How do you keep track of equity or any other form of acknowledgment between founders before incorporating?
How do you keep track of equity or any other form of acknowledgment between founders before incorporating?
Real curious what you guys think. I have participated in multiple early-stage startups and it was always a hassle to have the "equity talk" between founders let alone sign IP/NDA. It seems like every startup makes up their ways/documents to sign.
From my research, nothing is 'formal' or 'legal' before you incorporate. How do you keep everyone in the loop while protecting the company? What did you do - just a verbal acknowledgment or did you put it on paper? If it is on paper, which kind of document did you sign?
There is a platform for that: seedlegals.com - automates the process and reduce the legal costs.
That's really cool. Seems like it's only for the UK for now - I am trying to create a platform that's geared towards helping pre-incorporated startups with legal. This definitely inspires me. Thanks for linking
IANAL, but my understanding is that if you write up an agreement and sign it, it is legally binding, even if you haven't incorporated yet. I definitely recommend writing up an agreement and having all the cofounders sign it. Ideally there should be conditions for firing a cofounder. It's pretty common for startups to use a "cliff" - if you quit or are fired within the first X months, you get nothing.
As for how to split up equity, I thought this article was pretty useful: https://www.geekwire.com/2011/wrong-answer-5050-calculating-cofounder-equity-split/
That's a really cool way to split equity. I am currently trying to create a project that helps pre-incorporation startups with legal documents. They are not legally binding but are useful to keep track of all acknowledgments. Do you know any other documents cofounders should sign before incorporating except equity, NDA and IP?
I haven't gone through a legal cofounding process yet, so I don't know what other documents might be required/recommended. Sorry!
I would definitely check out Slicing Pie as a great framework. Effectively it's a dynamic equity split based on inputs. You would use this as a placeholder until the business is generating sufficient revenue to justify something more formal.
I don't think this is the right answer to your question, but I've used Carta to manage our cap table.
Anything written even on a napkin is ideal.
I like Carta a lot, but feel like it is too expensive for a lot of early-stage projects who are mainly just friends working on ideas...What do you think?
Yeah I agree. We decided to start using it when we started actually getting investment
I have a pretty cool framework which works quite well. Sad part -- it's in Russian :) https://uklad.vc/obshchak/. You can try to reach the author tho -- https://www.facebook.com/almas.abulkhairov
You might find this useful https://www.danmartell.com/majorlegalissues/
Bookmarked it, thanks!
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