Welcome Back! BSG Team Ventures is proud to once again host the 4th Annual Benefit: VC vs. Entrepreneur Tennis Tournament – Davis Cup Challenge, and we are thrilled to have you join us.
The VC/Entrepreneur tennis community has been growing every year so please register now so we can build the teams early.
TENACITY – Transforming Youth and Building Community. Founded in 1999, Tenacity has served over 20,000 Boston students who otherwise would lack a safe, productive, and healthy after-school and summer environment. Our high-quality literacy and tennis programming not only build academic skills and improve fitness, they also foster the development of strong bonds between our students and caring staff, which instills the resilience needed to succeed in school and life.
The Leading Provider of Wealth Marketing Solutions
Based in New York City, our client provides strategic and interactive marketing solutions for wealth management firms and luxury brands. The company offers strategy planning and research services; online marketing and advertising programs; and e-marketing tools, which comprise a suite of software offering an e-marketing platform that allows communication with clients and prospects. It also provides marketing services, including print and online content publishing, brand and identity creative, creative strategy and planning, logo and mark creation, graphic design and layout, editorial design, copywriting, multimedia design, video and audio production, prepress and print, and collateral development services. In addition, the company offers interactive solutions, such as Web design, Web building and analytics, Internet and intranet/micro site development, information architecture, SEM/SEO, systematic design, content management, E-commerce, and Internet application development services, and multichannel integrated marketing, rich and emerging media, media strategy, media planning and buying, and strategy and creative development services.
The company has become the pre-eminent provider of interactive agency expertise, accompanied by specific CRM oriented software tools to help their marquis clients, including Merrill Lynch, Morgan Stanley, Charles Schwab and Barclays.
The Position
The SVP Engineering’s role is to oversee day to day activities of the software product development and enterprise architecture integration teams for the company’s Software as a Service (SaaS) offerings. The SVP will directly supervise a team of software developers, quality assurance, and business analysts; identify risk and opportunity areas; and coordinate all software development activities.
The head of engineering will also work closely with Product Strategy on the business side and manage the Lead Technical Architect to envision and define features in the product roadmap and be accountable for the features development, deployment and support. In addition to the technical leadership of the team, this role has full management responsibility and oversight for a cross-functional group of engineering personnel.
Reporting directly to the SVP of the software group, the SVP Engineering shall:
• Manage software architecture, design, development, procurement, and integration. Also manage tier-2 and higher support once software has been placed into operations.
• Achieve cost, schedule, technical and quality performance for delivered software. Compile, maintain, schedule, resource, execute prioritized lists of development projects, including planning and managing the budget and scheduling personnel and vendor contracts to meet project needs. Collect metrics on development performance and report on them.
• Collaborate with other functional managers (customer facing business units, systems engineering, QA, and operations) to ensure architectural integrity, effective integration and test, and ongoing system stability.
• Direct technical subcontractor management including contract negotiation, technical support, budgetary management and program management of various contracts and associated budgets. Coordinate vendor contracts, deliveries and schedule with affected company parties. Contract with vendors for services to support engineering while addressing Intellectual Property, Non-Disclosures and Statements of Work.
• Manage short- and long-term staff planning, recruitment, performance management, work assignments, training, mentoring, career development, and recognition or disciplinary action.
• Be responsible for business planning and proposals, operating budgets and financial terms / conditions of contracts for both internal and external customers.
The successful candidate must also have the ability and experience to lead a multi-disciplined organization in a multi-location environment.
Qualifications
• Minimum of 10 years overall software development experience, with no less than 5 years in a SaaS environment as well as at least 5 years of management experience.
• 2-3 years of senior-level or leadership experience in a software environment with 10 or more direct reports.
• Experience working with product managers and other business stakeholders to set timeliness, budget resources, and manage expectations and quality of the development process
• Advanced understanding of SaaS web application programming architectures, including standards for security, scalability and configurability
• Expertise and experience in implementing and overseeing measures for data security, business continuity, disaster recovery
• Deep understanding of load balancing and performance optimization principals for high volume/transaction web applications
• Strong skills in Java software development.
• Experience with refactoring and eliminating legacy dependencies
• Demonstrated substantial leadership in both technical and management areas
• Experience leading development efforts using a variety of different SDLC approaches (waterfall, agile, etc.)
