To Main Proceedings Document
Figure 1 - Hagel & Armstrong's Model on
Online Conmuanmities
members Draw more
aad rene members to
A
‘Transaction. Generate
Draw offering re CONE) venereal
vendors to thractiveness tent
community
Target Promote
advertising i 1
and Member Member int on
transaction, Profiles Loyalty
offering
Gather
inf 4 Build
about loyalty to
members
From Hagel/Annmstrong, Net Gain, Expanding Markets through Virtual Communities, 1997, page 56.
“Population
Growth
internet
Adoption
Relative Performance
Pricing
Site Performance
‘Brand Equity
*Content
Product Selection
Quality of Fulfillment
Quality of Customer
Service
Acquisition and
Turnover Rates
——
*Browsers
User Flows
Multiple Competitors
Potential Shoppers
«Independent Shoppers
«Loyal Shoppers
#of
Transactions
#of Page Vie\
#of Transactions
Average Order Siz:
Revenue
Growth Rate
Financial Accounting
*Revenue
-“Expenses
Cash Flow Statement
income Statement
*Balance Sheet
The Online Retailer
Income
Gross Margin
Growth Rate
Marketshare
y,
Expenses
Pricing
Site Operations
taal *Marketing Spending Cre
*Product Selection Ici
*Number of Warehouses
¢———_
|
Performanc¢
data
*Content
FTE
Available
Investment in Servers
Site Performance
“Brand Equity
Quality of Customer Service
Quality of Fulfillment
FTE
Required
Human Resources
*Target Headcount
*Rookies
“Experienced Employees
“Average Productivity
sTurnover Rate
“Average Option Strike Price
Cash
Raised
Fundraising
Financial Markets
‘Traditional Stock
Valuation
*Intemet-Style
Valuation
Market
Capitalization
*Pre-IPO discount
*Market-Leader
Bonus
*Amount to be Raised
+#of Shares to be Issued
+#of Shares Outstanding
‘Value of Founders’ Equity
Salary
Expense
#of
Shares
Outstanding
Stock
Price
Fi
Getting
Online
<Experienced
Buyers Recapture
Fraction>
Surfing for
retail sites
te)
Capture of
High-Volume
Buyers
\
<Experienced Buyers
Recapture Fraction>
This stock-and flow structure describes the acquisition and retention of users by the different
companies in the market. Note that the Loyal Buyer Stocks exist separately for each company.
Figure 4 - The Hiring and Training Cycle
Source: Inspired by Figure 12-11 in Sterman, Business Dynamics, Systems Thinking and Modeling fora
Complex World, page 491. See also James Lyneis, Corporate Planning and Policy Design A System Dynamics
Approach, Chapter 13, 1980.
Figure 5 - Tracking Option Strike Price
relative to Stock Price
&
Dropred
-_
Cashing
Employee
Cash-In
Fraction
Figure 6 - The Intermmet-Style Valuation
Value of theFim = ~¢—
| Minimum Steady Statq<<—— S33
Pre-IPO Discount
Effective
z Intemet-Growth |
a ae Revenue> Vaue Weighted Industry ‘Time to adjust
Average Margin Worst Case
A \ Expectation
<Target Gross
<Perveived Growth in
Margin> <Marketshare>
Figure 7 - ‘Two Modes of Stock Valuation
<Total <Total
Assets> Liabilities>
\ v4 Indicated Intemet Market
Value of the Finn
Breakup-Value
of Company
\ Weight Of
Intemet-Type
Yai _ hange i
Minimum —- Stock Market Valuation. Valuation. y i mn
“ vue ; Ne ae \
Rate of Change
‘raditional Market Bae
Value of the Finn
Figure 8 - ‘Testing Robustness
Graph Lookup - Effect of Option Performance on Financial Attractiveness of the Job
2
-100000 100000
This graph describes the impact of the current difference between option strike price and stock
price on Financial Attractiveness of the Job. A positive value increases attractiveness, a negative
value decreases attractiveness
Figure 9 - ‘Testing Robustness
a3
Bi Equity + initial brand
AtBegiming ——Sxtuity>
of Operations
A»)
7 —
Brand Equity a! 3
Total Marketing Loss of brand equity
Spending
Free Riding on +
Bricks-and-
Mortar Annual Fractional Loss of Brand Equity
advertising
Effectiveness of
Free-Riding
Figure 10 - Base Case 1 (Books)
Graph for Marketshare
0.75
0.5
0.25 \
Ph
=.
