Author: "The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage IPOs"
Contributor's Links: The Fairshare Model Amazon

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 ... more

ALL CONTRIBUTIONS

E What Is Venture Capital, Really?
There is disagreement on what constitutes "venture capital." The traditional view is that it is an investment by a VC fund--that excludes angel investments. The author of The Fairshare Model takes an expansive view--many IPOs raise venture capital.
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E Should The Basis For A Pre-Money Valuation Be Disclosed?
If the SEC requires issuers to disclose their pre-money valuation, should it also require an explanation for it? If it does, here are two Top 10 lists: one of the explanations that you MIGHT see, and another of the explanations you will NOT see.
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E The Case For A Valuation Disclosure Requirement
The U.S. Securities and Exchange Commission can help investors protect themselves from overpriced stock deals if it requires valuation disclosure in offering documents.
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E An Allegory For What Troubles Developed Economies
An allegory illustrates what troubles developed economies have and hints at why dialogue about what to do about those problems has increasingly taken on a toxic quality.
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E Reduced Employer Payroll Taxes: A Direct Path To Job Creation
Lower employer payroll taxes offer a direct test of the argument that lower taxes leads to job creation. A transaction tax on the sale of securities in the secondary market is the way to pay for it.
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E A 2:3 Paradigm For Investor Risk In Venture-Stage Companies
How might one evaluate an investment in a venture-stage company? That is, one that presents high risk of failure and will require more money from investors in the future to survive.
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Comments

Latest Comments
Class Action Investor Lawsuit Raises Facebook IPO Valuation Issues
3 years ago

There are many non-GAAP figures that can be relevant to a business.. Please provide an example of what you consider to be an inappropriate use of one.

Meanwhile, I'll give you a GAAP figure that is expensive to generate and doesn't provide useful information to any reader of a financial statement that I can think of--stock compensation expense. Theoretically, I don't see why it makes sense to report shareholder dilution an income statement matter. Practically speaking, everyone I can think of adjusts it off in their analysis--evidence that it is not useful. Dilution is relevant but the way GAAP handles this is not helpful.

I share your desire to see stronger investor protections but I believe better valuation data will be more beneficial than a change in accounting standards..

In this article: FB
Applying John Rawls’ Theory Of Justice To IPO Valuation
3 years ago

Its hard if an IPO is priced "right" for long term investors. In my simple example, no one knows if my idea will be worth $1--it could be nothing, $0.05, $0.50 or $2.

An IPO is priced to ensure its is sold and give a 15% to 20% pop in the secondary market to those who buy shares from the company. See my prior article on IPO valuation www.talkmarkets.com/.../class-action-investor-lawsuit-raises-ipo-valuation-issues

The real issue is whether public investors should get a form of price protection to mitigate valuation risk. Price protection has proven itself in the VC industry--its considered an indispensable tool. The only question is whether public investors should get it too! I wrote about that here www.talkmarkets.com/.../shouldnt-public-venture-capital-investors-get-price-protection-too

The point I want to make in this article is that public investors who benefit most from IPO distributions would support price protection if they had to buy shares in the secondary market.

Class Action Investor Lawsuit Raises Facebook IPO Valuation Issues
3 years ago

Your cynical comment led me to wonder, did anyone with knowledge of the forthcoming reduction in ST projections short the stock? Less cynically, the desire to head off short sellers may be why FB lowered its guidance so quickly.

In any case, the point is that no one knows how to evaluate venture-stage deals. Better valuation data and IPO deal structures that are valuation-elastic, like those VCs get, are promising solutions.

In this article: FB
1 to 3 of 3 comments

STOCKS I FOLLOW

AAPL Apple Inc.
AMZN Amazon.com Inc.
DLTH Duluth Holdings Inc.
GE General Electric Company
KBIOQ KaloBios Pharmaceuticals, Inc.

TWEETS

PERSONAL BLOG

Latest Posts
A New Way To Structure Ownership In A Venture-Stage IPO—The Fairshare Model
With regard to investor valuation risk, the Fairshare Model capital structure for a venture-stage IPO rivals the VC Model for a private offering.
The Fairshare Model Launches A Movement To Reimagine Capitalism
The first of a series of articles that discuss ideas in my new book, "The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings."
Pre-Money Valuation: How To Calculate It
Video about calculating a company's pre-money valuation.

Work Experience

Blogger/Author
Fairshare Model
March 2013 - Present (6 years 4 months)

Worked to produce my April 2019 book, "The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings."

Consulting CFO
IO MedSoft
September 2013 - June 2014 (10 months)

Worked with technical founder to define business model and to create investor collateral for start-up seeking up to $2M to develop cloud-based medical decision support software.

A world-class development team based in the U.K will use Bayesian network mathematical and statistical methodologies to implement decision algorithms developed and tested by a Sacramento area physician who has a background in advanced mathematics.

Interim Controller
TCHO Ventures
June 2013 - June 2014 (1 year 1 month)

Provided turnaround leadership for $6M chocolate manufacturer as it dealt with broken accounting system, a liquidity crisis and shareholder disputes that led to a change in control.

In addition to managing tactical matters, I developed solutions to systemic cost and accounting problems and put the company on a path to have robust reporting and controls. This required reimplementation of NetSuite.

Education

Michigan State University - The Eli Broad College of Business
MBA
1975 / 1976
Finance
Michigan State University
Bachelor's
1973 / 1975
Business/Pre-law

Publications

The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings
Karl Sjogren
Fairshare Model Press
04/26/2019

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.