Text of Avoiding founder meltdown founder pre nups
FOUNDER MELTDOWN AVOIDING 10 TOPICS TO DISCUSS FIRST
Fighting with your co-founders sucks
Yet founder meltdowns are incredibly common in the start-up
Heck! Facebooks founder squabble was so bad it become a
feature-length move called The Social Network!
They typically happen about 2 or 3 years in
when somebody starts thinking that somebody else is not putting
in their fair share of sweat
or that the strategy is just wrong
or life priorities are pulling you apart
or when the thrill is just gone
Whatever the case, it is almost always emotional, irrational,
Thats why you should always prepare a prenup for the worst,
when things are the best
All founder teams should have a heart-to-heart and produce a
signed founders contract at the outset of any venture
Here are 10 things that you should discuss and agree upon
01SHAREHOLDING How will we divvy up equity, assign vesting
rights, and why? Be quantitative here. It needs to make sense. Dont
just split it equally among friends. You are acting on behalf of
the firms best interest here.
02TIME AND PRIORITIES How much time will each of us explicitly
commit to during years 1, 2, & 3? What are known, acceptable
other priorities (and how will we agree to schedule them)?
03DELIVERABLES What are our shared goals for the company? What
are each of our SMART milestones and deliverables (as defined in a
job description)? What if one of us does not deliver?
04LOANS & CASH INJECTION How much $ will each of us put in?
What if we need a cash injection from founders mid-stream? Who pays
what, how will we determine valuation, and what happens if one of
us cant pay?
05SALARY How much will everyone be paid? What happens if we
need to adjust up or down?
06RETIREMENT What if one of us has an accident, wants to leave
or relocate? Needs to take another job to survive? What if that
other job is competitive? What if it turns out that we hate each
other? What is expected in terms of leaving? How do we deal with
shareholder loans & shares?
07TIE BRAKING What if we disagree on strategy or tactics? How
do we make a final decision?
08REALITY CHECK What are each of our known strengths and
weaknesses? What are we each not prepared to do?
09EXITS What type of exits are we OK with? How will we deal
with the sale of shares (see standard shareholder agreement terms
like tag-alongs, drag-alongs, right of first refusal, etc)?
10WORST-CASES SCENARIOS What is the process for dealing with a
breach of these agreements?
listen to each other
But know that if you cannot candidly discuss these
hypotheticals and agree upon resolutions when things are good, then
something smells fishy!
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