American History 1988
Chapter 136 - 130 The Faster, the Better

Chapter 136: Chapter 130 The Faster, the Better

Central Avenue, Menlo Park, in front of a modern two-story office building, renovation workers were hoisting a blue and white advertisement sign right in front of the building’s main entrance.

A blue background with the white italic letters "Teams"—pedestrians who had used this software in their companies stopped curiously to watch, knowing that a new company was born in Silicon Valley.

Yes, after moving into a decent office and securing a spot in the heart of Menlo Park, Byte Software truly entered Silicon Valley, and the flag was planted.

At the moment the workers adjusted and secured the Teams sign, a silver Cadillac Brougham smoothly pulled up in front of the office building.

Dean, stepping out of the car, glanced approvingly at the massive company logo. Nice and big, just the way he liked it.

Just like the Brougham he had only recently acquired, with its 5.0L V8 engine, it really packed a punch.

Indeed, Dean had finally discarded his old Huffy bicycle. This Cadillac was his new ride, and Dean particularly liked its front fascia, which gave him the illusion of directly facing the transformer Optimus Prime.

He didn’t opt for a flashy sports car like Marcus had. It wasn’t that he didn’t like them, but rather that this $50,000 Cadillac suited business occasions better.

"Boss, here are the profiles of the two investment firms," Anna, who had come out of the passenger seat, handed him a memo.

Although Dean already had an understanding of them, he still commissioned some consulting firms to thoroughly investigate the backgrounds of Morgentaler and Mayfield.

This so-called background mainly referred to the investors behind them. The money of venture capital firms was raised through private offerings.

Whether it was David Morgentaler or Glenn Miller, they were merely agents of the funds.

By making various investments with the raised money, the agents earned profits for the investors and also took their own commissions.

This involved a complex set of procedures, the internal game rules of venture capital firms, which belonged to a different system from the financing that Dean was currently concerned with.

Casually flipping through the documents, Dean saw many unexpected names, such as the military, Stanford...

Well, in America, business was everywhere, and Dean had grown accustomed to this.

Handing back the documents to Anna, Dean adjusted his shirt cuffs before heading toward the new office of Byte Software.

Some employees had already moved in ahead of time, and since the old office was close enough to Stanford, Dean hadn’t yet moved out.

However, now with this Cadillac, distance was no longer a problem, and he would also move his office here this week.

Guided by Anna, Dean went straight to the conference room on the second floor, east side.

"Sorry to keep you waiting, just had to take a phone call," Dean said, smiling as he greeted everyone upon entering the room.

"Look, our genius innovator, the young millionaire, has arrived~" David Morgentaler said with a smile, putting down the newspaper in his hands, and walked toward him with open arms.

"Come on, Mr. Morgentaler~," Dean laughed helplessly, having seen the San Francisco Chronicle in his hands too.

For some reason, what was originally published only in the Stanford Review had been picked up by the San Francisco Chronicle.

Thus, Dean, the so-called new Stanford star, seemed to be slowly gaining some fame in the Silicon Valley area.

"This is your honor," David said after their hug, patting Dean’s shoulder, "and it’s not a bad thing at all. Byte Software needs such publicity, doesn’t it?"

Since the two parties had already reached consensus on the main direction, Morgentaler was even considering establishing a new entrepreneurial image for Dean, what the media calls "character setting."

The media needed this as a gimmick for their stories, and Byte Software also needed the exposure. A win-win situation~

"This is Glenn Miller from Mayfield," David greeted and then introduced another investor in the room to Dean.

"Hi~ Dean, we’ve spoken on the phone." Glenn, with silver hair, came forward smiling and shook his hand.

If Clark had been there, he would have been surprised to see such a warm side of Glenn.

"Hello, Mr. Miller." If not for having learned the details of the matter from Clark, Dean might have been deceived by his gentlemanly appearance.

"Wow~ Look, the newspapers didn’t lie at all." Glenn said, theatrically waving his hands, "Dean not only has a genius mind but also a handsome face like a Hollywood star. I’m even a bit jealous of the girls at Stanford."

"You’d first have to turn into a girl to stand a chance," David, with a laugh, waved everyone to sit down. Since everyone had arrived, it was time to get down to business quickly.

When it comes to making money, the efficiency of capital is always high.

Once all the representatives were seated, the spacious conference room quietly filled with more than a dozen people.

