When a co-founder dies

This is how I've always handled it as well. There really is no better approach. To keep the legal stuff simple and the costs of acquiring the equity low, I hand out the equity when the founder joins (usually you can do this at a penny a share or whatever your corp allows that early in the game) and the shares have "reverse vesting" stipulations attached.

(Please take my condolences as given.)

Meanwhile, on a discursive note, here's my cautionary start-up anecdote on this subject ...

Some years ago, my wife was involved in a start-up -- a local microbrewery. She was the trainee brewer; two experienced brewers, Ian and David, were the muscle behind it. Ian and Karen worked back at the plant, pumping out beer: David drove the van, making deliveries to local pubs, collecting debts, keeping the business side running.

Now, microbreweries don't generally get VC backing. (They scale linearly with labour inputs, rather than exponentially, and they're paid after the product is drunk. It's a very 18th century business model.) In Fisherrow Brewery's case, it did what most small Scottish businesses do: it relied on a prearranged overdraft facility for its float (basically a line of credit from the bank).

This worked fine, and the brewery was growing, getting ready to hire more staff ... until David died. He was 40, he'd been working hundred hours weeks for a year, and he had a stroke one night.

The business was dead in the water six weeks later. What killed it was not Ian and Karen being unable to keep it going, but the bank; they called in the overdraft. "Why?" Asked Ian. "Because our experience shows that when one of the founders of a small business dies suddenly, 90% of the businesses go bankrupt within six months," said the bank manager. "But we're viable!" He protested. "Yes, but our statistics show that you're going to go bust, so we're pulling your line of credit."

The banks are in the business of risk management, and they know that when a founder dies, the business is going down the shitter. And so they flush, hard, to clear their own liabilities, even if it becomes a self-fulfilling prophecy.

(Here's the icing on the cake: the overdraft was secured against assets that David owned. To be precise, against shares in the bank in question valued at rather more than the overdraft!)

Sorry to hear that. Hope you recover and carry on what your best friend has left there. It is a heart-breaking period, but, you will be fine.

That depends on what stage you were at. If you both had an idea to 'do search' and had only got as far as picking a name. Then after another 10years of work by you alone you are ready to take on Google, does your late partner's partner get half?

If you need to bring in investment or new people and give them options who has to agree to that dilution?

If in a few years there is a row in the family about who owns your late partner's share - are you ready to spend time and money to defend in court what you said to who at the funeral?

Again my condolences for the OP's loss. BUT Startup founders need to consider that today they are co-owners with their best friend - tomorrow they may be working with their friend's newly divorced and bitter wife, their useless kids or a slimey lawyer who is preying on their grieving parents.

25 is just not fair. Kudos to you for keeping at it.

Condolences, now go and make him proud.