Co-Founders' Equity Agreement Template | Alex Gulakov Dev Blog

By Alex Gulakov, Founder of QwkSearch.com - Follow My LinkedIn Feed
From Linkedin Post

Co-Founders’ Agreement - Read, fill out, download PDF, upload to OpenSign, send to sign.

Agreement Demo in OpenSign

OpenSign emails this web ui to cofounders to draw signature and fill out text, then sends certificate.

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As a tech startup founder, one of the most crucial steps you'll take is establishing a solid legal foundation with your co-founders. A well-crafted co-founders' agreement can prevent misunderstandings, protect your interests, and set clear expectations from day one. We've obtained a comprehensive co-founders' agreement template that's particularly relevant for tech startups. Let's break down its key components and how you can use them in your venture.

1. Flexible Roles and Responsibilities

Use this section to clearly outline each founder's primary areas of responsibility while building in flexibility for future changes.

1. Equity Distribution and Vesting

Customize the equity split based on your team's contributions. The vesting schedule protects the company if a co-founder leaves early, while the leaver provisions add nuance to departure scenarios.

1. Intellectual Property Rights

Implement this to avoid future disputes over ownership of critical company IP.

1. Compensation Structure

Adapt these figures to your startup's financial projections and funding strategy. This approach aligns founder compensation with company milestones.

1. Confidentiality and Non-Compete Clauses

Customize the duration and scope of these clauses to protect your startup while remaining legally enforceable in your jurisdiction.

1. Dispute Resolution Process

This multi-step process can save time and money by avoiding immediate litigation. Specify a mediator or arbitration body relevant to your location.

1. Exit and Succession Planning

These provisions help maintain business continuity in unexpected circumstances. Tailor them to your specific needs and risk tolerance.

1. Future Funding Expectations

Use this section to align expectations about future funding rounds and the impact on founder equity.

1. Amendment Process

The template includes a structured approach for making changes to the agreement, requiring unanimous approval from all co-founders. This ensures the agreement can evolve with your company while protecting all parties' interests.

Co-Founder Essential Questions

Share in a Google Doc, have each founder answer in a few words or leave blank if no answer.

Vision and Goals

1. Why do you want to do this startup? What are your personal goals, both financial and non-financial?

2. What is your overall life plan and how does this startup fit into it?

3. What companies, founders, or products do you admire and want to model our company after?

Roles and Responsibilities

1. What will our roles and titles be? How will we divide responsibilities? Who will be CEO?

2. What will each of us contribute to the company in terms of skills, time, and resources?

3. How will we split up equity?

Idea and Strategy

1. What idea will we work on? If that idea doesn't work out, are you willing to pivot?

2. What are our respective timelines for achieving our goals?

3. What needs to happen for each of us to go full-time?

Work Environment and Culture

1. Where will the company be based? Will we work together in-person or remotely?

2. What will our typical working schedule be? How will we balance work with personal commitments?

3. What kind of company culture do we want to build if we're successful enough to hire employees?

Financial Considerations

1. What is your personal financial situation? How long can you work without a salary?

2. If you'll need a salary, how much do you need to feel comfortable?

3. Will either of us invest money into the company? If so, how much and for what?

Decision Making and Conflict Resolution

1. How will key decisions be made? (e.g., by majority vote, unanimous vote, or certain decisions solely by the CEO?)

2. What will we do if we're having trouble agreeing on an important decision?

3. What happens if one founder is not living up to expectations? How would this situation be resolved?

Exit Scenarios

1. What happens if one of us wants to leave the company?

2. If one founder leaves, does the company or the other founder have the right to buy back that founder's shares? At what price?

3. What happens if we want to sell the company, raise money, or shut down the business?

Personal Compatibility

1. How would your friends or colleagues describe your strengths and weaknesses?

2. What kind of work is so enjoyable for you it doesn't feel like work? What kind of work do you avoid?

3. How do you handle stress? Do you prefer to talk about it or avoid discussing it?

4. What's the best way for me to give you feedback?

Background and Experience

1. What were your experiences like at past jobs or startups? What lessons did you take away?

2. Have you worked with a co-founder previously? What was that experience like?

Additional Considerations

1. Are there any current pressures or challenges in your life that might affect your work on the startup?

2. Can we launch other startups while working on this project?

3. If the business doesn't take off and we end our venture, can one of us take the idea and try again?

Further Resources

YC Cofounder Matching

Startup Equity Calculator

How to split equity among cofounders in a startup: 11 factors to consider

Startup equity split: how to distribute equity the right way

Co-Founder Mistakes That Kill Companies & How To Avoid Them

How Much Equity to Give Your Cofounder - Michael Seibel

10 Questions to Discuss with a Potential Co-founder

Tim Brady - How Much Equity Should I Give My First Employees?