Agreeing how investment partners work together
Agreement on an opportunity is a starting point; funding obligations, decision rights and responses to change need equal attention.
Define what each partner brings
Partners may agree on the appeal of an opportunity while expecting different things from the relationship. One may contribute capital, another a business, development rights or delivery expertise.
Record those contributions, their timing and any conditions. Where the contribution is not cash, agree how it will be assessed before it becomes part of the ownership discussion.
Agree how decisions will be made
An ownership percentage does not explain every decision the partners will face. Budgets, financing, appointments and changes to the business plan need clear approval arrangements.
Agree the reporting requirements and a process for decisions the partners cannot resolve.
Discuss what happens when plans change
Delays, additional funding needs and a partner’s wish to leave can change the original balance of a venture.
Establish what happens when a partner cannot meet a commitment or wants to transfer ownership, and reflect the agreed arrangements in the partnership documentation.
Test the agreement against a funding shortfall
Consider a project that needs more capital before its next milestone. Who can request the funding, what evidence is needed and how will the partners respond?
Work through three possibilities: everyone contributes, one partner contributes more, or the project changes scope. Discuss the implications for ownership and decision rights before a shortfall forces the conversation.
