Avoid the legal pitfalls of cofounder beefs

Attorney Steve Rosard, who runs Drexel University’s Entrepreneurial Law Clinic, is no stranger to cofounder fights.

“It seems that every semester our clinic has one or two clients that have an issue with this,” the lawyer tells Technical.ly. “They have multiple cofounders who got together over a cool idea, maybe worked on it together at a startup weekend and maybe found each other at a cofounder dating event or website, and agreed to start a business and split up ownership.”

If all goes well, the business grows and retains its leadership. But Rosard said not too long after the company’s set up often a cofounder will drop — out of boredom, over opposing views or to take a job etc. — leading to a squabble over the company’s equity. What then?

“A problem that could have been simple to deal with under a proper founders’ agreement with vesting, is one that takes significant time, attention and (if we weren’t a free service) legal fees to cure.”

On Nov. 29, Rosard and the Clinic’s student lawyers will talk vesting, equity splits, deadlock resolution mechanisms and other legal moves aimed at protecting a startup from cofounder fallout. The event, aptly titled Swipe Right to Issue Equity, is free and will happen at Drexel’s Thomas R. Kline School of Law.

(Here are more tips on cofounder scouting via the Technical.ly Toolkit.)