How to Structure a Cofounder Agreement

Don't let your startup fail before it starts! Starting a company is exciting. You’ve got a killer idea, a solid team, and the hustle to make it happen. But before you go all in, there’s one thing you can’t ignore, the co-founder agreement. Think of it like a prenup for your startup. It’s not the most exciting part, but trust me, it’s essential. A solid agreement sets the tone for a strong partnership and avoids major headaches down the road. As Paul Graham says, founder relationships can make or break a startup. Getting things in writing early can save you from a world of trouble later. What Should a Co-founder Agreement Cover? Here are a few key things to lock down: Equity Split: The big one. How’s ownership divided? Be real about contributions, past, present, and future. A 50/50 split isn’t always the way to go. Consider things like: Who had the original idea? Who’s putting in the cash? Who’s dedicating the most time? Who brings unique skills to the table? Vesting Schedule: Make sure founders earn their equity over time—usually over 4 years with a 1-year cliff. This protects the company if someone leaves early. Roles and Responsibilities: Define who’s doing what from day one. Who’s leading product? Who’s running sales? Clarity here avoids future confusion and tension. Decision-Making Process: How do you handle big decisions? Majority vote? Unanimous agreement? Who has the final say in specific areas? Intellectual Property (IP) Assignment: Everything built for the company should belong to the company, not individual founders. Founder Exit (a.k.a. "Founder Divorce"): What happens if someone leaves? How’s their equity handled? What about their responsibilities? Your vesting schedule is key here. Dispute Resolution: Even the best teams run into issues. How will you handle disagreements? Mediation? Arbitration? Better to figure this out now than later. Why This Matters Founder disputes are one of the top reasons startups fail. A good co-founder agreement helps: Avoid conflicts: Clear expectations prevent misunderstandings. Provide a playbook for resolving issues: When problems arise, you’ll have a plan in place. Protect the business: Whether a founder leaves or challenges come up, the company stays on track. So... have you signed yours yet?

𝐂𝐨-𝐅𝐨𝐮𝐧𝐝𝐞𝐫 𝐀𝐠𝐫𝐞𝐞𝐦𝐞𝐧𝐭 𝐓𝐞𝐦𝐩𝐥𝐚𝐭𝐞 Great startups fall apart early—not because the idea fails, but because the co-founders do. This 18-section agreement covers everything a founding team needs to survive and scale together—from equity splits to what happens if someone walks away. Key Takeaways: 1️⃣ Equity and vesting from day one – 4-year vesting, 1-year cliff, and clauses for good vs. bad leavers are baked in to protect the company and each other. 2️⃣ Clear responsibilities and role flexibility – Initial roles are defined, but reviewed quarterly to adapt as the business evolves. 3️⃣ Time commitment and compensation – No salary until funding hits €250K, then capped at €5K/month until €2M is raised. 4️⃣ IP assignment and confidentiality – Founders assign all inventions to the company and stay bound by non-compete and non-solicit terms post-exit. 5️⃣ Dispute resolution + exit clauses – If conflict happens, there’s a path to mediation, arbitration, and even clear repurchase rights tied to leaver status. Bottom line? If you’re building with co-founders, you need this doc. It’s not just about equity—it’s about protecting the mission and the relationships behind it. Credit: EWOR PS. check out 🔔 for a winning pitch deck the template created by Silicon Valley legend, Peter Thiel https://lnkd.in/eQFrsUnE

I recently on twitter saw this graphic that looks like it’s from the YC office of how companies die. I have no idea if it’s real, but from experience it does seems relatively representative of how companies die, especially at the seed stage. One of the reasons YC is so successful is they’re great at dealing with that 96% or whatever that is very solvable that kills companies. But, what if you're just getting started? I think every founding team should have a “roommate agreement“ for cofounders for how you’re going to operate your company. A normal roommate agreement might answer: - Who does the dishes and takes out the trash? - Who’s responsible for cleaning and when? - When are we quiet? - What if I want to bring a significant other or friends home? A cofounder roommate agreement is similar, but answers: - How do we fire one another and under what circumstances? - When do we pivot vs double down and why? - How do we resolve conflict? - Who does what roles (sales, investors, engineering)? - How do we make hiring decisions, raising decisions (the big stuff)? - What are our goals in 5-10 years? Is it a big exit or a profitable side business? - What if one of us needs to quit? What are good reasons for doing that? - How do we revise this periodically? - Anything else that’s important for decision making Basically, how are we going to navigate those 95% of things besides "other" that could kill us. It’s shocking how few cofounders talk about this stuff, let alone put it in writing. Just like a normal roommate agreement, you should write it down (maybe even sign it). Not because it’s legally binding, but because it enables you to have a shared framework for most major decisions that are already agreed on, and helps a ton with those 95% of things besides "other" that kill companies.

