The Most Important Startup Document

Although I'm not big on contracts for startups, I can say with confidence after starting 10 companies that the "Nutshell Agreement" is by far the most important.

What's in the 2-3 page agreement? A high level summary about everything you are setting out to do, along with everyone's expectations.

1. Goal / Mission

   1. What are you setting out to do and why? The why is critically important because it can keep you going when times get tough. More on that later.

2. Product / Service

   1. What exactly are you building and for who. This will likely shift over time but paint a picture of what you see in the short & long term.

3. Business Model

   1. How do you plan to monetize? It's a business after all.

4. Team

   1. Who is CEO and makes the final calls (there can be only one).

   2. What is each person responsible for?

5. Effort / Schedule

   1. Is this full time? In person/remote? Everyone on same schedule? Vacations? Sabbaticals? All this stuff is particularly important these days post-covid.

6. Compensation

   1. Are founders paid? Deferred salary? I like to do deferred with step-ups over time when you hit certain goals.

7. Equity / Investment

   1. What is the current breakdown? How much do you plan to give out to early team members / equity pool?

   2. Whats the vesting schedule?

   3. Who is investing what? Whats the expectation on early raises?

8. Board / Legal

   1. Who's on the board?

   2. For LLC's how does voting work? (C-Corps are 1 vote per person).

9. Financials / Budget

   1. What is the near-term expectation on burn / budget?

   2. Do you plan to shoot for profitability or the traditional VC model?

10. Culture

    1. What kind of office / team / culture do you want to build?

    2. How do you see the day to day?

    3. What values do you want to have?

11. Gotchas

    1. How do you handle equity if someone leaves / etc?

    2. What if someone needs a sabbatical?

    3. Try to have some discussions about edge cases even if not perfect.

That's it.

I usually write Nutshell Agreements as a bulleted list to keep it simple.

Once you're done, I sign it and send it off to the lawyers to turn it into the operating agreement / bylaws.

Below is a quick template you can copy to get started: