Agile Partnerships vs Co-Founder Agreements

Startup life moves fast - one moment you have an idea and all of a sudden you’re 50/50 in a company with your co-founder, and looking to grow. However, in the rush to build something great, you may have missed a vital step that can protect you in the long run. 

It’s easy to assume that issuing an even split with your co-founder(s) is the fairest way to divide equity at the start, but this doesn’t account for changing roles, uneven contributions, and unexpected exits.

Without the right protections in place, a departing co-founder could walk away with a large slice of the company that they didn’t earn - damaging your own share, muddying your cap table, and potentially putting off future investors.

Research shows that 65% of startups fail due to co-founder conflict, often due to disagreements around equity and expectations. In fact, a two-person founding team is twice as likely to break up as a solo founder setup. And when that happens, it can derail the business entirely.

That’s where a solid co-founder agreement comes in. A solid agreement set out at the start of your venture can clearly align expectations, and ensure equity mirrors real contributions. 

This will help to keep messy disagreements at bay, as everyone is clear on their role within the business, and how this plays a part in the equity they earn. They are simple agreements that keep everyone aligned, incentivised, and protected. 

To get protections in place, there are a couple of routes you can go down with Vestd: 

• Co-founder agreements
• Agile Partnerships™

Both of these offer varying levels of complexity and flexibility, so understanding which would be applicable for your startup is important in ensuring you have the correct protections.

With Vestd, setting up these agreements is fast, affordable, and founder-friendly. Whether you’re just getting started or already sharing equity, we’ll help you create a framework that’s fair, flexible, and ready to scale - so your startup can grow without unnecessary risk. 

Let’s dive into the details of these agreements!

What is a co-founder prenup?

Both co-founder agreements and Agile Partnerships™ are forms of co-founder prenups. Think of it as a prenuptial agreement for your startup - you’d agree in advance how equity is earned, who gets what, and what happens if someone leaves the business early.

It’s all about preventing painful scenarios where someone walks away with a big slice of the pie without earning it.  

These typically include vesting schedules, a way for equity to be earned over time or by hitting key performance milestones.

It’s understandable that optimism will find its way into your business plans, as without it, it’s hard to get things off the ground! However, it’s important to be aware that the future is unpredictable, and should things turn sour, it’s essential to have the right protections in place.

What are co-founder agreements?

Co-founder agreements are a popular way to formalise equity splits where shares have already been issued. 

If you and your co-founders have already allocated ordinary shares, you can set clear vesting schedules for founders. 

These vesting schedules allow the shares to be earned after particular conditions are met. It’s key to note that with standard co-founder agreements, everyone adheres to the same vesting schedules.

Everyone follows the same rules, and you’re able to bake in key protections like good leaver/bad leaver clauses and vesting cliffs.

Pros: 

• Ideal if equity has already been issued
• Simple to set up and standardise across all existing founders
• Set up vesting schedules on your pre-issued ordinary shares
• Aligns founders with shared timelines and expectations

Limitations: 

• Same rules apply to all, so there is less flexibility for individual circumstances
• Can’t tailor vesting schedules to each founder
• Less ideal if roles and responsibilities amongst founders differ

What are Agile Partnerships™?

Agile Partnerships™ are Vestd’s more dynamic, flexible option - ideal if you’re still looking at how to allocate founder ownership, or want to tailor different individual conditions to co-founders and key hires.

Instead of tying founders to the same equal conditions, you can decide and agree on how, when, and under what conditions shares will be granted. This may be time-based, milestone-based, or both. 

Each person can have their own bespoke vesting schedules, tied to their specific role or contribution. These also aren’t limited to co-founders, and can be set up with any key partners.

This is ideal for early-stage businesses where not everyone is joining at the same time, or where responsibilities and input is likely to change over time. 

This is particularly valuable when using growth shares enabled through Agile Partnerships™. These are a special class of shares that only carry value once key performance have been set, usually when the share price reaches above a set value - called the hurdle rate. Here is how it works:

Since tax is only applied at the point that the shares accrue value, shares can be set at just above the hurdle rate for new joiners, avoiding the standard tax liability that is usually created. 

Pros: 

• Total flexibility: Tailor vesting schedules, milestones, and conditions per person
• Protects against early leavers and under performers
• Allows ownership to build or adapt as roles evolve
• Great for dynamic teams or staggered co-founder entries
• Fully guided set up with Vestd, including updated Articles of Association

Considerations:

• Requires more upfront and nuanced thinking around roles and goals
• Needs the right Articles of Association*
• Slightly more complex than a standard agreement

Final thoughts

Both co-founder agreements and Agile Partnerships™ can protect your business from common founder pitfalls. Having these protections in place will ensure your ownership structure is fair and thought-out, as your business grows.

If you want a dynamic, tailored, and future-proof structure, Vestd’s Agile Partnerships™ give you the tools to do that. They turn vague equity promises into clear, measurable, and enforceable goals. 

Want to discuss your options and figure out which are right for you?

Book a call here