10) L ‘ Wail 2
1995 1997 1999 2001 2003 2005, 2007 2009 2011 2013 2015
Time (Y ear)
Marketshare{ Company 1] : Books dimensionless
Marketshare{ Company2] : Books dimensionless
Marketshare{Company3] : Books $————+—+ < - —— dimensionless
The base case produces a familiar result: the aggressive early-mover (Company 1)
dominates, the bricks-and-mortar player (company 3) and others struggle to catch up.
Figure 11 - Base Case 1 GBooks)
Graph for Stock Market Valuation
ep 7
20B /
10B
WV
1995 1997 1999 2001 2003 2005, 2007 2009 2011 2013 2015
‘Time (Y ear)
‘Stock Market Valuation[Company1] : Books dollar
‘Stock Market Valuation[Company2] : Books dollar
‘Stock Market Valuation{Company3] : Books $$ _- _____— —_——_ a—+ dollar
The base case produces a familiar result: the aggressive early-mover dominates,
other players, including the bricks-and-mortar player struggle to catch up.
Figure 12 - Base Case 1 (Books)
Graph for Cumulative Retained eamings
6B 1
3B
0 7
-3B w4
j}-——1
-6B
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
Cumulative Retained eamings[Company1] : Books dollar
Cumulative Retained eamings[Company2] : Books dollar
dollar
Cumulative Retained eamings[Company3] : Books ws ~ - “ - ~~ * —
The base case produces a familiar result: the aggressive early-mover (Company 1)
dominates, the bricks-and-mortar player (company 3) and others struggle to catch up.
Figure 13 - Growth Loops
Stock Price
+ Cash on Hand vaca naar
Marketing” 4. + Loop
Employee Spending R
Productivity (x) She
+
Marketing-
ae Musde-Loop +
sitd Attractive Loyal Buyers
Sa
R
User Generated.
Content Loop
User-Generatd +
Content
This graph describes some of the key growth loops in online retailing.
Figure 14 - Balancing Loops
This graph shows some of the limits to rapid growth.
Figure 15 - Base Case 1 (Books)
Graph for Perceived Site Performance
/ | im KI ee oe
0.75
05 / Vi
0.25
fe)
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015,
‘Time (Y ear)
Perceived Site Performance{Company1] : Books dimensionless
Perceived Site Performance{Company2] : Books dimensionless
Perceived Site Performance{[Company3] : Books —— - dimensionless
The aggressive early-mover (company1) shows the worst site performance during
the early rapid growth, but recovers as growth stabilizes.
Figure 16 - Base Case 1 (Books)
Graph for Perceived Quality of Customer Support
Ler PVT =
amily
0.7
0.55
0.4
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Year)
Perceived Quality of Customer Support{Company1] : Books
dimensionless
Perceived Quality of Customer Support{Company2] : Books dimensionless
Perceived Quality of Customer Support{Company3] : Books dimensionless
The aggressive early-mover (company1) also shows the worst performance in
customer support during the early rapid growth, but recovers as growth stabilizes.
Figure 17 - Base Case 1 (Books)
Graph for Average Work-week
“ /
60
Komp
40 f Pa A a oe
44 pS 4 oe Ss
20
Co)
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
“Average Workweek" [Company engin] : Books hours/week
“Average Workweek" [Company2,engin] : Books hours/week
“Average Workweek" [Company3,engin] : Books < - - - - - S- hours/week
The aggressive early-mover (company1) requires its workers to work long hours
during the early growth ...
Figure 18 - Base Case 1 (Books)
Graph for Financial Attractiveness of Job
7, \A
14 ™
am
ra
-+—
LK P< Z| Ss f+] ‘
08
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
‘Time (Year)
Financial Attractiveness of Job[Company1, engin] : Books dimensionless
Financial Attractiveness of Job[Company2,engin] : Books dimensionless
Financial Attractiveness of Job[Company3,engin]: Books $ - - - _ “ - dimensionless
... but workers are happy because of the performance of the stock price realtive
to their options.
