Co-founder agreements

Stock docs say who owns what. They do not say who is CEO, what needs a unanimous vote, or what happens when two founders deadlock 50/50. A short founders' agreement — or clear board consents plus stock docs — beats a novel-length contract. Ambiguity is the enemy.

The big idea

Align on paper, while everyone is still optimistic:

• Roles and decision rights — who is CEO; what needs unanimous consent (fundraising, hiring or firing co-founders, selling the company)
• IP and invention — already in PIIAs, but restate expectations for side projects
• Time commitment — full-time by when; moonlighting rules
• Departure — resignation vs for-cause; how unvested shares are repurchased; whether vested shares stay
• Dispute process — mediation before litigation; what happens if two founders deadlock 50/50

Two-founder companies often start with a two-person board and equal stock. That works until you disagree on a CEO hire, a pivot or whether to take a term sheet. Build an escape hatch early: an independent third director once you can afford one, a named mediator, or a narrow list of decisions that require unanimous stockholder consent so day-to-day cannot freeze. Investors dislike permanent deadlock almost as much as they dislike dead equity.

Walking through a freeze

Founders A and B are 50/50. B wants to take a term sheet; A wants to wait. There is no independent director and no list of decisions that require both signatures vs one CEO. The company cannot close, cannot hire and cannot spend above whatever the bank already allows. A one-page rule — "financings and sale of the company need both founders; hiring under the budget is CEO" — would have kept operations moving while they argued the round.

Common mistakes

• 50/50 with no deadlock hatch. The first real disagreement freezes the company.
• Using the board as couples therapy. Align privately; bring one recommendation.
• Leaving departure rules implied. Resignation vs for-cause changes repurchase and reputation.

Check yourself

Two founders, equal stock, two-person board, no independent. They disagree on a term sheet. What is missing?

An escape hatch: an independent director, a mediator, or a written list of decisions that need both vs one.

Should "firing a co-founder" be a CEO-only decision?

Usually no. That is a classic unanimous-consent item, written down before anyone wants to use it.

Key takeaways

• Write roles, time commitment, departure and deadlock rules while you still like each other.
• A 50/50 board needs an escape hatch — independent director, mediator or a short unanimous-consent list.
• Day-to-day can stay with the CEO; financings, co-founder firings and sale of the company usually should not.
• Short and signed beats long and unsigned.

Further learning

YC LibraryYC's library of startup advice: essays and videos that teach you how to start a company.YC Startup Library The Holloway Guide to Equity CompensationStock options, RSUs, job offers, and taxes—a detailed reference, including hundreds of resources, explained from the ground up, for both employees and managers.Holloway

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