- $US9 billion Stripe wants to make it automatic for startup co-founders to divvy up their shares in the company.
- The service automatically draws up legally binding paperwork for stock issuance, cuting down on the risk of drama between cofounders.
- The new service is a part of Stripe Atlas, a “company-in-a-box” solution that makes it easy for startups to incorporate, get a bank account, and use Stripe to take credit card payments.
One of the most common mistakes in starting a company is when it comes time for the founders to divvy up their equity. Too often, cofounders rely on verbal agreements, shoddy informal paperwork, or simply don’t talk about ownership at all, leaving open the possibility for drama and legal action down the line.
Stripe, the $US9 billion financial services startup, thinks it has a solution: a free new tool that helps you figure out how much equity each founder should get, and then automatically draw up legally-binding paperwork to expedite the process.
This stock issuance tool is a part of Stripe Atlas, a “company-in-a-box” solution that helps entrepreneurs automate the process of incorporating a company in Delaware, setting up a US bank account with a tax ID number, and, crucially, creating a Stripe account to accept online payments, expanding the startup’s customer base.
“The challenges of starting a business don’t end there, it’s where they begin,” says Taylor Francis, the lead of the Stripe Atlas project, in an interview with Business Insider.
Equity distribution was a logical next step for the Atlas service, says Francis. Too often, he says, founders don’t realise that the way they divvy up equity can have a bearing on how they report and file taxes to the IRS, just for starters.
The system takes out a lot of the guesswork. Orrick, a law firm with which Stripe has a long partnership, helped draft the paperwork, so it’s straightforward and legally binding. It also lets you build in tricky concepts like a four-year vesting period with a one-year cliff.
The Atlas system automatically reserves 20% of the stock pool, to make sure that there’s enough equity left to give out to investors or early employees.
And speaking of early employees, that’s where the system runs into its limits. It’s designed for founders, says Francis; you’ll want a lawyer to get involved by the time you hire your first employee or take your first outside investor.
The ultimate goal of Stripe Atlas is to make it easy for businesses to get started anywhere in the world. While the details may differ from continent to continent, Francis says that they face similar challenges — like stock issuance — that can distract from actually making a product.
“There’s a very long list of hard things that take time away from founders,” says Francis.