Founders Agreement
A founders agreement is a written contract among co-founders that defines equity, roles, vesting, IP assignment, and what happens when a co-founder leaves. It is signed at or near incorporation and is usually the single most important document the founders sign before they take outside capital.
A standard founders agreement covers the equity split (with the underlying logic so it can be defended later), founder vesting schedules (typically four years with a one-year cliff), an IP assignment clause that transfers any pre-formation work to the company, decision-making rules (which decisions are unanimous, majority, or unilateral by role), and "what if" provisions for departure, including buyback rights on unvested shares and treatment of vested shares. At a venture-backed company, the practical pieces of the founders agreement (vesting, IP assignment, equity split) get rolled into the incorporation documents and the first priced round's transaction documents, so the founders agreement and the corporate documents end up reinforcing the same terms. Skipping it does not mean the questions go away. It means they get answered later, under pressure, by lawyers or a judge.
Ryan's Take
The founders agreement is the conversation founders avoid because it feels weird to talk about a breakup before there's anything to break up. That avoidance is exactly the bug. Roughly two-thirds of startup failures involve co-founder conflict, and most of them would have been smaller fires with a written agreement in front of them. Have the awkward conversation while you still like each other. Write down the equity logic, the vesting, the IP assignment, and the departure terms. Then forget about it until you need it, which you might never.
What founders get wrong: Treating the founders agreement as a legal formality to handle "when we raise." By then, the departing co-founder may have already started a dispute, kept unvested equity, or held IP you can't prove the company owns. The agreement only protects you if it exists before the trouble.
Related: Co-founder · Equity Split · Founder Vesting · Vesting Cliff
FAQ
What should be in a founders agreement?
Equity split, founder vesting schedule, intellectual property assignment, roles and decision-making rules, and "what if" provisions for departure including buyback rights on unvested shares. The IP assignment and vesting are the most consequential.
Do you need a founders agreement if you trust your co-founders?
Yes. The agreement protects the company from situations no one predicted, including amicable departures, illness, and shifts in commitment. Trust is not a substitute for written terms on equity, IP, and vesting.
When should co-founders sign a founders agreement?
At or near incorporation, before any meaningful work is done by either founder. Waiting until the first priced round means you sign under investor pressure rather than as equals while everyone is still aligned.
Find this article helpful?
This is just a small sample! Register to unlock our in-depth courses, hundreds of video courses, and a library of playbooks and articles to grow your startup fast. Let us Let us show you!
Submission confirms agreement to our Terms of Service and Privacy Policy.