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Startup ecosystem · Incorporation

Founders' agreement: what every co-founder relationship needs in writing

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A founders' agreement is a private contract between co-founders, separate from the company's legal documents. It governs: equity split rationale, vesting schedule (standard: 4 years, 1-year cliff), IP assignment to company, non-compete and non-solicitation, decision-making authority, and what happens if a founder exits.

Provisions

Indian Contract Act 1872 | Companies Act 2013

Analysis

The most common startup failure point is a co-founder dispute. 65% of co-founder splits result in legal action or company shutdown. A founders' agreement prevents this, or at least makes resolution faster. Vesting is non-negotiable: Even if you trust your co-founder completely, every investor will require vesting. Structure it before they ask.

Close

  1. Equity split, and the rationale (so it can be defended later)
  2. Vesting, 4-year / 1-year cliff, acceleration on acquisition
  3. IP assignment, all IP created for the startup belongs to the company, not the founder
  4. Exit clause, leaver provisions (good leaver vs bad leaver definitions)
  5. Decision rights, who has final call on product, hiring, finance

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