Legal Muse is proud to announce a forthcoming full-length book on Founders’ Agreements!
In support of my writing process, for a limited time, Legal Muse is offering a Founders’ Agreement Kickstart Package at a heavily discounted rate of $1,500.
(Subject to conflicts clearance; some restrictions apply.)
Contact Legal Muse for more information on this limited-time offer!
The Founders’ Agreement is the agreement every startup’s founding team should have to clarify roles, responsibilities, equity, vesting, and other items to manage potential founder disputes. 23% of startup failures are attributable to founding team disputes—develop a Founders’ Agreement early to help strategically manage this risks and concerns before they impede your potential for success!
Legal Muse’s unique Founders’ Agreement process combines emotional intelligence, business strategy, and legal advice to set a strong foundation for your startup to succeed.
Legal Muse sends a questionnaire to each member of your founding team.
Legal Muse reviews the responses and then holds a bespoke live/Zoom session with your founding team.
Legal Muse uses the outcome of this session to develop a Founders’ Agreement to meet the needs of your startup.
The founding team can refer to the Founders’ Agreement document itself in the event of confusion or disputes between the founding team. It offers a foundation on which you can base decisions for or against the position of one or more founders on a topic in dispute. This enables you to “de-personalize” the agreement or disagreement with that person’s position based on the terms you agreed as team during the Founders’ Agreement process.
Creating your Founders’ Agreement necessitates sharing objectives, motivations, pain points, financial limitations, and other personal matters impacting each founder’s engagement in the startup with each other. This transparency is a key driver of value because it provides your team with a truly human, empathic perspective on each member of your founding team. In the event of challenging issues or inter-team disputes, this transparency enables you to operate from a totally different baseline than if every team member were operating at arm’s length from each other. Anticipating and understanding the internal and external strengths, motivations, and pressures on each team member allows you to come to a solution or a resolution which is not only higher quality (as it is responsive to these features) but also more quickly.
As you work to build your Founders’ Agreement, you are slowly drawing the lines of a clearer picture of what each founder’s engagement in the startup might look like (both risks and rewards) in the near and long-term. Crystallizing this vision, including the potential challenges and risks, can help ensure your founding team is comprised of individuals with compatible expectations and risk tolerances. It allows you to identify incompatibility in a potential co-founder early and determine whether the solution is mediation of these incompatibilities or simply removing that co-founder from the team. When the path ahead becomes clearer, some potential co-founders may simply depart to avoid the substantial hardships which may be required to achieve the startup’s objectives. As you build a shared vision of the startup’s path forward, it also helps prepare each team member mentally for what lies ahead. Just like counting to three before the doctor gives you a shot, understanding the hardships in advance makes them less unexpected and therefore your team is better able to prepare—personally and as a group.
Creating a Founders’ Agreement and considering potentially challenging legal matters early acclimates you to the relevance of legal matters and compliance/risk management considerations earlier in your life cycle. If your startup becomes a unicorn, years before that date you will find yourself drowning in procurement, sales negotiations, legal risk management, securities laws, investor relations, and many other highly technical legal matters most founders do not want to engage with. The sooner you begin to see these legal matters as a facilitator for your company’s success as opposed to a hindrance, the more likely you are to effectively include more efficient processes in your company earlier thereby saving you time, money, and headaches in the long run. Build the relationships and understanding of the interrelationship of legal and your business’s success early to avoid major misses which can threaten your startup’s future.
As you work through the topics which contribute to the areas of transparency and alignment described above, a vision will begin to form among the founding team. This vision will include likely exit options and strategies, phased levels of engagement and responsibilities for each founder, and other facets of the startup’s life cycle. Using this shared desired vision of the future, you can begin roughly sketching the path forward from today to that point considering the various constraints, pain points, likely market and cash flow challenges, and other issues. As this is a natural externality of the creation of a Founders’ Agreement, simply having a Founders’ Agreement in place signals to potential investors the seriousness and commitment of your founding team in and to the idea.