Your shareholders agreement is working against you

Mission Briefing

Two founders from opposite ends of the galaxy built something real, signed a shareholders agreement they downloaded from the internet, and spent three years assuming they were protected. When one of them wanted out, they discovered the agreement covered everything that had never happened and nothing that had. By the time it was over, €80,000 in legal fees had vanished. Three clauses. Half a page to draft. This is how that happens.

Venture Odyssey

Departure: The Agreement That Looked Fine

Rig met Cassie at a hackathon in 2020. One of those forty-eight hour sprints where everyone is slightly too caffeinated and slightly too optimistic, and the projector fails during the pitch round. They built something that worked. Found early customers. Decided to make it official.

They needed a shareholders agreement.

So they did what most first-time founders do. They searched for one.

The template they found was twelve pages. It covered shareholding percentages, voting rights, what happens if someone wants to sell. There was a confidentiality clause and a non-compete. It had section numbers and recitals and defined terms in bold. It looked exactly like what a shareholders agreement was supposed to look like. Rig from Rigel, who had been writing code for two years before the company existed, and Cassie from Cassiopeia, who had bootstrapped a €2M ARR side operation before pivoting to this, both read it and thought: yes. This is a legal document. This covers us.

Their lawyer reviewed it for two hours, charged them €800, and said it looked fine.

That was not wrong. The document looked fine. The problem was not what was in it.

The problem was the three things that were not.

Rig and Cassie signed. They celebrated. They got to work. The agreement sat in a folder in their Drive, last opened the day the lawyer returned it.

They did not think about it again for three years.

Layover: The Three Gaps Nobody Named

Here is what a shareholders agreement actually is, underneath all the recitals and defined terms.

Think of it less like a business contract and more like a pre-nuptial agreement. Two people, genuinely optimistic about their future together, sitting down to decide what happens if things go sideways before things have gone sideways, when everyone is still aligned and the idea of needing these provisions feels theoretical. The clauses that feel unnecessary in the room where you sign them are the only clauses that matter in the room where things fall apart.

Rig and Cassie had signed the business equivalent of a pre-nup that covered who gets the apartment, but forgot to mention what happens if one of them had been building the apartment before the relationship started.

The first gap was a deadlock resolution mechanism. They were fifty-fifty founders. Equal shares, equal votes. The document said so in clause three, very clearly. What it did not say was: if these two equal co-founders ever disagree on a major decision and cannot resolve it, here is what happens next.

The answer, in their agreement, was nothing. The agreement simply stopped. No casting vote assigned to either founder for specific decision types. No mediation process with defined timescales. No buy-sell mechanism. Two people with exactly equal power and absolutely no tiebreaker.

A deadlock clause with no resolution mechanism is the same thing as no deadlock clause at all.

The second gap was the leaver provision. The agreement said that if a founder left, their shares would be subject to a buyout. This sounds straightforward until you ask one follow-up question: what does "left" mean?

Does it mean someone who resigned because they found a better opportunity? Someone who was constructively dismissed because their co-founder made their working life impossible? Someone who stepped back for health reasons? Someone who joined a direct competitor the following Monday?

These are not the same scenario. They should not produce the same outcome. A well-drafted agreement defines them, names them, prices the buyout differently for each one, and specifies who decides which category a departing founder falls into. Rig and Cassie's agreement had none of that. It had one word: "left." What it meant was anyone's interpretation.

The third gap was IP assignment. Rig had been writing code before the company was incorporated. Some of it came from a side project he had been building for two years before Cassie. When they set up the company, the shareholders agreement said the company owned all its intellectual property.

Which it did. Except for the pre-existing code. Which nobody had formally assigned. Which meant it technically still belonged to Rig. Which nobody thought to ask about until it suddenly mattered enormously.

Three years in, it mattered enormously.

I was introduced to this situation through a mutual contact. The call was short. Rig walked me through what was happening. I was sitting in the client chair in my office in Barcelona, watching the city outside and listening to a very calm, very precise technical founder describe a situation that was not calm at all.

I asked him whether the pre-existing code had ever been formally assigned in writing, separate from the shareholders agreement.

There was a pause.

"I don't know," he said. "We just assumed the company owned it because we were building it for the company."

"Did you build it before you incorporated?"

