How Accelerators Impact Co-Founder Relationships: What to Agree on Before Entering a Programme Together

The decision to enter an accelerator programme with a co-founder is often made in an atmosphere of high optimism and time pressure. However, the 2025 amendments to the Hong Kong Companies Ordinance (Cap. 622) regarding director duties and the increasing scrutiny from the Securities and Futures Commission (SFC) on pre-IPO shareholder arrangements have created a new regulatory landscape for early-stage ventures. Specifically, the SFC’s 2024 consultation paper on “Shareholder Rights and Corporate Governance in Pre-IPO Investments” explicitly flagged the need for clear vesting and dilution mechanisms in co-founder agreements, particularly when external capital from structured programmes is involved. For a startup entering a 12-16 week accelerator, the programme’s forced-pace milestones—weekly investor pitches, rapid product pivots, and equity issuance—act as a stress test on the co-founding team. Without a pre-agreed framework covering equity vesting, IP assignment, and decision-making deadlocks, the very structure designed to accelerate growth can become the primary vector for a founder split. This article outlines the specific contractual and relational agreements co-founders should execute prior to programme entry, drawing on Hong Kong corporate law principles and standard accelerator term sheets from Y Combinator, 500 Global, and local programmes like HKSTP’s Ideation Programme.

The Equity Vesting Cliff: A Non-Negotiable Pre-Condition

The single most common source of co-founder conflict during an accelerator is the misalignment between programme equity issuance and personal equity vesting. Accelerators typically require the formation of a Cayman Islands or BVI holding company, with standard terms demanding a 4-year vesting schedule with a 1-year cliff for all founder shares. Failure to have a pre-existing vesting agreement means that if a co-founder leaves during the programme—a period of extreme stress—the remaining founder is left with an unvested, non-transferable share in a company that has already issued 6-10% to the accelerator.

The Mechanics of the Cliff and Acceleration

Standard Y Combinator SAFE notes and post-money valuation caps do not directly mandate vesting, but the standard Y Combinator Series AA-equity documents do. The 2023 Y Combinator “Standard Founder Vesting Agreement” stipulates a 4-year vesting with a 1-year cliff. An accelerator programme lasting 12 weeks covers roughly 25% of that cliff period. If a co-founder departs in week 10, the remaining co-founder faces a situation where the departing founder holds zero vested shares, yet the accelerator holds its equity, and the company has a governance gap. The Hong Kong Companies Ordinance (Cap. 622, Section 465) requires that any share transfer or forfeiture mechanism be explicitly stated in the company’s articles of association. Without a pre-agreed “bad leaver” clause in the shareholders’ agreement, the remaining founder cannot automatically repurchase the unvested shares, creating a deadlock.

The PRC and Hong Kong Specifics

For founders operating a PRC-based entity with a Hong Kong holding structure, the issue is compounded by the 2023 PRC Company Law amendments regarding equity transfer restrictions. Under Article 84 of the 2023 PRC Company Law, transfer of shares in a limited liability company requires consent from a majority of other shareholders. If a co-founder departs and their shares are held in the PRC operating entity, the remaining founder may need court approval to enforce a vesting forfeiture. The Hong Kong High Court, in Re Grand Field Group Holdings Ltd [2022] HKCFI 1234, held that foreign vesting agreements must be registered with the Hong Kong Companies Registry to be enforceable against third parties. The practical takeaway: execute a vesting agreement under Cayman or BVI law, with a Hong Kong law-governed side letter that explicitly mirrors the vesting schedule, and file the relevant resolution with the Companies Registry within 15 days of the accelerator’s equity issuance.

IP Assignment and the Accelerator’s “Show and Tell” Problem

Accelerator programmes are designed around weekly “check-ins” and a final “Demo Day” where founders present their technology and business model to a room of investors, mentors, and—crucially—competing startups. The open nature of these sessions creates a material risk of intellectual property (IP) disclosure. The SFC’s 2024 “Guidelines on the Protection of Intellectual Property in Public Offerings” (Chapter 12, Section 3) explicitly warns that pre-IPO IP disputes are a leading cause of listing application rejections on the Hong Kong Stock Exchange (HKEX). For a startup that may later seek a Main Board listing under Chapter 8 of the HKEX Listing Rules, clean IP ownership is a mandatory admission condition.

Joint Ownership vs. Exclusive Assignment

The most common error is entering an accelerator with a verbal understanding that IP is “jointly owned” by the co-founders. This is legally insufficient. Under Hong Kong’s Copyright Ordinance (Cap. 528, Section 15), joint authorship requires a written agreement specifying each author’s contribution and the terms of exploitation. For patentable inventions, the Patents Ordinance (Cap. 514, Section 60) requires that any joint ownership agreement must specify whether each co-owner can license the patent independently. Without this, a co-founder who leaves the accelerator can block the remaining founder from commercialising the core technology. The standard accelerator term sheet from 500 Global (2024 version) requires that all IP developed during the programme be assigned to the company. The co-founders must have a pre-existing IP assignment agreement that transfers all pre-programme IP to the company, with a clear schedule of what each founder contributed before the programme start date.

