In the movie Jobs, Steve Jobs says “We’ll do the $90,000 investment. At a $300,000 valuation. But I also want you to kick in a $250,000 credit line with 10% interest to be paid back in full once we meet net revenue positive.” to Mark Markkula (an angel investor). What does that mean?
This plays in my mind after watching Jobs for the second time, 3 days ago. I have found the answer.
Markkula, on the other hand, offers money + managerial support. Once profitable, Markkula can go since Jobs is not the kind of person who would give up equity, unnecessarily. Steve Jobs only gave equity to those who do EXTRA work like the motor dude, Ronald Wayne, who were given the task to design and build computer motor into a small box inside Apple II computer. Those who are crazy are those who do. Good lesson. Bad lesson is when Wayne sold his 10% stake for $800 after spending a mere 12 days with Wozniak and Jobs. Wayne had his name taken off the contract and sold his shares back to his co-founders for $800. Phew. 10% now equals to $130billion.
$340k would be equal to RM1, 360,000. That is APPLE’s starting capital.
I have to give Mark Markkula a big applause for sticking to something he doesn’t sure can take off, only clued by igniting pair of eyes + uncertain naivety & vision. He was one of the big reasons, why Apple is Apple today since Steve Jobs got rejected by HUNDREDS of investor at the very start, despite Jobs tried to not giving up his ass by saying he has 6 ‘giant stores more’ during ‘interview’ while he just had the garage. I say Mark Markkula is a talented investor and I don’t care if the term ever exists.
Longer technical version:
An angel investor or a venture capitalist will often use one of these two terms – Pre-money valuation and Post-money valuation. The $300,000 valuation mentioned can be assumed as Post-money valuation and the pre-money valuation would be $210k (300k – 90k). It means the company had a valuation of $210k before the investor entered and the valuation will rise to $300,000 when the investor puts his money. So after raising this money, the investor gets 30% of the company.
Steve Jobs is a high self-esteemed man. Someone like Jobs would always believe that his company will make a lot of money in the future and he was not willing to give up any more equity. Though high self-esteem man he is, he is not infatuated by the facilities he’s gotten. He was still aware that it won’t be sufficient to scale the company very high with that amount and needed more cash. Though high self-esteem again, he is still uncertain about Apple’s future. So he added contingency (unpredictable occurrence) that investor also lends him $250,000 as loan which would be returned to investor @10% interest rate p.a. when the company turns profitable. So if the company turns profitable in a year he would pay back $275,000.
If he would have raised that money through equity, he would have to give up the entire company. Secondly, if he was also had not added that contingency, he would have to sacrifice some more equity in the future. He utilized these tools well and made a great deal.
Steve Jobs is an all-rounded unique man.
Somebody can just innovate, but not a good business person. Steve Jobs is not an actual designer-doer, but he is a clear-cut philosopher, he is radically practical on his philosophies, he knows how to talk business, a radical innovator, he is a magician (during presenting his ideas) John Sculley can’t do and he is also a visionary teacher (he doesn’t into TOP talent. Rather be with those people who stay with his vision even they did not understand what they are about to create).
I like to think of him as an almost perfect teacher. He guided them towards innovation. His energy woke up all sleeping men and guided their instincts to higher senses. From nothing to something. From zero to hero. He doesn’t give a shit about money but just pure importance. I am not sure of the importance of what here. He has no larger nor evil agenda. Just pure maniacal focus on building natural extensions of a man. Pure fierce naive hungry passion.
How do I say so? You see when he was kicked out from his project Lisa and his company and pursued NeXT and invited back into the Apple’s board, he didn’t sulk/not going back. He was only furious when the board was so stupid and infatuated by IBM and kissing IBM’s ass. He said, “I never lost anything. It was stolen from me” – This is a BIG statement, my friend. “Stolen from” is a hella positive attitude. When he was in, he made luck again for Apple. Radical pure product importance, perhaps.
He is also very fierce about living simple. I have said about living simple. It requires vigorous…? What? 4 things.
Living simple takes a lot of definition and elimination before entering automation and liberation.
Today the company is worth approx. $1.3 Trillion. So today the value of that 30% is $390 Billion i.e., $39, 000, 000, 000,000.
What would you do with 90k + 250k? Open a restaurant or innovate?