Everyone reading this knows someone whose marriage ended. Those endings aren’t always kind. And when things turn adversarial, the only real winners are the attorneys.
Prenuptial agreements get a bad rap. But at their core, they’re practical: two people agreeing on how to handle a future they hope never comes. Whether it’s property division, financial support, or who keeps the dog, the value is clear. Make hard decisions when emotions are calm so you don’t have to when they’re not.
Founders break up, too. And just like in marriage, those splits can be painful, messy, and expensive.
A founder prenup — a written agreement that outlines what happens if one co-founder leaves, voluntarily or not — is the startup version of a safety net. So why are they practically unheard of?
It’s not a startup thing; it’s a human thing.
You’d think that, because divorce is an incredibly common outcome, prenups would be common, too. You’d be wrong. Only 15% of married couples have one. Why? Because writing a prenup means admitting failure is possible. And whether you’re building a marriage or a company, most people would rather not even entertain that thought.
Across the nearly 200 startups my partners and I have supported since 2015, I’ve never seen a single startup prenup. Vesting schedules? Sure. The occasional “what happens if …” conversation? Maybe. But an actual document that spells out in clear, fair, respectful and legally binding terms how a founder split would work? Not once.
That’s surprising, considering how we’ve all seen founder breakups go terribly wrong. My partners and I have even been pulled in to help mediate situations where:
- One founder threatened to wipe the source code unless their accelerated vesting demands were met.
- Another began spreading damaging stories about their co-founder to investors in an effort to control the narrative around their resignation.
- And one vanished, taking with them key logins, critical relationships, a chunk of equity, and breaking more than just the cap table in the process.
Would a founder prenup have prevented all of this? Maybe not. But would it have made the fallout less brutal? Absolutely.
Getting It Right
There are two parts to getting this right: the conversation and the document. First comes the dialogue that the founders need to have. Then comes the framework they should formalize.
We’re not lawyers (we’ll leave the legal language to the pros), but we are startup advisors. And we know the topics worth clarifying before things get complicated.
The Conversation
Let’s start with the conversation every founding team should have, ideally before the company even exists.
How will we split ownership?
Will it be even or not? If not, why?
What titles will we hold?
Who will be the CEO? As the company matures, what parts of the business will each of us own? Who leads product? Who owns revenue? Who manages the finances?
What’s your personal goal for this company?
Are you imagining a bootstrapped business that throws off cash? A product that gets acquired in a few years? Or are you aiming to build something world-bending with a shot at IPO?
What kind of culture do we want to build?
Hard-charging and sleep-can-wait? Or something more inclusive, sustainable, and supportive of families? Will everyone be in one office, or will remote work be the default?
Where does work sit in your life priorities?
Is this your everything — nights, weekends, holidays? Or are you balancing work with kids, hobbies, and other commitments?
What level of financial risk are we each willing to take?
Are you OK with going without a salary for a while? Willing to fund the company yourself at the start? Or do you need outside capital before you can commit?
What happens if we can’t agree?
Who breaks the tie? Do we make that call every time, or define clear areas of decision-making authority?
What happens to our equity if someone leaves?
Do we set a repurchase formula? Does unvested equity simply get forfeited?
Under what circumstances can one of us be fired?
Negligence? Fraud? Public misconduct? Or more mundane reasons, like deciding to move away from HQ?
How do we communicate if someone steps away?
Who drafts the message? Do we agree on a script in advance? Who gets the final say? And who needs to hear it — employees, investors, customers, partners?
Hard questions now prevent hard feelings later. They protect the company, the brand, and the people behind them from an expensive distraction.
The Document
The conversation is just the beginning. The document is where commitments get real. We strongly recommend involving an attorney for this step, but there are predictable sections every founding team should consider:
- Equity repurchase rights: Defines what happens to a founder’s equity if they leave or are asked to leave.
- Vesting schedule: Lays out the vesting timeline, any acceleration triggers, and how unvested shares are treated upon departure.
- IP ownership: Confirms that all intellectual property remains with the company, regardless of who leaves or why.
- Noncompete and nonsolicit: Protects the company from a departing founder launching a competitor or recruiting employees.
- Communication rights and narrative: Establishes the agreed-upon messaging for investors, team, and press, and who has final approval.
- Access to information: Details how and when the departing founder loses (or maintains) access to internal systems, financials, and communications.
- Board and voting rights: Clarifies what happens to any board seat and associated voting rights held by the departing founder.
- Severance (if any): Specifies any transitional compensation, benefits continuation, or other agreed-upon support.
- Return of property and cleanup: Requires return of all devices and credentials and includes a representation that no data or IP has been retained.
- Dispute resolution: Outlines how disagreements will be handled (e.g., mediation, arbitration) and under which jurisdiction.
Now What?
Putting this document in place is like the old advice about real estate: The best time to buy a house was 10 years ago, but the second-best time is today.
So, whether you’re just starting your venture or are a few years in, a founder split might not feel probable, but it’s absolutely possible.
If you’re building with someone else, ask the tough questions now. Write the answers down. Treat it like you’d treat a business you care about. Because it is.
So:
Did this spark a pre- or postnup conversation with your co-founder(s)?
I’d love to hear how it went. What came up? What surprised you? Drop me a note — or pass this along to another founder who might need it.
* Special thanks to our friend Andrew Hoag for suggesting this topic.