Startup Agreement

Apr 12, 2021 |

According to The Harvard Business Review, the proportion of founders who say they are dissatisfied with their share share is more than doubled as their startups mature. Since 2008, HBR has studied the share splits of more than 3,700 founders of more than 1,300 startups in the United States and Canada. Once the agreement is reached, each founder should receive a registered copy of the agreement for his future reference. Founders generally do not have to worry about long-term planning or estate planning issues in contracts. Avoid the agreement of seventy “all-but-the-kitchen-down” parties and go with something in line with the expected life of the agreement (for most companies, this life lasts until the next financing cycle or any other important transaction). The founders of Smartix, Inc., who developed an intelligent ticketing system for sports facilities, decided to delay the allocation of equity at the beginning of their startup`s scaling, as roles are constantly evolving. After reviewing each person`s current and future contributions, it became clear that a 50/50 split would have been unfair. In the absence of legal agreements, anyone who learns more about their start-up`s product or service can take care of it and make it their own. Do you remember Winklewoss – Zuckerberg Dispute over legal rights on Facebook? In this case, both sides had the means to fight him in court. However, most startups do not have the luxury of unlimited process funds to settle disputes over the ownership of a product or idea, especially in the early stages of the business. Some difficult decisions are the mandate to lead a startup.

How do you plan to make such hard calls? Is it better to have someone who has the power to decide? How do you control and balance? It is a hard phone call between a person who has an uncontrolled power only against decision paralysis at a crucial moment. Decisions extend to investments, equities, the addition of new employees to the core team, layoffs and turning, etc. You can have a clear distribution of areas and ownership of business development, marketing, product development, etc. The person who owns an area may have more power in this area, but a clear decision structure should be defined as critical decisions related to future growth and difficult times. Every startup is different, and every founder has a different relationship with each investor, so there is no real one-size-fits-all approach. There are good compensation rules for start-up creators, but also bad policies and some guidelines that directly kill a start-up. That`s another point that you may think about with an oral agreement – or even an implicit understanding of what everyone is good at – you`ve managed, but you don`t fall into that trap. The project is just another way of saying “your startup.” In this section, you should describe one or two sentences describing what you are doing.

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