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Technology Stocks : Babb Enterprises, A new startup

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To: Roger A. Babb who wrote (27)	12/9/1997 9:04:00 AM
From: Craig Richards	Read Replies (2) of 119

As soon as a venture team proves the viability of its business plan, then a new venture is formed with a focus on that business plan and we will seek funding for the new venture, operating it as a more traditional company. Any idea about how traditional venture capitalists would respond to a company spin off of this type? It's my experience that they want to have a lot of control of a new company in exchange for their financing. Pre-IPO stock in a new venture can be a great motivator in terms of getting things done. If the parent company takes a huge chunk of stock, that would leave a lot less for the spin-offs to delve out. What percentage of spin-offs do you see the parent company keeping? How would this percentage be determined? The parent company will be constantly seeking new talent because it will be losing staff members to each new spin-off company. If a staff member from the parent company left to go with a spin-off start-up, what would happen to their share of the parent company? How would new staff be attracted to the parent company? If there is a constant turnover in new staff, wouldn't that cause an endless dilution of stock in the parent company?

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