Figure 19 - Base Case 1 (Books)
Graph for Experienced Quit Fraction
0A
0.3
a
02 ! W/, inn ea
4 MISS
ie!
O21 =
Se”
to)
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
‘Time (Y ear)
Experienced Quit Fraction[Company1, engin] : Books Year
Experienced Quit Fraction[Company2,engin] : Books 1/Year
Experienced Quit Fraction[Company3,engin] : Books 1/Year
Therefore the aggressive early mover (Company1) enjoys lower employee
tumover than the competition.
Figure 20 - Base Case 2 (Pet Supplies)
Graph for Marketshare
0.6
jt} jt#—_|
aa Pap
[+
p+ _]}
0.45 .
2
03 t = 4
5 t3— fF
2 ast eT aid
Be
a .. a|--24-2
eS » 2 2 [2:
/ 2 2 2
0.15
4
|
|
|
|
re) i
1995 1997-1999 2001 2003 2005 2007 2009 2011 2013 2015
‘Time (Year)
Marketshare{Company1] : Pets dimensionless
2 dimensionless
— dimensionless
Marketshare{Company2] : Pets 2- - 2° - -2- -2- -2
Marketshare{Company3] : Pets | —3 — 3— -3 —3— 3
OS * BES wpeenye seal o aps cigpesig
$e BSS Se Se 28
The base case produces a familiar result: the aggressive early-mover dominates,
other players, including the bricks-and-mortar player struggle to catch up.
Figure 21 - Base Case 2 (Pet Supplies)
Graph for Stock Market Valuation
6B
}-——}
45B =
Annes
ef
a
AB
Va
3B
7
15B
wfeae ja vee nas ey
2
# 2 i
0)
1995-1997 2009 2011 2013 2015
Stock Market Valuation[Company1] : Pets
Stock Market Valuation[Company2] : Pets
Stock Market Valuation[Company3] : Pets
Despite its huge market share lead, Company 1 suffers in terms of valuation until
its gross margin tums positive in mid- 2004.
Figure 22 - Base Case 2 (Pet Supplies)
Graph for Weighted Industry Average Margin.
0.2
0.1
-0.1
-0.2
1999 2000 2001 2002 2003 2004. 2005 2006
Weighted Industry Average Margin : PetsOnetenth
Weighted Industry Average Margin : Pets1
‘Weighted Industry Average Margin : Pets3
Weighted Industry Average Margin : Pets5
Weighted Industry Average Margin : Pets10
Margins in online pet supplies retailing are assumed to improve over time.
Figure 23 - Base Case 2 (Pet Supplies)
Graph for Cumulative Retained eamings
0 7 ° TSS
Pn |
AS.
2.
Niel
-2B 2
N Paes
ani
-6B PSK,
Pp
PA]
rr]
-8B
1995 1997 1999 2001 2008 2005 2007 2009 2011 2013 2015
Time (Y ear)
Cumulative Retained eamings[Company1] : Pets dollar
Cumulative Retained eamings{Company2] : Pets : “2° dollar
Cumulative Retained eamings[Company3] : Pets —3— 3 —3— 3 3 —3— 3 — dollar
Despite a positive gross margin, companies continue to make losses.
Figure 24 - Base Case 2 (Pet Supplies)
Graph for Minimum Steady State Margin Conceivable
0.2
0.1
10)
-0.1
-0.2
1999 2000 2001 2002 2003, 2004. 2005, 2006
dimensionless
dimensionless
dimensionless
Minimum Steady State Margin Conceivable : Pets5 Ce ee oe dimensionless
Minimum Steady State Margin Conceivable : Pets10 % Soap i Fa Sai Se SE + dimensionless
If the adjustment time for expectations is three years or less, the market will
temporarily assume that margins in the mature state are negative ....
Figure 25 - Base Case 2 (Pet Supplies)
Graph for Stock Market Valuation
2B
15B
1B
— — e.
75 -
“ss.
