Full text of this morning's piece on BotProof''s gift of options:
BotProof.com, an Illinois-based startup with an office in Salt Lake City, has donated options for 5,000 of its pre-IPO shares to the Community Foundation of Utah.
The gift is the first of its kind ever received by the nonprofit community foundation, which makes grants to organizations in the Salt Lake City area.
It's a way for BotProof to establish an ethos of corporate giving before it has extra cash to give to charities, Chief Operating Officer Tim Brown said Monday.
"Our capital is very important to us. One way we can share that without giving up the limited amount of cash that we have is to share our equity," Brown said.
BotProof, based in Napierville, Ill., has developed a new kind of "captcha," a software program that protects Web sites from fraud by generating tests that humans can solve but computer programs can't.
A common captcha is a distorted word with a line through it. BotProof's animated captchas are an improvement because computers are becoming more sophisticated at reading static captchas, Brown said.
Brown wouldn't say what value the BotProof shares have, but if the company's captchas become successful, they could be worth plenty.
"If they end up being worthless, it's no cost to us. And if they end up being Google, hurrah!" said Fraser Nelson, executive director of the foundation, which has been active since June. It has already raised more than $1 million via conventional cash donations.
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Nelson said she doesn't know of any other Utah foundation that has raised potential funding with option donations.
The foundation will be able to exercise the options if someone tenders an offer for its shares or if BotProof becomes a publicly traded company through an initial offering of its stock to the public.
The concept of donating stock options instead of cash dates back at least to the late 1990s. The Silicon Valley Community Foundation and the Community Foundation in Boulder, Colo., have raised funds with stock options.
