..before Your Co-founder Leaves Your Startup

Dear startup founder, 

Do you know that when a Co-founder leaves your startup  he actually still has some  rights in your Company?

Three things should happen when you decide to come together to start up a business as Co-founders

1. All shares should be subject to a share vesting schedule.

What that means is that, all the rights and benefits attached to the Co-founders shares or equity should be put on hold until a certain period of time has passed. e.g. 4 years 

Or, until a certain event has happened e.g. when the company hits $1million.

2. All shares should be subject to a buy back agreement or the company’s repurchase rights.

This means that, when a shareholder/Co-founder leaves for any reason, the company has the right to buy back or repurchase the stock at a fair price.

3. All intellectual property  should be transferred to the company.

For example, the intellectual property right in a work, work products etc done by the Co-founders or employees should be transferred to the company.

So that the company rather than the creator of the work becomes the owner of the intellectual property in the work or products.

Please note that these things are not done by verbal Agreement. 

It is not by words of mouth, there has to be an actual written contract to give effect to any of these things.

Failure to do all of these things means that the ex-cofounder will still have access to his shares, and the intellectual property right in whatever work or product he created.

………and there goes the rights of an ex-cofounder  of a startup.

by Barinaada Bema Alexander

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