Cofounders on Stack & Scale Journal

A Co-Founder Agreement Template, Clause by Clause

Fri, 06 Nov 2026 17:07:00 +0000

A co-founder agreement does two jobs. Before incorporation, it records what the founders agreed: who owns what, who does what, and what happens if someone leaves. After incorporation, most of its clauses get replaced by formal company documents. Founders who understand that second job write a better first draft, because they know where each promise has to end up.

This is general information, not legal or tax advice. The template below is a starting point for a conversation with counsel, not a substitute for the stock purchase agreements, IP assignments and board consents a corporation needs.

Where each clause ends up

Clause in the founder agreement	Becomes, after incorporation
Equity split	Number of shares in each founder’s stock purchase agreement
Vesting	Repurchase right in the restricted stock purchase agreement
IP	Each founder’s IP assignment agreement
Roles and titles	Officer appointments in the board consent
Board seats	Board composition in the bylaws and initial consent
Decision-making	Board and stockholder approval rules under the charter, bylaws and Delaware law
Departure	Repurchase right, plus any separation agreement
Confidentiality	IP and confidentiality agreement

The how to start a startup company guide lists those formation documents in order. The point of the table: nothing in the founder agreement should contradict what the company documents will say. If the founder agreement promises acceleration on a sale and the stock purchase agreement does not include it, the stock purchase agreement is what binds the company.

The template

The template below is written for a two-founder company that intends to form, or has formed, a Delaware C corporation. Bracketed text gets filled in.

CO-FOUNDER AGREEMENT

1. Parties
 This agreement is between [Founder A] and [Founder B] (the "Founders"),
 dated [date].

2. The company
 The Founders intend to form [Company name], a Delaware corporation
 (the "Company"), to build [one-sentence description]. Until the Company
 is formed, this agreement records the Founders' understanding.

3. Equity
 On formation, the Company will issue common stock as follows:
 [Founder A]: [number] shares ([__]%)
 [Founder B]: [number] shares ([__]%)
 Each Founder will pay fair market value for the shares at issuance.

4. Vesting
 Each Founder's shares will vest over [48] months, with [25]% vesting
 after [12] months of continuous service and the rest in equal monthly
 installments. Unvested shares will be subject to repurchase by the
 Company at the lower of cost or fair market value if the Founder's
 service ends. [Vesting credit of [__] months for work before formation.]
 Each Founder will file an 83(b) election within 30 days of issuance.

5. Acceleration
 [None.] / [If the Company is acquired and the Founder is terminated
 without cause within [12] months afterward, [__]% of unvested shares
 will vest.]

6. Intellectual property
 Each Founder assigns to the Company all rights in work product related
 to the Company's business, including work created before formation,
 and will sign the Company's IP assignment agreement at issuance. Each
 Founder confirms that no current or former employer has a claim to
 that work, except as listed here: [list or "none"].

7. Roles
 [Founder A]: Chief Executive Officer, responsible for [areas].
 [Founder B]: Chief Technology Officer, responsible for [areas].
 Roles may change by board decision.

8. Time commitment
 Each Founder will work full time on the Company starting [date].
 [Exceptions: ...]

9. Board and decisions
 The initial board will be [Founder A and Founder B]. Decisions
 outside the ordinary course (raising money, issuing equity, hiring
 executives, taking on debt over $[__], selling the Company) require
 approval of [both Founders / the board].

10. Compensation
 Neither Founder will draw salary until [event or date]. Salary
 changes require board approval.

11. Departure
 If a Founder leaves, the Company may repurchase unvested shares under
 Section 4. Vested shares stay with the departing Founder. The
 departing Founder will return Company property and keep Company
 information confidential.

12. Confidentiality
 Each Founder will keep the Company's non-public information
 confidential during and after their service.

13. Disputes
 The Founders will try to resolve disagreements by discussion for
 [30] days, then by [mediation / arbitration] in [location].

14. Replacement by formal documents
 Once the Company issues stock, the Company's charter, bylaws, stock
 purchase agreements and IP agreements control. The Founders will
 sign documents consistent with this agreement.

Signed: ____________ [Founder A] ____________ [Founder B]

Notes on the clauses that cause fights

Equity (clause 3)

The number of shares matters less than the percentages, but use real numbers so the agreement maps directly onto the stock purchase agreements. Y Combinator partner Michael Seibel’s essay on splitting equity argues for equal splits. Whatever the split, write down the reasoning in one line. Investors ask.

