They don't have zero voting power. They have greatly reduced voting power. Huge difference.
Snap Inc. is a delaware corporation. The shareholders (DE = shareholder; NY = stockholder) have certain non-waivable rights as a matter of delaware law.
To put it another way: The founders create the company, including designing the ownership structure. The fact of the matter is, common shareholders are willing to buy into this structure, even without very strong voting rights, at a huge valuation. The proof is in the pudding - why should the founders have done otherwise? No one is forcing the common shareholders to buy into the Company - they are doing so knowing full well that they have very low voting rights.
So, why should management give up control to common stockholders? What benefit is there? The only answer, in my role as a corporate lawyer, is when the company cannot raise money on terms more favorable to the founders and management.
That was not the case with Snap. And it worked out brilliantly.
I have yet to see a news outlet describe the SNAP common stock as you have. Do you have any references?
A few of many example articles describing how their common stock will have 0 voting rights:
https://www.fool.com/investing/2017/02/08/your-snap-shares-w...
http://fortune.com/2017/02/07/snapchat-ipo-snap-stock-buy/
"Snap acknowledged in its IPO filing that it would likely be the first company to sell non-voting stock in an IPO on a U.S. stock exchange."
If all you mean is that Delaware law allows certain kinds of lawsuits by stockholders, then no, IMO, that is not the same as having voting rights. And yes I understand that it not unusual for common stock in public companies to have greatly reduced voting rights. There is still a difference between that and none.
I actually have that on a sticky on my desk. Sadly.
Why should this necessarily be the case? There are many reasons to buy a stock. Sometimes leadership is an issue, and getting rid of it is an opportunity.
FWIW, there are a lot of people who's goal isn't to sell but to collect dividends due to the long term success of a company.
For me, despite ever maybe owning 0.0000000000001% of a company, the power of mutual ownership means all perspectives are taken into account. And that generally means more accurate valuations, and therefore safer investments.
Private held companies: not necessarily traded. Your investment is illiquid. Nobody outside is really watching. The managers can fly the company into the ground before you can find a buyer, and voting is your only shield against this.
Sam Altman has a right of first refusal provision in his "founder-friendly term sheet". At least I think he does.. he doesn't call it a ROFR, preferring the plainer language of "investor participation rights". But it's there and even the multiple is left as an open variable.[1]
So are @sama's terms actually spat-worthy?
These are reasonable terms. They don't bend over backwards for the company, they are not a land-grab by the investor. Are there 50 other ways from Sunday to also have equitable terms? Yes - every deal is different, which is why you need a lawyer, and depending on the context, different terms can be equitable. In general, though, this is pretty "content-neutral."
Note: I am not your lawyer. If you need a lawyer - get a lawyer. But yes, my handle is my actual name (so you can look me up to see that I am not just an armchair IANAL). As far as I know, I am the only lawyer named Liberty around.
This is a fairly favorable founder term sheet. I negotiate startup investment fairly often - this is a decidedly equitable offer.
This is illustrated in detail here: http://venturehacks.com/articles/options-open
From the point of view of the original angel investors and early employees, why shouldn't the founder push for the best, least dilutive, offer? Are you suggesting that if VC2 comes in with a low-ball offer, the founder should just say "gee, they made such an effort, I owe them the right to excessively dilute us all, even though VC1 is putting his money where his mouth is, and is willing to step up to avoid it."
Let's say I helped you by putting up a down payment for you to buy your house, for which I get 10% ownership. Later, you want to sell the house (or a further interest in it). If you get an offer, and I think it's too low, is it unreasonable for me to want to "steal the deal" at that artificially low price? Otherwise, it's simply a transfer of wealth from me (and you) to the new buyer, which I'd certainly like to defend myself against. People buy houses all the time in competition with other buyers; no serious buyer says "I'm not going to make an offer on that house, because someone else might beat my offer, or maybe exactly match it and the seller could choose that other offer."
