Shareholder agreements

Mark Zuckerberg instituted controls on different classes of shares for Facebook. How do I?

Lane Campbell Lifelong Entrepreneur

February 10th, 2015

Basically, is there a sample/template available or is the Facebook stockholders agreement public?

I have a Delaware Corporation that I would like to apply the same controls to the founders shares so that the investors can't easily wrest control from the founders by voting them out.

Here is the media report from 2012 that covers what he did: http://venturebeat.com/2012/02/01/zuck-power-play/

Kate Hiscox

February 10th, 2015

This will never happen to you with good legal advice. Don't mistake the lawyer you hire to take of your business needs, as a lawyer with your best interests at heart. He represents your company's best interests. If you stick classes in, you're potentially creating a hurdle to investment. Mark Zuckerberg had considerable traction and a known intro. Keep your personal objectives aligned with your company's needs. Sent from my iPhone

Lane Campbell Lifelong Entrepreneur

February 10th, 2015

Kate,

I don't plan to seek outside financing until we have considerable traction in our market.  My goal is to insulate myself to known issues with activist shareholders now before we have a problem.  Call it the engineer in me pushing through.

Regards,
Lane

Daniel Ice

February 10th, 2015

Lane,

I would recommend two books on the topic. The first is Venture Deals. This goes through a lot of the mechanics of venture backed companies. The second is Founder's Dilemmas. This book deals with the primary tension on an entrepreneur between wealth and control. It examines this dynamic between founders, early employees and investors.

Finally, I would echo Kate's advice to find a good lawyer that specialize in venture backed startups. Going with a known venture backed legal firm will help you more than a complicated set of shares. One of the important idea about legal work is that if you make up a very unique stock structure, every deal you interact with will have a lot more overhead and rounds with all the legal teams involved. Those rounds are costly. They also might scare away good deals because the VCs might not understand them.

Focus on creating and capturing value. Allow your legal team to help protect the value you have created and captures.

Best,
Daniel


Kathy Fogel Entrepreneur

February 11th, 2015

Many in SV commented that Mark has it because it is Mark. The previous posts are absolutely right that he had tractions beyond anyone's wildest dreams and people fight to give him money. Unless you have that kind of negotiating power, you won't get his kind of a deal.