OK. Startup folks work crazy hours, with passion, zeal, drive, commitment to their idea, concept, platform, product, service. Whew. I got exhausted just reading that last sentence, didn’t you? The time and emotional, physical, and mental energy required to nurture and sustain startups can be daunting.
Startups are marriages of founding partners, teams, mentors, investors and systems. There are two questions I ask startups when I work with them:
- Do you have IP for your startup deliverables? (intellectual property such as a patent, trademark, copyright)
- Do you have a Founders Agreement?
While my legal colleagues offer a far more learned discourse on the value of intellectual property, Founders Agreements are often overlooked in the early stages of a startup. For that matter, these types of documents are overlooked in the founding of what eventually morph into small to mid-sized businesses.
What happens if you file for divorce from the rest of your startup founders?
A Founders Agreement is one of those documents you and your founding partners need to create sooner rather than later. In fact, create one right now, if you are reading this post and are at the helm of your startup.
A Founders Agreement is like a prenuptial agreement.
As you’ve heard me say before, depending on where we sit around the table, we all see the same things, differently. As you and your team move forward to commercialize your technology, product, platform, or service, there comes a point in time where your opinions on how to proceed will diverge. One Founder may want to stay all-in and remain at the helm of the company forever (which can be wishful thinking, but that’s another blog post). The other Founder may want to license the technology, for a smaller economic return versus remaining with the venture for the longer haul. One Founder may be a Thinker. One Founder may be a doer.
Maybe one of you decides that they didn’t sign up for this, and wants out.
No matter which way you look at startups, you are not only married to your concept. You are married to your co-Founders. Your Partners become your family, in business sickness and in business health, for richer or poorer…. You know the rest of those vows.
Once a few mentors, advisors, family members, offices of tech transfer, and investors are inserted into your startup’s equation, your relationship with your founding partner can become diluted. One partner can begin to feel marginalized from all the action as the other, more gregarious partner becomes an effective spokesperson for your startup.
This scenario begins to look and feel pretty dysfunctional as you go through your startup’s lifecycle. It begins to resemble going home for the holidays with The Addams Family®. Do you have a skeleton in your startup closet? How about Cousin It?
Founders Agreements address, at the very least, rights of ownership, decision making, responsibility, operations and whatever else you want to include. So you and your founding partner aren’t surprised later on, when investors are or aren’t flocking to your door, when your patent gets rejected, when you want to make a pivot, when your startup encounters challenges of maturation.
If you don’t have a Founders Agreement currently in place for your startup, begin working on one today. If you have an existing Founders Agreement, read it. If you don’t understand all the legal spiel, ask an attorney to translate. Otherwise, you may leave your creation up for grabs.
Something to think about this week.
Babette N. Ten Haken, President of Sales Aerobics for Engineers®, LLC, catalyzes business transition, startup growth, and professional development. She works with non-traditional sellers, engineers, manufacturers, and technical startups.