Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on the day's biggest business stories

Subscribe to Axios Closer for insights into the day’s business news and trends and why they matter

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Stay on top of the latest market trends

Subscribe to Axios Markets for the latest market trends and economic insights. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sports news worthy of your time

Binge on the stats and stories that drive the sports world with Axios Sports. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tech news worthy of your time

Get our smart take on technology from the Valley and D.C. with Axios Login. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Get the inside stories

Get an insider's guide to the new White House with Axios Sneak Peek. Sign up for free.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Axios on your phone

Get breaking news and scoops on the go with the Axios app.

Download for free.

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Denver news?

Get a daily digest of the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Des Moines news?

Get a daily digest of the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Twin Cities news?

Get a daily digest of the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Tampa Bay news?

Get a daily digest of the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Want a daily digest of the top Charlotte news?

Get a daily digest of the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Sign up for Axios NW Arkansas

Stay up-to-date on the most important and interesting stories affecting NW Arkansas, authored by local reporters

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Aïda Amer/Axios

Since Google's IPO in 2004, some Silicon Valley entrepreneurs have sought ways to retain control of their companies via dual-class stock with super-voting rights, including at the earliest stages of startups.

Yes, but: It’s still only found in a minority of startups, and founders often end up using alternative routes to retain control. Super-voting stock, several lawyers tell Axios, is most useful once a company is public.

The goals of special structures likes dual-class stock fall into two buckets, says startup attorney Jared Verzello.

  • Economic: Alternative structures like "FF preferred" stock or setting up two classes with different liquidation preferences can help with taxes (capital gains instead of income), or in cases where founders put in significantly different assets into the business.
  • Control: Founders often look to these legal tools to make sure they retain control of their companies even as they sell off more and more of their business to investors.

Private vs. public: While public company founders turn to dual-class stock that gives control of their company and their own continued employment, other legal tools can arguably be more effective.

  • "If you’re trying to maintain control, pay very close attention to your board composition," says Atrium's Verzello. "Board dynamics are misunderstood by early stage founders.”
  • Founders' biggest bargaining chip will always hinge on how successful their company has become."If you’re seeing success, whatever that means, you’ll have leverage to negotiate and you can retain," says Goodwin's Joshua Cook.
  • Most notably: Dual-class stock structure often get ripped out during a startup's first (or second) institutional financing round. Other provisions like board seats "are much easier to justify in your VC term sheet negotiations because you're not just asking for blanket voting rights," says Grellas Shah partner Mital Makadia.

Despite being increasingly popular among tech companies going public — ride-hailing company Lyft disclosed a dual-class stock structure in its IPO filing — these still remain rare among early-stage startups.

  • Only 10% of Atrium's startup clients choose some form of special stock structure. Makadia says that only about 20% of her clients have dual-class stock structures, typically putting in about 10% of their stock into a super-voting class.

Still, some early-stage startup founders do opt for one of these alternative structures.

  • One founder of a consumer mobile app says he went with a two classes of common stock with equal voting rights as an early precaution, and as a bargaining chip he can give up in his next funding round with VCs.
  • "When I raise money, my question to VCs is 'how are you gonna screw me?' he says, admitting his decision stems from a lack of trust that investors' incentives will be in line with his own.

Go deeper

Caitlin Owens, author of Vitals
29 mins ago - Health

Special report: America's biggest hospitals vs. their patients

Expand chart
Data: JHU; Chart: Will Chase/Axios

More than a quarter of the 100 U.S. hospitals with the highest revenue sued patients over unpaid medical bills between 2018 and mid-2020, according to new research by Johns Hopkins University provided exclusively to Axios.

Why it matters: The report suggests that, rather than being an anomaly, patient lawsuits are relatively common across the country and among the largest providers.

30 mins ago - Technology
Column / Tech Agenda

The next big social network: Nextdoor

Illustration: Aïda Amer/Axios

Nextdoor, the neighborhood social network, has seen explosive growth over the past two years as homebound users became more fixated on what was happening on a hyper-local level.

Why it matters: Such rapid growth comes with challenges. What was once a niche social network is now so popular that it's grappling with some of the same thorny problems plaguing Facebook and Twitter, such as content moderation.

Updated 3 hours ago - World

American men plead guilty to helping former Nissan chair escape Japan

Carlos Ghosn, former Nissan chair, during a news conference in Jounieh, Lebanon, last September. Photo: Hasan Shaaban/Bloomberg via Getty Images

Americans Michael Taylor and Peter Taylor pleaded guilty in a Tokyo court Monday to helping former Nissan chair Carlos Ghosn escape Japan in a box aboard a plane in 2019, per the Wall Street Journal.

The big picture: Ghosn was awaiting trial in Tokyo on financial misconduct charges following his 2018 arrest when he fled to Lebanon. He denies any wrongdoing.

You’ve caught up. Now what?

Sign up for Mike Allen’s daily Axios AM and PM newsletters to get smarter, faster on the news that matters.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!