Another pause. Longer this time.

"Some of it," he said. "Does that matter?"

It mattered. It mattered a great deal.

Arrival: What €80,000 Looks Like in Practice

Cassie had decided to leave. She had found something else. She was tired. She and Rig had not been getting along for months. The departure was not a surprise. The problems it created were.

They could not agree on whether the code Rig had built before incorporation was company IP or Rig's personal IP. Without a formal IP assignment on record, both arguments had merit. This turned into a dispute about what the company owed Cassie for her shares, which turned into a dispute about the company's value, which turned into a dispute about the definition of "left."

Was this a good leaver scenario, because Cassie's departure was at least partly attributable to the breakdown of the working relationship? Or a bad leaver scenario, because she had technically resigned voluntarily?

The agreement did not say. Both lawyers said their client was right. Both clients believed their lawyer.

When they hit deadlock on the IP question, they had no mechanism for resolving it. They tried mediation. Mediation required both parties to agree to a mediator. They could not agree on a mediator either.

By the time they settled, fifteen months had passed and €80,000 had been spent. For context: a properly drafted shareholders agreement, reviewed by a lawyer who understood what was actually missing from the template, would have cost them approximately €3,000 more at signing. That is the difference between an €800 review and a €3,800 review. They spent three thousand euros on the logo. The agreement that governed the entire ownership structure of the company got the template.

Now step out of the story for a moment.

Imagine two musicians forming a band. They write a partnership agreement covering how to split revenue from gigs and what happens if they want to bring in a third member. But they forget to specify who owns the songs one of them wrote before the band existed, what happens if one of them wants to leave, and who gets to make the call if they cannot agree on whether to take a particular booking. Three years of touring later, someone wants out. The songs become the lawsuit. The agreement, which covered all the things that never happened, is useless for the things that did.

This is not a story about bad lawyers. The lawyer who reviewed Rig and Cassie's agreement was working with a template that covered the standard scenarios. Standard templates cover standard scenarios. Nobody told them what the non-standard scenarios looked like. Those were the ones worth paying for.

Go read your own shareholders agreement today. Not to review it fully. Just to search for three things: a deadlock resolution mechanism, a definition of good leaver versus bad leaver, and confirmation that any pre-existing IP was formally assigned. If one of them is missing, you have found the gap worth filling.

The Blueprint

1. Pull up your shareholders agreement and search for the word "deadlock."
If it does not appear, or appears without a corresponding resolution process, your fifty-fifty structure has no tiebreaker. Done looks like: you can point to a specific clause that says what happens if both founders disagree on a reserved decision and cannot resolve it in fourteen days. That clause must include at least one of: a casting vote assigned to a specific role, a mediation process with a named procedure, or a buy-sell mechanism.

2. Find the leaver clause and write out in plain language what it actually says happens when a founder leaves.
Then ask: does it distinguish between a founder who resigned, a founder who was pushed out, a founder who left for health reasons, and a founder who joined a competitor? If the outcome is the same for all four scenarios, the clause is not doing its job. Done looks like: your agreement uses the words "good leaver" and "bad leaver," defines both, prices the buyout differently for each, and names who makes the categorisation call.

3. Identify every piece of IP the company relies on and trace it back to when it was created.
Anything created before incorporation, or created by a founder using personal resources or pre-existing work, is not automatically company property even if your shareholders agreement says the company owns all its IP. Done looks like: a signed IP assignment agreement, separate from the shareholders agreement, that formally transfers each piece of pre-existing IP to the company. If you incorporated through Stripe Atlas, Clerky, or similar, check whether this was included. It often is not.

4. Find the drag-along clause and check the threshold.
It should specify the percentage at which a majority of shareholders can require the rest to sell their shares in an exit. If that threshold is 50%, a minority shareholder can block a sale. Done looks like: your drag-along is set at a threshold that reflects how you actually want exit decisions made, and your lawyers have confirmed it works under the law of the jurisdiction where you are registered.

5. Book thirty minutes with a startup lawyer to review just these four points.
Not to rewrite the agreement. Just to confirm whether the gaps exist and, if they do, what closing them would cost. Done looks like: a written summary from the lawyer of what is missing and a quote for fixing it. Get this done before the next time someone joins or leaves the cap table. Not after.

