M&A of a tech start-up: How to resolve the conflict of interests between investors and technology co-founders?

For the last 4 years, I was involved in various roles in 5 processes of M&A of technology startups.

Every time I observed the same conflict of interests between investors and a core tech team/co-founders because in every technology startup there are 3 groups of stakeholders with different interests:
1. Investors;
2. Investment banker, legal and accounting teams;
3. Co-founders/technology team who developed the core IP that is the subject of acquisition.

Usually, by the time the question of M&A is raised co-founders/technology team have already dedicated more than 4 years of their life to the startup, but they never get all their shares at closing. Therefore they have to work for the additional 1+ years to receive all the money from the deal (shares + stock options), as well as the core technology team has to sign a non-compete agreement for 1+ years and other obligations.

At the same time, other 2 groups (investors, IB, legal and accounting teams) receive money immediately at closing without any additional obligations and restrictions, thus their only interest is to get money as soon as possible.

It means that if, for example, a founder owns 50% of the company and an investor just 20%, at closing of the deal the investor will receive 20% of the price, but the founder could receive LESS than the investor as the acquirer is usually interested in motivating the founder to work as long as possible in the acquirer’s company. Also, the founder has to spend the additional time of his life for this business project comparing to the investor.

Usually after signing the term sheet beneficiaries that get money immediately at the closing start to push other groups to sign any non-compete terms, limited terms of Good Reason resignation, and very long obligatory time to work for the acquiring company.

How to avoid such conflicts of interest?

From my experience I see only one way – all these conditions should be incorporated in the term sheet.

As soon as all these conditions are in the basic deal document the temperature of such conflict of interests lowers significantly.

Good luck with business and M&As to everyone!:=)

Best regards,

Vitaliy Goncharuk

v @ vactivity.com

Computer Vision in Eastern Europe: Bunch of Cool Researchers & Engineers, but Lack of Big Challenging Projects

I live and run a business in Silicon Valley ( http://augmentedpixels.com – SLAM and CV for Robots and AR / VR, est. 2011), but since 2012 I spend a part of my time to the systematic development of CV / ML in Eastern Europe:

 – Since 2014 I have been holding a conference on Computer Vision and Machine Learning that gathers the largest community of  CV/ML Researchers and Engineers (more than 1700) – EECVC (web – http://eecvc.com);

 – With a group of activists we popularize CV/ML specialties, including active work on the opening of labs and majors in universities (MSc of computer vision, etc.).

– I manage a stealth community of angel investors from the United States interested in investing in CM / ML startups and cooperate with R&D centers in Eastern Europe;

After Amazon’s acquisition of Ring for 1 billion dollars with R&D office in Eastern Europe, the interest in opening R&D centers in this region rose significantly – everyone is impressed by the fact that Ring Labs could grow from 10 people to 500 (!!!!) in 2 years, which is almost impossible to do in Silicon Valley with the same level of new employees.  Continue reading “Computer Vision in Eastern Europe: Bunch of Cool Researchers & Engineers, but Lack of Big Challenging Projects”

The Future of Augmented Reality infrastructure (Software and Hardware)

This year I decided not to speak in front of the big audience as the time losses on preparation and travel are huge.

Nevertheless, my client have asked me to have a private conversation with a very special group of people on the topic “What stack of technologies we need to have in order to lead in the AR field in the upcoming 10 years.”  Continue reading “The Future of Augmented Reality infrastructure (Software and Hardware)”

About new channels that distribute and “install” new worldview programs

One hundred years ago the worldview was “installed” on “people” mainly through two main information channels:

– Education systems (school, university, church);

– Personal experience (practice, books, family, environment).

If at that time you developed any “add-ons” to the prevailing worldview system, wanted to offer a fundamentally new system of worldviews or modify the emphasis in the existing, then you would have to negotiate this with the church or the state (represented by the monarch), who were the owners/censors of the main distribution channels. Continue reading “About new channels that distribute and “install” new worldview programs”

AI Bureaucracy vs Human Bureaucracy

I think that each of us has faced the bureaucracy of public authorities when the solution to your personal issue is not provided for in the system or the question is too innovative and unusual that it takes ages to resolve it.

Sometimes there is no solution within the system at all and the system needs modernization (e.g. the adoption of a new law, an act or a judicial decision).

In this case, we can talk about “reprogramming” of human systems, when a person or a group of people has to make changes (or build new mechanisms) with the help of built-in mechanisms of the system.

In fact, reprogramming of one human system occurs with the help of another human system. 

In some respect, one can even say that one group of people tries to change neurons connection of another group of people :=) (I think very few people seriously considered the fact that passing the law ultimately aims to change the connections between neurons in voters’ minds).  Continue reading “AI Bureaucracy vs Human Bureaucracy”

Physically Passive Augmented Reality

Physically Passive Augmented Reality

I’m writing this short post on September 19, 2017 at the heart of the marketing hurricane raised by ARKit and ARCore for mobile phones, but still I hope to be heard :=)

Since 2010, we at Augmented Pixels, Inc. have tested a lot of UI / UX hypotheses in Augmented Reality (from the AR Basketball game, which was featured by Apple, to the furniture store in Augmented Reality (AR), AR Browser and Pokemon Go analogs) and in the end came to one trivial conclusion:

Because Augmented Reality applications usually require physical movements (standing up – bending over – walking and so on), users very quickly stop using them REPEATEDLY if they do not receive either a good dose of endorphin or do not see the HIGHEST utility from the mobile phone application, the use of which requires increased calorie burning (let’s face it, this is a fairly rational behavior in biological terms). Continue reading “Physically Passive Augmented Reality”

Parasitism in social groups and knowledge exchange

Each of us whether we want it or not belongs to different social groups.

Types of such groups are extremely diverse – the community of parents of same cass pupils, council of the charity foundation, society of amateur fishermen, Freemasons society, that is building plans to seize world domination, etc. ;=)

We stay in most of these groups for personal pleasure and we invest relatively small money / part of personal time.

Therefore, we do not waste time on a critical analysis of the rest of the group and just enjoy being in such group …. or we leave it – becoming a member of the majority of social groups does not cost a thing.

However, there are groups which we enter to achieve specific goals, exchange communications and knowledge that is valuable to us + the very fact of joining such groups costs us significant time and financial resources. Continue reading “Parasitism in social groups and knowledge exchange”

2D Symbols are Obsolete and Should be Reinvented for Augmented and Virtual Reality

2D Symbols are Obsolete and Should be Reinvented for Augmented and Virtual Reality

In 2011, my team of designers with extensive experience in developing for mobile platforms started developing the first interfaces for augmented (AR) and virtual reality (VR) applications.

After a series of tests, we realized that the simple transfer of experience from 2D UI/ UX design into the field of 3D virtual reality and augmented reality does not work; at that time I wrote an article “Future belongs to Augmented Reality and 3D interfaces”.

Moreover, the utility and usability of interfaces in virtual reality and augmented reality are fundamentally different and even the experience of interface design for 3D games does not play a big role and should not be considered relevant.

Continue reading “2D Symbols are Obsolete and Should be Reinvented for Augmented and Virtual Reality”