What is the Founders Contract?

In examining the Founders Contract for the first time, it is essential to understand the concept as a novel, equitable entrepreneurial compensation paradigm for companies, referred to as “Foundations.” This paradigm aims to fairly distribute the benefits of AI technologies and other innovations among stakeholders while preventing power and wealth from concentrating in the hands of a few founders and investors.

The Founders Contract is based on the following principles

  • Democratic ownership and governance
    A Foundation is established as a DAO (Decentralized Autonomous Organization) using blockchain smart contracts or through traditional legal agreements. It employs modern DAO governance theories to ensure decision-making power is distributed among the stakeholders, ultimately shifting the control from founders and investors to the broader community.
  • Stakeholder value generation
    The Founders Contract introduces various share types (Founder Shares, A, B, and C Shares) that allocate different rights and responsibilities to stakeholders. B Shares are granted to suppliers, partners, and customers based on their economic contribution to the Foundation, ensuring that value generated by the organization is shared among all participants.
  • Phased compensation and transition of control
    The Founders Contract outlines a phased approach to compensating founders, investors, and other stakeholders.

Phase Alpha

Formation – Establishment of the Foundation and initial agreements.

Phase Beta

Fundraising – Capital is raised from investors.

Phase 1

Buildout – Key employees are hired, and some may be granted A shares.

Phase 2

Buyouts – Profits are allocated to buy out founders and A shares, gradually transferring control to B shareholders (suppliers, customers, and employees).

Phase 3

Stakeholder Governance – B shares convert to A shares, and stakeholders govern the Foundation through the DAO. This phased approach allows founders and investors to be fairly compensated for their efforts while ensuring that the Foundation’s long-term benefits are distributed broadly among the community.

From an economic perspective, the Founders Contract represents a logical evolution of market dynamics and capitalism for several reasons

Incentivizing innovation

By ensuring that entrepreneurs are fairly compensated for their efforts, the Founders Contract encourages the development of innovative AI technologies and solutions, fostering a more dynamic and competitive marketplace.

Promoting equitable distribution of benefits

The Founders Contract prevents monopolistic tendencies and the excessive concentration of wealth and power by distributing ownership and decision-making power among all stakeholders, leading to a more inclusive and sustainable economy.

Aligning incentives with long-term societal goals

By gradually transitioning control to the broader community, the Founders Contract encourages organizations to prioritize long-term societal and environmental objectives over short-term profits.

Enhancing efficiency and resilience

The Founders Contract promotes a more efficient allocation of resources and risk-sharing by incentivizing collaboration and coordination among stakeholders, leading to more resilient organizations and economies.

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In summary, the Founders Contract and Foundations represent a potential evolution of capitalism and civil governance by promoting a more equitable, sustainable, and innovative economy. By distributing the benefits of AI technologies and other innovations broadly among the community, the Founders Contract can help prevent the concentration of power and wealth, ensuring that market dynamics and capitalism continue to serve the greater good.