Why Founders Should Get Everything in Writing: Lessons from a recent federal court case

Startups thrive on speed, trust, and big visions. But when relationships fray or leadership changes, what once felt like “we’ll figure it out later” can turn into a multi‑year legal nightmare. A recent case—AlSayer v. OmniX Labs (SDNY 2025)—is a stark reminder of what happens when founders rely on verbal understandings, blurred lines, and undocumented expectations. The court ultimately sided with the founder, concluding there was an implied agreement. But make no mistake: expensive litigation, personal liability, and years of uncertainty could have been avoided if a writing had been used.

1. “We’ll figure it out later” is not a strategy

In OmniX’s early days (a U.S. company), the founders verbally agreed they would secure Kuwait National Fund (KNF) financing to build their product. Because a U.S. company wasn’t eligible, one founder (AlSayer) personally created a Kuwaiti sole proprietorship to receive the loan. But everyone acted as if the loan belonged to the startup: they used the money for product development and operations, included the loan in their pitch decks, and the founders reported their U.S. operations to KNF. But no written agreement ever said

the company would repay the loan.

When the relationship between founders soured years later, verbal understandings became disputed memories—and the founder was left personally on the hook for the $1.3M loan . . . until the court intervened.

2. The fix is simple: write it down.

After the founding CEO stepped down, the new leadership denied any responsibility for the KNF loan. Fortunately for the founder, the judge found that an implied agreement existed: the startup clearly used the money, represented it as funding, and behaved as if the loan belonged to the company. There were sufficient emails and actions that allowed the court to come to this conclusion. But there may be instances where there just isn't enough evidence. So don't take the risk; write it all down.

3. Founders: protect yourselves the moment money moves

If you are:

• paying expenses personally,

• using your own credit to help the business,

• securing grants or loans through a personal entity,

• advancing funds from your family or another company,

• signing as a guarantor,

Get a written agreement. Startups change rapidly—relationships, leadership, and leverage shift fast. Documentation is how you preserve fairness.