Our senior executive offers insight on day-to-day newsflow, spanning economies and markets worldwide. These comments appear regularly on his LinkedIn feed. We offer them here for wider community benefit.
CAPITALIZATION TABLE
16 May 2025
How to Tell the Story of Your Startup’s Cap Table
As a young entrepreneur, I thought a capitalization table was merely a spreadsheet listing objective information about company ownership. I did not understand that it was actually a marketing document. That strategic error probably cost me two potential investors, limiting my ability to keep the firm intact during the 2008 financial crisis.
Organizing and maintaining a company’s equity distribution seems like a straightforward task. Maybe it is at the outset. But new investors soon become part of the equation, diluting the stakes of existing shareholders. There are employees who are given stock options. New classes of securities are issued, while debt can be converted into equity. Keeping track of these changes, depending on their velocity, can be onerous.
When a potential investor asks to see your cap table, you should be able to send it immediately, not pausing for a week to “double check for accuracy.” The implication is that you may not be in control of your firm, if the cap table lacks precision. The message you broadcast should be one of measured confidence. We often remind startup founders that the quality of their cap table is fully within their control. More pointedly, do not throw away this opportunity when negotiating the terms of a cash infusion.
For potential shareholders, the essential question is just how much of the company is retained by the founder. There are other concerns, though. Do incubators or accelerators control chunks of the firm? What types of investors are on the roster? Is the list skewed to industry leaders, or does it contain layers of family relatives? Did employees acquire stock by funding operating costs or capital expenditure? What is the scope of so-called “dead equity.” The ability to respond to these issues authoritatively spotlights judgement and vision, if not common sense.
CHATBOT WORLD
22 April 2025
How An AI Customer Service Chatbot Created a Mess
I am not a fan of customer-service chatbots. There may be few people who are. A study by the University of Alberta, for instance, determined that customers understand that chatbots exist primarily to help companies save money, not necessarily solve their problems. If there is no perceived benefit for buyers, why do marketing departments think those chatbots are so clever?
Customer service, as a corporate function, may be infused with chatbots that hallucinate. The AI systems that drive session answers are not designed to concede ignorance. Rather, they confidently respond with confabulations, jeopardizing hard-won revenue.
The core issue with chatbots is that they are designed to help companies be more efficient, or rather, manage overhead. That idea is misplaced if they undermine trust. The online code editor Cursor uncovered this problem when its chatbot made up a new company policy to the detriment of its subscriber base. Granted, a premium subscription only runs $384 a year, but multiply that figure times fifty customers over a five-year account lifecycle. You begin to see the scope of the issue.
Companies can disingenuously try to deny ownership of its chatbot answers. That approach is a slippery slope, though, especially when session responses seem plausible or there is no countervailing information at hand. Air Canada once creatively tried to argue that its chatbot is a “separate legal entity that is responsible for its own actions.” A civil tribunal rejected the defense, generating sizeable reputational damage for the airline.
A simple answer to the hallucination problem may be direct, if not aggressive, human oversight of chatbot activity. Adding appropriate disclosures to chatbot dialogue offers some cover, maybe. A better solution can be found in viewing customer service as a marketing opportunity, rather than a forsaken cost center. But that choice may mean staffing call centers with trained, human professionals. Retrograde? The idea is not as outlandish as it sounds.
Get our newsletter. Our email is a way for you to stay informed on business-to-business trends. You benefit from our unconventional, below-the-surface perspective, while we filter strategies and tactics in our disparate field.