Byte Software’s three founders, along with a temporarily hired lawyer. Morgan Tailer and Mayfield are similar in configuration, where the lawyer is an indispensable figure for both sides.

"So, does anyone have an objection to the $20 million valuation, the 15% equity allocation, and the employee stock option pool?" As the lead investor, David Morgentaler naturally chaired the meeting.

"David, isn’t the employee stock option pool a bit much? I think 10% is more reasonable, and Mayfield is willing to bear the corresponding valuation for the additional 5% equity," Glenn seized every opportunity to grasp more shares.

Besides, the 10% employee stock option pool he proposed was somewhat reasonable. Many companies in Silicon Valley distributed shares in this way; he was just following industry practice.

However, before Dean could speak, David had already objected first. "Glenn, a 15% option pool is not excessive, because it will be diluted in the next round of financing."

"Additionally, this was what we originally agreed upon, wasn’t it?" David’s final words were directed at Dean.

Confronted with his gaze, Dean shrugged, "Yes, Byte Software needs to attract a lot of talent, and we urgently need it."

"Exactly," David nodded in agreement, "So Glenn, do you accept this explanation?"

"Of course," Glenn shrugged indifferently, "I respect everyone’s decision. I was just suggesting that Mayfield would like to provide as much funding for Byte Software as possible, since we urgently need to expand our scale."

to 1, Glenn had to accept this outcome. However, this was just a trial balloon; the result did not surprise him.

"OK~, I’m glad we’ve reached a consensus," David certainly wouldn’t agree to Glenn’s proposal.

If Mayfield also received the additional 5% equity, then Morgan Tailer’s shareholding ratio would no longer be dominant. Now the question arises, who will be the lead investor?

The rights of lead investors and follow-on investors are different. Entrepreneurs with relatively mature products like Byte Software, everyone wants to be the lead investor.

Silently pushing Mayfield’s additional considerations aside, David quickly moved on to the next phase of the meeting.

"The total valuation of $20 million has been confirmed, regarding the total number of shares and the value per share, Morgan Tailer has had a third-party financial firm perform a detailed pricing calculation."

At David’s signal, an assistant from Morgan Tailer’s side began distributing materials. "Guys, please share your thoughts~"

See, this is one of the rights of the lead investor. Of course, the final outcome requires the consent of the majority.

Dean flipped open a white paper, ignored a bunch of valuation principles, and quickly fixed his attention on the final result.

$7 per share, with a total of approximately 2.85 million shares. By proportion, Dean received nearly 1.6 million shares, and other parties followed suit.

"David, I believe that the per-share price of Byte Software should be at least above $10," Glenn felt that Byte Software’s pricing was undervalued compared to similar types of software companies on the market.

"I see your point, Glenn," David didn’t deny anything, "but this is done to facilitate the next round of financing and transactions."

The set number of shares and price now are not set in stone. Every time financing happens, they will be repriced.

The reason for determining the number of shares and pricing now is to facilitate transactions with new investors entering the next round of financing.

Setting a lower price per share results in more shares, which enhances the volume of private transactions.

Of course, by the time of going public, these numbers may have changed beyond recognition, so the current number of shares and price per share don’t hold much reference value.

Glenn understood this as well, which is why he was not dwelling on these. "OK, I have no objections."

"Neither do I," since his own equity was not changing, Dean was indifferent about it.

"Great, guys, now it’s time to sign contracts," with the smooth progress of events, David immediately called on lawyers to start serving the main course.

Several contracts were laid out in front of the representatives of each party, and this was when their respective lawyers came into play.

Dean hired someone from the law firm Cooley LLP, which is quite renowned in Silicon Valley and specializes in drafting various contracts for startups.

After the lawyers from all three parties confirmed everything was correct, Dean, David, and Glenn all signed the contracts.

Silicon Valley drafts so many of these contracts that there are even templates available. Of course, there are some matters that everyone tacitly complies with.

For instance, employee stock options do not carry the power of decision-making, and shares are cashed out every 2 to 4 years. This is mainly to prevent employees who have left from continuing to enjoy dividends from Byte Software.

Also, the board seats are temporarily set at five, with the founders occupying two seats, each venture capital firm taking one, and the remaining one to be filled by an external independent director later on.

Everything is a process-oriented operation; with the contract signed, Byte Software officially completed its first round of financing.

"The funds will be transferred within a week," David closed the agreement, "We have no time to waste, guys. Byte Software needs to capture the market before the next imitator shows up—the sooner, the better!"

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