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UKDeveloper99

Need urgent advice regarding a business decision

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UKDeveloper99    102

Hello and thank you for taking the time to look at my post,

 

I have a very important business decision to make and being rather inexperienced in this particular area, I have decided to seek the advice of others. So here goes..

 

Basically I am a games programming graduate and I've been rather fortunate to join a startup app development company with big investors who have taken a liking to some of the apps I have developed one of them which is relatively half done, they have seen potential in and they want to use it as their flagship app so to speak, the app they will establish a foothold on the market with.

As it is a startup the team is very small now but all the directors come from a very successful background so they have really invested in me as a person and my ideas. So the predicament is I have to make a somewhat dragon's den type deal, to agree a percentage of the app with them as it is my intellectual property.

I am already being paid a very reasonable salary, so I would consider that part of their monetary investment in to my idea and also the fact that they are using money and time to develop my idea.

I will be the sole developer on the app with possibly some minor input from one other developer and a student artist who will be on an internship basis.

 

They want to know by tomorrow what percentage I want of the sales, they have an idea in mind already (even though they are relatively inexperienced in the games industry) but I have absolutely no idea of what percentage to pitch to them.

My first thoughts would be something low like 20% for me to cover their investment and then maybe increase the equity (correct word?) up to 50% based on profit milestones, so the more successful it is the more I benefit for my idea but if unsuccesful it covers them more at lower profit margins.

Any advice would be very much appreciated.
Regards
 

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jpetrie    13132
They want to know by tomorrow what percentage I want of the sales

 

This is a potential red flag for me. Most business does not need to be conducted at this kind of breakneck pace, and nothing about what you have described above sounds like this should be an exception.

 

Ask for more time so you can weigh the decision more carefully if that's what you feel you need. If they are not willing to accommodate you, then this becomes a definite red flag. 

 

 

My first thoughts would be something low like 20% for me to cover their investment and then maybe increase the equity (correct word?) up to 50% based on profit milestones, so the more successful it is the more I benefit for my idea but if unsuccesful it covers them more at lower profit margins.

 

 

They can negotiate for themselves and their own needs. Figure out what you need irrespective of what you think they need first. Don't offer them concessions that you don't want or cannot afford just because you think it will please them. Think about and plan for the concessions you can make if it comes to it, so you are ready, but you should be thinking about your needs and what will serve you first and foremost. It's business, not a high-school dance.

Edited by Josh Petrie

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UKDeveloper99    102

I think it's a case of they are just really eager to get started as time is money as you know. The main reason that they are persistent I think also is that they don't reside in the UK and are flying back in a day or so, they are very eager to do the contract in person rather than over the phone because of their principles they think it's better to discuss such matters face to face.
I don't think that's any reason for concern.

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UKDeveloper99    102

Exactly sure, I never take business lightly, but it's already very favourable for me, I don't think that taking fair considerations for their potential for losses or wasted development time is being too generous but then again I'm still unsure on the exact percentages.

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frob    44962

So going over your post, you wrote:
1. I am already being paid a very reasonable salary
2. I will be the sole developer on the app
3. it is my intellectual property
4. I would consider that part of their monetary investment in to my idea

5. what percentage I want of the sales

6. based on profit milestones

Perhaps you are just using improper wording, but all those things are rarely spoken together.

For #1, if they are paying you a salary than you are likely an employee. That means for #3 it is likely not your property, and for #4 it becomes their idea, #5 becomes tricky, and #6 doesn't exist.

If instead for #1 they are paying you an advance then it is probably a publication deal where #3 is correct but #4 is wrong, #5 is difficult to negotiate, and #6 is important to figure out. they are not investing your idea but agreeing to give you money in advance as a loan to help make a product. Depending on the contract the advance loan may be recoverable or not -- that is, if your product doesn't sell they may or may not demand money back.

 

Or, instead for #1 they may be giving a milestone payment then it is likely a contract for services and at least one of 2-4 above is incorrect, and #5 and #6 probably don't really exist thanks to things like Hollywood accounting.

 

 

Exactly what kind of deal are you making? Are they employing you to make an app for them?  Or are they contracting with you to publish your app? Or are they contracting with you to develop an app for them? They are all very different situations with different implications.

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UKDeveloper99    102

Okay thanks for your reply,

to clear a few things up, yes I am a new employee and they are newly incorportated in the UK I have seen clear evidence of their previous business success so I know they're not some kind of wind up merchants or scam artists, I've sat in the accountancy meetings etc.

 

In regards to intellectual property I have an employment contract with them that means they own only the work that I produce for their ideas becomes solely their IP. There is a clause in my contract that basically says any projects I have created myself will have a separate contract agreed upon therby having shared ownership of the IP based on pre agreed percentages. So if the idea is developed by myself as part of the company and makes x amount of revenue then they will have a fixed percentaged (could be variables) and so could I.

 

And this is the basis of the agreement I need to come to for the first app. Under the terms of that contract.

 

Thanks very much.

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Tom Sloper    16062
Have they made you an offer? He who first names a figure likely will come to regret it. Try to get them to name the figure first. Tell them you want it tonight (putting the pressure back on them, and stepping it up). (Struck through bad suggestion, but it is a negotiation tactic.)

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