Mark Founders’ Agreement Template Made Easy

Signature founders agreement template

you so what is a founders agreement and what are the important provisions to include in it some great question we see this a lot think of it this way founders agreement is really an agreement that will be made by founders that come together when they have an idea to form a company so it's at the very very early set you know stage of a company's lifecycle and it's when nothing's been created or formed yet but some folks have a few ideas and they get around a table and talk about creating a company around those that agreement is is really a critical agreement and it comes at a critical time because once you establish what those rights and responsibilities are you want to make sure that going forward there aren't going to be any problems as a result of that so we oftentimes will recommend that the parties come together and have the kind of frank discussions you'll want to have between people that are going to be starting a company so who who will have what rule and what responsibilities in the company and it's not always that everyone has to have the same right or say in the company you might divide it up based upon the experience of the people sitting at the table that want to start the company so for example you might have someone that comes to the group that has a finance background and he may he or she may want to be the CFO or treasurer and handle the financial aspects of the company whereas another individual is going to be sort of the technical expertise of the company and has an engineering background or design background whereas someone else might be that the sort of the business manager because of his or her experience being a manager and at a various businesses so understanding those rules and responsibilities is critical in making sure that that agreement reflects that as well so everyone's role in the company is clear from the very beginning other issues that are important to include or what sort of ownership will each of them have and what sort of vesting provisions will be provided another obviously critical issue is understand who's going to have what ownership in the company is everyone coming in as an equal owner are they gonna have different ownership percentages and based on on what sort of percentages will their role and responsibilities vary to certain extent and what sort of vesting provisions will do what that ownership have we typically recommend that you know for vesting you should really have market vesting terms so we oftentimes see sort of vesting over for you period with a one-year cliff which essentially means for the you know the first year their stock does invest after the completion of one year twenty-five percent will vest and then the remainder will vest over the next thirty six months usually on a monthly basis that's that's fairly typical what we see and that's an important provision to include because you want to make sure that that the founders are incentivized and motivated to stay with the startup as it gets going the the worst-case scenario might be if you you know sign an agreement everyone gets stock on day one and then on you know day five or a month two someone leaves and they walk away with the stock that now they've invested and fully and they're not participating and not helping the startup grow any further from that point onward so certainly something to avoid and then the last of sort of the three main areas I would think you'd want to see in a founders agreement would be the IP and how are we treating intellectual property so everyone typically is coming to the table some may be providing most or all of the IP or all of the the parties may be contributing to it but it's really critical to make sure that the company owns the IP and that the individuals creating it the founders assign that IP over to the company from from the very early stage because what you don't want to have happen is to be in a situation down the road where now you've got investors that are looking to invest and as they're do their due diligence they find out that well the the most valuable aspect of the company's IP is really not Ellyn by the company it's owned by one of the founders and then that presents a very difficult scenario where the founder that particular founder may have a lot of levers to demand certain rights in connection with funding because they still own what is the most valuable piece of that company I would recommend starting that discussion about who's gonna have what and how everything is going to be laid out very early on the tendency I've found with a lot of founders is they're excited about the business idea and so they'll rush forward with developing the business and they'll put the idea of talking about a founders agreement on the back burner so I would say it should be very very early on I mean maybe even the first meeting you have there should be an understanding of who's gonna have what role and what kind of ownership because that sets the stage for everything that comes afterwards and if you have a problem that you don't address upfront trying to correct at a later stage can be extremely disruptive the company and extremely expensive