Management company with a combined insurance fund
A recent article by Paul Graham (Paul Graham) about what to do "after a startup" and how to prepare for it.
The level of preparation of the reader: high .
July 2008
')
This year, at the startup school, David Heinemeier Hansson gave a lecture in which he expressed the opinion that the creators of startups should do everything as before. Instead of hoping to get rich by creating a high-priced company and then selling fixed capital during the “exit from business”, founders should create companies that make money and live off their income.
It sounds good. Let's think about the optimal way to implement this plan.
The disadvantage of living on your company's income is that you must continue to manage it. And anyone who runs their own business will tell you that this requires full attention. You can’t start a business and then quit when the business is good, otherwise it will surprisingly quickly become bad.
It seems that the main economic incentives of the founders of a startup are freedom and security. They want to have enough money (a) not to worry about being stranded, and (b) they want to manage their time as they like. Managing your own business does not give either one or the other. Of course, you are deprived of your liberty: no one is needed as much as a boss. And, of course, there is no guarantee, because as soon as you stop paying attention to your company, its revenues will flow away, and with them your own revenues.
For many, it would be best to hire a company manager when it grows to a certain size. Suppose you could find a really good manager. Then you have both freedom and assurance. You can pay attention to your business to the extent that you want, knowing that your manager will ensure that everything goes smoothly. In this case, revenues will continue to grow, and you will have a warranty.
Of course, there are founders who don’t like this idea: those who like to manage their company so much that they don’t want to do anything else. But it seems that such a few. The key to success in most types of business is fanatical concern for the needs of consumers. What are the chances that your own desires will exactly match the requirements of this powerful external force?
Naturally, managing your own company can be quite interesting. Viaweb was much more interesting than any other job I had to do before. I made a lot more money out of it, and the ratio of income to boredom accompanying what I did is orders of magnitude. But was this the most interesting job I could ever imagine? Not.
It is unimportant whether the number of founders in a similar position is unlimitedly approaching the majority or simply large; one thing is certain: there are many. For them, the right thing would be to pass the company over to a professional manager over time if they can find a good enough candidate.
Well, so far everything seems to be going well. But what if your manager got hit by a bus? What you really need is a management company to manage your company for you. Then you are no longer dependent on one person.
If you own a rental property, there are companies that you can hire to manage it for you. Some of them will do everything: look for tenants and eliminate leaks in the aqueduct. Of course, the management of companies is much more complicated than the management of real estate for rental, but let's assume that there are management companies that could do it for you. They will charge you a lot of money, so is it worth the skin of manufacture? Personally, I would donate a large percentage of my income for extra peace of mind.
I understand that everything I describe already sounds too good to be true, and yet I can think of some other way to make this idea even more attractive. If there were management companies, there would be an additional service that they could offer to their customers: customers can let them insure their income by combining insurance funds. In the end, even the most professional manager will not be able to save the company, as sometimes happens in the event of a complete disappearance of its market, just as a real estate manager cannot save you from the fact that your building can burn to the ground. But a company that manages a fairly large number of companies could declare to all its customers: we will combine the revenues of all your companies and pay you your proportional shares.
If there were such management companies, they would offer a maximum of freedom and security. Someone would manage your company, and even in case of its collapse you would be protected.
Let's think about how such a management company could be organized. The easiest way is to create a new kind of equity capital, which would represent the aggregate total fund of managed companies. In this case, by subscribing, you exchange the capital of your company for shares from this common fund, which are proportional to the valuation of the value of your company, with which both parties agree. After that, you automatically receive your share of income from the general fund.
The snag is that due to the difficulty of canceling such an exchange, you will not be able to move on to other management companies. However, there is a way to remedy this situation: suppose that all management companies come together and agree to allow their clients to exchange shares in all of their common funds. Then you, in essence, could simultaneously select all management companies to manage yours instead of you in any proportion that suits you, and later change your decisions as often as you like.
If there were such management companies with combined insurance funds, for many people following the path that David was promoting, cooperation with such a company would seem to be the ideal plan. Good news: they really exist. What I have just described is the takeover by any public company.
