The Greenshoe = how to repay all those that helped along the way.

Angel Investor, early stage, founder, Hawaii, Revenue Growth, Scalability, startup, startup CEO, Tom Nora, venture

How is it that so many people associated with startups reap the financial benefits, yet others just as close get no financial upside This is a source of frustration among many people in the startup sphere. Imagine if you’re in Silicon Valley right now with no equity in a tech startup, but associated with several people getting six figure “bonuses” because they somehow wound up with some stock in one.

The free parties (or not free) and swag and great stories and boat rides in the bay are nice. Sometimes you’ll even score an iPad or Apple TV, but it’s not the same as being one of the insiders.

Often as startups grow and maneuver their way through the jungle of success or failure, they have a lot of help from those around them.

Often many these people don’t have any equity or upside from their advise or moral support or money lending, or even the spare couch they let you sleep on when you were in their town.

If the startup actually makes it to an IPO, there is actually something you can do.

It’s called the “Greenshoe”. You have to be very careful about this, you can’t imply or promise anything in advance, and it only works when the company goes public, but the Greenshoe is an amazing award for those involved that don’t have equity.

The Greenshoe is an over-allotment of stock options, up to 15% of the total offering at time of IPO. You can offer these options to virtually anyone, friends, family, people who helped your company. Since they’re options, acquirers only exercise if the stock goes up, and have no downside risk or capital outlay.

Upon the IPO event, the option owner can gain the upside if the stock goes up over the initial offering price and essentially collect that difference.

I’ve used it a few times when I was lucky enough to be able to offer it to friends and family. Strangely enough, some people have declined, because they’re not sure it’s legal; they’ve never heard of it. Others have bought themselves a new Lexus with it.

Here’s more info on wikipedia:


The Greenshoe should provide motivation for all of us in the startup world to try to continuously build our company steadily, continuously and profitably and to know that you can make many peoples lives a little bit better by sharing the wealth. The rewards are pretty amazing.

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Common traits of Successful Startup Entrepreneurs.

AdTech, Angel Investor, Business Development, CEO Succession, early stage, founder, Hawaii, Launch, SaaS, Scalability, startup, startup CEO, Tom Nora, venture

Here are a few traits to try to emulate if you want to be a successful startup guru. Success may be financial, fulfillment of a life goal or even altruistic. Success will begin to create itself if your heart is in the right place…

Take a look at the 9 things below and send me feedback on your thoughts.

1… Genuineness, honesty.

2… Humble openness to feedback. When I returned to LA in 2011 after being away for many years, I was smacked in the face by the volume of young startups that were in their first stages; and many of them sought me out. After a bit I noticed a dangerous trait in many of them – a false confidence and no ability to hear constructive criticism. The attitude was “just give us funding” even though I could see several fatal flaws that they couldn’t.

Being closed to feedback in itself is a sign of bad health, a fatal flaw. You don’t take all advice given to you of course, but you listen to it, calibrate it, mix it in with everything else you know that they don’t. You also have to know whom to spend your time with, many of the wrong people will want to offer advice, mostly for the wrong reasons.

3… A set of doctrines. It’s almost corny to see in many companies; they’ve worked out an internal lexicon, code words, project names to make things more unique and understandable. It speeds up communication. It

4… Taking everything from 90% to 110%. This is one I often see in looking under the hood of successful startups. It’s like a beautiful restored car that has every detail perfected when you inspect it further. The wiring, the upholstry, the under carriage – all the little details that most never see. In startups there is a beauty when you see these little things. I can think of many startup companies

5… Belief in the Idea. Belief that you have something unique, that the world, or part of the world, really does need this new thing/method/service. This is a key factor in many of the successful kickstarter products.

6… The journey is the reward. The #1 request I get from would be entrepreneurs startups is ” how do you do it, what does it take to build a successful startup, what should I do differently? They want all of these answers in one sitting, over lunch, and then want to go off and pour them on top of their startup like syrup. Great questions, but it doesn’t work like that. My answer is this… Get up every morning, work very hard (see 3. 90 to 110) make the best decisions you can, cry a little bit, then do it again the next day. Do that for several months continuously. Enjoy the process with its imperfections, if nothing else you’ll create a rhythm for yourself and your team.

7…Self Confidence. This is the most important trait of all. Unyielding confidence, an authentic, real confidence that comes from deep down inside is what takes you through the bumps and setbacks. Think of a topic you know that you have down cold. Nobody can tell you you don’t know this.

