Launching a startup with a friend: Cofounder agreement?
I'm launching a startup with a friend. The idea still needs to be validated but I've built the initial MVP.
I'm just wondering if anyone has any experience with a cofounder agreement?
I'm launching a startup with a friend. The idea still needs to be validated but I've built the initial MVP.
I'm just wondering if anyone has any experience with a cofounder agreement?
I've written simple agreements in the past (no lawyers involved) to lay out basic terms.
In my mind the key thing is to work out who will own the business before it becomes a success (i.e. how people will earn equity and what kind of split you're expecting in the future). It's much like a lottery ticket - the best time to work out who owns it is before it's a winner.
Also consider the downside as well - I've been in two businesses in which I was the only full time, unpaid worker and my downside ended up being much larger than everyone else (because they kept their day job and I didn't).
This is one of the best summaries of a co-founder agreement I've come across. "It's much like a lottery ticket - the best time to work out who owns it is before it's a winner." Love this!
You've got great advice really already but just to add my two cents.
You can find out really quickly stuff you simply assumed, can be the total opposite of what your friend believes.
Working with friends is a fantastic experience when everything is crystal clear but it can quickly ruin a friendship once money and power come into play!
Best of luck with it and have fun!
Definitely prove out your hypothesis with your MVP. Legal stuff can often be a distraction from realizing you don’t have a product.
Once you’re there though, consider having some type of vesting structure for the both of you. In Silicon Valley/SF it’s a typical 4 years with a 1 year cliff (meaning you own nothing if you peace out before one year). If there’s investment involved it may be more complicated. Best to get a lawyer who specializes in incorporation and equity. ;)
This is what I was leaning towards. We have agreed an equity split. But nothing is in writing. The MVP would cost money, (squids, servers / hosting / domain ) etc.
But if the MVP works, how does this get split back? Or does it go directly back into the company?
I guess these are the questions I need to put into this cofounder agreement 😄
You mean if you’re making money? That’s probably outside the ownership that you two share. That’s something you both would have to agree upon. I.e. how much is put back into the company whereas how much is taken out in the form of a salary. I would definitely hash these out separately and only worry about the stock paperwork when you are dang sure of product market fit. But yea, like I said earlier, once you get some money pay a laywer to button everything down for both your sakes.
CooleyGo has great resources and their attorneys have written many good articles on these topics. They're basically best-in-biz for startups.
Not legal advise here.
High level, a co-founder agreement is simply a record of what you and your partner agree to. It can be continually updated/revised as your idea/company evolves so long as all parties to the agreement agree.
A local biz attorney can walk you through a template for a flat fee. Almost always worth it if they're competent.