Unfortunately, despite the fact that open joint-stock companies, sinks are identical to the management companies in their structure, they do not consider themselves as such. Using the services of a real estate management company, you can, at any time when you wish, come and say “manage my rental property instead of me”, and they will. Whereas absorbing public companies are extremely changeable in this context. Sometimes they tend to buy, and overpay a huge amount; and sometimes they are not interested. They are like real estate companies that are run by folly. Or rather, Mr. Market Benjamin Graham (Benjamin Graham's Mr. Market).
So, while absorbing open joint-stock companies only sometimes behave like management companies with a combined insurance fund, it will take you several years to create favorable circumstances. If you wait for a long time (say, about five years), it is quite possible that you will fall into that period when a certain absorbing public company will be eager to buy you. But you yourself can not choose the moment when this happens.
You cannot expect your investors to drag you for a long time, during which you may have to wait. Your company must make money. Opinions differ on how early it is to concentrate on this. Joe Kraus says you should immediately try to charge the appropriate fee to customers. And yet, some of the most successful newly established firms, including Google, initially ignored revenues, and focused solely on development. The answer probably depends on the type of company you are creating. I can imagine some in which to ensure sales it would be good to use a heuristic approach to product design, which, on the contrary, would be a distraction for others. The criterion is probably how it helps you understand your users.
You can choose which revenue strategy you think is best for the company you are creating, provided that you have a profit. If you have a profit, you will receive at least an average of the acquisitions market, in which open joint-stock companies actually behave like management companies with a combined insurance fund.
David does not make the mistake of saying that you must create a company in order to live on the income it brings. It’s a mistake if you think that it’s somehow contrary to creating a company and selling it. In fact, for most people, the latter is simply the best way out of the first.
Thanks to Trevor Blackwell, Jessica Livingston, Michael Mandela, Robert Morris and Fred Wilson for discussing the draft versions of this work.
This translation to Translated.by: translated.by/you/the-pooled-risk-company-management-company
The translation was made by order of the company JumpIDEA
The level of preparation of the reader: high .
July 2008
')
This year, at the startup school, David Heinemeier Hansson gave a lecture in which he expressed the opinion that the creators of startups should do everything as before. Instead of hoping to get rich by creating a high-priced company and then selling fixed capital during the “exit from business”, founders should create companies that make money and live off their income.
It sounds good. Let's think about the optimal way to implement this plan.
The disadvantage of living on your company's income is that you must continue to manage it. And anyone who runs their own business will tell you that this requires full attention. You can’t start a business and then quit when the business is good, otherwise it will surprisingly quickly become bad.
It seems that the main economic incentives of the founders of a startup are freedom and security. They want to have enough money (a) not to worry about being stranded, and (b) they want to manage their time as they like. Managing your own business does not give either one or the other. Of course, you are deprived of your liberty: no one is needed as much as a boss. And, of course, there is no guarantee, because as soon as you stop paying attention to your company, its revenues will flow away, and with them your own revenues.
For many, it would be best to hire a company manager when it grows to a certain size. Suppose you could find a really good manager. Then you have both freedom and assurance. You can pay attention to your business to the extent that you want, knowing that your manager will ensure that everything goes smoothly. In this case, revenues will continue to grow, and you will have a warranty.
Of course, there are founders who don’t like this idea: those who like to manage their company so much that they don’t want to do anything else. But it seems that such a few. The key to success in most types of business is fanatical concern for the needs of consumers. What are the chances that your own desires will exactly match the requirements of this powerful external force?
Naturally, managing your own company can be quite interesting. Viaweb was much more interesting than any other job I had to do before. I made a lot more money out of it, and the ratio of income to boredom accompanying what I did is orders of magnitude. But was this the most interesting job I could ever imagine? Not.
It is unimportant whether the number of founders in a similar position is unlimitedly approaching the majority or simply large; one thing is certain: there are many. For them, the right thing would be to pass the company over to a professional manager over time if they can find a good enough candidate.