• Knowledge of multi-threaded programming
• Outstanding collaboration skills, excellent communication skills, an ability to look at the big picture
Essential Job Functions/Responsibilities
• Lead software and front-end engineers in the specification, design and development and support of all our applications, including websites/products, our core services and our internal and external tools
• Provide hands-on technical management leadership and support to software development team of 12 – 15 engineers
• Identify skill and performance gaps in current organization and provide improvement plans
• Improve existing processes and establish new processes for efficient development and high quality output
• Evaluate and enhance overall development environment, release practices and Quality Assurance methodology
• Instate and maintain development standards, code reviews, unit testing and integration testing frameworks
• Maintain overall ownership / accountability for data security, business continuity, disaster recovery
• Work in tandem with Technical architect and development team to identify and implement new measures for system performance optimization under high load
• Lead, recruit, develop and supervise the development team members
• Evaluate and take accountability for decisions on key technologies adopted
• Ensure proper development of technical specifications and documentation.
• Estimate resource usage and timeliness for development team
• Review team members’ detailed design of components/modules/code
• Provide a good balance of experience and skills in several front-end and/or back-end technologies
• Strong relational database skills, preferably MY SQL Serve
• Knowledge of latest web technologies with understanding of AJAX and RIA
• Ability to translate technology choices into business implications
The diagram below illustrates the intersection of competencies critical in the SVP Engineering position:
Compensation
Compensation is competitive with the position’s requirements. In a performance-based environment, this will include base salary, incentive bonus structure based on both individual, department, and corporate qualitative and quantitative MBOs, and a potential stakeholder position in the company.
SVP Software Engineering, SaaS software for financial services sector
I have it on good authority that June has been declared New England Innovation Month, per Scott Kirsner who has been tireless tender of the innovation flame here in New England for years now (http://www.boston.com/innovation). See the growing list of June events at http://neinnovation.com.
In honor, a few thoughts follow on Innovation in New England. First, a pointer to a related concept, called National Entrepreneurs’ Day to recognize what entrepreneurs do for this country. It’s an idea sparked by a fellow New Englander, David Hauser, founder & CEO of successful tech start-up Grasshopper. The date being requested of the Obama administration happens to be the first day of spring each year. [Coincidence that the French word for “start up” also references the spring season–“jeune pousse,” loosely translated as “young sprout” or seedling).
See the video clip below for serious entrepreneurial inspiration, and the other link to add your John Hancock (yes, yet another famous New England innovator) to the virtual petition.
Now, back to June’s month-long celebration of innovation. Indeed, New England has a storied innovation past. However, what may begin as a strength in our region can at times turn to weakness, the metaphorical double-edged sword. I’ve penned a wish list of five ideas for innovation here in New England along that thematic refrain, akin to “innovation on innovation”:
#1 “Coopetition” in New England to foster national visibility
New Englanders are known for their fierce independence and self-reliance. We needed this when we came over as settlers 300+ years ago and put our MacGyver-esque skills to the test to survive (note, MacGyver was no doubt was an Irish immigrant from good New England pioneering stock). It’s been said that unless you can trace your lineage to the Mayflower, you’re still considered an outsider. New England has never been known for leaving fresh-baked pies for the neighbor who just moved in next door. In fact, at times, neighbors live next to neighbors for years without getting to know each other, all in the name of “independence” and a desire to not meddle in others’ affairs. However, New England could benefit a great deal if we pulled together and collaborated just a wee bit more. Example, Peter Rothstein, recently named Director of the New England Clean Energy Council, has been driving for both State and Federal government resources (Department of Energy and other), to fund the concept of a “Regional Consortium” that would bring together all the components of the cleantech ecosystem in New England in a thoughtful, harnessed approach. The only way New England can achieve this national recognition (and funding) is via collaboration. OK, just to prove to hardy New England stock, we’ll call it “coopetition” just to retain a bit the independence streak that runs so deep up here.
#2 Greater sense for openness for new ideas/ways of doing things
New England also has a wonderful sense of tradition—Mayflower, Plymouth Rock, the Boston Marathon, Red Sox, clam chowder… we’ve pioneered our fair share of “we were first to….” And “we have the oldest of….” I’d like to see us bring back a bit more of the revolution versus evolution. A bit more General George Washington and Lexington/Concord derring-do, rather than what has grown to be our reputation as conservative in all things “blue sky”-oriented. Wouldn’t it be great if we didn’t have to wait for the imprimatur from an MIT lab or a Harvard Business School professor before we tried something new? New Englanders are possessed with pedigree. And until something has been anointed with pedigree pixie dust, an innovation often languishes in ignominy.
