Google Stock Option Re-pricing: Get Over It

Posted on February 1, 2009. Filed under: Internet, Uncategorized, Web/Tech | Tags: , , , |

Prominent finance publications like the WSJ and the Motley Fool along with several bloggers have recently taken shots at Google with respect to their decision to re-price a boat-load of employee stock options.  Just to review the details, in their last earnings call google management stated that they would offer all employees with options that have strike prices above the current price the ability to trade in those options for new ones with a lower strike price.  This affects about 3% of the shares outstanding, and resulted in a one time charge of almost half a billion dollars.  The journalist that take issue with this suggest that shareholders are not nearly so lucky, and for the ones that bought in the $700 range they are drastically underwater — with no hope for a re-pricing themselves.  In general, I am sympathetic to this concern, but not in the case of Google.  Why are they different?

When Google went public, they insisted that investors participating in their shares would be explicitly second class citizens, and not by a little, by a lot.  These common shares carry 1/10th the voting power of those shares held by the founder and original shareholders.  To boot, management was remarkably transparent about this – almost to the point of bragging about their ability to remain in “control” of the company’s long term decisions.  This is just one of those decisions.  

So my reaction to anyone who owns Google stock and is sore over this decision — Get Over It.  You bought a stock where you gave up the ability to vote on such things, and if you don’t like it, sell the stock.  But you have no right to complain, as the rules were laid out from the beginning.

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Benchmark Capital: Open For Business

Posted on December 1, 2008. Filed under: Internet, Uncategorized, Web/Tech | Tags: , , , , |


“People see you having fun
Just a-lying in the sun
Tell them that you like it this way”
     – BTO, Takin’ Care of Business

The seemingly chronic state of our economy, combined with the thundering sound of dire financial news has left many in a state of shock.  This unprecedented moment in time has resulted in unprecedented questions, such as, “Do you think California Municipal bonds are safe investments?”  Hard to imagine in the past, but with the country’s richest state begging for a federal bail-out, who knows? 

There have been similar questions raised about the VC industry, and perhaps many of them are equally unprecedented.  Do VCs have money to invest?  Are they pulling back?   Do they have access to their money?  Do they have enough capital for follow-on investments?  Are the LPs pulling back for their own liquidity?  The list goes on and on, and if you read the popular press you might think we are all under our desks dreaming of 1999.

I can’t speak for other firms, but make no mistake about…Benchmark Capital is wide open for business and we are eager to invest new capital behind great entrepreneurs.  Right now.  In this environment.  Today. 

You may wonder why I feel the need to make this pronouncement, and you many even consider this a stunt.  It is not.   We have made fourteen new investments this year, and are actively considering new investments each and every day.

What is driving our enthusiasm to be optimistic while the general perception is that we should be “scared”?  Here are four answers on a roll:

1)   We make money investing, not sitting on our money.  Innovation and disruption are constant and not subject to the whims of the overall economy.

2)   We believe that environments like this tend to sort out the true entrepreneurs from the pretenders.  When money is easy in Silicon Valley, it tends to attract short-term opportunists looking to make a fast-buck rather than build a lasting company.  Only the best entrepreneurs set sail in rough seas like this.

3)   We like the probability for startups (especially Series A deals) in this environment.  Consider that people are easier to hire and rent is cheap.  Incumbents are cutting their R&D budgets, and there will be fewer startups in each space, all of which means less competition.  These are good things. 

4)   Graham and Dodd said it first and best, but one “… should try to be fearful when others are greedy and greedy when others are fearful.”  Pretty clear what time it is.

If you hear anyone asking if VCs are “puling back” and unwilling to invest, please tell them to call us.  We are open for business.

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    …focusing on the evolution and economics of high technology business and strategy. By day, I am a venture capitalist at Benchmark Capital.


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