I've first heard of this special class of stock through The Founder Institute. It's basically a way for founders to protect from dilution by authorizing both Common stock and a special Class F (for Founder) Common stock, which has 10x voting rights over Class A Common.
Most of the people I've asked haven't seen this structure around, and a few other people advised me against using it because apparently VCs won't be happy with it (I'll let you know later in any case).
What do you feel about this kind of special stock for founders? Evidently as a founder you gotta feel good about it, but have you seen this around? Have you heard any stories of teams with this structure getting funded/busted?
If you can read legalese or are plainly curious (as I was when I first read the sample certificate), here's a link to download the sample certificate of incorporation with this special class of stock. I post this because when I downloaded it (like a month and a half ago) it was posted on the Founder Institute site for free too, so I'm assuming it is a public document by now.
Edit 1: I found the original link to download the forms, you can see it here.
Finally, is it possible that someone edits this post and adds a tag like: "stock" or "common-stock", and also erases this sentence. Thanks!
Incorporation Founders Stock Options
Here's a pretty good article on the matter: http://entrepreneur.venturebeat.com/2010/03/01/ask-the-attorney-what-the-heck-is-class-f-stock/
Strikes me as having the potential to do more harm than good, particularly in today's environment where investors have the upper hand (more entrepreneurs seeking money than investors willing to invest their money).
Risk: Potential investor will think that you are being too cute / aggressive and will be turned off for fear that you will be difficult to work with.
Reward: Modest, at best. If the investor is savvy, the Class F protections will be negotiated away. If the investor is not savvy, (a) you probably could have negotiated favorable terms more simply, and (b) its not clear that you want a non-savvy investor, anyway.
Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.
VCs will not be happy with any sort of preference that reduces their control. I asked around a bit and no one I know heard of this as well. That would lead me to believe that it's not that common.
The typical founders stock price/structure is usually purchased for a deep discount compared to the common stock price (e.g. if common is $0.10 then founders is $0.01) but that's just a pricing thing. I guess that does mean that founders have 10x the voting power per $ invested.
Once the founders stock is issued, I have not heard of any other preferences given. The benefit of founders stock is that it's stock, not options (which most other employees get). So, it has voting power unlike options which have no voting power (unless exercised).