#3 Be more “what you know” versus “who you know”:
As an outgrowth of #1 and #2 above, New Englanders often suffer from an acute case of “who you know.” This to some extent is a derivative of the circular logic involving #2 above on pedigree. Despite our reputation as the nexus of sophistication and erudition, New England seems to grow more and more insular in letting outsiders into board rooms as well as bar rooms. New England, despite being the original crucible of diverse cultures, has homogenized. Amazing ideas and innovations come from equally surprising and diverse sources. One of the best examples of “what you know” is exemplified in one of my favorite recent Malcolm Gladwell articles in the New Yorker Magazine (dare we say also a New England masthead), chronicling a Silicon Valley entrepreneur from India who heretofore knew nothing about the sport of basketball, who—when tasked with coaching his daughter’s middle school basketball team—innovated game strategy to turn a weakness into a strength and a last place team into a near division winner (see http://www.bostonsearchgroup.com/blog/type-leaders-required-to-outpace-competitors-in-recovering-economy/ )
#4 “Hold” vs. “Fold” or “Sold”
OK, so I’m not pioneering this idea, but if imitation is the highest form of flattery, I’m a big fan of this growing mantra in the innovation community here in New England that goes like this. Massachusetts used to have an incredible set of tech & science crown jewels: in biotech, Genzyme, Biogen & Millennium Pharma. In tech, companies in hardware and systems like Data General, Digital, Wang, 3COM, and Banyan Systems. In software & Internet the likes of Lotus & Lycos. However, over the years, these companies have either been sold or forced to fold. One of the few remaining companies embracing the “hold” mentality is EMC, preferring to buy others than sell themselves out. However, just one EMC, or even a handful more doesn’t make for a robust, sustainable innovation ecosystem. Innovation can metaphorically be cast in the same light as combustion– that combination of spark, oxygen and fuel that powers innovation and drives creativity. Spark is the new idea, fuel is the money provided from investors in the idea. And oxygen is the people who take the idea and the money, the business-saavy entrepreneurs who partner as the steel to the innovator’s flint to spark the novel idea, tech innovation, or scientific breakthrough. I wish we were making more oxygen in New England. This type of oxygen only comes from the talent that grows up and makes small companies into big companies. These bigger companies serve as a training ground for the next generation of entrepreneurs to cut their teeth, get their training, build their network. These larger companies offer entrepreneurial training wheels. When we sell companies too early, they never get the chance to develop a critical mass of next generation talent who can apprentice at the knee of others and with greater security to make mistakes without having each decision be a bet-the company-one that risks putting the company in mortal peril. When there is no larger company safety net, fewer young talents practice jumping into the uncertainty of innovation acrobatics, often key experiences required to be able to drive younger companies to success later in their innovation careers.
#5 Create a “Celebrate the student Week” I’ve always been in awe of many of the Asian countries who celebrate things that we in the U.S. might find odd. I believe they have a day that celebrates children. And a day that celebrates the elderly wise ones in their communities and cultures. There is likely no region in the U.S. that has more undergraduate and graduate students than New England. And these students are the equivalent to our regional “innovation fountain of youth.” Undergrads, Masters students, PhDs, Post-docs, Fellows. I wish we could celebrate them. What better time to do it than during New England Innovation Month. Make them feel welcome. Give them social stature to counterbalance the grumblings around U-Haul vans that descend like locusts in late August, or parties that get a bit too raucous. New England students should be lauded. Perhaps a regional “student innovation awards” as capstone to this celebration. OK, at minimum, a free scoop from yet another New England innovation legend, Ben & Jerry’s. A scoop of a new flavor in their honor, “College Cram Crunch.”
One of the many challenges for early-stage technology and science-driven companies revolves around compensation for founders. When a start-up is created, how do those there at the beginning get compensated? When there isn’t any cash in the bank yet, and there may be a period of time where products are in development, do founders get compensated, and if so, how? When angel investors seed the company, what happens then? Founders usually will get cash compensation, but perhaps not at the same levels as when the company later gets venture capital funding.
