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I'm confused by the 0.4%. Who was intended to own the other 98.4%? > "contracts aren’t allowed from the event" Isn't this kind of conflict pretty much guarant

by 1wd 11y ago

I'm confused by the 0.4%. Who was intended to own the other 98.4%? > "contracts aren’t allowed from the event" Isn't this kind of conflict pretty much guaranteed then? From http://startupweekend.org/about/firsttimer/ http://startupweekend.org/about/firsttimer/: > "How do teams address the issue of IP/ownership? As with any startup, the team decides. Startup Weekend doesn’t support or take part in the signing of any legal documents at the events themselves, and while Mentors with legal backgrounds are often present and able to give general advice, they are not permitted to give specific legal counsel.While it doesn’t hurt to be clear about your individual expectations from the start, we’ve found that teams who don’t spend time addressing this issue until it actually matters (i.e., there is a tangible product to have ownership of) are much more productive and successful than those who do." Oh, but it's more "productive" during the weekend. OK...

bakhy 11y ago
> we’ve found that teams who don’t spend time addressing this issue until it actually matters (i.e., there is a tangible product to have ownership of) are much more productive and successful than those who do. OMG! i was just about to ask what's up with that "no contracts" policy. this is incredible! they should rename to Exploitation Weekend.
IkmoIkmo 11y ago
Here's how I understand it. OP's buddy proposed the 0.4%, they ended up with 5 members in the team, OP, 3 other engineers and the guy who pitched the idea and is depicted as the asshole fitness biz guy (Billy), so 2% of the ownership of the startup the idea would potentially evolve into would end up in the hands of these initial team members regardless of who runs the startup. i.e. if after the weekend 4 members said 'that was fun, now let's go home', and 1 member said 'oh guys, can I use all the code and make it into a company?', then the other 4 guys would each have 0.4% ownership in that company even if they didn't put in any money or any time beyond the weekend, on the basis of their work that weekend. I think that's a sensible idea: 0.4% is not a lot, but it's a weekend of work, and if the startup ends up worth $10m or $100m then it's a nice kickback for a weekend's work. If it ends up being worth nothing, no biggie, after all you just worked there a weekend and didn't do anything after to make it a success. In short, the 0.4% is a reward for anyone who decides 'I don't want to be part of the process of continuing this idea, but I want a small reward relative to what the idea I helped initialise could one day be worth'. The issue is that when it's all said and done, the process to decide who'd want to turn this into a startup and who didn't looks to have been really authoritarian. One person turns it into a company and splits it 50/50 with a friend of his who wasn't even part of the startup team, and then declares himself to be the owner and leader of the gig which is absolutely ridiculous. A fair process would either be 'alright let's sit together as equals, decide on how we launch the startup, who becomes the leader, equity, salary etc, and anyone who isn't interested gets the 0.4% regardless'. Instead it was 'I'm the leader, I'm half the owner, the other half is someone you've never met, you can still be part of the startup but it's under my conditions and if you don't like it you can have the 0.4%'. In short I can see the problem OP has with this, added to implications that Billy was being a condescending asshole. Fact of the matter is however that (1) OP and the team can decide to use the code and run a similar project themselves if they want and iterate on it faster than Billy ever could given the former have all the expertise of not just development but the codebase as well and (2) if they were never interested in that, they'd still get 0.4% of Billy's venture (as long as the handshake deal is upheld i.e. which didn't seem to be put into question). I think the handshake deal was sensible and I see absolutely no legal basis for Billy to be able to appropriate the work exclusively to his startup. In short I think OP had the power, met an asshole, still has the power. They still have just as much right to the work, still can run a startup without Billy and still can own 0.4% of Billy's venture. edit: they ended up with a team of 9, billy and likely 8 devs, rather than 5, billy and 4 devs. Can't be bothered to adjust the percentages etc but the same story applies.
- logfromblammo 11y ago
  Billy ended the weekend co-owning the codebase with 8 other partners. Absent any pre-existing business agreement (forbidden by the competition rules), the future disposition of that codebase requires unanimous assent of all 9 owners. No single member can use any of it without permission from all the others. If Billy already was 50/50 owner with another person on a completely unrelated LLC, it would have to license/purchase the code from the entire group of 9 to use it. As the 0.4% deal was agreed to at the start, it is unlikely that licensing/purchase agreement would be accepted without including that provision. Ideally, each member of the team (including Billy), gets a 1/9th split of the prize winnings. Billy-the-LLC buys the code from Billy-the-team-member at a reasonable price, and each member gets 1/9th of that. Additionally, Billy has to grant each other team member 0.4% ownership stake in his LLC, or they never agree to sell their code. The team members, of course, surely realize that 0.4% is going nowhere if Billy is trying to run a tech-based business without respecting the nerds, so they might just sell it right back to him while he is still full of himself, and before he realizes that he is dead in the water when the first customer makes its first feature request. The end result is that the 8 nerds get a nice paycheck for one weekend, and Billy gets a stale codebase that he can still monetize through excessive schmoozy salesmanship. It should be a win-win. The only hitch seems to be that Billy seems to think his LLC already owns the code, rather than his informal partnership-of-nine.
  - MatthewMcDonald 11y ago
    I've always had the impression that whoever writes the code owns it, unless there are agreements in place that say otherwise. If Billy didn't create the codebase, and never contributed to it, does he still have partial ownership of it?
    - logfromblammo 11y ago
      The writers of the code do own it. Clearly, a team was formed for the purposes of submitting an entry into a competition. Since they intentionally commingled their efforts, they own it as a partnership rather than as individuals. Each one of them owns the whole code. If they want to do anything with it outside the existing nine, they need all nine signatures on the agreement. For practical purposes, that means Billy does not have much leverage. He needs to get all 8 of his partners to cooperate, and none of them need him in the slightest. If he chose to block any partnership agreement, they could just reconvene as a partnership-of-8, and spend another weekend re-creating a better codebase from scratch. He would be left with nothing. The reasons they would not do that are because the idea itself is rather lame and unoriginal, they could probably come up with something better on their own, and having proved themselves as a team, they might want to try something new anyway.
metamet 11y ago
0.4% seems like nothing, too. That was very confusing to me.
- jegutman 11y ago
  I think 0.4% was just for the weekend worth of work. Like just think of it as everybody vested that much over the weekend so the company still had 96.4% unvested equity with very unclear ownership. That makes it seem a little more reasonable although not any less confusing.
- jessedhillon 11y ago
  40 basis points is an insanely large grant for 10-20 hours of work. They wanted 160 bps: 40 per person. At any normal company, you would have to work 4 years to get that amount. If you work at a company as engineer number 1-5, prior to any funding, you might expect 50-300 points, over 4 years, after working for a small salary, and under highly uncertain conditions. These expectations are ridiculously misaligned and totally unreasonable.
  - nostrademons 11y ago
    Why exactly would you take 0.5-3% to work for a startup with no money under highly uncertain conditions, when you can take 33-100% of equity to found a startup with no money under highly uncertain conditions?
    - jessedhillon 11y ago
      > Why exactly would you take 0.5-3% to work for a startup with no money under highly uncertain conditions Because you believe in the team, the idea and the opportunity. > when you can take 33-100% of equity to found a startup with no money under highly uncertain conditions Those who can, will. But this guy wants to do neither. He wants 0.4% for 20 hours, and then he wants to walk away and let someone else build up the value of the company. Assuming his total stake is ~12%, that's equivalent to a demand for a 4 month vesting schedule with no cliff, for what? A weekend? He doesn't want to found a startup -- he wants to spend one weekend building a shitty prototype. He's not talking about being there when the thing goes live, fixing the broken deployment, troubleshooting the errors -- you know, the actual work which keeps the customers satisfied. He's talking about writing a model one time, and letting someone else take all the risk.

