The Cap Table
*Spoilers, and plot from Silicon Valley Season 1 will be discussed in the following section.
At the Pied Piper launch party, Donald ‘Jared’ Dunn, performed by Zach Woods, decides to crash the small event at Erlich Bachman’s house.
One of the comical inside jokes to the launch party is that the team is sitting at computers with the screensaver running. I mean sure, when I think of a wild party, I first think about turning on a laptop and watching the preset screensaver play through.
Richard confronts Jared, and informs him that he has decided to partner with Peter Gregory. It is at this time, we find out that Jared is interested in working with Richard and the Pied Piper team.
The second show starts off with a launch party in similar fashion as episode one, but the difference is the amount of money pumped behind the party. The contrast between the two launch parties shows the inequality behind launching a company.
A stripper known as ‘mochaccino’ provides entertainment to the party. Once again, Mike Judge and company pokes fun at the social insecurities within the tech community. To be honest, I would much rather have ‘mochaccino’ for entertainment at my next launch party in comparison to Kid Rock. If we really pump some money behind the launch, we could afford both.
Peter Gregory calls that Richard and the company provide a cap table, business plan and financial data.
When Gregory inquires for financial reports from Pied Piper, it does an excellent job of showing the lack of experience that early startups and entrepreneurs go through.
Richards calls up Jared for help to create a business plan. His ability to ask for help when he hits a roadblock shows an excellent use of leadership.
The show uses a traditional form of human resources communication between the characters at the kitchen table. It creates a compelling scene, but when I review the $200,000 loan from an investor, I don’t think the team should be focusing on which person to kick out of the group, but rather how much money could each person live on for 6 months minus the total operating costs. If we assume that Pied Piper only needs an operating budget of $1,000 for six months, (which is totally undervalued,) a requirement of four employees, and ten percent going to Bachman; the result would be close to $45,000 going to each employee.
This example does show the bottom line of mixing friendship with business.
In reality, the rent in Silicon Valley would cost more than $20,000 to host three to four programmers for six months. With average rent at $2,300 for a single bedroom in Silicon Valley area, multiplied by four equals $9,200. Then we multiple that number by six months, and get $55,200. So, first we have to assume Bachman will take a loss of $35,200 just to house these programmers before we take into consideration their food intake, transportation or any other real world cost.
Even when an investor supports a company, they still experience real world problems. In fairness, this show is a piece of fiction.
More commonly, startups have to use sweat equity to raise enough capital to hire one employee. Since hard work is not sexy and commercial, the show just fast forwards to the cutthroat part of slimming down a business. Overall, Silicon Valley is a condensed version of running a company.
Once Richard decides to inform Big Head that he is still apart of the team, Nelson ‘Big Head’ turns on Richard and the team and informs them that he is getting a raise to stay with Hooli for $600,000 per year.
This creates an outburst within Richard. His rant of not selling out is one of his best scenes in season one.
The final scene of episode two involves Richard finding out the steps to launching a business, and a business bank account.
Points I learned from within episode two, season one:
- It is important to create and maintain a business plan, a cap table, records of all financial data relating to the company, and records to the amount of hours that each employee has spent developing the company.
- If an entrepreneur does mix friendship and business, it is important to be upfront and honest with one another.
- In engineering, science, and statistics, replication is the repetition of an experimental condition. This is connected to Hooli creating their own version of Pied Piper, and the trend of tech companies developing similar ideas.