargaining and workplace protections, they would still be instruments of racial capture and control. ....... paying incarcerated people a minimum wage would produce a net national benefit of up to $20.3 billion per year.

Donald Trump Is You! And You! And You!

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Dropping Sagoon For Good

Dropping Sagoon For Good
by Paramendra Bhagat
April 22, 2015

Govinda Giri.

You had talked shit about 4 times even before our talk yesterday, starting from the very first meeting, but your use of hate speech was the final straw. It is mind boggling for me how a guy who is about 10,000% dependent on me for his company’s very survival would exhibit such bad behavior. You talked shit 3 times during the talk yesterday itself. I am also getting the impression perhaps that fucking country is not ready for Alibaba style ecommerce.

The dragging of feet on the internal homework aside, this bad behavior is not something I need to put up with. And so as of now I am dropping Sagoon. This decision on my part is final. As per the agreement, I will mail a check for 5K to Kabin Sitaula’s address within three months.

Bye. And all the best.

सगुन, न्यु यर्कका नेपाली, र Anti Dilution Clause को बखेड़ा

सगुनको राउंड १ मा पैसा हाल्ने तर anti dilution clause छ भने मात्रै भनेर अडान लिरहेका नेपाली केही छन न्यु यर्कमा।

जुन दिन सगुन न्यु यर्क आयो त्यो दिन अगाडि मैले कहिले सगुनको नाम सुनेको थिएन। तर म अहिले औपचारिक रुपले नै सगुनको Advisor छु, मैले सगुनको राउंड २ fundraising गर्ने जिम्मेवारी लिएको छु।

मजाको कुरो यो छ कि यो anti dilution clause जुन छ त्यो न्यु यर्कको नेपाली समुदायमा पसाउने मान्छे नै म हुँ। मेरो आफ्नै tech startup छ, मेरो टीमले एउटा Augmented Reality Mobile Game बनाउँदैछ। हामी पनि राउंड १ मैं छौं। हामी चाहिं अहिलेलाई pre-launch हो, सगुन चाहिं post launch हो।

मेरो tech startup मा anti dilution clause छ। हाम्रो अहिले valuation १ मिलियन डॉलर हो, त्यस valuation मा हामीले राउंड १ मा 50K उठाउन लागेको। भने पछि 50K हाल्नेले ५% स्वामित्व पाउने कुरा छ। 10K हाल्नेले १% पाउने भो। र त्यहाँ anti dilution clause छ। अर्थात पछि राउंड २, राउंड ३, राउंड ४ जति सुकै राउंड fundraising भए पनि अहिले १% स्वामित्व पाएको इन्वेस्टरको १% कायम रहने छ। IPO हुँदा पनि त्यही हो।

तर नाक छुने दुई तरिका छन भन्छन। र सगुनले अर्को बाटो रोजेको छ। र बहुसंख्यक tech startup ले मेरो होइन सगुनको बाटो नै लिएको देखिन्छ। सगुनले २ मिलियन valuation मा 350K उठाइ सक्यो र अर्को 150K उठाउन लागेको छ। यो 500K हाल्नेले समग्रमा २५% पाउने भन्ने छ तर anti dilution clause छैन। र त्यो समस्या होइन। यो राउंड १ को २५% dilute हुँदै गएर राउंड ५ मा आखिर ५% हुन सक्छ। तर त्यो समस्या होइन। अहिले २ मिलियन valuation मा रहेको कम्पनी राउंड ५ मा ५०० मिलियन valuation मा पुगेछ भने २५% बाट झरेर ५% मा पुगेको स्वामित्वको डॉलर value कति भयो? २५ मिलियन भएन? 500K इन्वेस्ट गरेको र झिक्दा २५ मिलियन भएर आउने कुन मम पसल छ? कुन किराणा दोकान छ? कुन अख़बार छ? कुन घर छ? कुन रेस्टोरेंट छ? कुन अपार्टमेंट छ?

परसेंटेज ओनरशिप मा नअल्झिने। डॉलर value हेर्ने हो। २५% र ५% को मतलब भएन।

तर कम्पनी डुब्यो भने २५% पनि जीरो हो, ५% पनि जीरो हो। तर यो सफल कम्पनी हो। सबै आतंरिक कुरा मैले publicly भन्न मिल्दैन, तर मैले सगुनलाई नजिकबाट अध्ययन गरेको छु। त्यही गरेर न मैले बिज़नेस डील गरेको हो। Advisor बनें म। मैले सगुनको राउंड २ fundraising गर्ने हो। त्यसो गरेर मैले पाउने लगभग सबै कुरा fundraising गरे पछि पाउने हो। महिनौ मैले समय लगाउनु छ। सगुनको मैले promise नदेखेको भए मैले किन त्यसरी समय इन्वेस्ट गर्नु पर्यो?

