Death of a Co-Founder: The Importance of Key Man Life Insurance

Key Man Life Insurance can be touchy subject for most startup founders.  Most of the time it’s a “just-don’t-think-about-it” situation, and the only time the idea even comes up is when it appears on the Series A term sheet.  Entertaining the thought of losing a co-founder is one of the last things any entrepreneur wants to do.

But unfortunately sometimes our worst fears our realized.  Techcrunch recently ran a story about Sébastien Métrot, one of the founders of a startup called Yasound.  In a recent presentation, Métrot shared the struggles he and the company faced when they lost co-founder and CEO Jean-Marc Plueger in a motorbike accident.  

According to Métrot, his co-founder lost sight of the “work/life balance” and invested all of his time and energy into the startup quite literally.  Apparently he was only “sleeping two or three hours a night.”  It’s a sobering story that reminds us how important it is to be fiercely passionate, but also strike a balance.

Métrot shed some light on the issues faced: “‘Without your co-founder, you have to learn overnight to take care of everything,’ Métrot said. ‘There are also many legal issues. Who has to take care of the company? What do we have to do on the inheritance side?’” He went on to mention that the company had not placed key man life insurance on each of the founders.   Since the accident, the VCs that backed Yasound have changed their term sheets to require key man coverage. Now it’s rare to see a VC underestimate the importance of Key Man Life Insurance.  

Undoubtedly, there’s not much that could be done to ease the mental shock of losing his co-founder.  But with the cash injection that a key man life insurance policy could have given to the company, Métrot could have had an easier time finding someone to step in to fill the void and as well as covering the inevitable legal bills.  Money is the last thing you want to be thinking about in this situation, so having extra funds can ease the stress and tension of trying to move forward.  

If you want to learn more about Key Man Life insurance and how it protects you and your company, check out our key man page.  You’ll also learn how Founder Shield can help you take care of this in 5 minutes and keep you thinking happy thoughts.

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