dotting i’s and crossing t’s

Will Herman’s post yesterday on the challenges of co-CEO’s reminded me of something I’ve been meaning to get off my chest. Many businesses run loose and fast in their early days. And lets face it, the kind of people who are drawn to starting companies often aren’t process people – they are creative thinkers. While that’s part of the fun of early stage companies, don’t forget that there’s a side to what you are doing that needs to be properly documented and orderly. It’s not just Mark Zuckerberg who has founder problems – I’ve seen many business partnerships with the best intentions disintegrate, where their founders who were no longer seeing eye to eye, had to work out (or not work out as the case may be) the details of their split. And while I’m certainly not your lawyer, I’d strongly recommend that even if you are starting your company with your childhood best friend who you just got out of the army with that you put together at least a basic set of documents that will cover not only the formation of the company itself (which most people don’t tend to forget…) but also clarifies who owns what, what – if any – vesting there might be on your founders stock, what IP is owned by the company (and that the work you are doing together is company property, not individual property), etc, etc.

And hopefully things will go great and none of this will really matter. But if they don’t, you’ll be happy you have all this in place.

  • Saul Lieberman

    Even if things go great, especially if things go great, a future investor, strategic partner or acquirer is going to demand those documents.

  • Sounds like a prenuptial agreement 😛 In school we're highly encouraged to create team contracts at the beginning of a semester long project. Personally I haven't ever had to resort to looking at the contract to figure out how to reprimand someone, but I think that's actually a result of writing out the contract. Everyone is on the same page so there's less misunderstanding/conflict

    “It's not personal, Sonny. It's just business” – The Godfather

    • sethlevine

      your point is well taken – often the actual act of drawing up the contract forces issues early or avoids them altogether.  it’s not dissimilar to why i strongly urge companies to put together a similar contract for their board of advisors (although in that case not something legally binding) – putting things in writing and discussing them up front gets everything on the table early.

  • ken