Emerging Companies Partner Discusses Series FF Stock

Daily Journal (California) | January.22.2013

This article, about lawyers finding innovative ways to help startup company clients, quotes Silicon Valley emerging companies partner Stephen Venuto.

According to Venuto, the inventor of Series FF stock, it was meant to help founders sell their stock in a way that doesn't negatively impact the company's tax structure. The problem arose when founders would purchase common stock at a certain price and then later sell it at a preferred price, Venuto said.

Venuto also stated that the stock has another benefit: It immediately signals to potential investors that the founder is interested in selling equity to make profit.

"For founders, all their income is from the startup and all assets are from the startup," Venuto said. "They're put in a position where, the more successful they are, the more difficult it gets for them."

He said a founder's salary is entirely dependent on the company, and working for a smaller salary for several years before a company goes public can be restricting.

"Trying to just eat, sleep, and work while the nearest possible liquidity event is seven years from now is rough."