23% of founding teams break up

Hi Everyone,

In January 2001, Zipcar co-founder Robin Chase fired the company's other co-founder, Antje Danielson. The two were friends whose kids went to the same kindergarten, and the company was barely a year old. Zipcar kept growing, went public, and sold to Avis for about $500 million in 2013. Danielson later said that walking away saved the company.

Not every founder breakup ends this well, and the outcome is usually settled by a few documents signed years before anyone thinks about leaving.

Today, we're showing you the four documents to check and what to look for in each one.

Founder breakups are normal

According to Carta data on over 20,000 founders in two- and three-person teams, about 23% of these teams lose a co-founder within the first three years. That's roughly one team in four, and the rate has been rising.

So it's worth preparing for a departure even if your partnership feels solid right now. Chase and Danielson from Zipcar were close friends too.

The four documents to check

1. The cap table

Check what each founder owns and how much of it has vested. Vested and unvested shares follow completely different rules in a departure, so you need this split before the other documents tell you anything.

2. The stock purchase agreement

Two things to look for here. First, a vesting schedule. The most common structure in venture-backed companies is four-year vesting with a one-year cliff, meaning nothing vests in the first year.

Under it, the company can buy back a leaving founder's unvested shares at the price they paid, which is usually close to zero. If you find no vesting schedule at all, that's common outside the venture world, and it's the first item for your list.

Second, a buyback right for vested shares. This is the one that's easy to miss. Without it, a founder who leaves after year four keeps their full stake forever. You end up with a large shareholder who no longer works at the company, and investors will price that into your next round.

3. The IP assignments

Work created before the company existed belongs to the person who created it, until they sign it over. If your technical co-founder built the first version of the product before incorporation and never signed an IP assignment, they personally own that code.

Investors check this early in due diligence. Fixing it after a founder has left means negotiating with someone who has no reason to make it easy.

4. The shareholders' agreement

This document holds the leaver terms. In the UK and much of Europe, agreements sort departing founders into good leavers, who sell their shares at fair value, and bad leavers, who sell at nominal value or what they paid. In the US, look at how "cause" is defined and what triggers accelerated vesting.

If these terms are vague, the definitions get argued over at the worst possible time, with lawyers on both sides.

If something is missing

If your company started without these documents, you can add them now. Asking co-founders to adopt vesting or a buyback right retroactively is a normal request while everyone is committed, and investors often ask founders to restart vesting at a funding round anyway.

The same fix costs far more once someone has decided to leave. At that point they have no reason to sign anything, and every missing document strengthens their side of the negotiation.

So find the four documents this week and mark what's missing. If something is, a short call with your lawyer is the next step.

Go deeper

👉 Cooley GO: Founder's Stock, Vesting and Founder Departures — read this before you check your vesting terms; it explains buybacks, cliffs, and acceleration in plain language.

👉 Carta: Founder Ownership Report — use it to see how much equity founding teams at your stage typically hold and how ownership shifts round by round.

👉 Kruze Consulting: How to Handle a Co-Founder's Departure — save this one for the week you need it; a step-by-step list from final paycheck to board communication.

Coming up tomorrow

In tomorrow's issue, you'll learn why August is the best month for the work that keeps getting interrupted, and how to pick which project gets it.

That's it for today!

P.S. Forward this to your co-founder. This only works when you do it together.