Rabby
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A few things here on finance.
First, don't finish the thing until it's clear who owns what. Contracts are *part* of your financing. If it turns out that your customer needs to own everythibg and you guys are just fulfilling an order, fine. Just learn from that and do the next project on the basis of equity, using the ideas below.
Ideally, it would be lovely if your customers would pay for software development, and release the software to your oqwnership and control. But if not, maybe you need money more than they need you as developers, so you can fall back in an organized way and negotiate something that lets you *share* in the upside.
You need an agreement, a written and executed contract, that specifies ownership and profit interest. Ideally (assuming we failed to secure all rights), you still get all ownership, but they get *some* profit interest in exchange for their valuable contributions. You should try to secure the right to buy back that profit interest at (ideally) cost plus (for example) 5% interest, or perhaps market value as determined by a pre-set multiplier on sales or profit after some period of time.
You. Need. A. Lawyer. To review the contract. You write it, but pay someone to read it for hidden traps and ambiguity. It's a few hundred bucks to save you from ruin and much suffering.
Put in a drag along clause. In a worst case scenario, the best thing you can negotiate is partial ownership. Other owners can screw everything up because they get to 'say so.' To fix that, your contract has a clause specifying that if you negotiate a sale of the IP or the business, you can force them to sell along with you. That way, you don't have some bozos or their successors blocking you from a multi million dollar exit.
First, don't finish the thing until it's clear who owns what. Contracts are *part* of your financing. If it turns out that your customer needs to own everythibg and you guys are just fulfilling an order, fine. Just learn from that and do the next project on the basis of equity, using the ideas below.
Ideally, it would be lovely if your customers would pay for software development, and release the software to your oqwnership and control. But if not, maybe you need money more than they need you as developers, so you can fall back in an organized way and negotiate something that lets you *share* in the upside.
You need an agreement, a written and executed contract, that specifies ownership and profit interest. Ideally (assuming we failed to secure all rights), you still get all ownership, but they get *some* profit interest in exchange for their valuable contributions. You should try to secure the right to buy back that profit interest at (ideally) cost plus (for example) 5% interest, or perhaps market value as determined by a pre-set multiplier on sales or profit after some period of time.
You. Need. A. Lawyer. To review the contract. You write it, but pay someone to read it for hidden traps and ambiguity. It's a few hundred bucks to save you from ruin and much suffering.
Put in a drag along clause. In a worst case scenario, the best thing you can negotiate is partial ownership. Other owners can screw everything up because they get to 'say so.' To fix that, your contract has a clause specifying that if you negotiate a sale of the IP or the business, you can force them to sell along with you. That way, you don't have some bozos or their successors blocking you from a multi million dollar exit.
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