Founders Wanted

Founders Wanted
27/10/2016, 5*20 PM
Recommended by Chris McCann, Henry Ward, and 190 others
Henry Ward
CEO at @eShares
Jul 9 9 min read
Founders Wanted
At eShares we split the organization into four business units operating

their own P/L. This post is about why we created our business units, how
we manage them, the corresponding org chart, and the hiring impact.
Every company is different so this is not meant to be a recipe for others.
This is just what works for us.
I had two goals in writing this post. First, I hope explaining our strategy is
helpful to other ceos thinking about structuring their organizations. And
second, self-servingly, I hope there will be a few founders or executives who
like our strategy and come join us.
. . .
Business Units
Today we have four business units: Corporate Team, Valuations Team,
Investor Services Team, and Platform Team.
https://blog.esharesinc.com/founders-wanted-4458b1f6a801#.r6x2b7gvc
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Corporate Team is our largest business unit and sells services to

companies including equity management and corporate governance.
Valuations Team sells 409A Valuations to companies and ASC820
Valuations to venture funds.
Investor Services team is our youngest business and sells portfolio
management products to venture funds and angel investors.
Platform Team provides cross-BU support services to help grow the
business units. These range from office management and people to
technical architecture and brand marketing.
We will launch our fifth business unit (marked Coming Soon) in Q1
2017.
Each business unit, aside from Platform, is responsible for generating
revenue and operating its own P/L. The Platform Team receives a tax
from the business units to fund itself (see Appendix A below).
Trifectas
We have a similar view to startups as Dave McClures Hacker, Hustler,
and Designer model. We prefer to call it Business, Product, and
Engineering, but the point is the same. A startup should be managed
by three people working as a partnership leading those three functions.
These three people are called a Trifecta.
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Each business unit at eShares is managed by a Trifecta. If we want to

start a new business unit, we form a new Trifecta, give them some
capital, and let them run.
At the top is a Platform Trifecta that manages the BU Trifectas. The

Platform Trifecta is myself (Business), Josh, (Product), and the head of
engineering (who we are currently looking for). This creates three
parallel reporting paths: the business trifecta leads report to me, the
product trifecta leads report to Josh, and the engineering trifecta leads
report to the head of engineering.
There is no single person at the top. The atomic unit of executive
decision making is a Trifecta. Each Trifecta is jointly responsible for the
success of their business, much like three cofounders succeed or fail
together.
Burn Rates
As a company we target a $600K net loss monthly burn rate. If we
spend more than that we are taking too much risk. If we spend less we
are not taking enough. (See eShares 101).
We allocate this target burn across the business units. Below are the
targets we set for 2016. Note that this is on GAAP revenue.
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Each business unit has similar decision trade-offs. They are allocated a
certain amount of equity capital (for example, $200K/month for the
corporate team) and have to fund any expense or investment beyond
that by earning revenue.
Startups within a startup

We think of ourselves as a startup factory. We can take an idea and a
Trifecta team and launch a new business unit. The overhead of starting
a business (office space, raising capital, recruiting, culture, etc) are
abstracted away by the Platform. Trifectas can focus exclusively on
building a product and business without distraction. And we have a
strong balance sheet of ~ $17M to fund these business units.
The speed with which we can fire up new businesses is remarkable.
Once a business unit hits product market fit, they get instant
distribution to 4,000 companies and 250,000 shareholders/employees.
These days we add about 300 companies and 10,000
shareholders/employees to our network each month. Every new
business gets to sell into that growth curve at zero CAC. It is like
launching a startup out of cannon.
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Since we pass the zero CAC savings to our customers, the more we
grow the more defensible each business unit becomes. Our moats
expand with each new business unit and each new customer.
Frictionless distribution is incredibly powerful.
0to-1 people and 1-to-n people

At eShares we often talk about 01 people and 1n people. Many
startups are founded by 01 people. As the company begins to scale
they are replaced by 1n people. We want to be a company where both
01 and 1-n people can do their best work for many years.
This model gives us that. We launch a new business unit with a team of
01 people. When the team hits escape velocity, those who want to
learn how to do 1-n can stay on the team. Those who want only to do
01 can join or start a new business unit. And we keep a deep bench of
amazing 1-n people who can come in and scale our businesses.
At any point in time we are recruiting founders to help start new
businesses and executives to scale those businesses.
Joining eShares
For those of you who have read this far, let me use my last 200 words
to pitch you on considering eShares in your future. I have three pitches
depending on who you are:
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Future founders and executives: Come to eShares to work for

amazing founders and executives and learn how to be one.
Founders: Help start a 01 Business Unit at eShares. You will have the
opportunity to build a business at light-speed. And we will teach you
everything we know.
Executives: Help scale our 1-n Business Units. Our current business
units are hitting escape velocity right now and we have more coming.
The size of business you can build here is limited only by you.
My pitch is cross-function: we need business founders and engineering
executives and vice versa. If you can build stuff or grow stuff we have a
need for you. And if you have an idea for a new business unit to build
on the eShares network, I am all ears.
. . .
Appendix AAccounting Treatment of Business Units

