Previously, we discussed the main ways of handling founder and investor preferences when structuring a company, as seen in some of the world’s leading unicorns. For your convenience, we have put together a table comparing the key similarities and differences in various provisions of the COIs of Uber, Facebook prior to its IPO, Snapchat, AirBnB and Palantir.

 

Uber Facebook Snapchat AirBnB Palantir
Two Classes of Common Stock for Founders Yes Yes Yes Yes Yes
Liquidation preference Non-participating preferred Non-participating preferred Non-participating preferred (for Series A, A-1, B, C) Non-participating preferred Non-participating preferred
Multiple in liquidation preference 1.25x for Series C-2 and C-3 Preferred 1x 1x 1x 1x
Investor relations in liquidation preference Pro rata Pro rata Pro rata Pro rata Pro rata
Election of Directors by Common Stockholders 6 Common Class B Directors 3 Common (Class A + Class B) 1 Director elected by Class A, FP Preferred and Voting Preferred 3 Common Stock Directors 2 Common Stock Directors
Election of Directors by Investors 1 Series A Preferred Director, 1 Series C-2 Director 1 Series B Preferred Director, 1 Series A Preferred 1 Preferred Director (Series B, A, A-1), 2 Series FP Directors 1 Series Seed Director, 1 Series B Director 1 Series E, D, C Director, remaining Directors together with Common Stock
Voting by Class Class A: 1 vote per share, Class B: 10 votes per share, Series A Preferred: 10 votes as-converted to Class B Common Stock, Series C-1, C-2, C-3, D, E: 1 vote as-converted to Class B Common Stock Class A: 1 vote per share, Class B: 10 votes per share, Series A, B, C, D, E: 10 votes as-converted to Class A Common Stock Class A: 1 vote per share, Series FP Preferred: 10 votes as-converted to Class A Common Stock, no voting rights for Series C, D, E, F Preferred, Class B Class A: 1 vote per share, Class B: 10 votes per share, Preferred: 1 vote as-converted to respective class of common stock Preferred: 10 votes as-converted to Class B Common Stock, Class A: 1 vote per share, Class B: 10 votes per share
Anti-dilution Broad-based weighted average Broad-based weighted average N/A Broad-based weighted average, special adjustment (conversion price reduction) for Series C Preferred Broad-based weighted average
Redemption of series preferred No redemption No redemption No redemption No redemption Redemption of Series H Preferred Stock
IPO auto conversion for series preferred Automatic conversion into Class A or Class B Common Stock at the then applicable conversion rate in the event of closing of underwritten public offering resulting in aggregate cash proceeds of no less than $30,000,000 or upon written consent of holders of a majority of the preferred stock Automatic conversion into Class B Common Stock at then applicable conversion rate in the event of closing of underwritten public offering with price resulting in aggregate cash proceeds of no less than $100,000,000 or upon written consent of holders of a majority of the preferred stock Automatic conversion into Class A Common Stock at the then-effective conversion price upon the closing of underwritten public offering in which gross cash proceeds are at least $25,000,000 – for Investor Preferred only or upon affirmative election of the Voting Preferred Class (for Voting Preferred) or Series FP Preferred (for Series FP Preferred) Automatic conversion into Class B Common Stock at the then applicable conversion rate upon the closing of underwritten public offering resulting in at least $75,000,000 gross proceeds or upon vote or written consent of holders of a majority of the preferred stock Automatic conversion into Class B Common Stock at the then applicable conversion rate upon the closing of underwritten public offering the public offering price of which is no less than $150,000,000 in the aggregate or by written consent of the holders of a majority of the preferred stock
Dividends for Investors Priority of Preferred Stock. Thereafter, on pro rata basis for Common Stock and Preferred Stock. Priority of Preferred Stock. Thereafter, on pro rata basis for Common Stock and Preferred Stock. 6% of the original issue price per each outstanding share of preferred stock. Therefore, on pro rata basis for Common Stock. 8% of the original issue price per share of preferred stock. Thereafter, on pro rata basis for Common Stock and Preferred Stock Stack priority of Series K-A Preferred Stock. Thereafter, on pro rata basis for Common Stock and Preferred Stock.
Cumulative dividends Non-cumulative Non-cumulative Non-cumulative Non-cumulative Non-cumulative
Permitted secondary transactions Yes – permitted transfer of Class B Common Stock to single trust for benefit of stockholder and stockholder’s immediate family, by will or intestate succession, transfer to affiliate Yes – permitted transfer of Class B Common Stock to trust for benefit of stockholder or family members, or to entity owned by stockholder or stockholder’s family members, transfer from such trust or entity to stockholder or family members N/A N/A Yes – permitted transfer of Class B Common Stock to trust for benefit of stockholder or entity owned by stockholder, transfer from such trust or entity to stockholder or to other owned entity by the stockholder

We believe that the issues covered by this series of posts should be thoroughly analyzed by every founder, even at the early stage of their startup. Studying the structures of the giants in the context of a fledgling business may seem outlandish but it is crucial to build the core of your company and set up relationships with the earliest of investors already using the successful, tested models. The chart may also serve as a useful guideline and point of reference while negotiating your company’s funding.