Well, so far everything seems to be going well. But what if your manager got hit by a bus? What you really need is a management company to manage your company for you. Then you are no longer dependent on one person.
If you own a rental property, there are companies that you can hire to manage it for you. Some of them will do everything: look for tenants and eliminate leaks in the aqueduct. Of course, the management of companies is much more complicated than the management of real estate for rental, but let's assume that there are management companies that could do it for you. They will charge you a lot of money, so is it worth the skin of manufacture? Personally, I would donate a large percentage of my income for extra peace of mind.
I understand that everything I describe already sounds too good to be true, and yet I can think of some other way to make this idea even more attractive. If there were management companies, there would be an additional service that they could offer to their customers: customers can let them insure their income by combining insurance funds. In the end, even the most professional manager will not be able to save the company, as sometimes happens in the event of a complete disappearance of its market, just as a real estate manager cannot save you from the fact that your building can burn to the ground. But a company that manages a fairly large number of companies could declare to all its customers: we will combine the revenues of all your companies and pay you your proportional shares.
If there were such management companies, they would offer a maximum of freedom and security. Someone would manage your company, and even in case of its collapse you would be protected.
Let's think about how such a management company could be organized. The easiest way is to create a new kind of equity capital, which would represent the aggregate total fund of managed companies. In this case, by subscribing, you exchange the capital of your company for shares from this common fund, which are proportional to the valuation of the value of your company, with which both parties agree. After that, you automatically receive your share of income from the general fund.
The snag is that due to the difficulty of canceling such an exchange, you will not be able to move on to other management companies. However, there is a way to remedy this situation: suppose that all management companies come together and agree to allow their clients to exchange shares in all of their common funds. Then you, in essence, could simultaneously select all management companies to manage yours instead of you in any proportion that suits you, and later change your decisions as often as you like.
If there were such management companies with combined insurance funds, for many people following the path that David was promoting, cooperation with such a company would seem to be the ideal plan. Good news: they really exist. What I have just described is the takeover by any public company.
Unfortunately, despite the fact that open joint-stock companies, sinks are identical to the management companies in their structure, they do not consider themselves as such. Using the services of a real estate management company, you can, at any time when you wish, come and say “manage my rental property instead of me”, and they will. Whereas absorbing public companies are extremely changeable in this context. Sometimes they tend to buy, and overpay a huge amount; and sometimes they are not interested. They are like real estate companies that are run by folly. Or rather, Mr. Market Benjamin Graham (Benjamin Graham's Mr. Market).
So, while absorbing open joint-stock companies only sometimes behave like management companies with a combined insurance fund, it will take you several years to create favorable circumstances. If you wait for a long time (say, about five years), it is quite possible that you will fall into that period when a certain absorbing public company will be eager to buy you. But you yourself can not choose the moment when this happens.
You cannot expect your investors to drag you for a long time, during which you may have to wait. Your company must make money. Opinions differ on how early it is to concentrate on this. Joe Kraus says you should immediately try to charge the appropriate fee to customers. And yet, some of the most successful newly established firms, including Google, initially ignored revenues, and focused solely on development. The answer probably depends on the type of company you are creating. I can imagine some in which to ensure sales it would be good to use a heuristic approach to product design, which, on the contrary, would be a distraction for others. The criterion is probably how it helps you understand your users.
You can choose which revenue strategy you think is best for the company you are creating, provided that you have a profit. If you have a profit, you will receive at least an average of the acquisitions market, in which open joint-stock companies actually behave like management companies with a combined insurance fund.
David does not make the mistake of saying that you must create a company in order to live on the income it brings. It’s a mistake if you think that it’s somehow contrary to creating a company and selling it. In fact, for most people, the latter is simply the best way out of the first.
Thanks to Trevor Blackwell, Jessica Livingston, Michael Mandela, Robert Morris and Fred Wilson for discussing the draft versions of this work.
This translation to Translated.by: translated.by/you/the-pooled-risk-company-management-company
The translation was made by order of the company JumpIDEA
Source: https://habr.com/ru/post/31693/
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