What is the most common cause of startup failure?

The most-cited causes are running out of cash and building something with no real market need. In CB Insights’ analysis of startup post-mortems, running out of cash and lack of market need top the list, while problems with the founding team appear in a meaningful minority of cases. Founder and team conflict is therefore not usually the single biggest cause, but it is a leading contributor that is largely preventable.

How big a role do co-founder disputes play in startup failure?

Larger than many founders expect. CB Insights records “not the right team” in roughly 14–23% of failures, and Harvard Business School professor Noam Wasserman found that interpersonal “people problems” among the founding team drive the majority of failures in high-potential startups. The widely quoted “65%” figure is best understood as referring to these broader people problems rather than co-founder conflict alone.

What should a founders' agreement include?

At a minimum: share vesting and reverse vesting, good-leaver and bad-leaver provisions, a deadlock-breaking mechanism, drag-along and tag-along rights, reserved matters requiring super-majority approval, each founder’s roles and remuneration, intellectual-property assignment to the company, confidentiality and restrictive covenants, and a dispute-resolution clause. In Singapore these are contractual good practice rather than statutory requirements, so they should be tailored to your cap table.

How are founder disputes resolved in Singapore?

Most are best resolved through negotiation and mediation, via the Singapore Mediation Centre or Singapore International Mediation Centre, which is confidential, faster and preserves relationships. Where a binding private decision is needed and an arbitration clause exists, arbitration at SIAC is available. Court action is reserved for statutory remedies such as an oppression claim under section 216, a derivative action under section 216A, or a winding-up application.

Can a 50/50 deadlock force a company to wind up?

It can. A genuine, permanent deadlock between equal shareholders is a recognised basis for winding a company up on the “just and equitable” ground under section 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018, and the Singapore Courts expressly cite management deadlock as an example. However, winding up is a remedy of last resort: if a less drastic option such as a share buy-out is available and the petitioner is acting unreasonably, the court may decline to order it. A deadlock-breaking clause in the founders’ agreement is the better safeguard.

Is a shareholders' agreement the same as the company constitution?

No. The constitution is the mandatory governing document every Singapore company files with ACRA; it is public and binds all members as a statutory contract, and amending it needs a 75% special resolution lodged within 14 days. A shareholders’/founders’ agreement is a separate, private contract that binds only its signatories and is not filed with ACRA. The two should be drafted to align, with sensitive commercial terms usually kept in the private agreement.

Why Startups Fail: Founder Disputes & Governance in Singapore

Published: 22 June 2026 · Last reviewed: 3 July 2026 · Reviewed by Ray Tay, Co-Founder & Managing Director, VIVOS PTE. LTD. (ACRA Filing Agent FA20240323 · MOM EA Licence 24S2425)

Why Do Startups Fail, And How Do Founder Disputes And Weak Governance Cause It?

Most startups that fail do so because they run out of cash or never find product–market fit, but a large share of failures trace back to the founding team rather than the product. In CB Insights’ post-mortem analysis, “not the right team” was cited in 14-23% of startup failures, and Harvard Business School research finds that interpersonal “people problems” among founders, not market or technical issues, drive the majority of failures in high-potential startups.

In Singapore, founder fallouts turn destructive when there is no founders’ agreement and weak governance: no vesting, no leaver terms, no way to break a 50/50 deadlock, and no clear reserved-matter controls. When that happens, founders may resort to statutory remedies, an oppression action under section 216 of the Companies Act 1967, a derivative action under section 216A, or, in the worst case, an application to wind the company up on the “just and equitable” ground under section 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018. The fix is preventive: a well-drafted founders’ agreement and a sound constitution from day one.

Table Of Content

Key moments

0:00	Introduction
3:30	What triggers founder disputes
7:00	Recognition, egos & HR risk
12:30	A real dispute case
21:00	Founders’ agreements from day one
30:00	When to escalate
38:00	Mediation & resolution
46:00	Bringing in outside help
53:00	The counsellor’s role & wrap-up

What Triggers Founder Disputes

Founder disputes rarely begin with a single dramatic event. They build from unresolved questions that were never written down at the start: who owns how much, who decides what, who does the work, and what happens if someone leaves. The VIVOS panel’s starting point is that the seeds of most disputes are planted on day one, when co-founders are aligned, optimistic, and reluctant to negotiate hard terms with people they trust.

