Turns out, employees are getting the short end of the stick lately at venture-backed companies.
Check out this report from Cooley Godward, a big Silicon Valley law firm, which shows the “rule of three” is being discarded. In former years, venture capitalists got about one-third of the company, the founders held on to a third, and another third was set aside for employee stock options. Today, investors get about 40 percent, founders get about 40 percent, and only 20 percent is set aside for employees. “…The old ‘Rule of Three’ is a thing of the past,” said Jim Fulton, a Cooley partner.
Take the $51 million just raised by wireless email service company, Visto, a story we reported last week. Well, turns out Visto is “washing out” common shareholders. By giving venture backers more ownership of the company, large venture rounds like this usually come at the expense of employees. In the Visto case, we’re hearing many employee shares have become essentially worthless. The company has also started layoffs.
MojoPac flawed?: Last week, we wrote about MojoPac, a notable PC virtualization tool that pushes things forward in letting you carry around all your applications in your pocket. We just saw this report, which suggests there are serious bugs MojoPac will need to fix. We’ll be talking more with the MojoPac folks next week.