Startup Cofounders Need to Have Proper Agreements in Place

Startup Cofounders Need to Have Proper Agreements in Place

It is important to negotiate key agreements with co-founders, who sometimes could be close friends or even family members, during a time when everyone is calm and on the same page about what is best for your company.


I think it’s a very good idea to have the right agreements with your cofounders including employment agreements and co-sale agreements. This is not always a comfortable thing to do, but it is really essential. I’ll give you an example of an employment agreement negotiation. I was negotiating an employment agreement with one of my companies, with the lead board member who was assigned to work with me on this. At one point, he was prickly about it. He said, “Don’t you trust us?” I said, “This isn’t about trust. If I didn’t trust you, I wouldn’t come to work for this company. I trust you with my career.

This is about clarifying expectations. Just like you ask me to sign a proprietary invention non-disclosure agreement, I’m trying to clarify expectations in case different things happen so that we know what the go-forward looks like.” You see this quite frequently with close friends or family members. Things go well for many years. Then things bust apart at some point.

They can get very negative and destroy families and all sorts of relationships if you don’t have clarity on how things unwind in the event that they do. You can’t predict everything but there’s a standard set of things that typically happen around ownership and severance. You should be able to articulate what makes sense and what’s fair for everyone when everyone is in a cool head situation versus a heated situation.

This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.

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