Think finding a co-founder was hard?  Wait till you try splitting equity and surviving the first big argument. Finding the right person is a huge win.  But the real work starts now, nailing down the uncomfortable but necessary conversations about who gets what, how, and when. The VC Corner outlines a solid framework for this.  Here are 8 critical areas to cover before you dive headfirst into building: 1. Define roles and responsibilities clearly. -> Leverage each other’s strengths and avoid overlapping efforts. 2. Agree on equity distribution and vesting schedules. -> Ensure everyone has skin in the game and a strong reason to stick around. 3. Establish decision-making and conflict-resolution methods. -> How will you handle disagreements? Set clear rules on how to make major decisions. 4. Clarify capital contributions and financial commitments. -> Whether it’s cash or expertise, be upfront about what each partner is bringing to the table. 5. Discuss salaries, profit sharing, and compensation plans. -> Be realistic. Lean salaries early on, with agreed plans for growth as the business scales. 6. Address intellectual property ownership. -> Who owns the IP now, and what happens if a co-founder leaves? Avoid future disputes by clarifying this early. 7. Plan for exits and dissolution scenarios. -> Co-founder breakups happen. Define vesting rules and what happens if someone steps away. 8. Align on long-term goals and working styles. -> Do you both see the same future? Can you live with each other’s working habits? These conversations aren’t easy. I'd recommend connecting with Tim He on that subject. He's an expert!

4 things early-stage founders MUST clarify before bringing on a co-founder: 1) Who makes what decisions? If everything needs to be agreed on together, you’ll move too slow. If decisions are made without warning, trust falls apart. Decide now: What needs joint approval, and what can be handled solo? And what happens when you don’t agree? 2) Who brings what to the table, and how are you splitting rewards? Most fights aren’t about ego → they’re about feeling underpaid or undervalued. Talk openly: How will you measure each person’s contribution? How does that show up in equity, pay, and credit? 3) Are you really on the same page about the future? It’s easy to say “we have the same vision.” It’s harder when things get real. Try this: Ask each other what happens if someone offers to buy the company in 18 months. Would you take it? 4) What if it doesn’t work out? Nobody wants to think about a breakup in the beginning. But that’s when it’s safest to plan for one. Agree now on what happens if one person wants to leave, isn’t performing, or just changes their mind. A strong co-founder relationship matters more than product, funding, or timing. Set the rules early. You’ll thank yourself later. *** Loved this post? Repost it with your network & follow me for more insights.

Have you had the "prenup" conversation with your co-founders? ***** In my first startup, each co-founder had a slightly different deal. There were differences in money invested, percent ownership, and outside cashflow. We operated the business as a partnership (consensus model without a CEO). Our arrangement was practical, fair, and got the initiative off the ground. It worked when things were looking up for the business. When things got hard, our deal structures (incentives) pulled us in different directions. Here are some questions to consider asking yourself (and your co-founders) before signing documents and writing checks. 1/ What's our commitment to each other? -What are we building? -What pivots are in/out of scope? -What's the timeframe of our commitment? 2/ What’s the ambition for the business? -Sell above a certain valuation? -Take out $X / yr for each founder and reinvest the rest? -Decide later? 3/ What process will we follow to bring in outside money/advisors? 4/ What metrics will tell us that things aren’t going well? 5/ If things aren’t going well, what principles will drive our decision-making? 6/ What would make us consider shutting down the business? 7/ Under what circumstances would we persist? 8/ How would we wind things down if we had to? ***** Prenups aren't fun to talk about. But, not having a framework in place when it hits the fan is even worse. Have the tough conversations when times are good.