The evidence backs this up. Across CB Insights’ startup post-mortems, “not the right team” appears as a cause in 14-23% of cases, depending on the dataset, alongside the better-known killers of running out of cash and building something with no market need. Harvard Business School professor Noam Wasserman, who studied roughly 10,000 founders for The Founder’s Dilemmas, found that interpersonal “people problems” within the founding team, rather than product, market, or technical failures, account for the majority of failures among high-potential startups.

Common flashpoints include unequal effort against equal equity, disagreement over strategy or pace, a founder wanting to exit, dilution from fundraising, and the simple drift that occurs as a company scales and roles change.

The Human Side: Egos, Recognition & HR Risk

Beyond the legal mechanics, founder disputes are fundamentally human. The panel’s discussion of recognition and egos points to a pattern many founders will recognise: as a company grows, contributions become harder to measure, credit becomes contested, and personal identity gets bound up with the business. A disagreement over a product decision can quickly become a proxy for a deeper question of whose vision the company follows.

These tensions also create real human-resources and legal risk. When a founder is also a director and an employee, a fallout can simultaneously raise employment issues (a founder’s removal or resignation), directors’ duties (acting in the company’s interests, not one’s own), and shareholder rights.

Singapore’s framework reflects this overlap: a founder who is sidelined can be both an aggrieved employee and an aggrieved shareholder, and the conduct complained of, exclusion from management, being cut out of information, or having decisions pushed through without consultation, is exactly the kind of behaviour the oppression remedy under section 216 of the Companies Act 1967 is designed to address.

Founders' Agreements From Day One

The single most effective protection against a destructive dispute is a founders’ agreement (often combined with, or expanded into, a shareholders’ agreement) put in place at incorporation. Under Singapore law this is a private, contractual document, it is not filed with ACRA and is not required to incorporate a company, which means founders can negotiate candid, tailored terms that stay confidential. It sits alongside the company’s constitution, which is the public, mandatory governing document filed with ACRA.

A good founders’ agreement answers, in advance, the questions that later cause fights. The clauses below are general good practice in the Singapore market rather than statutory requirements, and they should be drafted to fit your specific cap table and plans.

Clauses every founders’ agreement should include

Clause	What it does
Share vesting & reverse vesting	Founder equity “earns in” over time so an early departer cannot keep full equity. The Singapore norm is reverse vesting, shares issued upfront but subject to company buy-back or forfeiture if a founder leaves before vesting, typically over three to four years with a one-year cliff.
Leaver provisions (good vs bad leaver)	Defines what happens to a departing founder’s shares. A “good leaver” (e.g. illness) usually keeps vested shares, often subject to buy-back at fair value; a “bad leaver” (e.g. misconduct or breach) typically has shares bought back at nominal value. Unvested shares are generally forfeited.
Deadlock-breaking mechanism	Resolves a stalemate, which is acute for 50/50 founders. Options include a chairperson’s casting vote, an independent director, escalation to mediation, or buy-sell “shoot-out” clauses (Russian roulette or Texas shoot-out).
Drag-along & tag-along rights	Drag-along lets a selling majority compel the minority to sell on the same terms (clearing a clean exit for a buyer); tag-along lets the minority join a majority sale on the same terms (protecting them from being left behind).
Reserved matters	Key decisions needing more than a simple majority, often a 75% special resolution or unanimous/investor consent, such as issuing shares, taking on debt above a threshold, changing the business, or selling the company.
Roles, time & remuneration	Sets each founder’s scope, expected commitment and pay, pre-empting disputes over “who does what” and whether contributions justify the equity split.
IP assignment	Each founder assigns the intellectual property they create to the company, so core assets belong to the company, not an individual, which is critical for fundraising and acquisition due diligence.
Restrictive covenants & confidentiality	Non-compete and non-solicit terms plus confidentiality. In Singapore these are prima facie void as restraint of trade and enforceable only if they protect a legitimate proprietary interest and are reasonable in scope, duration and geography, so they must be tightly drafted.
Dispute resolution clause	Sets a defined path, typically negotiation, then mediation and/or arbitration, keeping disputes private and out of open court.

Governance, The Constitution & Reserved Matters

Founders’ agreements work hand in hand with good governance. Every Singapore company must adopt a constitution at incorporation, the single governing document that, since the Companies (Amendment) Act 2014, replaced the former Memorandum and Articles of Association, and it must be filed with ACRA. ACRA prescribes a Model Constitution that simple companies can adopt, while companies with investors or unusual share structures use a customised version. Altering the constitution requires a special resolution (at least 75% of votes cast), with the change lodged with ACRA within 14 days.