We were asked by one of our clients to help determine appropriate compensation parameters for an angel-funded enterprise. From this, there were clear norms that emerged–
Looking at a half-dozen angel-funded companies in the New England region (Boston, Massachusetts, New Hampshire), we assembled some data that helped inform the above mentioned principles.
Note that there are rarely more than 2 founders. Therefore, two can initially split the equity 50/50, and even with significant dilution, still end up with a meaningful equity stake after either angel, venture capital rounds, or both. If a higher number of co-founders split the equity pool, fully diluted equity stakes can dwindle to amounts that make it hard for those founders to retain meaningful upside in their enterprises at later growth stages.
Just food for thought for those who are creating new companies in today’s market conditions.
The Q2 2010 CEO survey has logged more than 50 respondents, so although additional responses may roll in, we’re posting the results in order to make the feedback to those who participated as timely as possible. Additional responses are unlikely to skew the percentages significantly.
We at BSG Team Ventures periodically take the temperature of the markets we serve. Below are the results. This survey’s focus was on the economic recovery (is it indeed here, and if so, measured how?), and where CEOs are budgeting their spend in the 2010 recovery year.
A note on methodology. We send these surveys only to those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). All responses were anonymous due to the web-based survey technology employed. The majority of respondents were in the United States, with the highest concentration on the East and West coasts (New York, Boston, and San Francisco/Silicon Valley areas).
The response to the first question clearly demonstrates that CEO sentiment versus our last survey has demonstrably shifted, with almost 75% of CEOs indicating that the economy has either bottomed out, or is recovering.
Similarly, for those growth-stage tech or sciences driven companies, when looking at revenues, more than 40% of CEOs reported that revenues were up from Q1 to Q2, with the largest percentage revenue increases in the 1-25% range. Approximately 10% of CEOs reported revenue increases of 25% or more.
We at BSG Team Ventures periodically take the temperature of the markets we serve. Below is a no more than 10-question multiple-choice survey for CEOs only.
We send these surveys only to those who fit the category (in this case, sitting CEOs or board member/founders of technology/science-driven growth-stage companies). [Note, if we've mistakenly sent this to you and you don't fit, please refrain from responding. Feel free to forward to the qualified CEOs in your sphere of influence. The more data generated, the more accurate the trend lines].
For the survey results from Q3 2009, titled “Strategy & Outpacing Your Competitors in the Recovery”, go to http://www.bostonsearchgroup.com/blog/3rd-quarter-innovation-ceo-survey-results-outpacing-competitors-recovery/
All responses are anonymous due to the web-based survey technology employed.
Second Wind’s (http://www.secondwind.com/) mission is to advance the use of wind data to make wind energy profitable for the businesses and investors who create wind energy plants, painless for the operators who work with wind energy equipment and practical for the businesses, consumers and utilities that benefit from wind energy as a low-cost and environmentally desirable source of power.
Second Wind prides itself on technology innovation with its in-house hardware development and software engineering talent. The company continues to develop ground breaking products related to wind data.
Thirty four employees staff Second Wind’s headquarters and manufacturing facility. The company has an industry-wide reputation for innovative, reliable technology and excellent customer support. Inc. magazine recently ranked Second Wind on its first-ever Inc. 5,000 list of the fastest-growing private companies in the country. The company’s ranking was based on its 27% revenue growth from 2003-2006 and was the only business-to-business wind organization in the energy industry category. In December 2007, Second Wind secured $4 million in second round financing from Good Energies, a leading global investor in the renewable energy and energy efficiency industry.
Second Wind has been growing steadily, with annual sales of about $7M in 2008. Their clients include the largest developers and operators in an industry with a 30% annual growth rate.
History
Second Wind was founded in 1980 by Walter Sass and Kenneth Cohn. Engineers who have been friends since grade school, they decided the emerging field of wind energy provided an opportunity to leverage their engineering skills to benefit the environment. They recognized that, to succeed, the industry needed more than wind turbines. Wind developers also needed software and hardware to measure wind accurately at prospective sites and to monitor turbine performance at established wind farms. The company’s first headquarters was the spare bedroom in Sass’s home.
Second Wind established a presence in wind resource assessment in 1981 by introducing the first data logger designed specifically for wind energy prospecting. In 1985, the company introduced their first wind farm monitoring system. In 2007, Second Wind launched the TritonTM sonic wind profiler, designed to re-invent sodar for wind profiling.