Free resource: Shareholders Agreement Clause Checklist. Five clauses to check before you sign anything, with plain-language explanations of what "done" looks like for each. Read it here: mexzungu.com/resources/sha-checklist

Curious Corner

Legal Nodes' Delaware Incorporation Guide: Updated 2025. Walks through every post-incorporation document founders must sign, including why the IP Assignment Agreement (PIIA) is a separate document from your SHA and your formation package. The section on what investors check at due diligence is worth reading before your next round.

NVCA Model Legal Documents: The closest thing to an accepted standard in US venture-backed companies. The drag-along, co-sale, and voting provisions sections are worth reading even if you are not raising US venture, because they show what sophisticated parties expect to see and why.

SeedLegals' Shareholders Agreement Guide: A plain-language breakdown of what a shareholders agreement must contain, written for founders who are about to sign one. Covers the clauses investors care about most, the difference between a SHA and your Articles, and when to create one. UK-focused but the clause logic applies everywhere.

The Question

The moment your lawyer walked you through the leaver provisions, were you actually following the explanation, or nodding at the right intervals while thinking about the pitch deck you had to finish that evening? Most founders remember signing. Very few remember understanding. Reply and tell me: which clause in your current agreement would you least want tested in a dispute right now?

Sign-Off

Writing this from Barcelona on a warm June evening, the kind where the terrace is clearly the correct place to be working but I'm at my desk running SHA clause diagnostics instead. Next issue: employee equity, and specifically the ways a well-intentioned option plan can be quietly unenforceable in three of the five countries where your team actually lives.

Go fix the clause before it fixes you. Pepe

Disclaimer

The Outlaw Chronicles is for education only. Nothing here is legal advice. For the real thing, you know where to find me.

I'll tell you why. Because the legal industry has built an entire culture around making clients feel stupid. The jargon, the formality, the six-page emails that say nothing, the invoices that arrive without context. It's all designed to create a dependency, not a partnership.

Here's a radical idea. You should understand every single structural decision in your venture. Not at a "leave it to the lawyers" level. At a "I can explain this to my co-founder and my investor in plain language" level.

If your lawyer can't explain your cap table in two minutes without jargon, that's not your problem. That's theirs.

If your governance framework lives in a 200-page document nobody has read, it doesn't exist. Governance that nobody understands is governance that nobody follows.

The best framework I ever designed fit on a napkin. Literally. A founder and I sat at a bar in Nairobi and sketched the entire decision-making structure for a multi-country operation on a cocktail napkin. That napkin became the blueprint for the formal docs.

Simple doesn't mean unsophisticated. Simple means everyone knows the rules.

Demand clarity from your advisors. If they can't deliver it, find ones who can.

#LegalClarity #VentureArchitecture #Mexzungu #FounderAdvice

Nairobi. Paris. Mexico City. New York. Barcelona. Kigali. Mauritius. Johannesburg. The list keeps growing. Every market has different regulations, different corporate forms, different cultural expectations around how business gets done.

But the pattern underneath is always the same.

Business moves at the speed of trust.

Not at the speed of your slide deck. Not at the speed of your legal review. Trust.

In Nairobi, I learned that the deal closes over dinner, not in the boardroom. In Paris, I learned that precision earns respect before personality does. In Mexico City, I learned that family structures and business structures are often the same conversation. In New York, I learned that nobody cares where you're from if you can close.

The best venture architects aren't just technically excellent. They're culturally fluent. They know that a governance framework that works in Delaware might collapse in Nairobi. That an investor relationship built on New York norms might alienate a founder in Kigali.

This is what you can't learn from a textbook. It comes from being in those rooms, in those countries, making those mistakes, and earning that trust.

Structure is universal. Context is everything.

#CrossBorder #VentureArchitecture #Mexzungu #GlobalFounder

Different deals, different structures, different continents. I built the governance frameworks, structured the entities, sat in the rooms where capital decisions were made.

You want to know the thing that almost killed the biggest deals?

Misaligned expectations between founders and investors about control.

Not valuation. Not terms. Control.

Who picks the board? Who approves the next raise? What happens if the founder and the lead investor disagree on strategy?

I watched smart people burn months because they negotiated the number on the term sheet but never designed the decision-making architecture underneath it.