THe
500 M “| ace a i
=
7¢ hha, I.
a oo OS
a ~ 57
1A ~ 4
Ay Se
© Seances
“Sik ~- a2
~
2001 2002 2003 2004 2005 2006
‘Stock Market Valuation{Company1] : +— dollar
‘Stock Market Valuation[Company1] : 2 dollar
‘Stock Market Valuation[Company 1] : —= aller
‘Stock Market Valuation[Company1] : : #-- dollar
Stock Market Valuation[Company1] : Pets10 —s -5— dollar
... Which leads to failure as the company cannot raise money to sustain its losses.
Figure 26 - Bricks-and-Mortar Catch up
Graph for Marketshare
08
Pe a in
a ears
7 a |
4 daa
0.6 ; ae, ol
LL
I
f
04
|
i
0.2 |
to)
1995 1997 1999 2001 2008 2005 2007 2009 2011 2013 2015
‘Time (Y ear)
Marketshare[Company3] : Books dimensionless
Marketshare{Company3] : Books100million -2- - - -2.-- -2---2---2---2--- 2 ---2---2---2---2-- dimensionless
Marketshare{Company3] : booksealier — —3— —3 — —-3s- 3-3 —3 —3— —-3-— > dnensionlas
Marketshare{Company3] : books100millionandearlier = — 4 — -4— + sh + 42 — 4 tH 4 4 ot imrersioniess
The market share of the late comer (Company 3) in year 2000 increases by a
factor of four if either the company spend an extra $100 million on marketing or
would have started earlier by a year. The combined impact of those changes is
even more powerful.
Figure 27 - Bricks-and-Mortar Catch up
Graph for Stock Market Valuation
40B
30B
20B _ paaes a _
al " Co ae
wf
4
10B .
4
apa
#
4 23 F
0) Lee |
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
‘Time (Y ear)
‘Stock Market Valuation{Company3] : Books
Stock Market Valuation[Company3] : Books100million + + + 2+ + + -2+
Stock Market Valuation{Company3] : booksearlier. = — 3- —3— —3—
Stock Market Valuation{Company3] : books100millionandearlier = 4 - —4- — 4—
The Valuation of the late comer (Company 3) in year 2000 increases
significantly if either the company spend an extra $100 million on marketing or
would have started earlier by a year. The combined impact of those changes is
even more powerful.
Graph for Marketshare
1
+ — + — + —4-—~_ 4 _, |
4] pape
ab 2] FP peed a
B-.
ad
0.75 t- 3)
2
2.
a.
“RB.
* gh
= wil,
05 2.
0.25
Co)
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Marketshare[Company1] : Books § —t——t——+_—+——+—+—_++ +++ + —_+—_ + — + —+—4+— _ dimensionless
Marketshare{Company1] : Warehouse B sews HRs = Boer Boos i882 Bue Bel we): ue > Bh Bes) dimensionless
If the warehouse performance of Company 1 is reduced, it market share will
suffer.
Figure 29 - Poor Warehousing
Graph for Net Income
2B
1B
| —t
ja
[4 pa]
b ‘Leads arp Qe pe da. b
ie 22h eo
° I is
1B N22
-2B
1995 1997 1999 2001 2008 2005 2007 2009 2011 2013 2015
Time (Y ear)
Net Income{Company1] : Books dolla ear
Net IncomefCompany1]: Warehouse 2° 5 Qe 0 De sD DD Bee Be ee Dee Dee eB eed eee Bee B+ dellafVear
The reduced warehousing leads to small savings in the short term, but huge
reduction in profits in the long term. Note: the fall in net income in 2005 is
caused by the exhaustion of the tax-credit for prior losses.
Graph for Marketshare
1
Lp |
Lat i id ee eee ee
+ +++
Vaan t+
0.75 f
0.5 ve
2.
“2, ap 2
2. b 4 .
a dg: + 42
Mya pando be dap epee Py?
0.25
°
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Marketshare[Company1] : Books = —t——t——+——+—+—+—_+ +++ +++ + — + —+—4+— dimensionless
Marketshare{Company1] : LowMarketing - 2-- -2---2.--2--2--2--2--2--2--2---2--2--2--2--2 dimensionless
Reduced marketing spending results in a loss of market share.