Market Opportunity
Wind energy is growing at 20-30% annually. The market is global, with 17 countries having attained over 1,000 MW via wind. Of the $37B invested in wind energy in 2007, 2% was for wind resource assessment instrumentation and services, or $735MM. 8,000 met towers were installed for prospecting, power performance and operations. Target markets for wind assessment include large, medium and small developers as well as services firms.
The pressing need for viable alternative energy sources that do more than just supplement coal fired power-stations is driving advances in the development of wind energy. A major hurdle in establishing successful wind farms is the difficulty of attaining accurate site evaluation data. The Triton Sonic Wind Profiler addresses this challenge. Designed to measure wind-speed at heights of up to 200m without the need for erecting costly and less effective masts, the wind profiler utilizes a technique known as Sodar (sound detection and ranging) that measures sound wave echoes in the atmosphere. The technique is not dissimilar to Sonar detection used by submarines underwater.
In evaluating a suitable site to establish a wind farm, measurements need to be taken over a period of at least a year. This has been achieved, until now, by using a meteorological mast or met mast – a tower equipped with anemometers and other weather instruments. These masts are limited to a height restriction of 60m; any taller tower requires aircraft warning lights, which complicates assessment of a site for a turbine 75-80m high. Another complicating issue is the masts’ high visibility, which can raise public concerns before the site has been properly evaluated.
Relying on precise measurements of frequency and time delay from sound pulses that are bounced back to the transmission unit by wind turbulence, Sodar technology provides a virtually invisible tool which measures wind speed and direction at heights up to 200 meters. The Triton system also overcomes some of the problems associated with existing Sodar technology by remaining effective even in poor weather and delivering easy to interpret wind data without an on-site presence.
Triton also boasts innovations such as a hexagonal transducer array and a tri-lobed acoustic enclosure that increase accuracy by improving signal-to-noise ratios and beam focus, rugged construction making the unit effective in all weather conditions and able to correct measurements when used on uneven ground.
The Products and Customers
TritonTM Sonic Wind Profiler re-invents sodar technology for wind assessment. It captures accurate wind data from any height, in any weather, at any location, without being attended. Readings look like anemometry results, with no expert analysis required.
SODAR (SOnic Detection And Ranging http://en.wikipedia.org/wiki/Sodar ), or sodar, is a meteorological instrument which measures the scattering of sound waves by atmospheric turbulence. SODAR systems are used to measure wind speed at various heights above the ground, and the thermodynamic structure of the lower layer of the atmosphere.
Sodar systems are like radar (radio detection and ranging) systems except that sound waves rather than radio waves are used for detection.
Sodar sends an audible “chirp” up through the air, and wind turbulence sends a portion of the sound back toward the ground. By precisely measuring the frequency and time delay of the chirp’s echo, the sodar device measures the wind speed and direction at various heights.
Sodar technology is commonly used for “site profiling” at the end of the prospecting process for potential wind farm locations. It measures above the 60-meter height of most meteorological masts, assessing wind at actual turbine heights. In addition, sodar is more portable than masts and can be moved to determine ideal turbine placement.
Current sodar products have multiple limitations for wind profiling. They require on-site support to
operate, and deliver wind data in formats that require expert interpretation. Readings must be carefully analyzed to filter out “side lobes,” or sound artifacts from nearby trees and buildings that can produce inaccurate results. Most current sodar products also must be covered in rain or snow to avoid damage to the sensitive microphones and speakers.
Benefits of the Triton Sonic Wind Profiler
Numerous Triton innovations address the shortcomings of existing sodar products for wind profi
•More accurate data. A hexagonal speaker array (patent applied for) focuses sound beams more
effectively than previous designs, which improves signal-to-noise ratio accuracy and decreases
disruption. The array is housed in a tri-lobed acoustic enclosure, which reduces the chance of
sound artifacts disrupting data.
•Unattended use in any location. A solar array and battery can provide adequate power for the
Triton unit to operate for prolonged periods of time, depending on available sunlight and amount
of use. Bundled with new Skyserve satellite wind data service, the Triton profiler delivers
accurate wind data to any computer from any location in North America.
•Ready-to-read data. Unlike other sodar products, the Second Wind sodar delivers easy-to-read
data that is similar to data read outs from conventional meteorological towers.
•Works in any weather. The unit is made of rugged plastic with stainless steel components and
sound absorbing material that functions when wet, unlike foam. Internal temperature sensors and
a propane heater also allow Triton to operate in icy conditions.