The money is never the hard part. The structure around the money is.

Every cap raise should start with a governance conversation, not a valuation conversation. Who decides what? Under what conditions? With what override mechanisms?

If you're raising right now and nobody has asked you these questions yet, your advisors are doing it wrong.

The money will come. The architecture determines whether you survive once it does.

#Governance #StartupFundraising #VentureArchitecture #Mexzungu

I grew up in Mexico. My dad spent his career in government. He signed me up for law school without asking. Having a gap year wasn't a thing back then. So I became a lawyer.

I went to big law because I wanted to tackle big monsters. Then Yale. Then Mauritius, which is where my Africa story actually started.

From there I flew to Kigali for four days to sign financing for a campus. I stayed four months. Negotiating a bond with the government pension fund, a loan with the largest local bank, and building terms with a Turkish contractor. Four days became four months because the work was real and someone had to stay until it was done.

Then came Nairobi. I was on a business trip from Mauritius to Dakar. Two-day layover. COVID hit. Two days became two years.

Every step was an accident that turned into a decision.

And every accident built the exact skill set that no traditional path could have assembled. Cross-border structuring. Multi-jurisdictional governance. Capital raising across cultures where trust matters more than term sheets.

Mexzungu exists for the people who took the weird path.

The founder who grew up in Lagos, studied in London, and is building in Kigali. The operator who spent five years in corporate and now can't breathe in those rooms anymore. The creative who knows their business needs real structure but can't stomach the pin-striped-suit consulting world.

You don't need to fit the mould. You need someone who understands why you broke it.

Mexzungu is an outlaw studio built by an outsider, for outsiders. Structure without the straitjacket. Big law rhythm meets rock and roll rhyme.

The beautifully unconventional ones. That's who we're here for.

#FounderManifesto #VentureArchitecture #Mexzungu #BuildDifferent

Every founder who calls me is in one of three situations. Here's which one you are.

The Builder. You're pre-Series A. You've got traction, maybe some revenue, and you're about to raise real money for the first time. Your structure was built on a template from the internet. You know it won't hold, but you don't know where it'll break. You need someone to pressure-test the whole thing before an investor does.

The Scaler. You've raised. Maybe $2M, maybe $20M. Now you're expanding into new markets, adding entities, hiring across borders. The structure that worked for one country is cracking under the weight of three. You need architectural oversight, not more lawyers billing by the hour.

The Fixer. Something already broke. A co-founder dispute. A cap table that doesn't work anymore. A board that can't make decisions. An investor relationship that went sideways. You need someone who's seen this exact situation before and knows the structural path out.

All three need the same thing. Not legal advice. Venture architecture.

Someone who can look at the whole picture, not just the document in front of them. Someone who's been the operator, the board member, and the investor. Not just the advisor.

If you recognised yourself in one of those, that's exactly who Mexzungu is for.

DM me which one you are. I'll tell you the first thing I'd look at.

Mission Briefing

Once upon a spreadsheet, a founder thought she owned 55% of her company. She'd been showing that number to investors for 18 months. Then three SAFEs converted, the real math came in, and she owned 31%. This is the story of how that happens, and how to make sure it doesn't happen to you.

The Deep Dive

Your Cap Table Is Lying to You

Let me tell you about something that happens more often than anyone in this industry wants to admit.

A founder builds something real. Gets traction. Raises a bit of money from people who believe in the vision. Then one day, usually on the worst possible day, someone runs the actual numbers and the story the spreadsheet has been telling turns out to be fiction.

I've watched this play out more times than I'd like. The details change every time. The plot never does.

1. Departure (Business Launch)

Two friends start a company. They split the equity 50/50 because they're equal partners and that feels right. They set aside 10% for an option pool because someone told them they should. The cap table is clean:

Everyone's happy. The spreadsheet looks great. Life is good.

2. Layover (Angel Funding)

Over the next year, they raise $400K from three angel investors. One SAFE at a $3M cap. Another at $5M. A third at $4M with a 20% discount. Three separate conversations, three handshakes, three moments of "we just got funded!" excitement.

Here's the thing about SAFEs. They stand for Simple Agreement for Future Equity, which is one of the great marketing achievements of our time. Every word in that name is designed to make you feel comfortable. "Simple." "Future." "Equity." It all sounds so... manageable.

