The serial entrepreneur and product inventor argues that the agreements founders treat as paperwork are the ones that decide who owns what, who pays when things go wrong, and who walks away with the business.
Steven Capuano has a test for how much trouble a young company is in. He does not look at revenue, headcount, or the pitch deck. He asks the founder to name the last three documents they signed and explain what each one obligates them to do.
Most cannot.
“Nobody sets out to sign something they have not read,” Capuano said. “They set out to get the thing made, or get the money in, or get the partner on board. The document is the last obstacle between them and the outcome they want. So they clear it fast, and the terms go into effect anyway.”
Capuano has spent more than two decades building companies in consumer products and health and wellness, and his view of what a business actually is has narrowed over that time. Underneath the product and the branding, he argues, a company is a set of commitments that somebody wrote down. The ones nobody read are still binding.
The Agreement That Protects Nothing
He starts with the non-disclosure agreement, because it is the document founders trust most and scrutinize least.
A founder about to describe an idea to a manufacturer, an investor, or a potential partner reaches for a template, sends it over, and treats the countersignature as a shield. Capuano’s objection is not that NDAs are worthless. It is that most founders never check what theirs actually covers.
“An NDA is only as good as its definition of confidential information and its remedy,” he said. “If the definition is vague and the remedy is that you get to sue somebody in a state you have never been to, you do not have protection. You have a feeling of protection, which is worse, because it makes you talk more freely than you should.”
He advises founders to read three clauses before anything else: what counts as confidential, how long the obligation lasts, and what happens if it is broken. If the answers are unsatisfying, the document has told them how much to disclose in the meeting.
Standard Terms Are Standard for a Reason
The second document on his list is the one a manufacturer or supplier sends over with the word “standard” attached to it.
Capuano’s position is that standard terms are standard because they work well for the party that drafted them. A founder eager to get units made will accept those terms because renegotiating means delay, and delay feels expensive in a way that a clause about liability does not.
Then something goes wrong. A run comes back defective. A shipment is late into a season the company cannot afford to miss. Prices move mid-contract. Every one of those outcomes is governed by language the founder skimmed.
“You do not find out what your supplier agreement says on a good day,” Capuano said. “You find out on the worst day of the quarter, and by then the only question is what you already agreed to.”
He tells founders to negotiate three things even when they have no leverage: what happens to defective units, what notice is required before a price change, and who owns the tooling. The last one surprises people. A founder who paid for tooling and did not put ownership in writing may find it is not theirs to move.
The Document Written While Everyone Is Friendly
The third is the agreement between founders, partners, or early collaborators, and Capuano considers it the most consequential of the three.
It gets written, when it gets written at all, during the period when everybody agrees. That is exactly the problem. A document drafted in a moment of goodwill tends to record the goodwill rather than the mechanics. It says the parties will split things fairly and work together in good faith, and it says nothing about what happens when one of them stops showing up.
“The agreement is not for the version of the relationship you have now,” he said. “It is for the version you might have in three years, when somebody wants out, or somebody is not contributing, or the company is worth something and two people remember the original conversation differently.”
He argues the document has to answer unpleasant questions while the questions are still hypothetical: how equity vests, what happens if someone leaves, who decides when there is no consensus, and how a departing party is bought out. Founders resist because raising the questions feels like distrust. Capuano’s counter is that the alternative is raising them later, in front of a lawyer, when the answers cost money.
What The Paper Is for
The thread connecting all three, in his telling, is that founders treat documents as friction and they are actually infrastructure.
“Nothing in a business gets decided by who remembers the conversation better,” Capuano said. “It gets decided by what was written and signed. If you did not write it, somebody else did, and they wrote it for themselves.”
He is not arguing that founders need to become lawyers. He is arguing for a habit that costs an afternoon: before signing anything, identify what the document obligates you to, what it gives away, and what it says happens when the relationship goes badly. Founders who build that habit early rarely lose sleep over the file cabinet.
Those who do not, he says, eventually read the documents anyway. They just read them under worse conditions.
Steven Capuano is a serial entrepreneur and product inventor with more than two decades of experience building businesses across consumer products, health and wellness, and innovation-driven markets. He writes and speaks on entrepreneurship, product development, and intellectual property. More at stevencapuano.com.