•More portable and less obtrusive. At six feet tall, Triton can easily be towed by a pick-up truck.
The unit has internal controls to compensate for uneven ground, and a built-in GPS and compass
identify the time and location of data as it’s captured. Because of better acoustics, it is also less noisy than other sodar products.
The Position
Reporting to the VP Global Sales Peter Gibson, the Director Eastern European Sales will be responsible for the planning and execution of sales activities for Second Wind in Eastern and Central Europe. The Sales Director be focused on direct sales of the company’s Triton SODAR device and services.
Periodically, we make an effort to pull together executive compensation trends and analysis focusing on venture capital backed companies in the United States. The last executive compensation report we put out was in September 2009 (see prior blog post http://www.bostonsearchgroup.com/blog/ceo-compensation-analysis-west-east-founder/), and focused on C-level compensation, with a further contrasting of founder versus non-founder CEO compensation, both West Coast and East Coast.
This report is similarly focuses on West Coast and East Coast differences in executive compensation, however this time looking at the VP level across the functional organizational structure. For purposes of this report, only companies who broadly fit the definition of “information technology” were used in the analysis, not including biotech, medical device/medical technology, or cleantech.
The titles looked at include the following–
Vice President Business Development
Vice President Engineering
Vice President Marketing
Vice President Sales
Vice President Sales & Marketing
VP Software Development
VP Product Management
Note that below we’ve only included the analysis of the executive compensation data, in other words the deltas. If you’d like more detail and the information on which we based the analysis, please email damador@bsgtv.com with your name, title, company and business email address, and we can provide you with the baseline full report.
Do keep in mind that this is only one set of data. To draw the best comparables, it’s important to do all three data-grabs listed above. Also, this is a “blended” sample set of multiple venture-backed industry sub-sectors in the information technology category. Some industry sub-segments may pay more or less than others with further parsing.
West Coast Early vs. Later-stage Venture Capital-backed Companies
Cash compensation is almost always higher in later stage companies, and this is reflected in all 3 quartiles of data analyzed. For West Coast venture-backed companies, the differences are $15,000 to $50,000 in most roles, with an average different of about $25,000. The only exception is for the VP Sales/Sales Marketing role, where cash was significantly higher in later stage companies for these roles, ranging between $75,000 to more than $125,000 in the top quartile companies.
Conversely, equity is almost always higher in early-stage companies to offset the lower salaries referred to above. For these West Coast companies, regardless of quartile, earlier-stage companies received on average ¼% to ½% more equity, with the biggest jump in VP Sales/Marketing, and lowest in the VP Engineering function.
East Coast, Early vs. Later-stage
East Coast compensation tells a different story from their West Coast counterparts. Although cash compensation was similarly lower in early versus later-stage companies, East Coast executives of venture-backed companies didn’t see the “make-up” effect in equity. In fact, equity appears lower in many of the quartiles compared, by as much as ½% comparing East Coast early versus East Coast later-stage.
East Coast vs. West Coast, Early-stage
Cash compensation, East versus West, shows that West Coast executives of early-stage companies more often than not earn more in base . West Coast Engineering is $10,000-20,000 more in base, VP Marketing is up West over East by $10,000 to $50,000. VP Sales/Sales & Marketing is actually the one notably lower cash category where East Coasters are better off than West in the higher quartiles (but not the lowest). As noted above, West Coast early-stage executives are compensated more favorably when it comes to equity than their East Coast brethren virtually across the board.
East Coast vs. West Coast, later-stage Venture Capital-backed Companies
As for cash compensation for later-stage companies East vs. West, a similar pattern existed being mostly lower than their West Coast counterparts, than its West Coast peers. However, when looking at equity stakes in later stage companies East vs. West, the East Coast did better, often by ¼% to as much as ½%.
We’re often asked how to establish fair market compensation when it comes to CEOs of privately held companies, often with venture capital or private equity backing.
Below is one method that can be employed as a jumping off point for this calculus:
1) “De-risked,” how much is a CEO worth? Is $500 -$1M a year too much? For our purposes here, we’re talking about a talented CEO. Not someone below average, but above the average, one that a retained executive search firm, venture or private equity investor, or board of directors would be proud to put in the role. Rather than pick some arbitrary number, this should be ”market set,” by looking at what someone working for any global 2000 company (i.e. General Electric or other similar) earns annually. From our executive search experience and database of compensation comparables in these companies, base salary is usually between 250K and 400K, depending upon how big the divisional P&L responsibility is, there is usually a bonus that is between 50-100% of base, and an LTIP (long term incentive plan) that-once partial vesting begins-can generate from 100K up to 250K or more a year in cash.
