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Should founders stock be subject to vesting before a venture financing?

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Generally yes.  Even though the founders stock is issued and outstanding, the company can have the right to repurchase the shares.  The right of the company to repurchase the shares will lapse over time or upon certain events, similar to vesting of options.  There are two primary reasons for subjecting founders stock to vesting even before a venture financing.1.  If...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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What should the vesting terms of founder stock be before a venture financing?

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I think that founders stock before a venture financing should be subject to the same general vesting terms as one would expect after a venture financing. A typical vesting schedule is four year vesting with a one year cliff. This means that 25% of the shares will vest one year...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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What is Series FF stock?

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I've been asked by a few people about the Series FF stock that has been advocated by the Founders Fund. Matt Marshall of Venture Beat reported on this invention in December 2006. See here for an Inc.com report in March 2007. Michael Martin blogs about economic incentives associated with the...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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What is an 83(b) election?

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Failing to make a timely 83(b) election with the IRS is something that could lead to disastrous tax consequences for a startup company founder or employee.Founders typically purchase stock pursuant to restricted stock purchase agreements that allow the company to repurchase "unvested" stock upon termination of employment. Similarly, employees may...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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What is qualified small business stock?

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Under Internal Revenue Code Section 1202 , a taxpayer (other than a corporation) that recognizes gain from the sale or exchange of "qualified small business stock" held for more than five years may exclude 50% of such gain from gross income for regular income tax purposes.  The amount of gain...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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Should founders pay for their stock in cash or contribute intellectual property?

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If a founder owns intellectual property that he or she plans on contributing to a company, the founder may want to pay for founder stock by assigning the intellectual property rather than paying cash.  Even though founders typically purchase stock for $0.01 or $0.001 per share, the aggregate purchase price...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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What is Class F common stock?

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Extremely founder-friendly provisions in the certificate of incorporation for companies. These provisions include a special class of super-voting common stock, called "Class F" common stock, which is named for "Founders."    * Voting.  The COI includes Class A common stock, which has one vote per share, and Class F common stock,...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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How many shares should be authorized in the certificate of incorporation?

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I usually advise companies to authorize around 10 to 15 million shares of common stock. Around 8 or 9 million shares are issued to founders with a 1 million to 2 million share option pool, for a fully-diluted base of around 10 million shares. The remaining authorized but unissued shares...
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By  Yoichiro (“Yokum”) Taku  | Corporate & Securities Partner at Wilson Sonsini Goodrich & Rosati
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Big banks mint money again: $18.7 billion

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(Fortune) -- The biggest banks are minting money. Can they keep it up? Do we even want them to?The six biggest bank holding companies - Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500), Goldman Sachs (GS, Fortune 500)...
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By  Marcos Arce  | Freelance Contributor
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New $100 Bill Released Today by U.S. Treasury

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The U.S. Treasury refreshes its currency every once in a while to stay a step ahead of counterfeiters, and this time they're refreshing the new $100 bill. The new bill will contain a security feature called Motion, where each bill will contain up to 650,000 microlenses embedded in the printing...
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By  Marcos Arce  | Freelance Contributor
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