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Insights

Set the Ground Rules First: Founder and Co-Founders

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Set the Ground Rules First: Founder and Co-Founders

Most co-founder conflicts trace back to something nobody wrote down in the first month.


Since I came up with the startup idea, I get to be the CEO?

CEO, CTO, CFO should match what someone actually does, not who led the group project or talks first in meetings. CEO usually means the person who raises money and makes the final call on disputes. CTO owns the product and tech decisions. CFO handles the numbers and cap table.


When the startup idea wasn't the team leader's…

Common university scenario: a business student leads the group, a marketing student handles outreach, and an engineering student built the app the whole idea depends on. Leading the team and originating the idea are different contributions. Founder equity should reflect both, plus who keeps showing up after graduation, not just who ran the stand-ups.


Patent under a name or under the company?

An inventor's name goes on the patent, but the rights should be assigned to the company through an IP assignment agreement, signed by every technical contributor. If a co-founder registers the patent under his own name and never assigns it over, the company doesn't actually own its core tech. Handle this at incorporation, before anyone has a reason to hold onto it personally.


Our idea originated from a class project…

Check the university's IP policy first. Many schools claim some rights over coursework, especially with grant funding involved. Even classmates with no interest in the startup should sign a release or IP waiver. Skip this and an investor's lawyer will eventually ask who else worked on the original idea, and you'll have no paper trail.


Equity, vesting, and people who leave or join later…

Talk about this before incorporating, not once someone's already annoyed about who's doing more. A one-year cliff with four-year vesting is standard, so someone who leaves after three months, including someone heading back to their home country once things get real, doesn't walk away with a full stake. Set aside a slice of equity as an option pool for whoever joins once the company already has traction.


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Scenario 1: When the Technical Co-Founder Wants to Leave, what happens to the IP?

Three foreign students meet through a university startup course, no prior relationship. The engineering student shows up with a working prototype but no business background. The business student ends up leading, backed by the marketing student. They pitch for a startup challenge and funding approval is pending. Suddenly, due to personal reasons, the engineering student decides he's moving back to his home country to build the startup there himself.


Ownership comes first.

If he built the prototype on his own time, he likely owns that IP outright, regardless of course grouping, unless the university or accelerator terms say otherwise. That needs confirming before anyone assumes what's shared and what isn't.


Tell the accelerator now.

They pitched with a prototype the team may not fully control. If the person who built it walks with the code, funding can get pulled after approval instead of before. Raising this early beats explaining it later.


Risks for D-8-4 application

If the engineering student leaves Korea and takes the IP with him without assigning it to the company, it could directly affect the other students’ D-8-4 applications in the future. Points awarded for patents or IP rights belong to whoever holds them, and Immigration also considers whether the Korean corporation itself owns the core technology when assessing business viability.


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Scenario 2: The Friend Who Funded and Built, What Happens When She Wants Out?

Two friends from the same university built a K-beauty app together, no paperwork signed at the start since they were already close. App development gets outsourced, business work is split between them. One takes an E-7 visa as she found a full-time job and puts part of her salary into the startup, while the other stays on D-10-2 and works on their business full-time. Two years later, now on F-2-7, the first friend who initially took on an E-7 visa decides she's done with the startup and wants payment or shares. The startup hasn't earned any revenue yet, and the other friend is left running things alone.


No signed agreement doesn't erase her claim.

Real money and real time put into a company generally count as a legitimate stake, even without a founders' agreement. The lack of paperwork makes the number harder to work out, not the claim invalid.


Start with what she actually put in.

Add up her transfers into the company and the work she did. Since there's no revenue yet, there's no profit to divide, only past contribution to settle.


Two ways to close it out.

Pay her back what she contributed, maybe with a bit extra for early risk, and she signs away any future claim. Or give her a small, non-active equity stake that reflects the past but carries no ongoing role or vote.


Put it in writing now.

Whatever gets agreed needs a short settlement agreement, so the claim is closed for good and doesn't resurface once the app starts making money.


People change. Circumstances change. So naturally, business partnerships change too. It is naive to assume the people you start with will always walk the same path with you. Sometimes, you are the one who changes.


So put things in writing while everyone is still in agreement. Not because you expect things to go wrong, but because you accept that things may change. And if they do, you can always rewrite the agreement together.


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