Because the constitution is public and binds all members as a statutory contract, while a shareholders’ agreement is private and binds only its signatories, the two must be drafted to align. Sensitive economics, vesting, leaver buy-back prices, drag and tag, usually live in the private agreement, but protections that need to bind everyone reliably (such as compulsory buy-back or transfer restrictions) should also be reflected in the constitution.

Sound governance also means meeting baseline ACRA obligations: at least one director ordinarily resident in Singapore, a qualified company secretary appointed within six months, a register of members, a register of registrable controllers, and timely annual filings. Reserved matters, the list of decisions requiring super-majority or unanimous approval, are the practical heart of governance for founders, because they determine who can do what without the others’ agreement.

When And How To Escalate

Not every disagreement needs formal intervention, and escalating too fast can entrench positions. The panel’s framing is to escalate in proportion to the problem: start with a direct, documented conversation; if that fails, use the agreement’s dispute mechanism (often a structured negotiation, then mediation); and reserve formal legal remedies for genuine deadlock, misconduct, or conduct that is unfairly prejudicial to a shareholder. Keeping clear written records throughout, board minutes, decisions, and communications, matters, because if a dispute does reach a tribunal or court, the contemporaneous record is what the decision-maker relies on.

Where conduct crosses into unfairness, Singapore’s Companies Act 1967 provides statutory remedies. A member can seek relief under section 216 where the company’s affairs are being conducted, or directors’ powers exercised, in a manner that is oppressive, in disregard of a member’s interests, or unfairly discriminatory or otherwise prejudicial; the unifying test the courts apply is “commercial unfairness.” The court has wide discretion under section 216(2), and the most common remedy is an order that one party buy out the other’s shares at a fair value.

Where the wrong is done to the company rather than to a member personally, for example, a director diverting opportunities, a member can apply for leave to bring a statutory derivative action in the company’s name under section 216A, which requires 14 days’ notice, good faith, and that the action appears to be prima facie in the company’s interests.

Mediation vs Arbitration vs Court

How a dispute is resolved matters as much as the underlying rights. Founder disputes often suit mediation because it is confidential, faster and cheaper than litigation, and, crucially, it preserves relationships and lets the parties (not a judge) shape the outcome.

Singapore is a global hub for all three routes: mediation through the Singapore Mediation Centre and the Singapore International Mediation Centre; arbitration through the Singapore International Arbitration Centre; and litigation through the Singapore Courts. Mediated cross-border settlements are also enforceable internationally under the Singapore Convention on Mediation, in force since September 2020.

Dispute-resolution options compared

	Mediation	Arbitration	Litigation
Binding?	Non-binding until a settlement is signed; that settlement is then enforceable	Binding final award; very limited appeal	Binding judgment, subject to appeal
Private or public?	Private & confidential	Private & confidential	Public (open court)
Who decides?	The parties; a mediator only facilitates	A tribunal the parties appoint	A judge appointed by the State
Speed & cost	Fastest, generally cheapest	Usually faster/cheaper than court	Typically slowest, most costly
Preserves relationship?	Highest	Moderate	Lowest
Typical use	Early founder fallouts; preserving the working relationship	A binding private decision where an arbitration clause exists	A statutory court remedy (e.g. s 216) or a public judgment is needed

Litigation is unavoidable for certain remedies, because some relief can only be granted by a court. A section 216 oppression claim is a court action, and so is an application to wind a company up. In a true, permanent deadlock, commonly two equal shareholders who can no longer cooperate and have no mechanism to break the impasse, a member may apply to wind the company up on the “just and equitable” ground under section 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA).

The Singapore Courts expressly list “deadlock in the management of the company” as an example of when this ground applies. Winding up is a remedy of last resort: where a less drastic option such as a share buy-out is available and the petitioner is acting unreasonably in seeking liquidation instead, the court can decline to wind the company up.

Bringing In Outside Help

Founders are often too close to the conflict to resolve it alone. The panel’s closing theme, bringing in outside help, including the role of a counsellor or neutral facilitator, reflects a practical truth: a trusted third party can de-escalate, separate the personal from the commercial, and help founders reach a workable outcome before positions harden into litigation.

