The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings—Reimagining Capitalism at the DNA Level - Softcover

Sjogren, Karl

Softcover

ISBN 10: 1950732002 ISBN 13: 9781950732005

Publisher: Fairshare Model Press, 2019

Synopsis

The Fairshare Model is an idea for a performance-based capital structure that redefines capitalism at the DNA level, where ownership interests are set. When used to raise venture capital via an IPO, it balances and aligns the interests of investors and employees—capital and labor.

Author Karl Sjogren utilizes highly approachable language, humor, and analogies, along with insights about capital markets. The result is an eclectic, yet inviting discussion that might occur in a graduate-level symposium on economics, finance and philosophy.

This groundbreaking book focuses on startup valuations—microeconomics. But it also considers the macroeconomic implications of the Fairshare Model for economic growth, income inequality, and shared stakeholding, as well as game theory and financing of blockchain projects.

The Fairshare Model has two classes of stock—both vote but only one is tradable.
· Investors get the tradable stock. Employees get it too, for actual performance.
· For future performance, employees get the non-tradable stock; it converts to the tradable stock based on milestones.

With this structure, public investors are more likely to profit when they invest in a company with high failure risk—because they have less valuation risk.

By offering a better form of capitalism, The Fairshare Model is a movement book for our times.

About this title

From the Author

Introduction
I come to capital markets via Main Street, not Wall Street. My 35-year financial career began at Fortune 500 manufacturing companies in the Midwest region of the United States. In 1983, I moved to California's Silicon Valley, the hotbed of what was then called "high technology." My first job there was with a personal computer company that had just had its initial public offering (IPO). It filed for bankruptcy nine months after I started. It was my initiation into a world more exciting and volatile than anything I had previously known. Nowadays, we call it the New Economy.
 
I then worked for a variety of companies before embarking on a career path as a consulting chief financial officer where I helped companies improve their performance and sometimes, raise money. In 1996, the insights I obtained led me to cofound a company that sought to make it easier for young companies to market IPOs without a broker-dealer. We built an online community of 16,000 valuation-savvy investors called Fairshare and it is the genesis of this book, The Fairshare Model.
 
My experience is detailed in Chapter 9, "Fairshare Model and the Future." What's important here, at the start of the book, is to know that we placed the interests of average investors--Main Street--first. That means the ideas presented herein are unlike those you can get elsewhere. Normally, views on capital markets are based on the perspective of entrepreneurs, investors in the private capital market, investment bankers or their best customers, the ones who manage to get shares in hot IPOs. Traditionally, the interests of average investors are relatively unimportant. I would like to change that.
 
That makes this a movement book. It seeks to rouse debate about a better way to structure ownership interests in companies that raise venture capital via an IPO. To set the stage for that, the book needs to help readers better understand capital structures. It must also promote awareness of the importance of valuation and expose a little secret--no one knows how to reliably value a startup. This knowledge will lead to a revolution in how public venture capital is raised because it will encourage investors to demand better deals than they get now.
 
In Spring 2014, a few months after I began writing this book, I was awakened from a nap by a phone call. I thought I was in a dream state when I heard the caller's opening words: "Whatever happened to Fairshare?" He told me he was from Wisconsin and had become a Fairshare member in 1998. I knew I wasn't dreaming when he said that he looked at his member binder from time to time. As we began our membership drive, some people said that it was difficult to absorb all the information on our website--hyperlinks could confuse those new to the internet. Those who printed pages felt overwhelmed by the challenge of organizing them. There were enough requests for printouts that we experimented with binders for premium members. More than a dozen years later, this gentleman still had his.
 
I told him Fairshare was too early and met its demise in 2001. I also said that I had decided to write a book about its core concept because the time seemed right for it. He replied: "I always thought it was a good idea."

About the Author

Detroit native Karl Sjogren has spent more than 30 years as a consulting CFO in the San Francisco Bay area. From 1996 to 2001, he was CEO of Fairshare, Inc., an online community of average investors that sought to make it less expensive for companies to market investor-friendly IPOs. A forerunner to the concept of "equity crowdfunding," Fairshare attracted 16,000 members and substantially more visitors to its education-oriented website before shutting down after the dotcom and telecom busts.

Edition details

• Publisher: Fairshare Model Press
• Publication date: 2019
• ISBN 10: 1950732002
• ISBN 13: 9781950732005
• Binding: Paperback
• Language: English
• Number of pages: 438