If there weren't enough customers to support the business model with the way he was approaching it, then there isn't enough business to sustain it. If one of his customers is interested in the platform enough that they want access to the code to run it, they should pay him for it - either to hire the talent, or to buy the business.
Some projects are created because people are passionate about them, and some are created so that people can keep the lights on.
Shared source is an awful model for startups - it results in increased legal wrangling to establish ownership and licensing, it creates entanglements that could prevent or constrain growth, and it explicitly says to the startup "I don't trust you to be here soon, so I want to own part of you."
The correct way for a business to eliminate a fear of a partner disappearing is to pay fair value and sign a contract so that the vendor they depend on has a reliable cash flow.
Other people have already commented on the trust and business issues. But regarding:
> Since the business has not picked up, all the worth that my startup has is the source code.
I believe this worth is zero. Unless you have built a solution to a cutting-edge, patentable Computer Science problem (for example a face recognition algorithm that beats all competition), the source code itself has no value.
General web/mobile/desktop app source code is too specific for the particular purpose to be useful for other apps - and a competent team could rewrite the common parts faster than it takes to understand and adjust existing code. You will not find anyone willing to pay for the source code unless you are also selling patents, the team or user base along with it.
On the other hand, I would never become dependent on a solo developer or a small business for a critical part of my business.
I’ve been on both sides of the issue. I worked for a struggling startup that got one large customer who was 80% of our revenue. They insisted on the code being put in escrow and released to them under certain conditions.
When the company was sold for scraps, they exercised that clause and hired me as a contractor to help them transition.
On the other side, I was the dev lead at a company who was looking at using the software of a solo developer as a critical component to our business. I suggested the same clauses be a stipulation to us signing the contract. We were going to be 80% of his business.
I worked on a project around a year back (something like fetch.io, but a stripped version) and had a deal with the employer that we'll be sharing the profits that are made from the service. He invested on the servers and the premium accounts with various file hosting services. I took care of the entire application. But he scrapped that project even before the beta is launched saying that the operation costs are more and he see no point in launching the service and also partly because of the legal issues involved in downloading and distributing content from other services. After reading this post, I feel like I should open source the code that I'm not using now.
If the author owns the code, it's very easy for him to quit without incurring any losses and might simultaneously destroy the company. It's better that the company own the code and license it to the author as needed for other projects. I would imagine the author would have considerable equity - so it should not be such a big deal.
I am intentionally making it vague to protect the privacy.
But the business we are in require millions of dollars to launch (after the code is ready). Without that much of money, the product provides 0 value.
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He can hire someone to replace you if he thinks it can succeed. Or continue to work on it on his own without you.
>> You are spot on. I am not stopping him from doing that. This makes me feel much better. Thanks.
I was the dev lead for a medium size company where we depended on a software platform by a solo dev. We made up 60%+ of his revenue. We insisted as part of the contract that he put his code in escrow and that we had the right to a copy of the code under certain conditions.
But no, I wouldn’t as a person
who hypothetically made buying decisions. It’s the “IBM problem” that non dominant companies face. “No one ever got fired for buying IBM”.
The developer was a friend of mine. The agreement was that we pay him and also provide him with equity.
I know the difficulties that can arise if you don't pay.
Please do not paint me with the brush of the prototypical non-tech with an idea. I have a strong knowledge base in the area we're working in. This project could not move forward without my knowledge base.
I had thought of this. Unfortunately I think his price will be exorbitantly high based on the time he put in. I also am not convinced that there is really much value in the code itself, it just puts me slightly ahead of square one in a new venture. Based on some comments it sounds like the code without the developer is actually quite worthless, so I'm coming around to it being OK that I don't have any rights to it should I leave.
Which is a perfectly reasonable business model and one which the vast majority of developers follow...
If the customer wants the source code, then by all means include it as part of your package, but along with that comes the complexities of copyright, support (do you still support code that your customer hired somebody else to mangle?), and other such concerns. These things come at a price.
Of course, how you do business is entirely up to you - but handing over the source code as part of the standard deal opens up a ton of questions which you should make sure you have covered.
You're right we are hearing one side of a story, but we can only go on the information we have. The co-creator wanted all of the product, and wanted to give nothing in return, and never really wanted to be a partner in the project but use the developer for unpaid work since it would be a learning experience.
Anecdotally I've turned down many projects in the past of a similar nature. "Do this X or Y for me for free I'll tell everyone what a great job you did and it will bring you more work!" "The experience and education you get from working on this is payment enough."
I've dealt with actual people in these situations, and this developer isn't the bad guy. There are no bad guys or good guys in business. This is one business partner taking advantage of the other. The developer should have never signed anything, used the project for their class, and not hand over any right to the code since no exchange of value for it was made.
@xarien, I couldn't reply again to you, but I wanted to say you're absolutely right about guilt being very complex, and to thank you for clarifying your thoughts. Guilt and me go way back as I'm sure it does with most folks. (^_^)b
Ownership of software is, as said before, not what you actually want.
The reason isn't necessarily that people won't do a good job. The reason you don't want it is because it is (should be) a lot more expensive to 'own' the copyright to the code.
A programmer who, for example, uses Ruby on Rails, will most likely not write just one application, but multiple applications in Rails, using a lot of the same code in most of them. Think things like user management, etc.
If you, as a customer, 'own' the software, he suddenly can't use things like `<%= render 'user_bar' %> or something anymore, he will have to rewrite it for every client. This is nonsense, because you don't WANT to own this bar. On top of this, you shouldn't want this because you want a programmer who can deliver high-quality code quickly. So him reusing his best code between clients is what you want him to do, not reinventing the wheel every time.
What you ACTUALLY want is to own the application, the problem that it solves, not the code. The success of an application is not (just) the source code, it is the problem scope, the design, the concepts behind it, the way it performs, the usability, etc.
