Initial Founders’ Agreement Template For Free

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Initial Founders’ Agreement Template

The Initial Founders’ Agreement Template serves as a vital tool for startup founders in defining their partnership and setting clear expectations. By using this template, you can ensure that all aspects of your business relationship are well documented from the outset. This proactive approach fosters a collaborative environment, ultimately aiding in the success of your venture.

Key Features

Comprehensive outline of roles and responsibilities
Clear definitions of equity distribution
Guidelines for decision-making processes
Conflict resolution terms
Provisions for future funding and ownership changes

Potential Use Cases and Benefits

New partnerships forming in startups
Clarifying responsibilities among co-founders
Establishing governance structures
Preparing for investor discussions
Preventing misunderstandings and disputes down the line

Using this template can solve your problems by providing a structured approach to your startup's foundational agreements. It helps clarify each founder's vision and mission, reducing conflicts and setting the stage for productive collaboration. By investing time in crafting a solid agreement, you position your startup for a smoother journey ahead.

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A Founders' Agreement is a contract that a company's founders enter into that governs their business relationships. The Agreement lays out the rights, responsibilities, liabilities, and obligations of each founder. Generally speaking, it regulates matters that may not be covered by the company's operating agreement.
First, you have to pay for your shares. It's best to issue the founders' shares when a company is first formed, because at that time the fair market value of the shares (and correspondingly, the purchase price that needs to be paid) is almost zero since the company's only real assets are the ideas of the founding team.
Employee- Yes, startup founders are the first employees of the company regardless whether they receive salary or not. Directors- The founders are the directors of the company and forms the Board of Directors responsible for taking decisions.
Names of founders and company. This one is pretty non-negotiable. Ownership structure. The Project. Initial capital and additional contributions. Expenses and budget. Taxes. Roles and responsibilities. Management and legal decision-making, operating, and approval rights.
Investors may not be called co-founders, but they always get equity, commensurate with their share of the total costs anticipated, or share of the current valuation. The challenge is for real co-founders to keep their equity percentage above 50 percent, or they effectively lose control of operational decisions.
As a rule of thumb a non-founder CEO joining an early stage startup (that has been running less than a year) would receive 7-10% equity. Other C-level execs would receive 1-5% equity that vests over time (usually 4 years).
At a typical venture-backed startup, the employee equity pool tends to fall somewhere between 10-20% of the total shares outstanding.
Startup Equity Dictionary Exercise shares: to choose to buy or sell your shares in a company. Fair market value: the current value of the share. Stock grant: A stock grant occurs when an employer pays a part or all of the compensation of an employee in the form of corporate stock.
In my experience, most startups don't tap their advisors for more than 10 hours of quality/focused time. Consequently, that's like paying advisors $50,000 per hour or $833 per minute. Even for the startup that taps its advisor for 100 hours, that is still $5,000 per hour or $83 per minute.
Suggested clip How To Distribute Startup Equity (The Smart Way) — YouTubeYouTubeStart of suggested clipEnd of suggested clip How To Distribute Startup Equity (The Smart Way) — YouTube
Dividing equity among founders. Founders receive equity for what they bring to the table. How much of the company they own as a result of their contribution is purely up to the group to decide. The earlier, bigger, or longer the contribution to the company, the more equity a founder should receive.
Step 1Dividing equity within the hierarchical organization. Step 2Dividing equity among Founders. Step 3Dividing equity among Investors. Step 4Dividing equity for Board of Directors & Other Advisors.
On an amortized basis, 35% equity is $105,000 per year. On average, about 20% of companies that make it to Series A successfully exit, which makes the expected value of the equity portion $21,000 per year. This means that, in total, the average early startup employee earns $131,000 per year.
But in order to give equity to investors, your startup needs to issue new shares. If an angel invested an amount equal to 20% of the value of the company, you'd need to issue shares to reflect his ownership stake: in this case, an additional 25 shares.
Step 1 — Dividing equity within the organization. Step 2 - Dividing equity among Founders. Step 3 - Allocating money to Investors. Step 4 - Dividing the Option Pool: Board of Directors, Advisors, and Employees.

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