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Why a Founder Collaboration Agreement is vital

Last updated
17th June 2021
Written by
Sam Simpson

Even if you aren't sure your business will ever seek external funding, producing a collaboration agreement is strongly recommended.

According to CB Insights "not the right team" is the third most likely reason for a startup to fail and Harvard Business School Professor Noam Wessman states that “65% of high-potential startups fail due to co-founders fall out”, so it is imperative to invest some time upfront to try and avoid this scenario.

The founder collaboration agreement records the intent of the founders on a number of key items, as detailed below. But, just as important, the process of writing the agreement will cause the founders to think about, discuss and (hopefully!) agree on the key decision points.

Reality is that this document should only be useful for a short period - before too long you will enshrine most elements of this collaboration agreement in your shareholders' agreement, articles of association, Founder Service agreements, IP assignment and by the way the company has been incorporated. That said, it may well serve as a useful reminder in years to come regarding decisions made early in the journey.

What are the key elements of the agreement?

Shareholding

This is very straightforward - who owns what portion of the company and at what point?

Typically, startups will include some kind of vesting / reverse vesting mechanism to ensure that anyone leaving the company earlier than anticipated only keeps an agreed proportion of their shareholding.

Directorship

Again, really straightforward: who will be a statutory director of the business?

Other role related items:

These are detailed on a 'per-founder' basis:

IP Considerations

At this stage it would be useful to detail what IP / trade marks will be allocated to the company by the founders and any IP that you have specifically agreed will be excluded from transfer into the company.

Document founder alignment on other matters

There are a number of other areas which founders may wish to document their alignment - these may include, as examples:

In our document these alignments specifically aren't legally binding but should be a useful record of the intent of the founders at the start of the journey

Great - how do I get one?

We've written a template for you to use - its got lots of comments and hints on use and should take no longer than half an hour or so to populate once you have agreed all of the key items across the founding team.

So download our free Founder Collaboration Agreement today and get started on your journey.

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