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I agree in the beginning - "get to work and build a product." Spending a day or a week on something without having this difficult conversation is not a huge risk, but don't spend months or years. The conversation only gets more difficult and can destroy whatever value is created. > So, yeah, I'll stick with my advice: if you're a fledgling startup, don't waste intellectual, physical, emotional and economic resources on your "stake". Earn it. Having a contract will not prevent disputes; I can speak from experience on that. Get to work and build a product. When there is something actually at stake, then worry about your share of it. I think this is bad advice, and goes against both my personal experience and almost every bit of startup advice on the internet. Sure, you don't need a formal contract, but you do need to make sure you are on the same page equity-wise, while being open to renegotiation. Generally, that "same page" conversation should be documented somewhere, even as a simple email. While that email IS legally relevant and possibly enforceable, the point is to get keep everyone's memory honest and provide clarity. An email thread like: "Based on our conversation, we plan to split this company equally three ways. Is that everyone's understanding?" "Yes, sounds good" "Yep" Can be very helpful to avoid misunderstandings both presently and in the future. The point is not to get into a lawsuit, but to avoid one. |
I agree with this. But equity is a sticky thing, and at the stage we're talking, no contract will be so air-tight as to avoid disputes.
In my experience, sometimes it doesn't matter what you've written and signed. In those cases what matters is the spirit of the contract (written, verbal or implied), intent and good faith. Call me an optimist, but if you're working with honourable people (as in the article), disputes can be managed objectively, even if you violently disagree about things. I believe our system is efficient in that matter.