3 ms·

Next time start with vesting (which a lot of people are mentioning) so that the other founders continue to earn shares and dilute the departed co-founder's stak

by uiri 9y ago

Next time start with vesting (which a lot of people are mentioning) so that the other founders continue to earn shares and dilute the departed co-founder's stake over time. Ideally, founder ownership in the company is compensation in lieu of (or in addition to a meager) salary. The founders who stay on board might try to dilute the departed co-founder's stake to nothing. Mark Zuckerberg did this to Eduardo Saverin. As a minority shareholder, you have to pay attention to the evolving cap table.

j_s 9y ago
Thanks! I am looking for a boilerplate / template for startup legal documents, intended to be taken to a lawyer for finalization as a part of getting the ball rolling. Something that included vesting + protection from dilution would have been useful here.
- greglindahl 9y ago
  "protection against dilution" (beyond what the law already provides for minority shareholders) for founders/common shareholders is not standard, so you'll have a hard time finding a template for it.
  - j_s 9y ago
    Perhaps this is an opportunity then. I looked in YC's Startup Documents and didn't see anything at all related to legal agreements between cofounders; maybe they will put something together someday. The only protection from dilution I saw mentioned in this thread isn't doing so well (gray at this point): https://news.ycombinator.com/item?id=14357964 https://news.ycombinator.com/item?id=14357964 an agreement from the company that neither of the remaining founders can receive additional shares for 2 years [...] is a pretty effective way to protect against dilution
    - greglindahl 9y ago
      Not sure how it's an "opportunity" when it's a red flag that would prevent the startup from raising money!
      - j_s 9y ago
        Thanks for expanding this point a bit further. While dilution protection does sound like a unique opportunity at this time, as you've pointed out it isn't in the best interest of anyone other than departing co-founders. I don't want this specific point to detract from the original question asking for recommendations of competent template-y resources (legal agreements between cofounders) to build on when starting a startup.

by uiri 9y ago

j_s 9y ago

Thanks! I am looking for a boilerplate / template for startup legal documents, intended to be taken to a lawyer for finalization as a part of getting the ball rolling. Something that included vesting + protection from dilution would have been useful here.

greglindahl 9y ago
"protection against dilution" (beyond what the law already provides for minority shareholders) for founders/common shareholders is not standard, so you'll have a hard time finding a template for it.
- j_s 9y ago
  Perhaps this is an opportunity then. I looked in YC's Startup Documents and didn't see anything at all related to legal agreements between cofounders; maybe they will put something together someday. The only protection from dilution I saw mentioned in this thread isn't doing so well (gray at this point): https://news.ycombinator.com/item?id=14357964 https://news.ycombinator.com/item?id=14357964 an agreement from the company that neither of the remaining founders can receive additional shares for 2 years [...] is a pretty effective way to protect against dilution
  - greglindahl 9y ago
    Not sure how it's an "opportunity" when it's a red flag that would prevent the startup from raising money!
    - j_s 9y ago
      Thanks for expanding this point a bit further. While dilution protection does sound like a unique opportunity at this time, as you've pointed out it isn't in the best interest of anyone other than departing co-founders. I don't want this specific point to detract from the original question asking for recommendations of competent template-y resources (legal agreements between cofounders) to build on when starting a startup.