But SAFEs don't show up on your cap table. Not yet. They're promises. They're guests who've RSVP'd to the party but haven't arrived yet. So the spreadsheet still reads 45/45/10. The founders still tell everyone they own 90% of their company.

They believe it. Why wouldn't they? The spreadsheet says so.

3. Arrival (VC Investment)

A VC offers to lead a $2M round at $10M pre-money. Everyone celebrates the valuation. Champagne. LinkedIn posts. "Excited to announce..."

Then the lawyers run the conversion model. And the spreadsheet finally tells the truth.

Combined founder ownership: 52%. Down from the 90% they'd been telling themselves. And here's what makes it worse: none of this was hidden. Nobody lied. Nobody acted in bad faith. The math was always going to land here. The founders just never asked the spreadsheet the right questions.

Why stories like this keep repeating

There are three reasons, and they show up in almost every version of this story I've seen.

The invisible instrument problem. SAFEs live outside your cap table until they convert. So you issue one, then another, then a third, and your spreadsheet keeps telling you a story that stopped being true months ago. It's like checking your bank balance without counting all the pizza you ordered on Uber Eats last weekend. The number looks fine until it doesn't.

The scenario nobody models. Every time I sit down with a founder, I ask the same question: "What does your cap table look like if you raise your Series A at $8M instead of $12M?" The most common answer is a pause, followed by "I'd have to ask my lawyer." That pause is where the problem lives. Your lawyer should have already walked you through this. If they haven't, they're processing paperwork, not doing architecture.

The option pool shuffle. This one is subtle, and I want to explain it gently because it's not anyone being malicious. It's just how the game works.

When a VC says they want a 15% option pool "post-money," it sounds reasonable. But the standard practice is that this pool comes from the founders' shares, not from the new investment. So before the round closes, the founders dilute themselves to create the pool. The VC's percentage is calculated after that dilution.

It's standard. It's legal. And it means the founders are quietly paying for something that benefits the company broadly. Most founders don't fully understand this mechanic until after the documents are signed. Not because anyone hid it. Just because nobody explained it in plain language.

What you can do about it

The good news is that none of this is complicated. It's just maths that nobody does until the moment it matters.

Model your SAFEs today.

I built a free cap table calculator you can use right now. It's pre-filled with the example from this story, so you can see the mechanics in action. Then clear the yellow cells and plug in your own numbers.

Google Sheet · click to make your own copy

Enter your founders, your SAFEs, your Series A terms, and watch what happens. Model what happens at three different valuations: your optimistic case, a realistic one, and the scenario you'd rather not think about. If you can see the range, you can make informed decisions. If you can't, you're writing a story without knowing the ending.

Keep a running total. Every time you issue a new SAFE, update the model. If the next one pushes your combined founder ownership below 50% at any reasonable conversion scenario, that's worth a conversation before you sign.

Understand the option pool before you negotiate. When a term sheet says "15% option pool," ask: pre-money or post-money? Who bears the dilution? Is the pool sized for your actual hiring plan, or is it bigger than you need? These aren't adversarial questions. They're structural ones. Good investors will respect you for asking.

Get a proper cap table tool. Carta, Pulley, Ledgy, whatever works in your jurisdiction. Not a spreadsheet. A tool that models conversion scenarios and shows you the real numbers. Because spreadsheets don't update themselves, and the gap between what you think you own and what you actually own tends to grow quietly.

The Blueprint

Cap Table Reality Check: 5 Questions

Grab the free calculator and answer these five questions:

The Docket

Things that caught my eye this week

The Question

When did you first realise your cap table was off?

Click the one that's you.

Every click opens an email. Add your story or just send it blank. I read every one.

Writing this from Barcelona, where the jacarandas are about to bloom and the terrace is finally warm enough to work from again. Next issue lands next Monday. Until then, maybe go check that spreadsheet. Just in case.

Have a great day ahead,

Pepe Carrillo

Founder, Mexzungu Group · Venture Architect

mexzungu.com · pepecarrillo.co · LinkedIn

Mexzungu Group · Outlaw Studio · Barcelona

The Outlaw Chronicles is for educational purposes only. It does not constitute legal, financial, or professional advice. For structuring decisions, engage qualified professionals in your jurisdiction.

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