Do we need a Partner Agreement for our MVP?
Hi all.
We are two guys from Europe that has found each other through IH that are now partnering up on a project. We have been talking for a while but soon we will launch the MVP of our product.
We thought that we should have some type of Partner Agreement now in the beginning just for our own safety. We definitely trust each other but both feel that it would be good to have some type of legal document saying that we are 50/50 partners on this. Later on if this project gets some traction we will form a company in one of our countries.
What do you IH'ers think of having a partner agreement for the MVP?
Does someone have a template? We have searched online and found some templates but would be nice to maybe find someone here with a template. We are both located in EU countries if that makes any difference.
IANAL, but I've launched 3 startups with various combinations of partners and have had this go differently every time. My TL;DR advice would be "not now, but as soon as you have traction". Here's why:
When you're pre-revenue, every expense is a hole -- especially legal expenses, which can easily run into the tens of thousands once you start talking to competent (read: expensive) professionals. A good solicitor will not only help you sort out your formation docs & partner agreements, she'll point out all the other legal holes you ought to fill, too: IP assignments, trademark registrations, shareholder agreements, &c. All of which are themselves expensive and, more important to you right now, attention-sucking. The last thing you want to be doing before you have traction is spending your time learning about drag-along vs. tag-along clauses and the minutia of registering at Companies House or INPI.
As soon as you have something of (market-proven) value and a little revenue coming in, though? Start ticking off those boxes ASAP.
Thanks a lot for your answer. We are not planning on using any lawyers for this and have found a template on Google that is a pre-partner agreement even though it has a lot of text that we probably wouldn't enter ourselves. The most important thing is that we own it 50/50 and that if we get revenue we will create a company and get a proper deal in place at that point.
So to start off, you both have a verbal contract right now that is binding (at least in the US). Just jot it down on a piece of paper or google doc and sign it - that is your legally binding contract. What is the agreement on? A split of equity?
You don't have to be too fancy now and waste a ton of money and time to write this out. I would just jot down the terms of what you both are agreeing to - be sure to list what each person gets FOR what each person will do/put in. Be sure that there is that exit too.
Now, I would refrain from putting in an actual equity line, etc. without any idea of vesting. I would basically put you two agree upon XYZ and will re-evaluate things in the future.
Thanks a lot for your answer. Like I said in the comment to Quail we are not planning on spending any money on this pre-partners agreement. We have found a template on Google that we might use but maybe it's easier to just write it down in a Google docs like you say?
We will not have any actual equity line right now and it's more that we own the business concept 50/50. What else could be interesting to put in this document? How we handle expenses? How much time we both put in (hard to know right now)?
Thanks a lot for you answer.