Startup Agreement Founders

October 9, 2021

If you`re working to experience this step, read our guide to founder compensation and our guide to startup CEO salary. Typically, founders don`t have to worry about long-term planning or estate issues in agreements. Avoid the seventy-page “Everything But kitchen sink” type of agreement and leave with something that matches the expected life of the agreement (for most companies, this lifespan lasts until the next funding round or any other significant transaction). It is normal to start with mutual understanding, but it is advisable to document it as soon as possible in the form of a “founding contract”. 8. Unwavering. The founding capital to be allocated under Section 6 is transferred to each founder by [NUMBER OF YEARS TO ENTER THE EXERCISE] and each founder enters into on the date of its creation a current share restriction agreement describing this exercise: conflicts, disputes and disagreements are part of the life of the startup. Maturity is about anticipating the scenario and agreeing and documenting a framework/process to resolve such a conflict. “I started a company with four founders and we didn`t define roles,” writes Jason Lengstrof, an expert in remote work. “What happened in the end was that one person didn`t do anything they weren`t interested in, one person started a number of tasks and left them half ready for someone else to accomplish, and one person could only do process-based work, leaving it to the fourth person (me) to do everything else (and write down the processes). It created resentment and made it very difficult to adapt the turnover in the future, because it was found that I could do anything and that is why I became the last point of responsibility, even if later we had defined new roles.

Our only way out was to sell the business. The agreement identifies the founders and the company for which they agree on the rules. The timing of investments is equally crucial. What if one of the founders becomes indulgent after receiving the equity? What if one of you wants to leave after a year or two? Do outgoing members retain or have to transfer their shares? In the event of a transfer, how do the remaining members distribute these shares? What if you need to add a new team member? The founder`s agreement should clearly define the timing of investments in order to avoid future conflicts. This becomes even more critical if you are raising outside funds. They should also have a documented understanding of how and under what conditions these agreed conditions of exercise can be changed. Excellent – now you are a professional of the founding contract. You know the ins and outs of what it is, for whom it is and what`s inside of you. No agreement can define your mutual trust and respect. Startups are bumpy hard cogs and there would be a lot of hiccups. If you can`t trust yourself right now, now is the right time to part ways…

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