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The Stock Plan Used by Hundreds of YC Companies
Today, we're extremely pleased to make a world-class set of stock plan forms available to startups completely free of charge:
This set of stock plan forms was developed over the past 3 years through Clerky's close collaboration with Y Combinator and Orrick, as part of an initiative to streamline startup legal documents. When portfolio companies decide to adopt a stock plan, Y Combinator recommends they do so on Clerky using these forms.
There are many reasons why we believe this is one of the strongest set of stock plan forms available – but one is that they allow for easy customization of stock option exercise terms. This is particularly important in light of the recent market trend toward longer post-termination exercise windows.
We strongly suggest that you use these forms with the assistance of an attorney or through Clerky's software (a paid service). Stock plans present a surprisingly large number of ways to make very expensive mistakes!
We've put a tremendous amount of effort into this set of forms, so we're very excited to be making them available to the startup community. We hope you find them useful!
Why should I trust these forms?
We can't tell you if these forms are suitable for your company – you need to talk to a lawyer for that. The forms are designed for Delaware C-corporations, but a good startup attorney can easily modify them for use by startups incorporated elsewhere. We know tons of great startup attorneys – email us if you need a referral!
With that said:
- Hundreds of startups have used these forms over the past couple of years with no issue.
- When portfolio companies decide to adopt a stock plan, Y Combinator recommends they do so on Clerky using these forms.
- These forms benefit from improvements and proof-reading that took nearly $1 million of attorney time.
Where did these forms come from?
The development of these forms goes all the way back to the fall of 2012. Carolynn Levy, partner and general counsel of Y Combinator, commented on the pesky problems faced by startups in dealing with stock certificates – problems that we were well familiar with. In response to this, we worked with Carolynn and our former colleagues at Orrick to develop company formation forms using uncertificated stock.
With the company formation forms complete, we turned our attention to doing the same thing with stock plans. In January 2013, one of our customers completed the first stock plan adoption on Clerky, using forms provided to them by their lawyers (which we helped them modify to use uncertificated stock).1 As we started doing this for more and more customers, we began to look at ways we could provide stock plans under a more scalable approach.
In September 2013, my co-founder Chris began the process of creating this set of stock plan forms, starting off of various forms gathered by Y Combinator and Clerky. For much of the next 4 months, he would be in what I affectionately called "stock plan land". Entire days would pass where I never spoke to Chris, even though we were both in the office. He was just that focused, and I didn't want to interrupt.
A lot of it was collaborating with Y Combinator and Orrick. A lot of it was resolving non-substantive inconsistencies that wouldn't bother any lawyer, but that we knew would cause confusion for our more eagle-eyed customers. And a lot of it was Chris being ultra-rigorous about convincing himself that all the language worked, so that we could be confident in offering them to startups.
We finished developing the stock plan forms in early 2014. In April 2014, the startup ecosystem was abuzz with talk about an emerging trend toward longer post-termination exercise periods – so we worked with Orrick to build in support for that.2 Finally, we put this set of forms into use on Clerky in May 2014.
Since then, we've continued to invest in updating and improving these forms both through our ongoing collaboration with Y Combinator and Orrick, and through the valuable feedback we get from the hundreds of startups already using these forms. If you have any feedback on these forms, please feel free to get in touch!
Notes
[1] As far as we know, this was the first fully automated stock plan adoption in history.
[2] This actually worked out really well, because Orrick had previously helped develop similar language for companies that were pioneering this trend.