May 2019
Background Note
HBS Case Collection

Founders' Agreements

By: Shikhar Ghosh, Shweta Bagai and Sanchali Pal

Format:Print
| Language:English
| Pages:12

Abstract

Crafting a Founders’ Agreement is an important component of startup infrastructure as it documents a complex set of decisions that build a company’s roots. Its four key elements are: roles and responsibilities, rights (decision rights, rewards, position on board), commitments (time invested, IP, capital contributions) and contingencies (vesting, stock restrictions etc.). The note indicates how to initiate a conversation with a co-founder, and provides a checklist of questions that can serve as a conversation guide to draft the Founders’ Agreement together. An Agreement is a framework, not a rigid set of rules set in stone, and should be created with flexibility and conditionality. The process of creating and revising the Agreement can bring clarity and commitment to the founding team and enable them to anticipate conflicts before they hurt the business. A Sample Agreement is included.