Why Founder Agreements Matter
Founder agreements clarify expectations, prevent disputes, and protect the company’s future. They should be created and signed as early as possible—ideally before incorporation or issuing equity.
Why Founder Agreements Matter
A founder agreement is essential for any startup with more than one founder. It defines each founder’s roles, responsibilities, equity ownership, and what happens if someone leaves. Without it, misunderstandings can lead to costly disputes, lost equity, or even the collapse of the company.
When to Create a Founder Agreement
Before incorporation or as soon as possible after forming the company.
Before issuing equity or making any material business commitments.
Before fundraising or bringing on outside investors.
How to Create a Founder Agreement
Discuss and align on key terms: Honest conversations about roles, equity, and expectations.
Draft the agreement: Use a template as a starting point.
Review with legal counsel: Ensure the agreement is enforceable and customized for your situation.
Sign and store the agreement: All founders should sign, and a copy should be kept with company records.
Example Founder Agreement Template
This Founder Agreement (“Agreement”) is made as of [Date] by and among the founders listed below (“Founders”) of [Startup Name], a [State] corporation (“Company”).
1. Roles & Responsibilities
[Founder 1 Name]: CEO – Product vision, fundraising, investor relations.
[Founder 2 Name]: CTO – Technology development, team hiring, product roadmap.
[Founder 3 Name]: COO – Operations, sales, customer support.
2. Equity Ownership & Vesting
Equity Split:
Vesting Schedule:
Standard 4-year vesting with a 1-year cliff: 25% vests after 12 months, remainder vests monthly over next 36 months.
If a founder leaves before the cliff, they receive no equity.
3. Intellectual Property (IP) Assignment
All founders assign to the Company any IP developed related to the business.
4. Decision-Making & Dispute Resolution
Major decisions (e.g., fundraising, hiring/firing, acquisitions) require unanimous or majority approval.
Disputes unresolved after [X] days are subject to mediation.
5. Departure & Buyback Rights
If a founder leaves (voluntarily or involuntarily), the Company has the right to buy back unvested shares at the lower of cost or fair market value.
6. Confidentiality & Non-Compete
Founders agree to keep company information confidential and not compete for [X] years after departure.
Signature:
Founder 1: ____________________ Date: __________
Founder 2: ____________________ Date: __________
Founder 3: ____________________ Date: __________
Key Takeaway: Founder agreements protect relationships and the startup. Draft and sign one at the very beginning, and revisit as the company evolves.
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Disclaimer:
This article is for informational purposes only and does not constitute legal, financial, or tax advice. Always consult with a qualified attorney, accountant, or professional advisor before making decisions about incorporating your business, structuring your company, or engaging in fundraising activities.
