FOUNDER MELTDOWNAVOIDING

10 TOPICS TO DISCUSS FIRST

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START-UP PRE-NUPTIALS

Fighting with your co-founders sucks

Yet founder meltdowns are incredibly common in the start-up

scene

Heck! Facebook’s 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, and

painful

That’s 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 before

signing

0 1

SHAREHOLDING

How will we divvy up equity, assign vesting rights, and why? Be quantitative here. It needs to make sense. Don’t just split it equally among friends. You are acting on behalf of the firm’s best interest here.

0 2

TIME 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)?

0 3

DELIVERABLES

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?

0 4

LOANS & 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 can’t pay?

0 5

SALARY

How much will everyone be paid? What happens if we need to adjust up or down?

0 6

RETIREMENT

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?

0 7

TIE BRAKING

What if we disagree on strategy or tactics? How do we make a final decision?

0 8

REALITY CHECK

What are each of our known strengths and weaknesses? What are we each not prepared to do?

0 9

EXITS

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)?

10 WORST-CASES SCENARIOS

What is the process for dealing with a breach of these agreements?

good luck

be honest

be respectful

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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