Adeo Ressi’s Founder Institute, a seed stage incubator and mentoring program that we first covered last month, is set to release a set of legal documents this afternoon that promise to protect startup founders from, as he eloquently puts it, the “atrocities of investors.”
The stock grants and any penalty fees paid are put into an exchange fund that all participating founders have ownership in. Therefore, all companies participating in each class have some stock in all the other companies – a great way to reduce overall risk. One big winner in each class means everyone gets a little bit rich. 60% of the warrant stock goes to the founders, the institute keeps the other 40%.
There’s a risk that these extremely favorable founder terms could create problems when the companies try to raise outside funding. Ressi says they won’t let a financing die from these terms and will likely waive rights if forced to. His reputation will require that – if these agreements protect founders he’ll be a hero, but if they kill financing deals the program will collapse.
Applications for the first startup class are open until May 10.