Quick. Think tech. Think tech startup.
Think tech startup riches….then think stock.
Then think about how to take and give stock, if you’re the founder or co-founder of a tech startup.
The dream of any number of innovative firms is to disrupt an industry, to make things easier or better, and along the way, to own a piece of that disruption. Ownership comes through stock grants, and of course translates into, possibly, a very nice living through income, or eventually, the sale of the firm.
The question is: Who owns what, when and how much is it worth? Sticky issues if not clearly defined, translating into conflict down the line in some cases, legal issues should real disputes arise.
Stripe said Tuesday that it had launched a stock issuance tool, tech-focused and automatic in many respects, and which helps users of Stripe Atlas found tech-focused companies and get them up and running in days. In a blog post tied to the launch Stripe Atlas Engineering Manager Alex Kehayias said of the launch that business owners have said that “the challenges of starting a business hardly end with incorporation.”
And in an interview with PYMNTS, Taylor Francis, Atlas program lead, noted that there are many areas where companies and their founders should be innovating, “but the legal foundation is not one of them.”
Against that backdrop, stock issuance is important, and “documenting who owns how much of a company that is legally solid is vital to get right at the beginning,” added Francis. Get it wrong and questions arise when founders leave, and in the meantime, companies spend thousands of dollars in legal fees issuing stock, and potentially much more if they have to go back and correct mistakes. Relying on excel spreadsheets alone can be a risky proposition.
To help smooth the process, Stripe has produced a new Stripe Atlas user guide to assist companies looking to issue stock through its software. Francis told PYMNTS the user guides include checklists (such as reminders of annual re-registration with their home states and prompts to hold conversations with accountants about sales taxes) that can help founders and executives navigate the mechanics of running their companies after incorporation and stock issuance.
Beyond the guide, companies that use Stripe Atlas can access the stock issuance tool for free. Founders can elect to issue stock to their founding team members, and users are also able to review, sign and store complete sets of issuance-related documents. Francis told PYMNTS those documents are generated from templates prepared by Orrick, a law firm often used by tech companies, with standard terms and parameters of equity issuance that can span four year vesting periods, for example. Atlas, said Francis, exists, and has been expanding, to coordinate interrelated corporate activities “in one consolidated place, where firms can go to incorporate, register with the IRS and now issue stock to founders.”