तर मैले हिजो कवीन्द्रजीलाई भनें, तपाईंले राउंड १ का इन्वेस्टरलाई २५% दिएर त्यहाँ anti dilution clause राख्नु हुन्छ भने सबभन्दा पहिला म भाग्छु। किनभने त्यस पछि राउंड २ fundraising का सबै बाटाहरु बन्द हुन्छन्। कम्पनी डुबछ, शुरुको 350K डुबछ, अब आउने 150K डुबछ। सब चिलिम।

परमेन्द्र भगतको कम्पनीको जस्तो anti dilution clause पनि खोज्ने अनि गोविन्द गिरी, कवीन्द्र सिटौलाको कम्पनीको जस्तो २५% पनि खोज्ने! त्यो कसरी हुन्छ? परमेन्द्र भगतको कम्पनीमा anti dilution clause छ तर त्यहाँ राउंड १ काले जम्मा ५% मात्र पाएका छन। नाक छुने दुई तरिका छन। दुवैले नाक नै छुने हो।

म नेपालको लोकतान्त्रिक क्रांतिमा फुल टाइम खटेको मान्छे, त्यस पछिको मधेसी क्रांतिमा फुल टाइम खटेको मान्छे, र अब आगामी ३० वर्ष नेपालको आर्थिक क्रांतिकालागि समर्पित मान्छे। सगुनलाई र मेरो tech startup लाई त्यस angle बाट पनि हेर्नु पर्ने हुन्छ।

कवीन्द्रजीले बारम्बार remind गर्नु हुन्छ, हामी नेपाली, हामी South Asian भनेर। त्यो feeling को ठुलो महत्त्व छ। त्यसै feeling को आधारमा ६ मिलियन इसरायलीले ६०० मिलियन जनसंख्या भएका देशले गर्न नसकेका कुरा हरु गरेका छन।

टेक टीम बिल्ड गर्नु भनेको fundraising भन्दा धेरै गार्हो काम हो। सगुनले गजबको टेक टीम बिल्ड गरेको छ दिल्लीमा। १००,००० user हुनु भनेको धेरै हो। मैले शुरुमा सगुनको आन्द्रा भुँडी बुझ्नु अगाडि म excited भएको त्यो एउटा नम्बरको आधारमा हो।

I do think there is space for another social network. And I think we need tens if not hundreds of successful Nepal/Nepali origin tech startups if Nepal is to hope to become a developed nation within 20-30 years. Nepalis investing in round 1 in a tech startup positions that startup to raise round 2 from professional investors. They come in with much bigger pots of gold.

Last year नवम्बर तिर म खगेन्द्रजीलाई भेट्न गएँ, मेरो टेक स्टार्टअपको बारेमा। बड़ो राम्रो गफ भयो। मेरो राउंड १ मा 5K हाल्नोस् भन्ने मेरो अनुरोध थियो। म र मेरा साथीहरु मिलेर 50K हाल्छौं तर हामीलाई ५०% ओनरशिप चाहिन्छ भन्नु भो। कुरै समाप्त भो। त्यो अनुसार मैले डील गर्ने हो भने कम्पनी पनि डुब्ने, वहाँको र वहाँको साथीहरुको 50K पनि डुब्ने --- त्यस्तो खेती किन गर्ने? (Tech Startup Equity Distribution)

सगुन र दर्शन रौनियार
सगुन, अंजन, छेपाक, डिल्ली, विनोद, कृष्ण
सगुन, अंजन, छेपाक, डिल्ली, विनोद, कृष्ण (२)

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सगुन, अंजन, छेपाक, डिल्ली, विनोद, कृष्ण (२)

सगुन, अंजन, छेपाक, डिल्ली, विनोद, कृष्ण

एउटा टेक स्टार्टअप ले राउंड २ मा जान का लागि राउंड १ मा २०-३० हजार डॉलर ले पनि पुग्ने बाटा हरु छन, ५० हजार देखि एक लाख डॉलर सम्म चाहिने बाटा पनि छन, मैले न्यु यर्क को नेपाली समुदाय का २-४ जना सँग विगत केही महिना गफ गर्दा एउटा टीम लाई दुई लाख डॉलर राउंड १ मा चाहिने जस्तो एस्टीमेट भएको थियो। साढ़े तीन देखि पाँच लाख लाग्ने बाटा पनि छन।

तर राउंड १ मा ३०-५० हजारले पुग्ने यदि छ भने पनि सफल भएको खण्डमा आखिर त्यसै स्टार्टअप ले पनि राउंड २ मा गएर ५ लाख डॉलर, एक मिलियन डॉलर fundraising गर्ने र खर्च गर्ने हो।

So it really is a matter of scheduling. कुनै स्टार्टअप २०-३० हजार मै हुने, कसैलाई ५-१० लाख चाहिने भन्ने होइन। सबै सफल स्टार्टअप त्यो मिलियन डलरको बाटो बाट जाने नै हो। नौबिसे हो त्यो रोड मार्कर।

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सगुनको पहिलो र दोस्रो राउंड बीच फरक