2) So, the cash component of a comparable, including average base, annual average bonus, and yearly LTIP pay-out looks something like this:
Base ~ 300K
Bonus ~250K
LTIP (cash only) ~ 200K
TOTAL: 750K
* This does not include any meaningful RSUs (restricted stock units) that are usually also part of that package, which could add another 200K or more per year in value to a general manager’s package with true P&L responsibility for their division, group, or sector/segment.
* This is also not indexed to geography/cost of living. If the position is in New York City tri-state area (New York, northern New Jersey, southern Connecticut), San Francisco, Boston, London, Singapore, Hong Kong, or Tokyo, a multiplier factor needs to be used to level-set for cost of living increase required for those metropolitan areas.
3) Now, back out the cash portion of a CEO’s compensation for the company that they’re stepping into (say 250K a year in cash in smaller companies as all base, or combination of base + cash bonus). So you’re left with say 500K that needs to be made up in equity, on a per anum basis.
4) Over how many years is the liquidity horizon (and/or vesting rate, 3, 4 ,5 years)? Let’s say it’s 4 years, at net 500K, equals ~$2 million
5) Now, this is with ZERO beta risk factor. Add back the beta risk of an earlier stage company. Let’s assume a global 200 company equals “1.” A CEO role in a privately held, externally backed company is not “1″. It’s probably a multiplier of 1.5, or 2. For a pre-revenue, VC-backed company with high burn rate, it could be as much as in the 3 to 5 range. Note that any illiquid company is inherently risky in terms of cashing in any equity at a reasonable price. Let’s pick a beta risk multiplier of 2.5 times riskier than “average.” So, 2M * 2.5 = 5M. Note that when there are preferences for the investors that create an exit hurdle rate before any common shareholders get paid, beta risk goes up accordingly unless the CEO participates in any exit event via cash carve out or other instrument. As mentioned above, a recent IPO that represents a reasonable market comparable netted a CEO who joined the company 4 years ago $20M. Using this number, the CEO’s compensation was $5M a year, or a beta multiplier of approximately 5.
6) Then, are there any combat pay provisions you need to add in (warts that a CEO or executive team member is required to overcome and vanquish in their role that are above and beyond the normal call of duty)-reconstituting the executive team, or raising an outside round of capital because existing investors are tapped out, or starting up an Asia manufacturing capability that will require the CEO to take a dozen 15-hour flights one-way to get up and running.
7) Finally, you have to look at what likely dilution there is going to be to an initial options grant for the CEO. If you start with a 6% stake in an early stage company in a Series A funding, and you then raise a series B and C, depending upon valuation for those rounds, the CEO will likely end up below 3% as a “fully diluted” stakeholder. There is an argument to be made that any of the management team critical to the success of the company will be “topped off” at later funding events in order to keep them motivated. However, there is no guarantee that this happens. It’s only good business sense to do it. For the CEO, it is more important what s/he ends up with, not how much with which they start.
8) Add water, and stir…
Notes & disclaimers:
* This is not intended to be biased in any direction, to any party, neither CEO candidate, nor company and/or investor.
* This is only one way of calculating compensation, indeed there are many others.
* There is no way an earl- stage emerging/growth company will be able to compensate a CEO in all cash, nor truly be able to offset the risks inherent in this stage of venture. The CEO either accepts this, or is not truly capable of working successfully in this milieu.
* Other than the impact of cost of living adjustments to base compensation, each CEO candidate comes with what we refer to as their own subjective “keep the lights on” cash needs. We calculate this simply as the amount of cash required on a yearly basis to cover their living/family obligations without having to write checks out of savings to cover it. Some CEO candidates may have 3 children in private school or college, while others may have no children and no mortgage. Cash needs therefore may range widely, and need to be adjusted for using equity as a “leveler” (less cash-needy, higher the equity, and vice versa)
* Alternatives to paying bonuses in cash might be to pay bonuses in equity, upon achievement of key milestones for the company
* This same calculus can be applied to the Vice President level as well, subject to appropriate adjustments downward in cash and equity
* In a circumstance where there is a “turn-around” required, equity may not be enough of a certainly to attract a competent CEO for the challenge ahead. In these circumstances, a cash carve-out may be warranted in addition and/or in substitution for a stakeholder role. The cash carve-out may be just for the CEO, or for the key management team required to achieve the turn-around. Often, the cash-carve out structure is a percentage of total sale price over a certain amount, with the possibility for an accelerator depending upon exit/liquidity circumstances/outcome.
