Today’s Menu ☕️

• El Segundo Tech Breakfast Club Mar 11th (LA)

• SF Tech Breakfast Club March 13th (SF)

• NYC Tech Breakfast Club March 18th (NYC)

• Remgu: Sourcing Top European (and Latin American) Devs

• How to own more of your startup

👋 Hi, Breakfast Club Members!

Thank you to Luka @ Remgu for sponsoring today’s newsletter - you know Luka as the go to partner for top European dev talent but now he’s also offering Latin American dev talent

I’m skiing in Colorado this week so going to keep this pretty short. We’re hosting breakfasts in LA, SF, and NYC this month. You should come. If you’re a founder or a VC, we’d love to have you join.

Scroll down for signups and, if you’re a founder, you might be interested in my article below about how not to get screwed over by your option pool.

Resources:
-Clerky offers a $100 discount for TBC Members on their formation packet. Reply to the newsletter and I’ll send you an invite
-Fixing the YC SAFE: Reply to the newsletter and I’ll send you a redline for the YC Postmoney SAFE that can save founders millions in dilution
-Ramp is offering a $500 bonus to TBC members when they start using Ramp.
-Did you know that J.P. Morgan has a complimentary Cap Table free up to 100 stakeholders? If you like to learn more visit their site link

Tech Breakfast Club Events

El Segundo Tech Breakfast Club March 11th
Cohosting with the legend, Isaiah Taylor, and the rest of the Valar Atomics crew. We’re celebrating some big news so come join!

SF Tech Breakfast Club March 13th
Cohosting with the absolute menace, Jack Raines (Slow Ventures).

New York Tech Breakfast Club March 18th
Cohosting with Lori Berenberg from Bloomberg Beta

Tech Breakfast Club 🤝 Luka @ Remgu

Meet Luka, founder of Remgu, who sources top European (and Latin American) talent for fast growing companies

You studied CS at Waterloo – incredible CS program – then you worked at companies in Toronto, Chicago, and NYC for almost two decades... why did you move to Croatia?
I moved to Canada as a kid from Croatia but then I went back on vacation in 2017 and met my wife. So, I moved back to be with her. I started finding all of this incredible technical talent that spoke English very well – that’s what prompted me to start Remgu

Who is Remgu a good option for?
We’re ideal for startups and SMB’s seeking top-quality European talent for long term engagements. Our talent is elite – we’re very selective and do intensive vetting. So when a client comes to us, the process is very streamlined, we match them with one or two handpicked candidates. So for $50 to $80/hour you can get a vetted experienced senior engineer instead of settling for the most junior and inexperienced US based engineers.

Why is Remgu a better option than competitors?
We have near perfect retention of clients, and I think that comes from our long term perspective. We’re not here to maximize profit from every engagement. We want to grow with our clients. We have a lean and flexible model with low overhead, so clients keep coming back to us for more and more talent.

If you’re ready to build out your team, the easiest way to get in touch with Luka is emailing him at [email protected] connecting with him on LinkedIn

All my homies hate dilution
How To Own More Of Your Startup

Many founders don’t realize that having too large of an option pool is basically a give-away to their VCs (and employees). By having a large unused pool, founders are absorbing dilution that everyone else on the cap table would otherwise (and should) share. 

How can an unused pool impact dilution? Doesn’t it just get canceled upon exit?

In a Term Sheet, VC’s generally make you top up the option pool to have a certain % of availability post-closing, but they make the pre-money cap table absorb all the dilution from it. They like to ask for way more than you really need.

It’ll look something like this –

“The total post-Closing available option pool (excluding granted options) represents 15% of the fully diluted shares of the Company.”

The higher the %, the lower the price the VCs are paying for their shares, and the more dilution the founders are absorbing. The price VCs pay is valuation / fully-diluted capitalization. Again, that denominator includes the unused pool.

The pool you reserve before your first VC financing, even at formation, will set the baseline for negotiating how much of an option pool “top up” VCs make founders absorb.  Don’t do the VC’s work for them by starting with a very large pool, which makes the VC’s top-up look benign, even if it’s not.

Even before a financing, never reserve a larger pool than what you really expect to use in the next 12 months. Further, when the VC’s top-up request comes in, have a hiring plan and a solid argument for how much of a pool you really need, and make the VCs argue for theirs.

Finally, many key employees will analyze their equity compensation package against the fully-diluted capitalization. They’ll say something like “I want 2% of the fully-diluted.”

If your fully-diluted has too large of a pool, you’ve artificially inflated the number of shares an employee gets to hit their 2% target. In an exit, that unused pool gets canceled. But guess what? Their number of shares stays the same, so they end up with a lot more than 2%. You overpaid simply because your starting pool had a lot of “wasted” space.

Bottom Line: reserve a thoughtfully planned option pool; not an ocean. 5-10% is often more than enough. The number you choose can have 8+ figure implications for founders over a company’s lifetime.   

About Morgan Barrett:
Morgan is the creator of Tech Breakfast Club. He hosts breakfast meetups in NYC, LA, SF, (and occasionally Austin, Miami, Boston) that bring together the best founders and investors.

Morgan is also a Startup Lawyer at Optimal, an elite lean boutique startup law firm repping clients funded by a16z, Sequoia, Kleiner, Accel, and countless other VCs. He works with clients from formation to exit, in collaboration with Optimal’s partners.