by 1wd 11y ago

bakhy 11y ago

> we’ve found that teams who don’t spend time addressing this issue until it actually matters (i.e., there is a tangible product to have ownership of) are much more productive and successful than those who do. OMG! i was just about to ask what's up with that "no contracts" policy. this is incredible! they should rename to Exploitation Weekend.

IkmoIkmo 11y ago

Here's how I understand it. OP's buddy proposed the 0.4%, they ended up with 5 members in the team, OP, 3 other engineers and the guy who pitched the idea and is depicted as the asshole fitness biz guy (Billy), so 2% of the ownership of the startup the idea would potentially evolve into would end up in the hands of these initial team members regardless of who runs the startup. i.e. if after the weekend 4 members said 'that was fun, now let's go home', and 1 member said 'oh guys, can I use all the code and make it into a company?', then the other 4 guys would each have 0.4% ownership in that company even if they didn't put in any money or any time beyond the weekend, on the basis of their work that weekend. I think that's a sensible idea: 0.4% is not a lot, but it's a weekend of work, and if the startup ends up worth $10m or $100m then it's a nice kickback for a weekend's work. If it ends up being worth nothing, no biggie, after all you just worked there a weekend and didn't do anything after to make it a success. In short, the 0.4% is a reward for anyone who decides 'I don't want to be part of the process of continuing this idea, but I want a small reward relative to what the idea I helped initialise could one day be worth'. The issue is that when it's all said and done, the process to decide who'd want to turn this into a startup and who didn't looks to have been really authoritarian. One person turns it into a company and splits it 50/50 with a friend of his who wasn't even part of the startup team, and then declares himself to be the owner and leader of the gig which is absolutely ridiculous. A fair process would either be 'alright let's sit together as equals, decide on how we launch the startup, who becomes the leader, equity, salary etc, and anyone who isn't interested gets the 0.4% regardless'. Instead it was 'I'm the leader, I'm half the owner, the other half is someone you've never met, you can still be part of the startup but it's under my conditions and if you don't like it you can have the 0.4%'. In short I can see the problem OP has with this, added to implications that Billy was being a condescending asshole. Fact of the matter is however that (1) OP and the team can decide to use the code and run a similar project themselves if they want and iterate on it faster than Billy ever could given the former have all the expertise of not just development but the codebase as well and (2) if they were never interested in that, they'd still get 0.4% of Billy's venture (as long as the handshake deal is upheld i.e. which didn't seem to be put into question). I think the handshake deal was sensible and I see absolutely no legal basis for Billy to be able to appropriate the work exclusively to his startup. In short I think OP had the power, met an asshole, still has the power. They still have just as much right to the work, still can run a startup without Billy and still can own 0.4% of Billy's venture. edit: they ended up with a team of 9, billy and likely 8 devs, rather than 5, billy and 4 devs. Can't be bothered to adjust the percentages etc but the same story applies.

