Atlassian deed of equity set to help startup founders put their money where their mouth is
7 July 2021 at 8:26 am
Atlassian’s Pledge 1% movement has been a philanthropic success story but pledges made have never been legally binding in Australia. Until now.
The Atlassian Foundation’s newly created deed of equity is set to take the company’s Pledge 1% movement one step further by holding successful founders accountable to the pledges they made when starting out.
Atlassian co-founded the Pledge 1% movement in 2014 as a not for profit to help startups bake philanthropy into their business model from day one.
The movement is built on the principle that participating companies and founders agree to donate one per cent of either their equity, profit, product or employee’s time to charitable causes.
For startups keen to make an impact with their business but with little to no profit, pledging one per cent of equity is a way to show a willingness to do their bit.
However, until Atlassian’s newly-created deed of equity, these pledges haven’t been legally binding.
Mark Reading, head of the Atlassian Foundation, told Pro Bono News that there has always been the risk that a one per cent pledge made in good faith when a startup has two founders and a small team, gets harder to implement the bigger the business becomes.
“It can be more difficult to implement when you’re a much larger business that has accepted capital from a whole bunch of investors,” Reading said. “The value of one per cent then becomes something quite substantial.”
While the Atlassian Foundation has never seen any instances of someone defaulting on a pledge, Reading wanted to find a way to give those early-stage equity pledges some legal substance.
“When we were thinking about how we could continue to grow and enable the Pledge 1% movement, I reached out to PwC as well as Herbert Smith Freehills, our foundation’s governance advisors and Australian Philanthropic Services,” Reading said.
“Together we worked through various options as to how we could give more substance to an equity pledge for the benefit of society.”
A logical progression for impact-driven founders
Signing Atlassian’s equity deed is the logical next step for those founders who’ve already signed up to, and are serious about, the Pledge 1% movement.
By signing, companies and founders are making a legally binding commitment to donate whatever percentage of shares they designate (normally one per cent) to an identified Australian registered charity or NFP.
The donation is made after any liquidity event the company might experience, such as an IPO, within 10 years of signing the deed.
“Even though there might be a lengthy delay between when [founders] make the equity pledge and when [they’re] ready to implement it, [they] are nonetheless legally bound to do so,” Reading told Pro Bono News.
“From a social impact perspective [the deed] is the right thing to do and from a founder’s perspective it helps them unequivocally demonstrate to their customers, employees and society at large that [impact] is something they’re serious about.”