Founders’ Preferred Stock, also known as Founders’ Preferred Shares (or Class FF Shares), is a special type of equity issued to the founders of a startup company. It represents a form of common stock that includes a conversion feature. This feature allows the Founder's Preferred Stock to be automatically converted into preferred stock under certain circumstances or transactions.

The main purpose of Founders’ Preferred Stock is to address specific tax considerations related to the sale of shares by founders. Generally, by converting their common stock into Founders’ Preferred Stock, founders can sell their shares to investors without potentially triggering adverse tax consequences. This conversion ensures that the transaction is treated as a capital gain rather than ordinary income for the founders.

Founders’ Preferred Stock typically comes with specific conditions and restrictions. It often includes provisions that allow for automatic conversion into the same class of preferred stock being sold in a new financing round, subject to approval by the company's board of directors. This conversion feature helps to avoid potential complications regarding the exchange of value between the company and the founders.

It's worth noting that the use of Founders’ Preferred Stock may vary, and its acceptance among venture capitalists (VCs) can differ. While Founders’ Preferred Stock provides founders with an opportunity for early liquidity, some VCs may prefer founders to maintain a long-term commitment to the company's success.