I have a small internet marketing business that is growing nicely. I'm also a mobile developer on the side. I have a few app ideas I came up with, with a few different friends. Aside from my business, I can find the time to build the apps, but not to market them on an ongoing basis. I'm considering building each app and partnering with my friends (separately for each app) to focus on marketing the app.
What I've learned in the world of mobile apps is unless your app is a game changer (Instagram, Facebook, etc.), it has to be marketed heavily to be successful. If I'm not going to have any marketing plans for these apps, I'm not going to bother building them.
I've been down the road of partnering with a friend before. When I first launched my current business, I partnered with my roommate in college. It turned out he wasn't a right fit for the business. Luckily our friendship was not affected when he left the business.
However, I feel this type of partnership will be different. First of all, it is not for my primary business and I will not depend on the income. Secondly, I will split the app partnership 50/50 until my friends prove themselves. They know I've had a failed partnership before and will understand I want to be careful. They also know I'm a fair person. Although my first partnership failed, I bought my partner out even though I was not legally bound to, because it was the right thing to do. I will write an agreement that will roughly say something like "an equity % will be determined after X amount of months after the release. The percentage will depend on their commitment to executing the marketing plan." I will make it clear of what I expect from them if they want to be 50/50 partners.
I'm a bit skeptical on the idea, but I think it could be fun. Each app is based on an interest I share with a few different friends (surfing, baseball, home improvement, etc).
I'd love some outside opinions!
Why not pay them commission? That way you just pay them a % of sales for as long as you work together. Have some sort of deal that if you go separate ways, they still get commission for the next month (or some fair period).
That would keep it simple which is often a good idea.
I assume this is a consumer facing app. If so, I recommend focusing on an affiliate style marketing plan. Figure out the value of your app, and pay affiliates/partner organizations to promote your app. Pay only for signups/engagement, whatever you prefer. In some cases it might be worth spending for clicks or impressions, but as a startup, I definitely prefer the CPA method.
Personally I'm a fan of splitting profits/ownership based on amount of effort expended. If you and your friends are strong, efficient contributors, then basing equity off of hours spent is a good idea. Also, I know these things often require money. If you're going to assign equity based on time, find some sort of reasonable hourly rate and use that to calculate the value of cash invested. If you figure your time is worth $12/hour (great for a startup) then an investment of $240 by your partner would give them 20 hours worth of equity.
Also, I've been down the road of depending on a Startup's success for income. Definitely a hard route. It's nice that you don't have to depend on these for income. I think it makes for a more enjoyable experience. Best wishes! :)
Don't write your own agreement- or if you do, at least run it by a friend who's a lawyer.
The earlier there is a mistake in a legal document for a business, the larger the consequences.
I'm just going to throw this out there. You build apps... you market apps... blog my friend! You'd be surprised what kind of product-selling power a good blog geared toward geeks like myself can have.
So together you can make more money in total. But there is no fair way to estimate shares correctly. If you do business with "partners" that you do not consider friends then any share is fair that you agreed because it it business.
It is impossible to estimate in hours of work as someone is more efficient and other is not.
Also there is more profitable directions of work then other. If someone is doing sales and other is washing flow. Usually considered that first makes more money but both jobs must be done and second one may be more hard work.
That is why many people do not wish to make business with friends. But business is built on trust and your partners become friends or destroy your business.
So may be it good to do business with friends but you should be ready to work more and get less for your job then your friends.