Not false confidence, that will do the opposite and cause failure.

8… Location. Being located in the right ecosystem helps foster self confidence; you know it can be done there, there’s success in the ether, those ahead of you help you make things happen, critique you,

9… 5 Best Friends. You want 5 people in your business-sphere that you can go to, brainstorm with, respect, and drive your progress. They must be influential, cognizant, and you must reciprocate, pay it forward. Don’t compromise here. If you don’t have 5 then go find them.

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The Power of Connection

Angel Investor, Business Development, CEO Succession, early stage, founder, Hawaii, Launch, SaaS, Uncategorized

Last week I witnessed again the difference between 2 people meeting in person compared all other forms of communication we currently employ.

It’s amazing to see the power of the connection between 2 people in proximity to each other. In the startup world, it seems to be winning over the bits and bytes style. I’ve discounted the value of face to face recently as much as anyone, leaning heavily on asynchronous electronic communication for much of my business and personal life, and even using broadcast communication (twitter, Facebook, LinkedIn, Pinterest, email, …) to replace individual communications. But we all should rededicate ourselves to the face-to-face – the random, the first time, the networking, the required, the “have a good weekend”. Connecting on LinkedIn or FB is great but usually leads to few subsequent actual interactions. Apple’s face time is bridging the gap nicely, but still isn’t the same. and Eventbrite, founded on this principle of meeting in person as a response to too much Internet meeting, has helped to spawn, grow and change thousands of startups.

So, back to last week – at a startup mixer I was walking past someone headed to my seat, and we kind of got stuck in the crowd face-to-face. He had on a name tag, I didn’t. We couldn’t move. So he stuck his hand out to say hello, and we wound up talking for 10 minutes and definitely made a bit of a connection. We found several things we had in common, most people do. Since then we have met and emailed and referred business to each other, all from a semi-random meeting.

We never would have connected otherwise. If we saw each other on the street or lived on the same block we probably would just walk on by. So get out there, go to things that you like and are interested in. Barriers will melt.    @tomnora

5Q03: Puneet Agarwal (True Ventures) on pitching investors, maker culture, and big trends he’s watching. — The Blog

Angel Investor, CEO Succession, early stage, founder, Hawaii, PHP, SaaS, Scalability, startup CEO, Tom Nora, venture

via 5Q03: Puneet Agarwal (True Ventures) on pitching investors, maker culture, and big trends he\’s watching. — The Blog.

via 5Q03: Puneet Agarwal (True Ventures) on pitching investors, maker culture, and big trends he’s watching. — The Blog.

Silicon Valley Uber Alles? I think so… Some of their Secret Weapons.

Angel Investor, Business Development, CEO Succession, Drupal, early stage, founder, Hawaii, Jobs, Launch, Revenue Growth, Scalability, startup, startup CEO, Tom Nora, Uncategorized, venture

Can any other region “catch up” to Silicon Valley, or be the next Silicon Valley? Statistics show that it’s probably kind of futile to even try. Many have tried, but must be content with their small market shares. How can other regions will ever match the MACHINE: Stanford, Andreesen, Draper, Valentine, Doerr, Facebook/Apple/Google Millionaires, 4 Generation VC firms, Hardware/Software partnerships, over 100 Billon $ market cap cos.


Because high tech and software industries are now being seen as lucrative, job creating, imperative and oh so sexy, many regions are trying as never before to get in on this – mobilizing their governments, old school industries, universities and grandmas to unite to be the next Silicon Valley, calling themselves Silicon- Beach, Forest, Plains, Alley, Prairie, Coast, etc. These towns are setting their expectations way too high while the real Silicon Valley giggles at the sight.

Here are some of the secret weapons that make Silicon Valley stronger than any other “region” and act as its barriers to entry:

1. Silicon – Uh, yeah, that word? It’s what started all this. Silicon Valley launched and was launched by the mainstreaming of the Silicon chip over 50 years ago, which is now part of everything. There was no other part of the planet where anything close in innovation, design manufacturing, equipment, marketing and sale of semiconductors has emanated from. This foundation still drives the area and the world, even thought it gets less attention now than the software side.

2. 100 Years of Growth – It all began with military electronics, low cost housing, lots of empty land and Stanford University. It has spread way beyond to the east bay. San Francisco, over 50 universities and trillions of dollars in revenue. The growth has had bumps but over time has increased more steadily than any other economy in history.

