After a Happy Ending — Help Handling Options

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Entrepreneurs & Angels — Perfect Together

One important function of a venture fair is to give

entrepreneurs and investors a chance to get to know each other. Many

angels and venture capitalists put respect for management at the top

of their list of requirements, but rarely do entrepreneurs —

desperate

for money — question how their personalities are going to

"fit"

with the personalities of their prospective investors. Sometimes the

resulting tensions can cause problems. This was the case when Michael

Cooper invested in Make Us An Offer (U.S. 1, March 1)

(http://www.princetoninfo.com/200003/00301c01.html)

One Venture Fair participant responded to that story:

"As an entrepreneur seeking angel funding, I’ll be sure to do

some due diligence on potential investors, though in the rush to pay

bills and get moving, this is probably a step entrepreneurs don’t

spend enough time on, especially if the investor is a referral from

a trusted source.

"As far as paying an angel investor a consulting fee, I think

many entrepreneurs wouldn’t mind as long as the expertise complements

their core competencies. Like most entrepreneurs I’ve met, my company

is looking for investors who bring active advice, contacts, and

credibility

to their operation — as long as they can keep their own vision

intact.

"After reading your article I guess we’re not living in the real

world yet and are probably in for a couple of major realizations as

our business expands."

— Barbara Fox

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After a Happy Ending — Help Handling Options

After the IPO, then what? One of the exhibitors, Garo

Doranian of AST Stock Plan Inc., hopes to line up as clients some

of these companies that are paying their employees partly with stock

options. His three-year-old firm offers away to outsource the administration

of stock options, which can be a headache for a small firm.

URI Kaufthal is the CEO of AST Stock Plan, which has offices in Manhattan

at 250 Broadway (212-659-2221, http://www.aststockplan.com).

AST Stock Plan is a sister company to American Stock Transfer Trust,

a transfer agent that holds the records of the shares for more than

4,000 public companies.

Theoretically a company can keep all its own records to administer

stock option plans and keep its employees happy, but that could be

both tedious and costly, says Doranian. "You have to know the

compliance issues with the ever-changing rules of IRS, the SEC, and

the FASB (Financial Accounting Standards Board) as to who gets what

shares. Each option becomes available on a vesting schedule that is

difficult to track," he says. To manage this a company will need

to license some software system for $15,000 to $25,000 per year, plus

the cost of labor. AST’s software, in contrast, lets it track thousands

of plans and achieve economies of scale.

"We are like the hub in the wheel of stock plan administration,"

says Doranian, who is a 1996 graduate of California State University

at Fresno. "The spokes are each department. We interact with payroll

to pay out the options. With legal, to keep on top of all securities

issues. With brokers trading the shares. With transfer agents that

our are clients are using — to make sure at the end of the day

that everything in the wheel of stock administration rolls smoothly."

— Barbara Fox


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