Why Every Indian Startup Needs a Founders Agreement

What is a Founders Agreement?

A founders agreement is a legally binding contract between co-founders that defines equity split, roles, vesting schedules, IP ownership, and what happens when a founder leaves. Without one, a single dispute can kill your startup.

What to Include

1. Equity Split

Define each founder's percentage. Document the rationale — equal splits often cause problems later.

2. Vesting Schedule

Standard is 4-year vesting with a 1-year cliff. This means a founder who leaves in year 1 gets nothing; after that, shares vest monthly.

3. Roles and Responsibilities

Who is CEO? Who controls the tech? Who handles finance? Write it down.

4. IP Assignment

All IP created for the company must be assigned to the company — not owned personally by founders.

5. Decision Making

What decisions require unanimous consent? What can one founder decide alone?

6. Exit Clauses

What happens if a founder wants to leave? Right of first refusal, buyback provisions, bad leaver/good leaver clauses.

7. Non-Compete and Non-Solicitation

Prevents departing founders from immediately starting a competing business or poaching employees.

Common Mistakes

Cost

A well-drafted founders agreement from a startup lawyer typically costs ₹8,000–₹25,000. It is the best money you'll spend.