The Fairshare Model

A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings—Reimagining Capitalism at the DNA Level

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Pub Date 26 Apr 2019 | Archive Date 22 Jul 2019

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Description

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.

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...


Advance Praise

"It's time to reassess the alignment of interests in early-stage companies. How do you allow for the fact that investors are subject to valuation risk and have to 'pay' now for assumed future performance that may never happen? How do you let founders and their employees keep more of their company? How do you get everyday people to share in the benefits of capitalism? How do you avoid insane valuations of companies going public? It may be time to look at the ideas set out in The Fairshare Model."

--Sara Hanks, CEO, CrowdCheck, Inc. and Managing Partner, CrowdCheck Law, LLP

"The Fairshare Model is an important work. The larger context is even more important: 'reimagining' the funding process from cradle to grave, as the existing ones all have serious flaws. That said, I see two challenges associated with early-stage IPOs:

1. Companies need the counter-balancing opinions that (good) VC's provide entrepreneurs--will investors be able to provide that once an early-stage venture is publicly traded?

2. Most important--and, most obvious--there is a general lack of interest in (actually, strong resistance to) creative solutions that undermine the interests of established players.


"Fight on and good luck, Karl. Your work IS important."

--Ken Wilcox, Chairman Emeritus, Silicon Valley Bank

"For some financiers, pay-for-performance might sound like it's just too far out to be relevant in the near-term. This book shows how it can be relevant, what it would take, and why it would make a difference."

--Gordon Feller, San Francisco

Board Member of four VC-funded tech start-ups, former Director-level positions at Cisco Systems

"Why not re-structure the financial industry to broaden opportunities to benefit millions more people? What sacred cows need to be put out to pasture? The result of the author's deep research and profound thought is an intriguing model for capitalism based on fairness, reciprocity, empathy, compassion. The author passionately appeals to the hearts and challenges the minds of readers with a tantalizing vision that declares: 'YES, IT COULD WORK!' "

-Po Chi Wu, Ph.D., Senior Partner, Futurelab Consulting, LLC

Adjunct Professor, School of Business & Management, Hong Kong University of Science & Technology Visiting Professor & Industry Fellow, Sutardja Center for Entrepreneurship & Technology, University of California--Berkeley


"The Fairshare Model provides an innovative and constructive pathway for capital markets to reward historic and future performance via two separate equity classes. It enables risk mitigation while enhancing returns as markets enter a potential period of disruption driven by societal collusions, infrastructure adaptation and resilience, geopolitical shifts, biodigital convergence, and natural resource scarcity."

--Gabriel Thoumi, CFA, FRM,

Director Capital Markets, Climate Advisers

"It's time to reassess the alignment of interests in early-stage companies. How do you allow for the fact that investors are subject to valuation risk and have to 'pay' now for assumed future...


Available Editions

EDITION Ebook
ISBN 9781950732005
PRICE US$9.99 (USD)