logfromblammo 11y ago
Billy ended the weekend co-owning the codebase with 8 other partners. Absent any pre-existing business agreement (forbidden by the competition rules), the future disposition of that codebase requires unanimous assent of all 9 owners. No single member can use any of it without permission from all the others. If Billy already was 50/50 owner with another person on a completely unrelated LLC, it would have to license/purchase the code from the entire group of 9 to use it. As the 0.4% deal was agreed to at the start, it is unlikely that licensing/purchase agreement would be accepted without including that provision. Ideally, each member of the team (including Billy), gets a 1/9th split of the prize winnings. Billy-the-LLC buys the code from Billy-the-team-member at a reasonable price, and each member gets 1/9th of that. Additionally, Billy has to grant each other team member 0.4% ownership stake in his LLC, or they never agree to sell their code. The team members, of course, surely realize that 0.4% is going nowhere if Billy is trying to run a tech-based business without respecting the nerds, so they might just sell it right back to him while he is still full of himself, and before he realizes that he is dead in the water when the first customer makes its first feature request. The end result is that the 8 nerds get a nice paycheck for one weekend, and Billy gets a stale codebase that he can still monetize through excessive schmoozy salesmanship. It should be a win-win. The only hitch seems to be that Billy seems to think his LLC already owns the code, rather than his informal partnership-of-nine.
- MatthewMcDonald 11y ago
  I've always had the impression that whoever writes the code owns it, unless there are agreements in place that say otherwise. If Billy didn't create the codebase, and never contributed to it, does he still have partial ownership of it?
  - logfromblammo 11y ago
    The writers of the code do own it. Clearly, a team was formed for the purposes of submitting an entry into a competition. Since they intentionally commingled their efforts, they own it as a partnership rather than as individuals. Each one of them owns the whole code. If they want to do anything with it outside the existing nine, they need all nine signatures on the agreement. For practical purposes, that means Billy does not have much leverage. He needs to get all 8 of his partners to cooperate, and none of them need him in the slightest. If he chose to block any partnership agreement, they could just reconvene as a partnership-of-8, and spend another weekend re-creating a better codebase from scratch. He would be left with nothing. The reasons they would not do that are because the idea itself is rather lame and unoriginal, they could probably come up with something better on their own, and having proved themselves as a team, they might want to try something new anyway.

metamet 11y ago

0.4% seems like nothing, too. That was very confusing to me.

jegutman 11y ago
I think 0.4% was just for the weekend worth of work. Like just think of it as everybody vested that much over the weekend so the company still had 96.4% unvested equity with very unclear ownership. That makes it seem a little more reasonable although not any less confusing.
jessedhillon 11y ago
40 basis points is an insanely large grant for 10-20 hours of work. They wanted 160 bps: 40 per person. At any normal company, you would have to work 4 years to get that amount. If you work at a company as engineer number 1-5, prior to any funding, you might expect 50-300 points, over 4 years, after working for a small salary, and under highly uncertain conditions. These expectations are ridiculously misaligned and totally unreasonable.
- nostrademons 11y ago
  Why exactly would you take 0.5-3% to work for a startup with no money under highly uncertain conditions, when you can take 33-100% of equity to found a startup with no money under highly uncertain conditions?
  - jessedhillon 11y ago
    > Why exactly would you take 0.5-3% to work for a startup with no money under highly uncertain conditions Because you believe in the team, the idea and the opportunity. > when you can take 33-100% of equity to found a startup with no money under highly uncertain conditions Those who can, will. But this guy wants to do neither. He wants 0.4% for 20 hours, and then he wants to walk away and let someone else build up the value of the company. Assuming his total stake is ~12%, that's equivalent to a demand for a 4 month vesting schedule with no cliff, for what? A weekend? He doesn't want to found a startup -- he wants to spend one weekend building a shitty prototype. He's not talking about being there when the thing goes live, fixing the broken deployment, troubleshooting the errors -- you know, the actual work which keeps the customers satisfied. He's talking about writing a model one time, and letting someone else take all the risk.