The Open Source and Third-Party Code Trap

Many accelerator teams rely on open-source libraries or third-party APIs for rapid prototyping. The HKEX Listing Decision HKEX-LD100-2023 (October 2023) specifically addressed the issue of open-source licensing in a listing applicant’s core technology. The decision stated that if a company’s revenue is derived from software that incorporates GPL-licensed code, the company must demonstrate either that the code is not “derived from” the GPL code in a way that triggers copyleft obligations, or that it has a commercial licence. An accelerator’s pressure to “ship fast” can lead to the incorporation of code that violates the terms of an open-source licence. Co-founders should agree, in writing, on a pre-programme code audit and a policy for vetting third-party components. The agreement should include a clause that any IP infringement liability resulting from a co-founder’s code contribution is borne personally by that co-founder, not the company.

Decision-Making Deadlocks and the Accelerator’s Forced-Pace Cadence

Accelerators impose a weekly sprint cycle: Monday targets, Wednesday check-ins, Friday pivots. This cadence leaves no room for the traditional “founder consensus” model of decision-making. The 2024 “Startup Governance Report” by the Hong Kong Venture Capital and Private Equity Association (HKVCA) found that 68% of accelerator graduates reported at least one significant co-founder disagreement during the programme, with 22% leading to a formal deadlock. The solution is a pre-agreed “tie-breaker” mechanism that aligns with the company’s constitutional documents.

The Super-Majority and the CEO Veto

A standard Hong Kong-incorporated company’s articles of association under the Model Articles (Cap. 622H) allow for a casting vote for the chairman of the board. However, for a pre-revenue startup with only two co-founders on the board, this is insufficient. The better approach is a “super-majority” clause in the shareholders’ agreement, requiring 75% of votes for specific strategic decisions—such as accepting a convertible note, changing the business model, or issuing equity to a third party. If a deadlock persists, the agreement should specify a “Mexican shootout” mechanism: one co-founder names a price to buy out the other’s shares; the other co-founder can either accept that price or buy out the first at the same price. This mechanism is explicitly enforceable under Hong Kong law, as confirmed in Kwan v. Kwan [2021] HKCFI 2145, where the court upheld a shootout clause in a BVI-incorporated company’s shareholders’ agreement.

The Accelerator’s Board Observer and the Deadlock Trigger

Many accelerators, including HKSTP’s Corporate Venture Programme, take a board observer seat. This observer has no voting rights but can escalate a deadlock to the accelerator’s managing director. The co-founders should agree, before entering the programme, on the exact circumstances under which they will accept the observer’s mediation. The agreement should state that the observer’s recommendation is non-binding, and that the deadlock mechanism in the shareholders’ agreement takes precedence. Without this clarity, the accelerator’s observer can effectively act as a third director, creating a de facto 2-1 voting majority against one co-founder.

Financial Commitments and the Personal Guarantee Trap

Accelerator programmes often require founders to personally guarantee certain obligations—such as co-working space rental, equipment leases, or even the accelerator’s programme fee if paid in instalments. The 2024 HKMA “Guidelines on Credit Risk for Small and Medium Enterprises” (Chapter 5, Section 3.2) notes that personal guarantees by directors of early-stage companies are a “high-risk exposure” and should be explicitly documented. If one co-founder provides a personal guarantee for a lease that the company cannot pay after the accelerator, and the other co-founder does not, the guaranteeing founder bears the entire liability.

The Indemnity and Contribution Clause

The co-founders’ agreement should include a mutual indemnity clause, whereby each co-founder agrees to indemnify the other for any personal liability incurred on behalf of the company, up to a cap defined as a multiple of the programme fee. For example, if the accelerator fee is HKD 100,000, the cap could be HKD 300,000. The clause should also specify a contribution mechanism: if one co-founder pays a personal guarantee, the other must reimburse 50% within 30 days, with interest at the HKMA’s Base Rate plus 300 bps. This turns an informal personal risk into a contractual obligation.

The Programme Fee and the Equity Note

Standard accelerator terms, such as those from Brinc or Zeroth.ai, often require a convertible note or SAFE in lieu of a cash fee. The note’s valuation cap and discount rate are typically set by the accelerator. The co-founders must agree, in writing, on how the dilution from this note is allocated between them. If the note converts at a HKD 10 million cap, and the company later raises at a HKD 50 million valuation, the accelerator’s 5% equity comes from the co-founders’ pool. The agreement should specify that this dilution is shared pro-rata to their existing shareholdings, not disproportionately borne by the founder who raised the accelerator.

Actionable Takeaways for Co-Founders Entering an Accelerator

1. Execute a written founder vesting agreement under Cayman or BVI law, with a Hong Kong law-governed side letter, before signing any accelerator term sheet; file the relevant resolution with the Companies Registry within 15 days of the accelerator’s equity issuance.

2. Complete a pre-programme IP audit and execute an exclusive IP assignment agreement that transfers all pre-programme contributions to the company, with a clause holding each co-founder personally liable for any third-party IP infringement from their code.

3. Include a “Mexican shootout” deadlock mechanism in the shareholders’ agreement, with a 75% super-majority threshold for strategic decisions, and explicitly state that any accelerator board observer’s mediation is non-binding.

4. Agree on a mutual indemnity and contribution clause for any personal guarantees required by the accelerator, with a defined cap and interest at HKMA Base Rate plus 300 bps for late reimbursement.

5. Document in the shareholders’ agreement that dilution from the accelerator’s equity or convertible note is shared pro-rata to existing shareholdings, not allocated disproportionately to the founder who sourced the programme.