Columbia Business School Professor Ed Zimmerman on Founder’s Prenup

While the rate of divorces among U.S. married couples has reportedly declined for decades, it doesn’t seem like the same is true for business divorces among startup co-founders.

When a team of two or three co-founders enlists my help to form a new startup, I invariably suggest that they earn their equity over time (“vesting”). Vesting often creates a shared incentive to stay in order to earn all of your equity over time–the “golden handcuff” effect. If–as the odds suggest–a co-founder departs, it can really help because the company will likely need that equity to give to whomever will fill his or her shoes.

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