Creating a Foundation under the Founders Buyout Paradigm

The Founders Buyout Paradigm is designed to ensure fair compensation for founders, investors, employees, suppliers, and customers while transitioning company ownership and control to its stakeholders over time. By adhering to the principles of the Founders Contract, a company can foster a democratic, sustainable, and innovative business environment that benefits its stakeholders and the broader economy.

Follow these comprehensive steps to establish a Foundation under the Founders Buyout Paradigm:

1. Phase Alpha: Formation

Establish the company (NewCo) as a DAO on blockchain smart contracts or through traditional legal agreements.

Importance: This phase is crucial for laying the groundwork for the Foundation and ensuring that the company’s structure and governance adhere to the principles of the Founders Contract.

2. Initial Agreements

Founders set a suitable compensation amount (e.g., $100M) and agree on the desired ROI for investors (e.g., 10X).

Importance: This step is essential for setting expectations and aligning the interests of founders and investors to the long-term success of the Foundation.

3. Share Types

Define the different share types:

  • Founder Shares: Held by founders, representing initial equity.
  • A shares: Granted to investors and key employees, with full voting rights.
  • B shares: Held by suppliers and customers, serving an advisory role until Founder and A shares are repurchased, at which point they convert to A shares.
  • C share: Held by the Founder/CEO, granting veto power and the right to claim a Board of Directors salary.

Importance: Differentiating share types ensures that all stakeholders have clearly defined roles and rights, reinforcing the principles of the Founders Contract.

4. Phase Beta: Fundraising

Founders raise capital from investors.

Importance: Fundraising is a critical step to secure the necessary resources for the Foundation’s development and growth.

5. Phase 1: Buildout

After the initial investment round, key employees are hired, and some may be granted A shares as additional compensation.

Importance: This phase ensures that the Foundation has the necessary human capital to execute its vision and that key employees are incentivized to contribute to the company’s success.

6. Trading and Share Distribution

With every purchase, B shares are distributed to customers and suppliers based on the cash value deposited into the company’s treasury.

Importance: This step promotes the fair distribution of shares among stakeholders, aligning their interests with the Foundation’s success and adhering to the Founders Contract’s principles.

7. Phase 2: Buyouts

Determine the profit allocation and specific payout structure:

  • 1.5% of net profit goes to investors until the promised ROI is reached.
  • 10% of net profit is used for Founder and A share buyback.
    1. Investors receive 100% of their initial investments.
    2. Founder buyback begins, with 50% allocated to founders and 50% to investors until investors reach 2X their investments.
    3. Founders receive 100% of the buyback until their shares are fully repurchased.
    4. Investors receive 1.5% until they reach 10X ROI.

Importance: The buyout phase is essential for ensuring the fair distribution of profits and the gradual transition of control to stakeholders, in line with the Founders Contract’s principles.

8. Transition of Control

Control of the company is gradually transferred to B shareholders (suppliers, customers, and employees) as Founder and A shares are repurchased.

Importance: This step ensures that the Foundation’s governance becomes increasingly democratic and community-driven, fostering long-term sustainability and innovation while adhering to the principles of the Founders Contract.

9. Full Transition to Foundation

After the complete buyback of Founder and A shares, the company’s control and ownership are transferred to B shareholders, who now have full voting rights as their shares convert to A shares. The company is now considered a Foundation, serving the interests of its stakeholders and the broader community.

Importance: This phase represents the fulfillment of the Founders Contract’s principles, establishing a company that operates for the common good and embodies the ideals of fair distribution of wealth, power, and influence.

10. Ongoing Governance and Adaptation

The Foundation operates under the governance principles established by the Founders Contract and encoded on the blockchain. Any changes to these principles require the consent of an elected group of human gatekeepers, who represent the Foundation’s equity holders, and the United Nations’ duly elected government retains veto power over new adoptions.

Importance: This step ensures that the Foundation remains responsive to the needs of its stakeholders and the broader community, fostering a culture of continuous improvement, innovation, and ethical governance.

By following these comprehensive steps, a company can establish a Foundation under the Founders Buyout Paradigm, aligning its operations with the principles of the Founders Contract, and ensuring a fair distribution of wealth, power, and influence among its stakeholders. This approach helps to create a more equitable, sustainable, and innovative economy, where the benefits of AI and other advanced technologies are shared broadly among the community, avoiding the concentration of power and wealth in the hands of a few, and contributing positively to society.

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