So, A friend of mine has a brand created for a game, characters, story, the works. He also a rough idea about how the game should be which looked pretty solid.
He took out about $40,000 loan and approached myself (designer/developer) and another designer/developer about coming together and building this thing into a great game to put on the App stores.
I'll take on roles such as:
He's offering $12 an hour for us to build this. But doing a cross platform development project with this many roles and responsibilities throughout the process would put my market rate around $125-150/hr But I'd be willing to a flat $100/hr.
Anyway, he can't do more than $12 which isn't really sufficient for me to live off of. But he is a good friend, and I'm hoping there is a future for me in this project if we can build a hit.
The contracts he presented would:
I was pretty clear I viewed our relationship as building this business together. I hope to see us bringing in revenue, making regular updates and fixes to maintain the game, running promotions, then planning versions 2, 3, 4, and so on as long as we can keep this great thing going.
I'd be taking a pretty significant risk lowing my hourly rate that dramatically missing out on a good chunk of money up front. But I'd be willing to risk making it back with equity if I can make this thing a success.
I'm afraid signing a contract like this could leave me in the dust once the hard work is finished and won't leave me with an opportunity to grow as the game grows.
I'm working on my proposal and I want to make a reasonable offer for a contract I'd be happy to sign. I'm not trying to take more than I deserve, and nothing less. If it could be structured in a way where if the game is a success, I'll succeed. If the game failed, then it makes sense I would fail.
He has hinted at a larger % (of only app revenue, not equity) when that time comes in a 2nd contract. But I'm not sure if it's smart for us to sign these contracts now.
He just seems to think because he's paying us (even though it's way below market price) we shouldn't be asking for anything else. Is he right? Does a vague 2nd contract in the future sound like a bad idea?
Welcome to the real world, which requires you get things in writing.
I agree with Zuly; I think your "question" was way too long to read so I skimmed it and got this...
So, you're basically stuck with whatever you can convince your 'friend' to give you. All he owed you for your work unless you have in writing is the $12/hr it sounds like he has been paying you. If there was any other agreement, it's currently irrelevant unless you have it in writing.
Next time, get the specific details up front, in writing. Or stop when the project is clearly becoming viable and rebalance then. At this point, you may be stuck. There's no 'normal' split for independent contractors on the equity thing, but you're welcome to go back and propose whatever splits you like, and see if you can get the guy to agree.
How much equity should startup Independent contractors get?ZERO If you get equity - you're no longer an independent contractor. Working for a business you own (even if partially) has implications. 20% makes you a significant stake-holder, not a contractor.
So its quite obvious that your expectations are completely out of touch with what is being proposed to you ($12/hr + 2% profit sharing bonus). Obviously, if your counter-part wants the rights to the code for himself, he would probably want the rights to the company to himself either.
Is there anything you're bringing to the table other than coding skills? Because coders are easy to find, if you don't work with him - someone else will.
At $12/hr you would be dramatically underpaid. A decent iOS/Android programmer can get $100/hr.
If you're not being paid, you deserve equity but judging from your description, your 'friend' doesn't think that way. He started with a very unreasonable proposal ($12/hr) which you shouldn't accept. It's unlikely that he'll suddenly become reasonable.
Negotiate for fair value but be ready to walk away if you don't get what you want. That's your only leverage.
Never do work for vague promises of future gains. That just smells like a con man trying to take advantage of you. If it's not written in the contract today, you won't get it tomorrow.
Consider that if a game is successful and your friend makes lots of money, he'll have zero incentive to give you a percentage of that money. If you refuse to do more work, he'll just hire another programmer with that money.
Finally, consider that even if you do get 20% equity, it still might be a bad deal for you. Looks like you've already written a couple of iOS apps so you do know that the odds for any game to be successful are very, very, very low. The most likely scenario is that you'll spend a lot of time working for $12/hr and end up owning 20% of nothing.
During that time, you could be making $100/hr. During 6 month period, it's ~$85k difference, risk free. A game would have to make $425k in order for your 20% to be worth that much. It would have to make much more to adjust for risk.
You should consider the opportunity cost of making lots of money, risk free, working for people who can pay market rate for iOS programming skills (and there are a lot of them those days).