3. Recruitment – Most of the leaders in SV are from elsewhere because Silicon Valley aggressively acquires the best from all over the world. Why not? Via Stanford, Berkeley, Facebook, Google, recruiting Harvard and MIT undergrads, their wonderful PR machine, advertising free meals, free car washes, free dry cleaning, free day care. $150,000 salary right out of college. Unlimited vacation. Where else can you gat all this?

4. Stanford – Not sure this even needs explaining, but Stanford has been a wole new entity in the past 20 years, beyond anyones imagination in wealth creation, funding, computer science, a recruiting engine into SV then on to local companies, pride, confidence, location.

5. Money, money, money – There are so many giant sources of money in SV that it’s staggering. VCs of course, Angels, they invented the term Super Angel, San Francisco, Real Estate leverage, IPO millionaires, corporate funding, Asian and European money, and on and on.

6. Tolerance for Weak Links – Here’s one most people don’t know – most people in SV aren’t stellar; I know several weak players who fake it well and are millionaires or millionaires-to-be just because they’re in the right zip code. The public tagline is everybody has a high IQ, but in reality there are lots of dwebes running around – I know, I’ve managed plenty of them. SVs leaders smartly realize the win ratio can be pretty low if you have a few enormous winners. Most SV projects die, most SV companies die, but if you build the algorithm to plan for this you’ll put more possible winners in play. So what if a few totally unqualified employees that snuck in make a few million. Like any organization, there are several who skate by or get by on good politics. That’s OK if you plan for it, “engineer” for it.

That’s just 6, there are plenty more reasons why there will only be 1 Silicon Valley for along time to come. The best answer for any other local economy is to just make the most of who you are, embrace your own identity, partner with Silicon Valley. And don’t use the word “silicon” in your name. Take Boulder, Colorado as a model, they’ve successfully created their own very strong economy for startups. There’s a startup for every 50 or so people there. They have all the pieces and they are heavily connected to Silicon Valley without envying them.


Update: What negotiation tactics does Dave Mcclure use? #500strong

Angel Investor, CEO Succession, early stage, founder, Hawaii, Launch, Revenue Growth, startup CEO, Tom Nora
Tom Nora, startup CEO, software dev, ux Edit Bio

1 vote by Casey Allen
I’ve advised several founders from 500 su and they’ve all said Dave is fair, honest, easy going, and lets you know when you’re cheating yourself. Most venture capitalists will take a little advantage of naive entrepreneurs so this was surprising to hear over and over.

Dave McClure should be thought of more as a movement leader than asking how he negotiates. He doesn’t really have to use any tricks, the whole thing is a brilliant maneuver. Remember, this thing didn’t exist a few years ago.

By design his operation is humble (I know, I’ve lived on Castro Street twice!). He created a new layer for people to get a shot at launching a Silicon Valley start with some cash and mentoring that they never would have otherwise had.

Negotiate? He could be more hard-ass but isn’t. He could wear contacts (or real shoes) but doesn’t. He created his own ecosystem that spreads out all over the world now, and even used some of his own money.

The environment allows people learn how to negotiate. And to fail softly if they fail, which is almost critical to later success.

500 startups went from strange idea to an integral part of the world startup ecosystem. Not many major players are not involved or connected in some way. One of the things Dave doesn’t charge for in his valuations is the connections to that world, and for that he will surely make everyone involved a bit of a winner.


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Mark M. Whelan

Tom, this is a great endorsement; however, doesn’t address the question set, being fair, honest and easy going is not a negotiation tactic. I think you are suggesting he is a partner style of negotiator, i.e. looking to find common ground before determining the valuation opportunity…



Tom Nora

Good points, but I think those are negotiating tactics, everything is. Dave’s strategy is to focus less on each deal and look for the wins through volume, hence the name. Many VCs on the other hand, heavily scrutinize and try to squeeze the best terms for themselves in every deal.

One key weapon VCs use is the threat of walking away from the deal at any moment. Dave pretty much takes that one off the table before starting the negotiation, giving an advantage to the green entrepreneur.

A classic trick is “all the deals are the same here, therefore there’s really nothing to negotiate” which is never true, but works often.


How SaaS + Mobile has changed our world.

