In the summer of 2011, three Stanford students, Evan Spiegel, Bobby Murphy and a third classmate named Reggie Brown, were building a disappearing-photo app they called Picaboo, out of a dorm room at Stanford's Kimball Hall. Within weeks it would be renamed Snapchat. Within a month, Brown says, he had been cut out of it.
According to Brown's account, he was the one who came up with the idea of a photo that deletes itself after being viewed, and he sketched an early version of the ghost that is still Snapchat's logo. He and Spiegel were friends from Stanford; Murphy, a computer science major, joined to help build the app. On August 11, 2011, Brown filed a provisional patent application listing all three of them as co-creators of the concept, the only formal paper trail that existed for who had contributed what.
There was no founder agreement between the three of them. No equity had been documented, no roles defined in writing, no vesting, nothing assigning the idea or the product to a company, because there was no company yet, just three students and a project. When Brown raised the question of what stake he would end up with, he says he was willing to take less than an equal third, reportedly proposing a 20/40/40 split. Spiegel and Murphy did not agree. By the end of August 2011, Brown says, he had been shut out of the project entirely.
Brown sued Spiegel and Murphy in 2013, alleging the idea and the app had been taken from him without compensation or credit. The case became public and closely watched; TechCrunch covered it at the time under the headline "How To Lose Your Best Friend Over $70 Million." It settled in September 2014, on confidential terms.
Those terms only became public in February 2017, when Snap Inc.'s IPO registration statement disclosed that the company had paid Brown a total of $157.5 million to resolve the dispute, $50 million in 2014 and a further $107.5 million in 2016.
We acknowledge Reggie's contribution to the creation of Snapchat and appreciate his work in getting the application off the ground.
That line comes from a statement Spiegel gave at the time of the 2014 settlement. It is notable for what it does not say: nowhere does it call Brown a cofounder of Snapchat, a title the company has never granted him.
What founders can learn from this
The striking thing about the Snapchat dispute is not the size of the eventual payment. It is how little existed in writing before it. Three people building something valuable together had, between them, no founder agreement, no documented equity, no IP assignment, nothing but a single patent filing that happened to list all three names. When the relationship broke down, there was no document anyone could point to that settled who owned what, so the question had to be litigated, then settled, then finally priced years later at $157.5 million.
This is exactly the gap a founder agreement is built to close, and closing it costs nothing close to that. Who owns the IP before incorporation explains why, before a company exists, an idea and the work built on it belong to whoever built it, not to "the team", unless the team writes down, while everyone still agrees, that it belongs to what they are building together. Do you need a founder agreement before incorporating makes the broader case: the agreement that would have taken an afternoon to draft in July 2011, while three friends were still excited about a dorm-room project, was instead fought over for years and priced in nine figures.
Whether Brown's account of his contribution is complete is genuinely disputed, and courts never fully resolved it either way; the case settled before trial. What is not disputed is that the absence of any agreement guaranteed the dispute would be fought on the worst possible terms: after the friendship had already broken, with years of lawyers, instead of one afternoon of writing things down while it was still easy.
Sources: TechCrunch, Forbes, CNBC.