How much is a CEO worth?

Innovator7Innovator7 subscriber Posts: 9
edited May 2007 in Grab Bag
i.e. besides the usual statement: it`s negotiable.My inverter startup needs more founders to raise eventually VC money.  VC always says management is more important than product.  I bring to the table an IP porfolio and working prototype, plus expertise in power electronics.  A business guy would bring to the table his past work experience in business and close to zero technical  knowhow.   Yet the VCs prefer the business guy to be the CEO, or have one of theirs to be CEO.  I personally don`t care much about title but am concerned about company ownership.  I understand with different series of funding I will eventually lose control of the company I found.  But initially, before funding, what would be a fair share of the company for the business guy who would become CEO to interface with VC?  Shouldn`t I get a % of my company fully vested in return for assigning my IP porfolio while the rest of my shares and all his shares are subject to a 4 year vesting period.  I also think of share-vesting as function of performance, i.e. actual results vs projected results.  Thus if the guy doesn`t accomplish benchmarks he won`t be vested per planned schedule but by percentage or per other predetermined schedules.  He was CEO of a division of a public company that does pretty poor and is shrinking in revenue.I`m aware that there may be no standard answer but how about some facts from real companies?
Innovator72007-5-17 11:32:54

Comments

  • InactiveMemberInactiveMember subscriber Posts: 12
    Depends on lots of things. Forget about the numbers for a few minutes.1. Do you like the guy?2. Is he a decent, honest individual?3. How good is your chemistry?Those are more important than money. If you answer yes to all of the above, then find a deal that works for both sides. Remember, you don`t have to like every aspect of a deal; that`s not how deals are made.
  • Innovator7Innovator7 subscriber Posts: 9
    #2 is the most critical question that has no answer.  Crooks are the nicest people on earth until they show their true color, according to my past experience.  That`s why everything has to be put down on paper, into contracts and agreements.  Still, contracts have been breached etc...I`m not saying all people are like that.  But when it comes to big sums of money, many sell their soul for a few millions.  Witness Enron, World Com, Tyco, and numerous others.That`s why the mortgage/lending industries use securities.  Even then they have loans to write off, and the credit rating systems.That being said, I`m now very cautious when I deal with people who are not known as God fearers.  That why I asked about what would be fair, and I try to have written agreements about performance-based compensation, with the assumption of normally contracts are abided by.
  • Innovator7Innovator7 subscriber Posts: 9
    tikki50:  that`s my current impression/perception of them too.  My post #4 was being composed at the time of yours.
    Innovator72007-5-17 11:29:49
  • InactiveMemberInactiveMember subscriber Posts: 12
    If you think a CEO is likely to be dishonest just because of his/her job title then you should stick to your day job. You will really dislike being involved in business, especially having to deal with all the people who are out to get you.
  • Innovator7Innovator7 subscriber Posts: 9
    No I don`t think CEOs are likely to be dishonest, but some are.  And I currently own 100% of my company, where I spend all my time.I`d say contracts are still the best way to go.  The question is what would be fair terms of the contract, knowing "it all depends" stock answer.I talked to a director of an incubator center.  He gave pretty much the same answer : "it`s negotiable, ranging from 30 to 40 for a startup"   But then he added "ask him what other people are needed and how much to compensate him".  He`s not that experienced anyway, IMO.I do have other options to consider, one being to bootstrap my company as I`ve been doing.  Another is to merge with another established company which needs to diversify into high tech.BTW I was invites to an angel funding seminar organized by local chamber of commerce.  Made a lot of good contacts.
    Innovator72007-5-17 14:9:15
  • Innovator7Innovator7 subscriber Posts: 9
    My real case: A VC asked his neighbor & former classmate to look into my business for possible investment.  After a credible PhD gave his opinion that my technology works, that individual "offered" to become CEO of my company and 50% share, plus ultimate decision call!  Just because he was CEO of his company that he sold after a dozen years in business.He doesn`t understand squat my technologies, invests nothing into it, and yet wanted 50% share and control!  I told him to get back to me in 2 weeks after I`m done with an urgent project.Well, I planned to turn him down, already told him his offer was unreasonable.  And he didn`t get back after all. End of story.Next story: a "professional" business advisor wants 20% to hook me with a potential established partner.  My CPA and I think it`s too much for a referal.
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