Angel Investor, early stage, founder, Hawaii, SaaS, Scalability, startup, startup CEO, Tom Nora

In 2008 I was working on a post-merger integration project for a small company being acquired by a Fortune 100 behemoth. We looked at several SaaS based systems for accounting, sales automation, calendaring, product management, scheduling our company airplane, travel, etc. At the time SaaS just wasn’t mature enough and people at the company weren’t comfortable enough to make the change; too many old habits of installing software.

Because of this reluctance, almost every business process we depended on required the manual intervention of humans. The difference in efficiency between then and now is pretty amazing.

Today, only 5 years later, almost every task we performed then is gone, a complete turn over of an industry. These are now done either transparently in the background, in the cloud, or done using minimally invasive mobile apps. Spell-guesser, auto-fill, travel, accounting, calculating company valuations, facebook, pinterest, dropbox, codecademy, me writing this blog are all managed by a SaaS platform.

PaaS, IaaS and other derivatives of SaaS are proliferating but are just that, derivatives. Today SaaS is pretty much the norm; many, many human processes have been displaced more rapidly than ever in our history. We wouldn’t be able to imagine our lives without it, auto-save, no software loads, freemuim, mobile, access anywhere. I can even build server based websites with Drupal and MySQL now on an iPad in a coffee shop.

But more importantly, the labor of moving software around by humans and physical media and even the Internet has been taken down to almost zero. The software just doesn’t leave it’s cloud hosts anymore. This saves energy, mistakes, cost, time, client computer memory and bandwidth. It vastly reduces computer waste.


SaaS is the culmination of over 20 years of changes from ASPs, client-server, the web, higher speeds, always on, mobile 2.0, cloud computing, laptops HTML5 and many more innovations to finally reach the moment we’re in now. This speed of innovation has never been seen in history – not in automobiles, education or any industry.

The way we do things today is very different because of SaaS and the Internet. 80 year olds can build a Facebook page of their family’s photos or create a new business using a cellphone because of SaaS, without ever knowing anything about the guts underneath. I wonder where it will go next, what the next big change will be to make todays capabilities obsolete. You know it will happen.

> Connect with me here and on twitter @tomnora

Why “Job Boards” and applying online do not work

Angel Investor, Business Development, early stage, Hawaii, Hiring, Jobs, Scalability

I’m building my own job hunting tool to try to fix the broken inefficient systems currently out there. I was interviewed by Forbes recently and asked to comment on the job hunting process and my opinion of applying online to jobs. Here’s an excerpt of my answers…

Great topic. The market has shifted in several ways – automation, obsession with young malleable low cost employees and the current bad economy – these factors have rendered the online job boards obsolete. Remember, job boards and online hiring were invented almost 20 years ago and popularized by Monster. Machines took over the process and proved to be a weak substitute for humans. The only major innocations since then are automatic resume reders which harm as much as they help.

Many article point out that networking and referrals are the most effective ways to get hired, and I tend to agree. There are many human emotions, loyalties, friendships, favors, proximities, etc. that have more weight than what resonator tells an HR person. There is also a lot of campaigning – with a weak economy and ineffective government help people want to help others that they know to get hired and survive all this. They for their cousin or friend or roommate for that job paying 80K plus benefits.

Online job systems assume the most important factor in hiring is qualifications, and that is far from the truth. The top factors are familiarity, recommendations, in-person meetings, personal prejudices and empathy. Many under-qualified get hired every day over better candidates. The bad economy amplifies that. Just look at acqi-hiring or the San Francisco tech ecosystem.

The way computers and social media and machine learning are used to streamline the hiring process must change and augment reality as it is today, not try to alter it. @tomnora

Be Audacious, like Sophia Amoruso.

Angel Investor, Business Development, early stage, founder, Hawaii, Scalability, startup, startup CEO, Tom Nora, Uncategorized

Audacity. Boldness. Risk Taking. Vision.

Audacity is required to build an innovative startup, to invent something new, try to do things others say you cannot do, and Southern California needs many more audacious people in its tech and media startup ecosystem. So Cal is a perfect environment for innovation and bold risk taking. We have sunshine, 20+ Universities, a great history of tech innovation, and more idle capital than most places in the world. We also have some of the most brilliant scientists and financial minds in the world.

But audacity is different than intelligence or experience or brilliance or funding, it’s a unique form of energy and effort that is the tipping point of incredible startups. It’s often more important than any other attribute in making the impossible happen. If you look at some of the best inventions on the Internet and throughout time, they’ve either been accidents or major audacity. In the history of Southern California, there has always been a large slice of creativity involved also.

