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Entrepreneur Office Hours: Issue #191
In tech news this week, we have a struggling seamstress and reports of a dying bird...
Before getting started, I should mention that an article I published last week seems to have gone crazy-viral. As a result, we’re welcoming lots of new subscribers into our Entrepreneur Office Hours community, and I found myself thinking: “What better way to welcome lots of new readers than with a shameless plug?” So here it is:
Have you seen all my new Instagram reels? They’re 🔥🔥🔥
Fine… maybe they’re not 🔥. Is there an emoji for lukewarm?
Whatever the case, I’m working hard on my Instagram game, it’s getting better, and I feel like I’m giving decent startup and business advice. Since you’re reading this newsletter (whether an old reader or a new reader), seems like you’re the kind of person who’d appreciate being able to learn more on Instagram, so check out some of my reels. If you enjoy them, maybe give a follow. Here’s one to get you started:
In other news, I recently posted a TikTok poking fun of students trying to cheat with ChatGPT, and an AP reporter reached out to interview me for a “back-to-school” article she’s writing about how teachers and professors are planning to deal with AI in the coming school year. My interview is later today (assuming you’re reading on a Friday), and it’s got me asking myself: What am I going to talk about?
The good thing about teaching entrepreneurship is that we don’t seem to be at a point where AI is entrepreneur-ing. However, do I expect my students to start using AI to “cheat” on their homework?
Dealing with this kind of issue is what makes teaching entrepreneurship tricky. On one hand, I want my students doing their work. On the other hand, shouldn’t I be proud of students who find clever entrepreneurial solutions to getting something done more effectively and efficiently?
I realize that’s not the kind of quippy answer reporters want to hear, so I’ll work on coming up with something that’ll make a better pull quote. Nevertheless, since I know this community has lots of fellow entrepreneurship educators, it’s an interesting issue I thought I’d pose to all of you. Should entrepreneurship educators act like most other educators and strictly enforce our rules? Or should we reward creative rule breaking?
Think about that as you read this week’s articles that, for whatever reasons, happen to be about Threads and Twitter (RIP). If you have some thoughts, feel free to share them either via email or in the comments.
Watching Meta navigate the complex roll-out of its potential Twitter killer is offering entrepreneurs everywhere plenty of valuable insights.
Twitter isn’t the first company to change names. How’d it work out for some of those other businesses?
Office Hours Q&A
I loved your honest answer about pricing startup rounds in last week’s issue of EOH. It was so refreshing to see someone being so candid.
I had a follow-up question for you if you don’t mind. You write that other deal terms besides pricing matter, too, which obviously makes sense. What is the most important non-price deal term for founders to consider?
This question stumped me. At first I thought I knew the answer, but, as I considered the question more closely, I realized almost any deal term can be taken to some level of extreme that makes it valuable.
For example, let’s consider vesting schedules for founders. Most deal terms will make sure founders are committed to working for their companies for a fixed amount of time before they get their equity (or employee contracts already have vesting schedules that investors see and are satisfied with during due diligence). In other words, tying a founder to a company is a standard and fairly unexciting part of any deal. However, what if founders managed to sneak through deal terms that allowed immediate vesting? Then the founders would be able to “peace out” while keeping all their equity, which could, theoretically, be beneficial to them.
Again, that’s not a rational or reasonable example. It’s just a hypothetical to show that most deal terms could be used to benefit founders in some way. I bring it up mainly to acknowledge the possibility so I can ask us to exclude any sorts of crazy/wacko/extreme hypothetical deal terms we might imagine from being legitimate answers to your question.
Excluding those kinds of terms, I’d think the second most important deal terms are related to company control. The prime example of this would be a company like Meta, where the Zuck owns ~13% of the company, but his shares have something like 10x the voting powers of everyone else’s, so he maintains control.
The thing about Meta is that Zuckerberg was in an extreme position of power when he made his deals. Facebook was blowing up, every investor wanted a piece, and he could negotiate a ridiculous control agreement. Most entrepreneurs don’t have that kind of leverage. Unless a company is absolutely-bookers-crushing-it when fundraising, I don’t expect a founder would be able to manipulate control structures much, but I’d definitely point to voting power as being the second most important deal term besides price. Depending on the context, it might even be more important.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!