If I attend a hack-a-thon event to work on a prototype, how much ownership do I give up?
I was thinking about attending a hack-a-thon event to get help creating a prototype. I am a non technical founder and was told this route may be a good option. However, I just found out that you give up some ownership by doing this. So my question is; how does this typically work, and how much ownership do you usually give up?
Development Equity Partnerships
3 Answers
I get asked that question often with regards to participation in Startup Weekends. In general, it all depends on 2 factors:
- Event terms & conditions - some may claim the right to some equity, so read them carefully & never hesitate to contact organizers for details.
- Team arrangement - at Startup Weekends (and many other events where people come to create products), teams have a lot of freedom of action. If there's no formal agreement on ownership of IP & shares, you may find yourself in a bad situation of misunderstandings, precedent law, and tarnished reputation. The simplest legally-recognized contract can be written on any piece of paper as long as it contains original signatures of all parties. (And don't forget vesting of shares.)
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@dnbrv...Thank you! I really appreciate your input. I'm thinking attending one of these events as a spectator first would probably be my best option. That way I can observe others and see how they do it. Is there a bench mark, or a typical standard that can/should be expected as far as an equity share for a weekends worth of work? – Derek 12 years ago
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@Derek: First off, startups aren't a spectator sport. If you're attending an event, don't spectate (some don't even allow visitors) but work on someone else's team. As for equity, there isn't anything standard: it all depends on the quality & the amount of work done + team chemistry. – Dnbrv 12 years ago
Having gone to a startup weekend and seen how things have worked, one big takeaway is that teams often disintegrate after the weekend is over. Of the three I paid attention to, all were reduced to the original idea-holder plus 1-2 people. Given that this is the case, I strongly support the concept of vesting. A weekend's worth of work can be quite a lot, especially given the intensity from the time constraint.
Don't approach it as "sweet, free work!" At typical rates, each developer is probably putting in a couple thousand dollars worth of time to the idea. As long as they continue to be involved with the company, that should count as dues, IMHO.
Make sure you hammer out the details the first night, it's not good to have contributors with hurt feelings.
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Good advice, thank you! – Derek 12 years ago
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@JohnZ...By chance were you privy to the arrangements made in those start up weekend teams? I'd just like to get an idea of what kind of agreements they tend to come to. It would be a great starting point for me. – Derek 12 years ago
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Not really. The team I was on didn't define the arrangements at the start of the weekend, and then afterwards I was offered a very small percentage IMO. I didn't continue on with that startup, but it reinforced to me the idea that you should hammer things before any code is written. – John Z 12 years ago
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For Startup Weekend - expect to walk out with exactly what you walked in with - eg nothing. Startup Weekend is about the experience, the education and the networking. We don't recommend that people try to come to equity agreements on the first night - rather, to do it many weeks after the event, once all the drop outs have happened. Of course, what you actually choose to do on the first night, is up to you. – Nick Stevens 12 years ago
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Smells like free work to me. I was led to believe it would be otherwise from the startupweekend's website. – John Z 12 years ago
Ideally, you would be able to trust your team enough to figure out a fair solution that everyone agrees with. Put yourself in the shoes of your team mates - look at their skills and the years they spent to achieve that.. what do you think would be fair?
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@ina...I think that's a great question. And to be honest...I truly have no idea what would be fair for a weekends worth of work on something like this. I do want to be fair, as I am also currently looking for a CTO, and good technical team members. I would appreciate any guidance on this. – Derek 12 years ago
