Founders at Work.pdf

66 Founders at Work
Kraus: They adjusted the vesting schedule a little bit. I think by the time we did
the financing we had been working on it 2 years, but they only vested us a year.
So, they got a year of free vesting from us.
Livingston: Had you incorporated when you were in the garage phase?
Kraus: Yeah, we must have. How did we do that? We had to in order to accept
the $100,000 from InfoWorld, so we incorporated pretty early. I think we got a
lawyer to do it for us really, really cheaply. I had a friend whose father was a
lawyer, so I called that friend and talked to his father and asked, “How do I do
this?” and I think they actually just did it for us.
Livingston: Did you wind up doing something for IDG?
Kraus: No, we didn’t. I think they might have put in a small amount of
money—I actually can’t recall. But we never ended up doing anything big with
them.
Livingston: When you got the VC money, I read that you had to think hard
about how you were going to redistribute the stock. You described it as a “couch
moment,” right—where you would pull the couches face-to-face to discuss difficult
situations?
Kraus: Yeah, it sucked. People ask me all the time, “Would you start a company
with your friends again?” This presumes that starting a company with your
friends is bad. And there are some things that are bad about it. It makes it hard
to be objective about personnel decisions. I love the show Entourage on HBO.
In it, the lead character is a rising movie star and his best friend really wants to
be his manager and is quite competent at it. The lead character says to his
friend, “Remember, I can’t fire my friend, but I can fire my manager.” And
that’s the hard one, right—if you have to make personnel decisions, you can’t
fire your friend, but you can fire your business partner.
That’s a very difficult line. But we would have never, ever survived as a company
without having something bonding us other than the pursuit of a business
idea. Because we came together to start a company before even knowing what
that company was doing. We were more committed to the idea of starting
something together and figuring it out than a bunch of people who were only
personally interested in how much money they could make or what could be
built around a particular idea.
That morphs over time as the business actually starts to take off, but that
commitment carried us through a lot of very dark moments and no money and
difficult nights and toiling away in a garage. It is the thing that got us through
the couch moment of redistributing the equity.
We originally had the company divided evenly: everybody had a sixth. When
Kleiner came in, Vinod said, “You know, you can leave it that way if you want,
but I think you guys are going to want to look at this.” And so Graham and I
went and had a meeting with the whole team and said, “We think we need to
redistribute equity in a way that isn’t even.” And that’s no fun to hear. I think,
quite honestly, nobody had a problem giving Graham more, because Graham
was clearly the man among boys in terms of his technical ability. The other guys