* Often the question of anti-dilution comes up in an effort to assure a CEO of a certain percentage of equity upon liquidity. Granting 5% equity to a CEO at a Series A financing with anti-dilution would ensure that the CEO retained his or her stake across the growth and additional funding needs of the company. However, this is rarely a good mechanism, as the CEO becomes less interested in new company valuations at subsequent funding events, and becomes misaligned with the company’s investors.
Becoming the leading content provider of geospatial imagery for mapping & monitoring applications
Our Client has its roots in rocket science… literally. Since the first image was collected from space over 30 years ago by classified government imaging systems, only a limited number of people have been permitted access to highly detailed photos of the Earth, and the industry was tightly regulated. Since its deregulation in the 1990’s, The firm is changing this historical usage of Earth information through the commercialization of high-resolution satellite imaging and an innovative approach to conducting business with customers, partners and resellers. The company was founded in 1992 to launch satellites into space for the purpose of taking high-resolution photos of the earth for defense and intelligence, government, and commercial use. In early 2000, the US government awarded its first significant contract for satellite imagery, to our client. Currently the company offers the world’s highest resolution commercial satellite imagery, the largest image size, and the greatest on-board storage capacity of any satellite imagery provider. In addition, the company’s comprehensive ImageLibrary houses the most up-to-date images available.
In 2004, the firm struck an exclusive portal agreement to supply much of its satellite imagery to Google’s new product launch, branded Google Earth. This deal served as both validation for a broader explicit push as well as anchor tenant into the non-federal government, commercial sector.
Continued growth in 2009 is punctuated by an IPO in May, and the launching of their third imaging satellite, WordlView 2, in October. With this satellite joining the prior two, the firm has the most powerful ability to add global imagery to its imagery library faster than any other company on the planet.
The company is headquartered near Boulder, Colorado, with other offices and facilities in key geographies throughout the world.
Market Opportunity
Popular business and technology soothsaying magazines have trumpeted mapping as the next “killer app.” Even as far back as 2005, the MIT Technology Review dubbed it “Killer Maps” in their article– More…
Location: Mountain View, CA. USA.
Website: www.google.com
Head of Product Management
Google’s mission is to organize the world’s information and make it universally accessible and useful.
In September of 1998, Larry Page and Sergey Brin set up their first workspace in Susan Wojcicki’s garage in Palo Alto, and over the last 10 years Google grew to being one of the world’s best known companies. Susan was employee number 18, and currently is responsible for managing Google’s monetization and measurement platform products including AdWords, AdSense and Google Analytics.
One of the most visible members of the senior management team is Marissa Mayer. Hired as employee number 20 and the first female engineer after receiving her Masters in Computer Science, Marissa is responsible for the consumer-facing (UI) side of Google, and has been called the Chief Experience Officer.
The opportunities for Directors of Product Management will report directly into Marissa Mayer or Susan Wojcicki , and will be responsible for working across Google in the innovation, creation, management, release, and lifecycle of new products that extend the improve the quality and measurability of search and advertisement monetization. They will establish short and long term product goals and strategies to build and manage a product roadmap to support Google’s goals and strategies. They will initiate and prioritize projects within engineering; track product development; develop product launch plan, and also engage closely with the engineering team to help determine the best technical implementation methods and reasonable execution schedules.
Product Management at Google is an engineering and deeply technically focused organization that is full of visionaries and entrepreneurs. They apply their core technical abilities to understand the capabilities and possibilities of computers, and then leverage insight and imagination to create new products that will allow users to gain better, faster, and more accurate access to information. They are fascinated with new products, and obsessed with making the best possible product for the largest possible audience serving the most important needs. They represent the visionary, the communicator, the leader, and the technologist all-in-one. Essentially, the Product Management team ensures that Google has the best worldwide product offerings by analyzing, positioning, packaging, and promoting their solutions
across a variety of countries and markets where Google does business.