Figure 31 - Low Marketing
Graph for Stock Market Valuation
40B
Lata [+++ ++
[4+]
a
Lar |
30B
20B
10B
2
Va ada poye Pr 8
Yr : De apt ap :
0 : [ep |
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
‘Stock Market Valuation[Company1] : Books dollar
Stock Market Valuation[Company1] : LowMarketing + - 2+ ° 20+ Q05 2-5-2 +--+ Bes BeBe Qe+ Qs -2--2- dollar
High Marketing spending is vastly superior as far as stock valuation is concemed.
Figure 32 - Low Marketing
Graph for Cumulative Retained eamings
6B 4
3B
| sai
272
2
Re
wP
2° |
0 cae
ies 2-2). 9.h 9. +2- 42 P LA
-3B 4
| |
-6B
1995 1997 1999 2001 2003 2005, 2007 2009 2011 2013 2015
Time (Year)
Cumulative Retained eamings{Company1] : Books dollar
Cumulative Retained eamings{Company1] : LowMarketing = - 2-5 2+° Q0 5 Qe0 QR 2+ B+ B+ B+ |Q-+ 2+ dollar
Retained eamings In the short-and-medium term, the low marketing strategy
produces better retained eamings as it avoid a huge billion dollar investment
upfront. Only in the long run does the high marketing spending pay of.
1
0.75 5
2
b
4
0.5
“2
3
a”
0.25 PSs
2.
2.
“B.
he
Bete 9.
oO
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
‘Marketshare{Company1] : Books —§ tt 4 4. 4-4-4. 4 4 9 4 4 4 4 dimensionless
Marketshare{Company1] : BooksS0percentlesshiring 20525 BQ QB -2+-2--B--2--2-- 2 dimensiones
The aggressive early-mover (Company 1) loses its dominant market position if
hiring is neglected.
Figure 34 - 50% Hiring
Graph for Loss of Occasional Buyers
4M
InP.
a
3M ;
2 ‘
2
Ss
“2,
2M
. %..
2 2
. [+e |
ee aie
[aq 2:
[—*] 2
2
1M a
4 Le]
aula 2
i
to)
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
People/Y ear
+22 People/Year
Loss of Occasional Buyers[Company1] : Books
Loss of Occasional Buyers[Company1] : BooksSOpercentlesshiring + 25° 2+ 20+ Q-- Der BB+ -B--2-
The impact of reduced hiring is most visible in the area of tumovers. Millions of
customers, just acquired at immense costs are lost due to poor performance.
Figure 35 - 50% Hiring
Graph for Adequacy of Staffing
am rt oe
‘a.
a
a» ah ge Bp cB [2 Rae 2p Bp eB qae sR - a
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
Adequacy of Staffing{Company engin] : Books dimensionless
Adequacy of Staffing[Company1,engin] : Books5Qpercentlesshiring 2+ = -2- +25 -2+-2+-2-+2++ ++ -2---2+-2 dimensionless
Reduced hiring leads to permanent understaffing of engineers.
Figure 36 - 50% Hiring
Graph for Perceived Site Performance
1 + J + rs + + + + + 4
0.75 E a
; 2
: (a;
0.5 iF : tad Bt que els b 2
0.25 a
0
1995 1998 2001 2004 2007 2010 2013
Time (Y ear)
Perceived Site Performance{Company1]: Books + 9 9 + dimensionless
Perceived Site Performance{Company1] : BooksSOpaventiesshiring -2----2- dimensionless
Without adequate staffing, Site performance falls significantly.
Figure 37 - 50% Hiring
Graph for Cumulative Retained eamings
6B ca
3B
O F Boe 5 |
Ae. 4]
PN. Late 4 oe
3B Ne cpl
Let
-6B
1995 1998 2001 2004. 2007 2010 2013
Time (Y ear)
Cumulative Retained eamings[Company1] : Books + + + + + dollar
Cumulative Retained eamings[Company1] : BocksS0pervantiesshiring cas sien Gie dollar
In the short-run, the savings through understaffing appear to outweigh the
damage done, but in the long run the company fails to achieve profitability.
