Start at the Beginning: What Start-Up Agreements and Prenups have in Common

Start at the Beginning: What Start-Up Agreements and Prenups have in Common

What Start-Up Agreements and Prenups have in Common

Embarking on a new partnership can be exciting and daunting at the same time. Two common kinds of partnership - marriages and business relationships - come with challenges that can be avoided by ‘cooperation plans’ from the get-go. For marriages, this would mean a prenuptial agreement (‘prenup’). And for business partners this means a partnership agreement. In both cases, there are steps that ensure the partnership is as strong as possible, including: full disclosure of starting contributions up front, collectively defining success, and having a plan if things fall apart. These conversations are never easy, but skilled mediators help improve communication and achieve better outcomes that pay off with long-term success.

By Ehsan Ali and Alnoor Maherali

Starting out is difficult. Whether it’s taking a big step in a relationship or launching a new venture – there is a lot to think about: Setting expectations; aligning goals; discussing what happens if things go wrong. Preparing for success includes thinking through what success means for every stakeholder – and what to do if things start to head in the wrong direction. In these ways, early-stage discussions for a startup are quite similar to discussions for drafting a prenup.  And there are also a few key differences. But in both cases, skilled mediators can make the discussion or negotiation much easier.

Item 1: Full Disclosure

Whether it’s a startup discussion or a prenup discussion, being upfront about what each party brings to the table is a great starting point for building trust.  Indeed, in prenuptial discussions, proof of full and fair disclosure is required in many jurisdictions in order to enforce a prenup in court.  But noting what each party will contribute to the new venture is very common in start-up agreements as well.  Either way, creating an environment of trust at the beginning allows for great things to happen down the line.  A good mediator can help parties to communicate their contributions to the new venture – be it business or personal.  

Item 2: Defining Success

Defining success early on can be a game changer when partners are charting a new course.  Very often, new partners are excited about getting started – to the point that they forget to discuss the end result they are trying to achieve.  While completely understandable, it can create unpleasant conditions where one person is happy with the direction things are going, but the other is frustrated by what they see as a lack of progress.  Or worse, both partners can be unhappy and unsure how to fix it.  These problems can be avoided if the parties start to think about their metrics for success in advance of taking the next step – whether it's saying “I do” at the altar or to the Articles of Incorporation.  

These carry some nuances, of course.  In some states, judges may not like to see prenuptial agreements that include provisions that go beyond terms of separation.  But good neutrals, like Venn Mediation, tell you what can go into a court-enforceable prenuptial agreement.  And what should go alongside it to reduce the likelihood you’ll need to rely on your prenup.    

Item 3: What if Things Go Wrong?

It’s uncomfortable to think about failure when starting out.  No one wants to consider what will happen if things fall apart – especially while they are putting the pieces together.  Instead of dampening the excitement, partners can approach the discussion about potential separation as a way to strengthen the commitment they are about to undertake. 

This is because a true partnership is made when parties choose to be together, freely and transparently.  Thinking about what happens if a partnership breaks down gives partners the chance to identify future pitfalls and commit to working together to avoid them.  And reaching a fair deal about what to do if things don’t go well can leave each partner feeling safe and confident in the person they’ve chosen to be with. 

To achieve this, a budding team or couple will need the information listed above in items 1 and 2. And they’ll need to consider what would be a fair deal if they ever have to go their separate ways.  And what the other person could accept.  This requires a mediator equally committed to finding solutions that (A) work for you and (B) could be enforceable in court if necessary.  Though difficult, you’ll always find that balance at Venn Mediation. 

In Conclusion

Whether you’re considering marriage or a new venture – mediation is an invaluable way to explore the questions that matter most:  

  • What are we each bringing to this?
  • What does success look like for each of us?
  • And what will we do if things fall apart? 

With the help of a skilled mediator, these discussions can strengthen the relationship and pave the way for long lasting success in your startup or relationship.  If you or someone you know are taking an exciting next step, contact Venn Mediation. We are based in New York but are very experienced in online mediation and can work with people anywhere. Start your colleague or loved one off on the right foot.  

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