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The stock swap scenario is a hedge. It allows founders to potentially realize some upside even if their company does not succeed. I think this could be a usef
by cubes 16y ago
The stock swap scenario is a hedge. It allows founders to potentially realize some upside even if their company does not succeed. I think this could be a useful tool to help founders effectively mitigate some of the risk they take on.
That said, there is the danger that allowing founders to hedge there risk in this fashion would make them less motivated to make their own company succeed.
- ashleyreddy 16y agoThat is why I prefaced my question, because it could be viewed as not motivated...I just thought it would be fun thats all.
- malandrew 16y agoOn the other hand, you may end up with what they call a Kigyo Shudan, a type of horizontally diversified business group found in Japan. Such a corporate structure could be beneficial if there is a lot of synergy between the participating companies, especially synergies where individual companies can increase their value by strengthening business and technological links with each other. The Small Business Web is a group of companies that voluntary cooperate with each other for the greater good. Involved equity exchanges between companies should foster self-interested cooperation. However, I do echo Cubes' sentiment that any equity exchanges should not diversify founder risk so much that they rest on their laurels or focus on the relationships with others to the detriment of their own startup.