« Bidding Under the Google Price Range | Main | Nasty IPO Weather Out There »
Latest Stories
- Quote du Jour: Vonnegut
- Traveling, Jobs Report
- Geithner Gives Best Explanation in Senate Hearing Today
- Quote du Jour: Value?! Value?
- It's Matt Drudge's World. We Just Blog in It.
August 15, 2004
Craig(slist) Didn't Want to Sell?
According to an interview in today's San Francisco Chronicle with Craig Newmark, founder of Craigslist, it was another Craigslist shareholder, not him, who sold 25% of the company to eBay.
One question: Given Craigslist absence of external financing, how is that a founder-run company started by a single individual has a non-employee with such a large ownership position in the company?
[Update 8/15/04] Craig (of Craigslist) responds in the comments section, and I respond in turn. The reason for the outside share block at Craiglist was more or less what I thought, so I offer a few general thoughts to others with the same "problem". (I say "problem" because some might rightly think that having eBay as a shareholder isn't such a bad thing.)
Sphere It
| 
Digg it
| 
Bookmark it
| 
Stumble it
Ah, I see. Thanks for the heads-up Craig. (In his blog Craig explains that there was a fellow who Craig brought in early, gave beaucoup shares, and then the fellow left.)
Yours is an interesting situation that I have seen occur many times: a non-executive with a significant block of vested shares who decides to sell said block to someone else. We recently had that problem with a company we were trying to finance, and figuring it out and keeping the company from tearing itself to shreads was, in a word, painful.
Merely as a side note to others out there, there are various ways to try to make sure that no-one sells your company out from under you. You can, for example, require that founder shares vest over a very long period. You can try to hold early employees to options, not stock. You can create tagalong/dragalong provisions, much like VCs do, that would allow you to sell all your shares any time anyone attempts to sell any of their shares. Similarly, you can require that any blocks be offered first to company insiders who are permitted to buy at some "objective" price, often one set by a predetermined outside valuation agent.
There are many other approaches -- the best of which, of course, is not to start companies with people with whom you are not compatible. Sadly, that sort of thing only reveals itself when it's too late.
good question, already answered in my blog at cnewmark.com
thanks!
Craig