Some startup "unicorns" are magical, and others are donkeys in party hats.
Illustration by Aleksandar Savic
By Erin Griffith
August 24, 2017

This week serial entrepreneur Jim Clark launched a new building security startup based in Del Rey, Fla., called CommandScape. One key element to the startup’s product is that its building management “command center” will be mobile-first, using a person’s phone to validate identity instead of a password, and using “the same highly secure certificate process invented by NetScape.”

Clark was inspired to start CommandScape after he bought a 7-story townhouse in New York City and embarked on a gut renovation several years ago. The contractor recommended he use a commercial-grade security and monitoring system, which cost $300,000 to install and $600 a month to maintain. “I said gee, I’d like to be that monitoring company,” he tells Fortune.

CommandScape, led by former chief corporate development officer at ADT Don Boerema, has raised $10 million in funding from Clark and his longtime business partner Tom Jermoluk. The firm will raise another round in the next few months from “people that I know who I want on the board,” Clark says. The 25-person company, which started officially nine months ago, has several installations live.

“We’re trying to firm up a market that is today very disjointed – building security, building management, lighting systems — and we’re trying to do it with a good business model,” he says. CommandScape will remain at the high end and commercial side of the market, avoiding competition with consumer-facing smart home products from Google, Amazon, etc.

Beyond his new venture, Clark discussed founder-friendly terms, employee liquidity, Uber, Benchmark, and IPOs.

“The Valley investment climate has changed so much since I was there I couldn’t go back there,” the founder of Silicon Graphics, Netscape, WebMD, MyCFO and Shutterfly tells Fortune. “I’m not interested in those kinds of competitive bidding wars, because you create a couple hundred unicorns and it’s false.” He has invested in one unicorn – he won’t say which — as well as Denver-based coupon company Ibotta and New York media startup Mic.

Clark notes he’s generally opposed to the practice of three-class stock structures that give founders extra power (“There are reasons to do it but in general, I think the traditional way”), and adds this to his answer:

Jim Clark: I also think companies stay private far too long. Microsoft went public after four years, the same year we did at Silicon Graphics. I think their market cap was under $100 million. Okay, maybe it’s risky for the public, but at least you give the public a chance to ride that out. With Uber, no one’s ever going to make money out of Uber except the guys that are in it now. [Laughs.] They’re probably going encounter that once you decide to take it public — basically flip the risk and let the suckers in the public market have a shot at it – that you’ve already sapped it of all its value.

Fortune: Now insiders are looking to get out, too.

That’s the big problem in all of these companies. You’ve got to give employees liquidity. If you don’t, you’re holding them hostage. You basically have – you have slave labor. They’re tied to you, they can’t really sell the stock, and if they do they’re going to sell it at a discount, and it’s never a fair valuation because it’s all arbitrary and it’s all done in private. You’ve got to make a liquid public security to be fair to your employees, otherwise you’re just screwing them.

That’s one of the big problems in the Valley now. There are a bunch of unicorns out there, and arguably, they’ve gotten overinflated. You get to a point where the market isn’t going to pay what the private investors paid, so people are going to have to take a down round to go public. In general, that is a huge problem and I’m very much not in favor of that. At CommandScape, assuming we’re successful, we will certainly go public way before we have valuations like that. We will not be that category of company.

This is a bugaboo of mine. I’m so frustrated with that stupidity. It’s not fair to the people. [My philosophy] is that everyone gets stock. [Boerema] was questioning, “Really, everyone? It’s not required in Florida.” But you know what? Then they own it. And when they own it, they’re more of a part of it. You can make mistakes and people walk away with stock they shouldn’t have, etc. etc., but it is, to me, a fundamental part of doing a company.

You can have that philosophy and still decide to keep it private for a long time. Some of that is encouraged by Sarbanes-Oxley. Shutterfly was a company I founded and we finally went public, and it was painful. It took three years of preparation to get public.

And it seems like it’s still hard for them to get attention and excitement because they’re not a $20 billion company.

Yeah, well, there is a market. There are institutional investors who want to buy because they say, “Hey, this could be a Microsoft.” But they’re not going to be saying, “This could be a Microsoft” about Uber, unless they already got in. And by the way, once [Uber] reached that point, why are they going public if they’ve been able to raise all the money themselves? The only reason is to give employees liquidity. Which means it’s mostly sellers. So, who are the buyers? The buyers are the suckers.

There needs to be a story about this whole screw job that’s happening to employees at unicorn companies, because they don’t have liquidity.

Some people would say, boo hoo, they’re still getting very high, competitive salaries and worth a lot on paper.

Not true. [Certain unicorns] have pretty mediocre salaries. And the stock is overinflated and it’s illiquid. And you gotta deal with the jerks who are doing what they’re doing.

So to your point about giving [founders] too much power – it’s the money – whoever paid up. There are some big venture funds who are going to lose a lot of money. Benchmark is going to do well on Uber almost no matter what. But if I were them, I’d try to get out of it right now. Get out and get out of the headache.

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