Figure 38 - 50% Hiring
Graph for Average Productivity
1
() JAAALEE-LEAAA
0.75 |} T = aEEr Axl aac Daca
05
0.25
)
1995 1998 2001 2004 2007 2010 2013
‘Time (Y ear)
Average Productivity[Company1,custsupport] : Books rt 1S FT E/Worker
Average Productivity[ Company 1,custsupport] : BooksSOpercentlesshiring 2°: FTE/Worker
The high tumover leads to a reduction in average profitability that further
aggravates the personnel shortage.
Figure 39 - Price War
Graph for Target Gross Margin
0.4
0.2
-0.2
1995 1997 1999 2001 2003, 2005 2007 2009 2011 2013 2015
‘Target Gross Margin{Company1] : BooksPriceWar
Target Gross Margin[Company2] : BooksPriceWar
Target Gross Margin[Company3] : BooksPriceWar
This graph shows how the competitors drive down gross margin in this scenario.
Figure 40 - Price War
Graph for Stock Market Valuation
6B
4.5B /
3B
a
15B
asl 3p 23 Sat oa ok ‘ ales
1999 2001 +=—«-2008-S «2005. «2007s -2009.—S2011.-—s—«2013~—=—«20115
Stock Market Valuation[Company1] : BooksPricsWar $4} 4 +4. 4. +4 +4 — + — + — +— + dollar
Stock Market Valuation[Company2] : BooksPriceWar
Stock Market Valuation[Company3] : BooksPriceWar
In the end, everybody loses as the financial markets stop supporting these loss-
making companies. One company temporarily attracts a lot of investment, though
as a level significantly lower than without the price war.
Figure 41 -Price War
Stock vs. Options and Financial Attractiveness of Job
0 KP
150
43 “
1995 1998 2001 2004. 2007 2010 2013
Time (Y ear)
Stock Price[ Company1] : BooksPriceWar ++ + + — dollar/share
"Average Strike Price (Non-Vested)"[Company1, engin) : BooksPriceWar 2 dollar/share
The average option strike price trails the stock price with a delay. If the stock
price is higher, employees are happy and loyal. If the stock price falls the option
price, employees are increasingly likely to jump ship..
Figure 42 - Price War
Graph for Financial Attractiveness of Job
2
1.65
13
0.95 re
0.6
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
Financial Attractiveness of Job[Company1,engin] : BooksPriceWar + + + + + + dimensionless
This is the impact of the stock and option performance (Figure 40) on financial
attractiveness of the job..
Figure 43 - Stock Crash
Graph for Stock Market Valuation
40B
|___+--4-— t+ +
Lepete
30B TI
\
20B :
FY :
\ fete | ESE = ge bBo
age
\]o\ aie
10B \ nee et
4 ay
4 S \ \ pap
ca ai. Nal
"oe [eed fe
(0) La“ > av
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Stock Market Valuation[Company1] :
Stock Market Valuation{Company1] :
Stock Market Valuation[Company1] :
Stock Market Valuation{Company1] :
Stock Market Valuation{Company1] :
This graph shows the impact of changing the stock valuation from Intemet-style
to traditional methods at different points in time between 1998 and 2001.
Figure 44 - Stock Crash
Graph for Net Income
2B
-1B Pee
-2B
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
‘Net IncomefCompany1] : crash $9 olla cr
Net Income[Compamy1]: Books = = - 25° - 275 -°25 5-255 B05 +2e sD BeBe BeBe -2- +--+ dollayYear
Company 1 survives the crash by tuming profitable in 2002. The kink in income
in 2005 is due to the exhaustion of the tax-shield created by prior losses.
Figure 45 - Stock Crash
Graph for Percentage of Company held by Founders
0.6
0.45
aan
“t is
0.3 ost fo eet a) a ee et a
ei
: ns—|— 3 — + al 4 e R iS e
0.15
F 2 Z| 2 2
oO
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Time (Y ear)
Percentage of Company held by Founders[Company1] : Books * + -- “ + dimensionless
Percentage of Company held by Founders{Company1] : crash1998
Percentage of Company held by Founders{Company1] : crash1999
Percentage of Company held by Founders{Company'1] : crash2000
Percentage of Company held by Founders{Company1] : crash2001
Even with company survival, the crash has a significant immpact on company
ownership by the founders. The earlier the crash, the higher the percentage of the
company that founders had to give up to finance the losses.
