This is my exact thought. It seems "Billy" here won because he paid $200 for something worth a whole lot more? adekok's response is perfect and really shows how to deal with this situation. Be clear about your rights, don't let people like this get away.
No the startup weekend awarded a roughly $200 prize to each member of the winning team. Billy didn't pay anything, he simply started a company without discussing it with anyone, in which Bobby has the right to 0.4%. OP then forfeited it seemingly for the reason of simply being disgusted and not wanting to be associated with Billy anymore.
Billy doesn't exclusively own the codebase or product. Any of the devs could reasonably start a company, use the product, as long as they award 0.4% to each of the members in his venture. That's what the handshake deal seems to have been all about.
It makes sense for the devs to either say 'buy out exclusive rights to the work and we forfeit the 0.4% share and be on your way, or keep the work, we'll compete with you (and grant you 0.4% in our venture, too, according to the handshake deal) and we'll see who can iterate on the codebase faster and run a successful business.'
The devs still have the power despite Billy's asshole move.
If someone offered me 0.4% for getting their company off the ground, I'd tell them to get lost. That's absolutely insulting.
If your goal at a startup event is to have fun, jam on something, see what comes of it, then it's easy to succeed.
If your goal at a startup event is to make something valuable, you've already lost. There is no winning. This is the worst possible environment to create a new business in, and there are way too many variables. Everyone will feel cheated no matter what the arrangement is.
> If someone offered me 0.4% for getting their company off the ground, I'd tell them to get lost. That's absolutely insulting.
I think you've flipped the situation around a little bit here.
The point is, it is startup weekend, it's time to have fun, to learn, collaborate and do something interesting and a lot of the guys going aren't necessarily interested in ditching their jobs and going full-time startup. In fact most people came to the weekend without any ideas they actually wanted to launch, simply interested to join an existing team and have fun.
So one of the developers who is like this basically proposed the 0.4%. You make it sound as if Billy said 'hey guys work for me for 2 days for 0.4%'. When in reality it was a developer who said 'Hey look, this is going to be fun but let's agree on something simple, if any startup actually does come out of this, let's all have a 0.4% share even if you're not interested to invest anything in the startup apart from this weekend's work. This way everyone is rewarded without having to exchange any money, and only if whatever we built this weekend actually ends up having value'. And the others agreed with that.
This may not make sense in every situation, but I think it was pretty sensible here and I don't think it was insulting either, particularly when the dev proposed this reward himself, for himself, not as some kind of payment to others for getting his company off the ground.
What they should do is work an equal split. Five parties? 20% each. If the "leader" wants to run with the project and pursue it in a more serious capacity they can make an offer to the team that will result in dilution.
I'd argue that they'd need to make a case, and the additional share would be conditional. Like "If you can close $100K in financing then you will get another 40% stake."
Likewise if team members really do want to quit their jobs and chase after this, they'd be accommodated in a similar capacity. Adjust the share balance when events happen, not by padding it heavily up front with the expectation that they will happen.
Otherwise you're valuing your contribution vs. some future unknown, yet saying with certainty your contributions are worth 0.4% of that. The chance of that being fair is basically zero.
> What they should do is work an equal split. Five parties? 20% each. If the "leader" wants to run with the project and pursue it in a more serious capacity they can make an offer to the team that will result in dilution.
Exactly, that makes total sense. Why then did one of the developers, OP's friend, another developer that agreed, propose 0.4%? This is where I get the feeling OP isn't telling the whole story.
Knowing nothing else and asked to speculate, I'd say that they proposed 0.4% knowing that Billy wanted to work on his own idea and wanted to turn this into a company, while they just wanted to have a fun startup weekend working on someone else's idea and then go home and go back to their normal lives. As a reward, they propose 0.4% of whatever company arises out of the startup weekend, without wanting to be part of anything else later. Billy said he's happy with that arrangement and they go forth.
Why 0.4% and not 100% / n team members? Because it makes no sense for the team of 9 people ultimately for each to have 11% equity in a company that perhaps only Billy will be running. That would mean if a company is formed and everyone gets an 11% share, but nobody actually works there except Billy who works 80 hours a week the next 10 years and turns it into a success, he has the same 11% share as any of the other guys who merely spent 20 hours over a weekend on this. That's why, if you're not interested in running this company beyond StartupWeekend, you'd propose 0.4%, a small percentage for a weekend contribution that is still significant if the company ends up worth a lot (e.g. $10m, means $40k for a weekend of work). A more granular valuation of the work is to simply value it as a fixed amount of money, say $1k per dev, but then you're getting in the realm of 2-day work-for-hire which doesn't make much sense in the context of StartupWeekend, it requires money transfers, investments and risks, and it just doesn't make much sense in a 2 day context to hire random stranger devs. Saying let's see what is possible, if it has any value well let's each have 0.4% even if we don't continue past this weekend, is more practical.
This is why I suspect that the article is only part of the story and that perhaps everyone was aware that Billy wanted to turn this into his own company and that the rest just wanted to work at it over the weekend for fun and get 0.4% in case their weekend work turned into a valuable enterprise. Why else would you agree to 0.4% and not just say 'let's see what we can come up with this weekend, and after incorporate it on an equal basis if we want to, or buy out the work by those who aren't interested in pursuing it further'?
True. But whether it holds up in court or not is a different matter, but they agreed. And contracts do not need to be signed to be valid and enforceable. Handshake deals and verbal deals are just as valid and have indeed held up in court (even on cases worth more than a hundred million dollars). The issue is that without signatures contracts are very difficult to prove and thereby rarely hold up in court unless e.g. there are witnesses, or statements made in reference to the agreement etc, which can serve as proof.
Did they agree? It didn't look like Billy actually did, and in fact it says there was no actual handshake, they just started working and the reader is left to guess whether Billy ever agreed (unless I'm missing something in the article of course).
We don't know, it says Billy was 'happy with the handshake deal'. I doubt Billy actually literally said said "I'm happy with that', before moving on, but rather said something like 'sure, that works', before moving on, which would be agreement. But that's just speculation on my part, I really don't know and you can't tell from the article.
From what I understood, Billy didn't pay Bobby $200 for the code, he just paid out a portion of the prize money they received from Startup Weekend. From the tone of the emails, I'm almost certain Bobby didn't sign over his rights in exchange for that $200.
He still owns all the code he wrote. If Billy uses that code in his own business that would be unauthorized and legal action can be taken.
Out of curiosity: You're feeling free because you're another member of the team or have prior knowledge of the situation, or because you Googled it and just want to?