Each business unit runs its own P/L and receives an income statement.
This is how their income statements are calculated:
All expenses are categorized as either a Business Unit expense,

Platform expense, or Facilities Cost. Below are a few examples of the
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types of expenses that fall into these three buckets:
Within each business unit income statement is a Facilities surcharge

and Platform surcharge. Think of these as taxes paid back to Platform
Team. The Facilities surcharge is calculated as 50% of a business units
salary payroll. For every dollar that a business unit pays in salary, they
pay $0.50 as a Facilities surcharge for office space, healthcare, lunch,
etc. It is a consumption tax on our most expensive asset, people.
The Platform surcharge is an income tax on the profit of a business

unit. This is the only way for the Platform team to generate revenue,
and so their purpose is to get business units profitable as quickly as
possible.
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Below are example income statements for an unprofitable and a

profitable business unit.
The Platform team has a similar income statement, but their revenue
comes from the income tax of the other business units. They also pay a
Facilities surcharge.
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The Facilities income statement is the simplest. You take the Facilities
surcharge (equal to 50% of payroll) and subtract actual facilities cost to
get the net Facilities expense.
This sounds complicated, but it translates nicely into the aggregated

eShares income statement that we report to investors. We simply add
up the incomes from each business unit and the facilities expense to get
the eShares income statement:
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For the accounting geeks, below is the complete flow of monies and the
corresponding accounting entries.
Appendix BHow to Think About Burn Rates

The burn rates below are target GAAP burn rates for each business
unit. There is a CEO Discretionary which allows me to fund special
projects. For example, if a business unit needs more money to scale
ahead of revenue we can temporarily fund the growth through this
account.
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You may notice the Facilities target burn rate of $0. Remember that
Facilities collects a consumption tax (50% of payroll) from each of the
business units to pay for health benefits, office space, meals, etc.
Targeting a $0 burn rate is the equivalent of telling our People team to
provide the best employee experience we can for 50% of payroll. This is
their budget. They use this constraint to make trade-offs between
benefits like vision plans, gym memberships, and catered lunches.
Appendix CDecision Making Between

Business Units
We think of the relationship of Business Units to the Platform similarly
to the relationship of State Government vs Federal Government. I
realize this can be a loaded phrase. But if you can see past the political
connotations it is a useful analogy to understand how we separate
responsibilities. If states are the laboratories of democracy, business
units are the laboratories of growth.
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And it is the role of Platform Team, much like the Federal government,
to align the business units and support them when they need us.
Below are examples of how we separate responsibility, and most

importantly decision making, between the states and the federal
trifecta.
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To pick one example, each business unit determines its headcount

(constrained by burn rate targets) and who they should hire.
Compensation, however, is set at the federal level. This is because
employees should not have varied compensation based on the success
and budget of their business unit.
Appendix CIncome Reporting

With this model we can report the P/L for each business unit and
eShares as a whole. Each month the business Trifecta leads know
whether they can hire or scale back based on their financials.
The P/L charts below are old, but they give you a sense for how we
track this.
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Founders Wanted

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Founders Wanted

Recommended by Chris McCann, Henry Ward, and 190 others

At eShares we split the organization into four business units operating

Corporate Team is our largest business unit and sells services to

Each business unit at eShares is managed by a Trifecta. If we want to

At the top is a Platform Trifecta that manages the BU Trifectas. The

Startups within a startup

0to-1 people and 1-to-n people

Future founders and executives: Come to eShares to work for

Appendix AAccounting Treatment of Business Units

All expenses are categorized as either a Business Unit expense,

types of expenses that fall into these three buckets:

Within each business unit income statement is a Facilities surcharge

The Platform surcharge is an income tax on the profit of a business

Below are example income statements for an unprofitable and a

This sounds complicated, but it translates nicely into the aggregated

Appendix BHow to Think About Burn Rates

Appendix CDecision Making Between

Below are examples of how we separate responsibility, and most

To pick one example, each business unit determines its headcount

Appendix CIncome Reporting

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