Where’s our google?

So why haven’t we produced a Google or Facebook here? In Silicon Valley people like Ron Conway and Tim Draper sometimes write a check for $500,000 without even seeing a pitch. They base their investments on instincts, probabilities, betting on the people involved. Where are these investors in L.A.?

Southern California certainly has a history of audacious visionaries who did it – created something from nothing. Louis B. Meyer, Howard Hughes, Edward Doheny Sr., Peter Drucker, Richard Meier, Frank Gehry, Walt Disney, James Irvine, Cecille B. DeMille, Sofia Amoruso and many other creative leaders. These people made something out of nothing, took enormous risks, lost it all and won it back.  Most used all of their own money, many started with nothing. People like this are required for L.A. to ever have a chance of approaching Silicon Valley’s success machine.

In the So Cal startup ecosystem, most of the companies launched are “safe”, evolutionary extensions of current business models and features, enhancing existing business ideas around the world. There are many cool twists, but not much in the way of revolutionary new ideas that succeed. Strange singe we are the #1 place in the world for entertainment origination in film and music. This does not attract investors from Silicon Valley. They’re looking for audacity, would rather invest in a low probability bold idea than in something “safe”.

Sometimes situations necessitate audacity, other times audacity generates the idea, the “manic” brainstorm. Audacity allows you to see beyond what others see, but requires an underlying confidence in the face of likely failure, criticism from people around you, and possibly major financial losses. Not a conservative approach. The reason for most startup failures is that they aren’t audacious enough – they try to be too much like everyone else, they stand way back from the leading edge. Or they mistake arrogance for audacity “we can’t fail” because we know everything. Audacity is threading that fine needle between crazy and lazy.

Be Like Sophia.

A great and very current case study of So Cal audacity and incredible success is Sophia Amoruso, founder of the Nasty Gal clothing dot com. At 22 in 2006, she was a junior college dropout, living with her step aunt working for $13 an hour checking student IDs. She had no business experience, no fashion experience, no Internet experience, didn’t know what e-commerce meant and zero $ in the bank. Today she is CEO of the fastest growing retail company in the US, according to Inc. magazine, with a valuation of somewhere between $600 million and $1 billion. So where’s the audacity here? In 2006 Sophia quit the admin job and started hunting through thrift stores for vintage jeans she could enhance and resell. Since she nothing about web design she used EBay. Not much audacity yet, many millions had tried that. Since she was in San Francisco there was lots of inventory available.

Then she did something extremely audacious – named it Nasty Gal. The name came from an album she owned by Miles Davis ex-wife and singer Betty Davis. She actually had to acquire the URL from a porn site. Most people have to do a double take when they hear the name. Audacious move #2 – her markups were insane, 10x to 100x in many cases. She never got an MBA so she knew none of the rules of profit margin, her guide was to be bold, ask for a lot. She bought one jacket for $8 and sold it for $1,000 as a “vintage” piece. Then she moved the company to L.A. to be in the center of hip fashion commerce. Nasty Gal even convinced a Silicon Valley VC to invest over $50 million into the company. They said “only in L.A. would we find a company like this”. In 2012 sales were over $130 million last year with $100 million net profit.

After all this success, Sophia still handles most of the marketing, using the same guerrilla tactics that have always works. Urban Outfitters recently made a bid for ~$600 million but she turned them down. Pretty bold. Remember this someone who was making $13 an hour 6 years ago. They’re now launching their own publishing company Super Nasty; of course Sophia is Editor in Chief. So we need more Sophias here. It’s not knowing how to code; it’s audacity and confidence in the face of certain failure.

It will happen in L.A.; the proliferation of original ideas that spawn leading tech companies is just around the corner. We have all the ingredients – desire and hunger for success, migration of brilliant minds from all parts of the world to this area, capital that is slowly getting less conservative and more audacious.

3 Questions to Ask Yourself (If You’re Trying to Convince The World That You Have a Hot Startup)

Angel Investor, CEO Succession, early stage, founder, Hawaii, Launch, Scalability, startup, startup CEO, Tom Nora, Uncategorized

1. What are people doing now because your product doesn’t exist, what is the pain you will solve?

2. What is it that you know about your specific niche that other companies do not?

3. How and when does this make revenue and profits? What is the growth graph?