t’s called The Fairshare Model: A Performance-Based Capital Structure for Venture-Stage Initial Public Offerings. Its name describes its purpose: to balance and align the interests of investors and employees—capital and labor.
It has implications for how to attract funding to companies that have poor access to equity funding but who have the ability to attract an affinity group of public investors. More significantly, it has potential to help companies attract and manage human capital.
The Fairshare Model was conceived to deal with the uncertainty involved in establishing a value for a venture-stage company. There are ways to mitigate the risk of getting it wrong in a private offering, deal terms. But there is no equivalent in an IPO.
The Fairshare Model changes that with a deal structure that places no value on future performance. It does that by providing shares for future performance that vote but cannot trade; they convert into the tradable stock based on performance milestones.
Simply put, what junk bonds were to debt capital in the ‘80s, the Fairshare Model can be to equity markets. What’s required is a few companies to try it. If it helps the issuer sell its offering, and gives it an advantage in attracting and motivating employees, it will be positioned to become the New Normal for how venture capital is raised in an IPO (or initial coin offering).