Most startups don't fail because of the market — they fail because the founders fall out. A founder agreement is the single cheapest insurance you can buy against that, and yet most teams skip it in the excitement of starting up.
What a founder agreement does
It's a written contract between co-founders that spells out, in advance, who owns what and who does what — so that when disagreements come (and they will), there's a clear reference instead of a bitter argument.
What it should cover
- Equity split: exactly who owns what percentage, and why.
- Roles & responsibilities: who leads what, and how big decisions get made.
- Vesting: equity that earns over time (typically with a cliff), so a founder who leaves early doesn't walk away with a big stake.
- Time commitment: full-time vs part-time, and what happens if someone can't commit.
- Exit & departure: what happens to a founder's shares if they leave.
- IP assignment: that all work belongs to the company, not individuals.
Vesting: the most important clause
A founder who leaves in month three shouldn't keep the same equity as one who stays for years. Vesting (e.g., over four years with a one-year cliff) protects the committed founders and is standard practice investors expect.
When to do it
Before you launch — while everyone is still friends and optimistic. It's far easier to agree on hard questions when there's nothing yet to fight over. Get it in writing, keep it simple, and revisit it as you raise funding.
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This article is for general information based on rules current at the time of writing and is not professional advice. Rules change — confirm specifics with a GovYapar expert before acting.
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