What I'd want as a client is for my programmer to not resell the same app to someone else in the same industry/competing industries. What do I care if some programmer uses the same trial account code in 20 different apps? As long as he doesn't sell others the same product I am ok with it.
On top of this I want to be able to use the code I get however I want within my own scope. I should not have the right, without paying extra, to sell the code to people outside of my industry. I do want to have the right to sell the whole company however, or the part of my company that 'has' the code.
Imagine you're a company looking for software as a cloud service. Suppose the best software for the purpose only does 70% of what you want. So you contact the company who runs that cloud service and pay them to develop the additional features and specific business logic you need. Then you contract with them to manage private servers with your build on them. At no point have you seen or purchased source code - not even for the 30% new features that were written on your behalf. Those are entwined with, and only work as a result of, the other 70%. You're basically using a black box that's maintained by another company, and trusting in that company's competence and goodwill. That's essentially what the situation was here. If you sold your company and touted your special build of the software as a feature, and passed the contract along to the buyer, that would be fine. But if you misrepresented the situation and said you owned 100% of the code and were selling that along with the right to distribute it, that would be fraud.
Of course, you could have gone the more expensive route and hired your own team of coders to write the whole thing from scratch, under whatever license you wanted, and then you would own the source. But if a company needs document software or meeting software in the cloud, how many pay to reinvent the wheel and roll their own?
I just talked to him and he will not do that. So I said "I'll do the work, it will be copyrighted under MY name, if shit hits the fan I take my work with me. All profits we make will be under the company name and all money will only go directly back into the company. We manage the money 50/50. Down the line once you get good and decent with code and you are able to help me out, then we can do 50/50 split of profits since we'll both be equal in workload."
As a company. Long story short, someone angled for years to have a partnership with us, finally got it and the day after the ink dried on the contract sold the rights to the source code to another company. That's not how that works...
I'm not actually commenting on either A) or B), just on menloparkbum's comment that it's common for contractors to retain ownership.
I don't really want to get into the ethics of it, because I don't think ethical debates are particularly fruitful. (I took a course in meta-ethics in college, which makes me particularly suspicious in attempts to ground ethical judgments in factual statements or logical debate.) I'll tell you that I wouldn't do it; it sounds dodgy enough that I wouldn't really want to get involved with it. Ultimately, most ethical judgments come down to gut feelings about right or wrong.
I will say that right or wrong, I think it's stupid. You're opening yourself up to big legal liability. If acquirers or investors find out about it (and they will - that's what due diligence is for), they will nix the deal. Heck, I'm spending about $1K to have a lawyer draw up a release to make sure all IP I developed for my startup while employed belongs to me, and I didn't take any source code from my employer (I'm using a completely different technology platform and am in a completely different area of business.) It's just something I don't want to fuck around with.
When it became clear that my first startup wasn't going to get off the ground, I sold the source to one of the contacts I had made when doing my research. My assumption is that he used it for his own products or something.
The second startup I was working on hit a wall and I ended up keeping the source code to that one in order to use for future projects.
Thank you for your thoughts. I certainly have learned a lot - although I had learned how to build full stack applications before I started working for him.
Just to be clear - he's not my partner, he's my client. So I don't have any rights to the source code. Also, we're building a custom software solution for a business and not a Saas product.
This is correct, my co-founder isn't pulling out all of the existing code, he wants to have a "product" at the center of the staffing agency, and is planning to re-use some stuff. He would not be open to resigning, and I think because he wrote the code there is a level of ownership he feels, regardless of the value being limited (or 0 - as many have noted).
Depending on how you've set the business up, the company may (and probably should) own the code, which would essentially make this not very feasible--without a rewrite, anyway.
I've been in your shoes, in terms of co-founder not pulling his weight (it was family, too--oops!), and I did not find a resolution. I ended up ceasing work on what I think was likely to become a very nice lifestyle business (we were already ramen-profitable), because I was going to have to do all of the work.
I could re-create the tech (I built everything), but I haven't, partially to avoid any bad feelings, partially because I'm doing other things.
Given that you hired a contractor, and that presumably your technology is your whole company's value (you seem to think it's almost all of the work that's been done), I'm not sure why it'd be okay to take that elsewhere, except by virtue of "these guys don't deserve it!"
The correct answer to "these guys don't deserve it" is to have clauses to handle that in your business documents--vesting, cliffs, etc. It's almost certainly not "take the technology and run."
You might be able to sort-of blackmail your co-founders into accepting your deal, but I imagine it's going to be approached in that fashion. "I want this to happen or I'm done building things" seems to be where you're at, and that's really not okay. (Edit: I think it's not okay to demand the technology. I think it's fine to demand their time, and perhaps a revised agreement where they all have to put in time to vest shares!)
Don't get me wrong--I side with you. I just think the best option is probably to not continue, or to continue at a capacity that you're comfortable with, given their work input.
That said, I've been fucked in a few business ventures now, and perhaps I'm erring way too far from where the money is. I don't think I have any regrets, I'm proud of how I handle myself--but I don't have any money, either!
If there weren't enough customers to support the business model with the way he was approaching it, then there isn't enough business to sustain it. If one of his customers is interested in the platform enough that they want access to the code to run it, they should pay him for it - either to hire the talent, or to buy the business.
Some projects are created because people are passionate about them, and some are created so that people can keep the lights on.
Shared source is an awful model for startups - it results in increased legal wrangling to establish ownership and licensing, it creates entanglements that could prevent or constrain growth, and it explicitly says to the startup "I don't trust you to be here soon, so I want to own part of you."
The correct way for a business to eliminate a fear of a partner disappearing is to pay fair value and sign a contract so that the vendor they depend on has a reliable cash flow.
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