सगुन सँग सम्बन्ध

केही घण्टा अगाडि कोलोराडो बाट एक जना साथीले कॉल गर्नु भो। "तपाईंले सगुनको fundraising मा रोल खेल्ने कुरा रै छ, मलाई पनि ५ हजार हाल्न मन लाग्यो" भनेर भन्नु भो।

सगुनका दुई जना फाउंडर हरुसँग म सम्पर्कमा छु। वहाँ हरुले आंट गरेकै हो। मान्नु पर्छ। मेरो आफ्नै एउटा pre launch tech startup छ। त्यसैले हामीलाई एकले अर्काको कुरा बुझ्न सजिलो हुन्छ। सगुन अहिले राउंड १ मै छ। 350K fundraising गरिसकेको, 150K गर्ने प्रयासमा रहेको अवस्था छ।

मैले सगुनको राउंड २ fundraising मा lead role लिने कुरामा हाम्रो छलफल भइ राखेको छ। निर्णय शायद त्यसै किसिमको हुन्छ होला।

तर मैले साथीलाई भनें ---- तपाइँ राउंड २ मा आउन पाउनु हुन्न। क़ानूनले नै दिँदैन। राउंड २ मा venture capitalist हरु, लाइसेंस प्राप्त एंजेल इन्वेस्टर हरु मात्र हो आउन पाउने।

आउने भए राउंड १ मा आउनुस् भनेर मैले भनें र गोविन्द गिरी र कवीन्द्र सिटौला सँग मैले संपर्क गराई दिएँ टेक्स्ट मेसेज मार्फ़त।

सगुन का १००,००० user छन --- त्यो early stage मा धेरै हो।

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33-33-34
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33-33-34

A tech startup shares its ownership widely as it grows and matures. I think 33-33-34 is a healthy ratio, although many permutations and combinations are possible: 33 to the founders, 33 to the investors in various rounds, and 34 to the team.

Some venture capitalists think their share ought be 40 per cent. Some of them collude with the founders to leave very little for the team. Some of them gobble up even more than 40. I know of one case where the founders had been watered down to around one per cent. That company died soon after.

Round 1 investment is also known as the seed round, or friends and family round. Usually people who have known you a few years put in some money. Venture capitalists are people too. There are all kinds. That includes the bad apples. Vulture capitalists are venture capitalists with bad character. Often times the vulture capitalists have a tendency to water down the early stage investors, and this is with successful companies.

If you are going to give away 33 per cent of the company to investors in various rounds, a good figure for round 1 might be 5. So say you raise 100K in round 1 to give away 5 per cent of the company. It is a good idea to add an anti-dilution clause in there so this 5 per cent stays 5 per cent in all future rounds.

But the anti-dilution clause not used right can backfire. Say you gave away 20 per cent of the company for 50K in round 1 and added an anti-dilution clause to the agreement. You just made it super hard to raise future rounds of money, to attract co-founders. If you gave away 50 per cent for 50K, and added an anti-dilution clause to it, the company is pretty much dead. The person who put in 50K just lost 50K.

I believe Mark Zuckerberg made this mistake starting out. He gave away a huge chunk of his company to his Harvard roommate who put in the first 100K. VCs who came in later had to incorporate a whole new company to dilute away that first guy who made no contribution beyond that first monetary investment. He was an angel investor, not a Co-Founder. Much of the drama in the Facebook movie resulted from this first misstep.

The anti-dilution clause is not the norm right now. Most first round investors might start out with some good sounding number like 20 or even 30. But in future rounds they get diluted to the point they might not make any money.

Another key concept is vesting. If you have a 5% equity, and it is scheduled to vest over five years, and you leave the team after one year, you only walk away with 1% equity. The other 4% goes back to the company. This vesting schedule is for team members, not the investors.

Launching a tech startup is kind of like launching a rocket. The first 100 meters are probably the hardest. Various rounds of fundraising can be compared to various stages of a rocket’s ascent.

A tech startup is a high risk venture. No risk, no gain. You could fail. If you do not raise round 1 money, you will have failed already. You could raise round 1 money and still fail. You could raise round 1 money, do the work, successfully raise round 2 money, and still fail. You could raise round 1, round 2 money, do the work, and still fail. You could raise rounds 1, 2 and 3 and fail. You could do very well for two years, even three years, get a lot of good press, get featured in the New York Times and TechCrunch, and The Kathmandu Post and Vishwa Sandesh and still fail.

My point being fundraising is important, press and hype are important, but ultimately it is about the business fundamentals. Unless you give it the very best shot you can, you will fail, guaranteed. A hundred million dollars is no joke. Heck, a million dollars is no joke. Less than five per cent of the people in America make more than 100K a year.

Fundraising can feel challenging. But once you have money in the bank, team building can be hard. Because ultimately how good you do depends on how good your team is.

There are such huge swathes of the economy that are waiting to be digitized that it still feels like the wild, wild west in the software industry. Big money is waiting to be made.There is a lot of wealth creation in the future. Understanding the ins and outs of equity is necessary to doing well with your startup. Most of the most treasured members of your team will join you for the equity you might give them. It is not salary. Chances are you will pay them below market rate salaries.