legalSo I’ve been talking to a couple of guys that have an interesting idea for a tech startup, but they are both business guys. I am a programmer and they want me to come on as the third person and be the “technical” head. I’m really into their idea and they’re smart guys, but if things go sour between us, I wouldn’t want them to have complete control over the product that I build and be left with nothing just because it wasn’t my idea. Now, I don’t want to Zuckerberg them, but should I protect my work somehow before I start putting in a lot of hours to build it? Should I approach them with contracts before we even start building anything?
Good contracts keep good friends.
I’ll give you two recommendations:
I wouldn’t waste my time (in the beginning) going through legal work, etc. the product might not work- and you’ve spent a few thousand bucks (or weeks of time) on operating agreements, NDAs, revisions, etc.
See how things go. And then if you’re more confident after a few weeks/couple of deployments- request a contract.
This is the lean way of going about it. There will probably be dozens of people here who will disagree with me. And that’s fine. But I’ve started/am working in 5 startups. 1 of them we spent 10k-15k in legal fees without even building anything. What came out of it? 3 years for now and nothing.
Go online and search up “Mutual NDAs”. That’ll protect you and them.
Then search up Operating Agreements. That should protect you as well (make sure the terms are the same for everyone - except probably the %). But DO NOT spend money on legal fees. Lawyers are criminals (and unneeded).
PS,
Chances are if you have a hunch that you need to protect yourself, go with the 2nd option. And if things get more serious, get a lawyer.
First and foremost, define the relationship between the three of you and put it in writing! I agree with the other answer that you don’t want to waste money on unneeded legal fees, but if you are successful and ownership has not been specified then you will have a legal mess on your hands.
Here are a couple of options:
(1) The three of you are cofounders of a company and you each own some percentage of the company to vest over four years with a one year cliff. The company owns any code you write so you can’t have complete control over it.
(2) You are not a company and you are working as an independent contractor to consult with the business guys. You need to sign an NDA and you need to clearly specify that you own the code that you write. If things don’t work out you can keep your code (though you are still subject to the NDA so you might not be able to use it right away). If things do work out, then you create a company with the three of you as cofounders.
There was a question just a few weeks about from a coder that got ousted and he is looking for his share.
The might be better on law than startup. IANAL and I am certainly not you lawer.
What you are looking for is an agreement. I don’t know if you need to call it an NDA.
Possession is 99% of the law. Set it up on a hosted server where you pay for the service. They would have to prove ownership of the code and they can’t.
If this is client software or some other format that you must release source code to the their possession then write up an agreement.
Until a formal company is established I retain ownership of any software I develop (in part or in whole). At which time a formal company is formed and I am a named partner and co-founder with a fair equity position I will release ownership of the software to the company.
You don’t really want to say 1/3 as they may add a 4th and the software may be such an asset that you will want 1/2. What you don’t want is for them to give you 1% and say see you are partner with and equity position. Is this going to be enforceable without the proper legalize - maybe not - but it is whole lot better than nothing.
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