Corporate advisers, a company secretary, an independent director, and where needed a mediator or lawyer each play a part, and the earlier they are engaged, the more options remain open. The most valuable outside help, though, arrives before any dispute: getting the founders’ agreement, the constitution and the governance framework right at incorporation is far cheaper and far less painful than untangling a fallout later.

Key Takeaways

Running out of cash and lack of market need are the most-cited reasons startups fail, but the founding team is a major factor, cited in 14–23% of CB Insights post-mortems, and the leading cause of failure in Wasserman’s high-potential startup research.
A founders’/shareholders’ agreement is the single best protection: it is private, not filed with ACRA, and lets founders pre-agree vesting, leaver terms, deadlock-breakers and reserved matters.
The constitution is the mandatory, public governing document filed with ACRA; it and the shareholders’ agreement must be drafted to align.
Singapore’s statutory remedies include oppression relief (s 216 Companies Act 1967), the derivative action (s 216A), and just-and-equitable winding up (s 125(1)(i) IRDA 2018), the last typically a remedy of last resort.
A genuine, permanent 50/50 deadlock is a recognised basis for winding up on the just-and-equitable ground.
Mediation often suits founder disputes best, confidential, faster, and relationship-preserving, with arbitration and litigation reserved for binding or statutory outcomes.

Set your company up to avoid disputes

Getting your structure, constitution and founders’ arrangements right from day one is the most reliable protection against a costly fallout. VIVOS helps founders incorporate and govern their companies properly in Singapore.

Frequently
Asked Questions

What is the most common cause of startup failure?

The most-cited causes are running out of cash and building something with no real market need. In CB Insights’ analysis of startup post-mortems, running out of cash and lack of market need top the list, while problems with the founding team appear in a meaningful minority of cases. Founder and team conflict is therefore not usually the single biggest cause, but it is a leading contributor that is largely preventable.
How big a role do co-founder disputes play in startup failure?

Larger than many founders expect. CB Insights records “not the right team” in roughly 14–23% of failures, and Harvard Business School professor Noam Wasserman found that interpersonal “people problems” among the founding team drive the majority of failures in high-potential startups. The widely quoted “65%” figure is best understood as referring to these broader people problems rather than co-founder conflict alone.
What should a founders' agreement include?

At a minimum: share vesting and reverse vesting, good-leaver and bad-leaver provisions, a deadlock-breaking mechanism, drag-along and tag-along rights, reserved matters requiring super-majority approval, each founder’s roles and remuneration, intellectual-property assignment to the company, confidentiality and restrictive covenants, and a dispute-resolution clause. In Singapore these are contractual good practice rather than statutory requirements, so they should be tailored to your cap table.
What is shareholder oppression under Singapore law?

Under section 216 of the Companies Act 1967, a member may apply to the court where the company’s affairs are conducted, or directors’ powers exercised, in a manner that is oppressive, in disregard of the member’s interests, or unfairly discriminatory or otherwise prejudicial. The courts apply a test of “commercial unfairness.” The court has broad discretion, and the most common remedy is an order that one party buy out the other’s shares at a fair value.
How are founder disputes resolved in Singapore?

Most are best resolved through negotiation and mediation, via the Singapore Mediation Centre or Singapore International Mediation Centre, which is confidential, faster and preserves relationships. Where a binding private decision is needed and an arbitration clause exists, arbitration at SIAC is available. Court action is reserved for statutory remedies such as an oppression claim under section 216, a derivative action under section 216A, or a winding-up application.
Can a 50/50 deadlock force a company to wind up?

It can. A genuine, permanent deadlock between equal shareholders is a recognised basis for winding a company up on the “just and equitable” ground under section 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018, and the Singapore Courts expressly cite management deadlock as an example. However, winding up is a remedy of last resort: if a less drastic option such as a share buy-out is available and the petitioner is acting unreasonably, the court may decline to order it. A deadlock-breaking clause in the founders’ agreement is the better safeguard.
Is a shareholders' agreement the same as the company constitution?

No. The constitution is the mandatory governing document every Singapore company files with ACRA; it is public and binds all members as a statutory contract, and amending it needs a 75% special resolution lodged within 14 days. A shareholders’/founders’ agreement is a separate, private contract that binds only its signatories and is not filed with ACRA. The two should be drafted to align, with sensitive commercial terms usually kept in the private agreement.