The economist John Kenneth Galbraith once wrote: “There can be few fields of human endeavor in which history counts for so little as in the world of finance.” This may be one explanation as to why so many late stage private company investors were willing to bid up the price of companies such as WeWork, Uber, Lyft, and other well-known businesses only to see their values significantly eroded after going public, or, in the case of WeWork, a complete failure to launch for its IPO.
For many years, we at Mintz have been advising both investors and entrepreneurs that one of the primary keys to the success of an emerging company is to balance the economic interests of the various stakeholders. If a capital raising event is struck where there is too much power given to the investors, the entrepreneur loses his or her incentive for success. Conversely, if the entrepreneur is able to demand complete control of the enterprise, the checks and balances of good corporate governance are lost, and we have seen time and time again a lack of discipline and rigor to follow economically productive business plans; WeWork is just the latest example of an excess of control given to the entrepreneur.
The most successful enterprises find a balance that fosters collaboration among all of the principal stakeholders: entrepreneur, investors, employees, and the board. We urge all of those involved in emerging companies to find the right balance and use your common sense to work together in building important enterprises that disrupt industries.
Our current edition of MintzTech Connect leads with some helpful tips to follow for Equity Incentive Plans. We have also included an important podcast on California’s new independent contractor law. This new law will have a major impact on all businesses operating in California. Our company spotlights are on Vivastream, a data company disrupting the event space, and Gas It Up, an ambitious emerging company intending to disrupt the retail gasoline marketplace.
As always, we welcome your questions and inquiries. Be sure to visit our website for emerging companies @ mintzedge.com, and please sign up here to receive email alerts when new articles are posted to MintzEdge.
Dan + Sam