Prospective investor/partner asking for source code, what should I do?


After developing a unique software product for the past 5 years, I am looking to team up with a business developer that can get the right investment for going viral...

The prospective business partner that I found expressed a lot of enthusiasm but immediately brought with him another partner (with a PhD in computer science) to examine achievements so far, estimate the amount of work ahead and manage the entire project.

Initial discovery process (along with explaining and defending a pending patent application) went fine, with each of them signing an NDA.

Now, they claim they need to have access to the actual source code, in order estimate work needed so they know how much to ask from investors (that's at least how they justify their request).

Now, since they are not partners yet and no agreement has been signed, I am not sure how to respond to this request. As you know, source code can be copied and transferred to other parties very easily.

What should I do next?

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asked Mar 30 '11 at 04:08
John Sel
6 points

3 Answers


I don't see that this is a huge issue, being a software engineer myself, I would want to see the condition of the source code. Badly written code is most likely their concern (no offense to you, they simply haven't seen it to know).

I would explain to them your concerns and ask if they are willing to spend a day with you reviewing the code using some screen sharing like Teamviewer. That way, they can take over the mouse and keyboard and have a really good look at the code, but they don't physically get access to the files.

As long as you are at your computer watching what they do, they can't take a copy. Even if they recorded the session, the effort to get that into an electronic format would be huge.

The other thing to remember with software, is maintaining and extending someone else's code without that person is bloody near impossible.

So, be very polite about it, maybe even invite them over and you all sit round a monitor together, if possible. That would balance off the possible ill-feeling over refusing them the source.

answered Mar 30 '11 at 04:33
David Benson
2,166 points


Speaking personally I'd take that as a red flag.

I can see a case for spending a half day or something going through the code with them (on your PC of course and avoiding any particularly revealing parts), but giving them open access seems way over the top to make a first estimate of what work is required.

Apart from anything else in a strictly technical sense they're not going to get up to speed in your software quickly enough to make sensible estimates. Estimates are more about the features list still to do and typical complexity, and a broad brush feel for how scary/horrible the coding is (ie how good are the programmers).

I certainly wouldn't do it with my code, especially as you've put such a lot of time in already. The risk seems too high to me.

answered Mar 30 '11 at 04:20
2,552 points


I empathize with your deep concerns on this. I know why you are concerned and afraid about the loss of your code. While at the same time being excited about the opportunity.

You must also appreciate the risk to an investor of providing money and discovering the code was oversold, or you need significantly more money to complete and get to market. Do your own due diligence My experience is that this is an important part of the due diligence process. You should be proud and excited that is has come this far. I assume that you have done or are doing your own due diligence on this team and have throughly qualified them. Based on what you are saying -- they are brokers who are going out to raise the money from someone else. Knowing their record and kicking their tires may increase your confidence.

Create a Black Box Element Something you might want to consider when you do allow them to review the code. Create a "black box" within the code you provide. Is there an essential component of the code-- a moment of brilliance that you could -- lift out of the code reviewed. When (assuming they catch it) the reviewer point to the black box and says "what's in there" -- you say -- "that's the secret sauce that make this work. And you show that "it" is working, and it could only work if that black box works. But it is your secret until they do become an investor.

Get the result regardless An independent review of the stability, quality and completeness -- the audit -- of your code is a valuable resource to you moving forward regardless of whether you work with this development team or not. Negotiate to get their resulting report, (branded by them) as a product for you to include in your own business plan and investor recruitment material.

If it comes back "bad" -- which I am sure it wont -- then take it and use it as a plan for raising money. "An independent audit said this is what was needed to complete. This is the cost of doing that. . . . " Can you plan to go viral? I am very suspicious of anyone whose plan is "to go viral." As a business developer I experience that the same way a personal financial advisor would experience "win the lottery" as a component of a personal retirement plan. We can all do things that make our product/companies attractive. We can prepare for explosive growth. We can plan and budget for explosive growth. But do we plan to go viral? (Okay, okay-- this is now it's own question. I posted it here. I hope you consider these thoughts in the context of this question.)

answered Mar 30 '11 at 06:54
Joseph Barisonzi
12,141 points

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