Vesting (clause 4)

The four-year, one-year-cliff schedule in the template mirrors what YC’s essay calls a typical setup in the Valley. Vesting protects the founder who stays. Without it, a founder who leaves in month three keeps their full stake, and the remaining founder works for years to build value for someone who left.

“Vesting credit” gives a founder credit for months already worked before formation. It is negotiable and should be written as a specific number of months.

The 83(b) line is in the template because missing it is expensive. IRS instructions for Form 15620 require the election no later than 30 days after the date the property was transferred.

Acceleration (clause 5)

Single-trigger acceleration vests shares on a sale alone. Double-trigger acceleration requires a sale and a termination. Acquirers price in any acceleration, so founders should agree on it now with the trade-off in mind. Leaving it blank is a choice too.

IP (clause 6)

This is the clause investors read hardest. The confirmation about former employers matters most for a technical founder who wrote early code while employed elsewhere. If there is any doubt, list it and get a lawyer’s view before the company is formed. The guide on how to find a technical cofounder covers trial projects and why IP assignment comes before the first commit.

Decisions (clause 9)

Two founders on a two-person board can deadlock. The template’s approval list keeps the founders from surprising each other on the big decisions. It does not solve deadlock. Some teams give the CEO the tie-break on operating questions and keep equity and sale decisions joint. YC’s essay also suggests that only the CEO hold a board seat before a significant equity raise. Pick one approach and write it down.

Departure (clause 11)

The template uses the lower of cost or fair market value for unvested shares, which means a departing founder gets back roughly what they paid for unvested stock. Some agreements add “good leaver” and “bad leaver” terms. These add negotiation and can be hard to apply when the facts are disputed.

What the template leaves out

Non-competes. Enforceability varies by state and changes over time. Ask counsel in the state where the founders work.
Entity choice. The template assumes a Delaware C corporation. The reasons are covered in Delaware C corp vs LLC.
Investor terms. Nothing here binds a future investor. A seed or Series A investor may ask founders to re-vest part of their stock. A clean founder agreement makes that conversation shorter.

If the company already exists

Founders who incorporated first and talked later need a different fix. There is no need for a pre-formation agreement, because the corporation’s documents already govern. The work is an audit:

Pull each founder’s stock purchase agreement and check that the share numbers match the cap table.
Confirm the vesting terms and repurchase price are what the founders believe they are.
Confirm each founder signed an IP assignment, and that it covers work done before the company was formed.
Confirm each founder’s 83(b) election was filed, and that the company has a copy.

Anything that does not match gets fixed by board consent and amended agreements. A short memo signed by both founders can still record the softer terms the documents do not cover: roles, time commitment, how deadlock gets broken.

Before signing

Each founder reads every clause aloud with the other present. Disagreements surface faster that way than over email.
Fill in every bracket. A blank is an argument postponed.
Have a lawyer convert the agreement into the formation documents within weeks, not months.
Calendar the 83(b) deadline the day stock is issued.

How to Find a Technical Cofounder Without Giving Away the Company

Fri, 06 Nov 2026 10:33:00 +0000

A technical cofounder is not a hire. The person builds the first product, makes the architecture decisions the company lives with for years, and owns a founder-sized share of the stock. The search should be run like a search for a business partner, because that is what it is.

The failure pattern is familiar. A non-technical founder with an idea and a slide deck offers 5% to an engineer, the engineer says no, and the founder concludes that engineers are hard to find. The offer was the problem. Engineers who could start a company on their own are being asked to take employee-level equity for founder-level risk.

Start with what the company needs built

Before looking for anyone, write one page that answers three questions:

What does version one have to do? Not the roadmap. The smallest product a first customer would pay for or use weekly.
What kind of engineering is it? A mobile consumer app, a data pipeline, a hardware prototype and a B2B web app need different people. “Technical” is not one skill.
What has the non-technical founder already done? Customer interviews, a waitlist, letters of intent, a pilot with a named company. This is the evidence a strong engineer will ask for first.

A founder who cannot fill in the third answer is not ready to recruit a technical partner. The better use of the next month is talking to customers.

Where technical cofounders actually come from

There is no single channel. The places below are listed roughly in order of how much the founder already knows about the person.

