Internet Economics Inc.
Incoming Chief Executive Officer
Dear Mr. Shaheen,
Welcome to your new office. As you know, you are a lucky man. You are entering the grocery business, and are about to take over as CEO of Webvan, just in time for its initial public offering. Here at Internet Economics Inc., we’ve taken care of everything. We’ve already got seven (count ‘em, seven) investment banks working for you. Sure, you used to have to get through the hard part — leading a company to the point where it could go public — before you could cash in; but you don’t have to worry about most of that. The boys at Goldman Sachs say all we need to do now is print up the prospectuses, and we’re ready to hit the Nasdaq. Just sit back and enjoy the ride.
We’ve taken the liberty of granting you 1.25 million shares of common stock. We’re planning to go public at $11 to $13 a share, so that’s probably about $15 million for you. (We know you’re already a millionaire, but as you know from 30 years at Andersen Consulting, a million here and a million there can really add up.) There will be vesting periods and such, but we’re sure your people have already taken care of that — accelerated vesting in case of a sale, severance agreements, all that other stuff.
Think of this as a little like Monopoly: You get a stack of bills to start. You don’t need to do anything for it. You’ll also have options to buy another 15 million shares at $8 a share. We hope you recognize that as an extra-special token of our esteem. With options priced at $8 a share, you can make money even if Webvan’s investors don’t. As long as the stock stays above $8, you’re making money. To stay with our Monopoly analogy, you can think of this as your annual reward for passing “Go.”
Naturally — just between us — in today’s economy we don’t really need to talk about stocks priced at $12 a share, do we? Webvan is an Internet company, after all. We know you’ll be moving from leading Andersen, a huge multinational corporation, to leading a fleet of delivery trucks and a warehouse in Oakland, Calif. — but it’s already a $4 billion warehouse. If investors bid up your stock, who knows how much you can be worth? At $40 a share, your 1.25 million shares would be worth $50 million. And your options could be worth another $480 million.
Yes, there have been other CEOs who’ve come in just in time to choose investment bankers (although, admittedly, coming into the top position after the company has filed to go public is still a bit unusual). You might be unsure of your footing at first: After all, a consulting company and an online supermarket don’t seem to have much in common, do they? But don’t worry. The important thing for a new Internet super-corporation is to get itself someone with Fortune 500 credentials. It can’t let investors think that the head of the company is just a nobody who’s been mucking around with the Internet for the past four years.
That’s why eBay hired Meg Whitman away from Hasbro four months before going public. And remember how much publicity Priceline got for hiring Richard Braddock, a “former president of Citibank,” as the press release said. (Hardly anyone noticed that he’d lasted all of two years in that lofty job, and lost it back in 1992.) Remember, in the days before Bud Selig, how baseball commissioners used to be former college presidents with lots of degrees? Getting a Fortune 500 name is just like getting the dean of the Yale Law School to serve as baseball commissioner. It gives us just that last little bit of extra credibility.
Remember Mr. Sheehan, your next few weeks will be exhausting. In fact, you probably will barely have time to choose your office wallpaper before you go out on the road show, flogging your new company to big investors. You’ll be talking to institutional investors from places like Fidelity, and they’ll want a CEO who’s really committed to the company, someone with a proven track record on the Net. So whatever you do, please, please don’t say Andersen when you mean Webvan.