Channel	What the founder learns before the first meeting	Cost
Former colleagues	How the person works under deadline	Time
Friends of colleagues	A trusted second-hand reference	Time
University networks and alumni groups	Shared background, sometimes shared coursework	Time, some events
Open-source contributors to tools the company uses	Public code, communication style in issues	Time
Hackathons and build weekends	How the person ships in 48 hours	Entry fees, travel
Cofounder matching platforms	A self-written profile	Varies; YC’s is free

On matching platforms, Y Combinator runs Co-Founder Matching, which its page describes as free, with no equity taken. YC says the platform has made over 100,000 matches and lists active profile counts by city. A profile gets a founder into conversations. It does not replace the trial described below.

Former colleagues sit at the top of the table for a reason. The question that matters most, how this person behaves when things go wrong, is one the founder can already answer.

The first three conversations

Treat the early meetings as mutual diligence. The engineer is evaluating the founder at least as hard.

Conversation one: the problem. The founder explains the customer problem and the evidence. The engineer’s questions show how they think. Someone who jumps straight to the tech stack before asking who the customer is may be a strong engineer and a weak cofounder.

Conversation two: the work. Each person describes how they like to work: hours, location, how decisions get made, what happens when they disagree. Remote or in person, full time now or after a notice period, salary needs for the next 12 months.

Conversation three: the deal. Equity split, vesting, titles and who sits on the board. YC partner Michael Seibel’s essay on splitting equity among co-founders argues for equal splits because the work is ahead of the team. A founder who wants an unequal split should be able to explain why in a sentence an investor would accept.

Run a paid trial project

A trial project is the closest thing to working together without being married. Four to six weeks is long enough to see how the person handles ambiguity, scope cuts and a missed deadline.

A simple trial scope, written as a short agreement:

Trial project agreement (outline)

Parties: [Founder A] and [Engineer B]
Term: 6 weeks starting [date]
Scope: Build [one workflow] end to end for [named pilot customer]
Check-ins: Twice weekly, 30 minutes
Compensation: [cash amount / none]; no equity promised during the trial
IP: All work product assigned to [Founder A, or the company
 once formed]; Engineer B confirms no employer claims it
Exit: Either party may end the trial with written notice
After trial: If both continue, incorporate and sign founder documents
 within 30 days

Two lines in that outline protect both people.

The IP line. Code written during the trial has to belong to the company, or to the founder for transfer to the company once it exists. An engineer with a current employer should check that employment agreement first. Employment agreements can include invention-assignment clauses, and work done on an employer’s laptop or time can create a claim. A lawyer should look at the clause before any code gets written.

The equity line. No equity is promised during the trial. Promising “10% if this works out” in a chat message creates an argument later about what was promised and when.

What to sign once both say yes

Once the trial works and both founders commit, the paperwork follows the same order as any new company:

Incorporate, as a Delaware C corporation if the plan is to raise venture money.
Issue founder stock to each founder under a stock purchase agreement with vesting.
Have each founder sign an IP assignment covering prior work on the product, including the trial code.
File each founder’s 83(b) election within 30 days of the stock purchase. The IRS instructions for Form 15620 set out the 30-day rule.

This is general information, not legal or tax advice.

When the search stalls

A three-month search with no candidate is a signal, not a failure. Three causes come up again and again:

The evidence is thin. Engineers are pitched constantly. A founder with paying pilots gets a different response than one with an idea.
The offer is an employee offer. Single-digit equity with a title of “CTO” reads as a hire.
The search is too narrow. Only looking for a senior engineer from a famous company, when the product needs someone who ships quickly.

There are fallbacks. A founder can hire a contractor to build a prototype under a work-for-hire agreement with IP assignment, then use the prototype and customer results to recruit a cofounder. That costs cash and gives up nothing on the cap table, but it delays the moment when the company has a technical owner, and investors will ask who that owner is.

Red flags in a technical cofounder

None of these is disqualifying alone. Two or more together should end the conversation.

Unwilling to sign an IP assignment or talk about vesting.
Wants a large equity grant up front with no vesting.
Cannot name a project they finished.
Will only work nights and weekends with no plan to go full time.
Dismisses the customer work as “sales stuff.”

The same list applies in reverse. A good engineer will be checking whether the non-technical founder brings something beyond the idea, and the honest answer has to be customers, distribution or money.