I posted on Craig's List looking for help developing an idea into a web app. Since there's no money/funding/compensation the thinking is we would take a percentage of the company and the income it makes when profitable (down the road). One developer suggested 60/40 and another 50/50. I thought both proposals were relatively high. Granted the potential developer would take on most of the coding, but that's basically it. I would handle everything else (business end stuff - marketing, advertising, operations, administrative, planning, etc.). Plus I'm a very capable developer and designer myself.
Am I wrong in thinking 60/40, or even 70/30 is an unfair split? Am I unrealistic because its my idea? If so, what is a fair and balanced share schedule in this situation?
Tough call. Ideally you would want someone who would bring as much to the table as you. Hence the terms co-founder and partner. If this person will single-handedly create the project and you market it, 50-50 or 60-40 makes sense.
You can't count penny by penny and try to see who will bring more value to the table. If you are a designer or a software developer, then maybe the 70-30 makes sense.
Also quality of the work really matters. If you get an A-level developer, it is worth to give them a huge chunk of equity to get them excited. Without them there is no product. With them there is a great product.
I would say avoid offering equity at all costs. It's something VERY hard to get back, and potentially very expensive even if it is "free" up front.
Plus the best developers will want a salary and you'll likely get more mediocre or inexperienced developers for an equity only offering.
Instead look into outsourcing small parts of the project and putting together the pieces yourself. It's something that's safer to do as no other "partners" with the complete project, and you can pay for the new parts as the old parts of the project pay for itself.
No offense, but it really seems you aren't ready to start this business, especially not as a dot com. If you can't think of at least 5 ways to get $1000 as initial funding, and actually go get the $1000 you probably aren't serious about the idea. This could be as simple as working an extra minimum wage job for 2 months after hours and saving the cash for starting the business. $1000 is a good minimum amount to launch.
$1000 could last you 6 weeks or 6 months. But if you say you have zero money to do anything it is a ridiculous proposition. How will you buy paper to print your business plan out? (It's a rhetorical question, there are 50 just like it.) If you don't look at the idea as a business already and develop a budget to get you to your minimum viable launch point, how will you have any idea if someone putting in "free" hours of development time will even have a platform to launch the idea on?
You say you are going to do all the "business end" stuff including marketing and sales and you're worried that all the effort you are putting in is going be more than what you are expecting the developer to contribute. How can you expect the developer to even believe this if you don't have a marketing plan with a budget already? You are basically telling the developer that however many tens or hundreds of hours he spends developing this product isn't even worth spending $1000 of marketing on? As a developer, this would tell me you indeed are not serious.
This can be corrected. Work the second job. Put the money in the account. Develop your marketing plan to figure out how you are going to spend that first $500 acquiring users. If you've put that level of work into the idea, then you can start worrying about equity distributions on partnerships.
There's nothing wrong with setting up an equal partnership. The key point is that you both need to have vesting for your stock. That means that if either of you quits the company before a certain amount of time has elapsed, you lose your stock.
A typical plan, if both partners quit their jobs and work full time, might be a 50-50 partnership, with shares vesting 25% per year for four years.
If your partner quits in the first year, he loses all his stock. If you quit in the first year, YOU lose all your stock.
If he quits after one year, he loses 75% of his stock. After two years, 50%. And so on. All the stock is vested after 4 years.
The advantage of this system is that it protects you from someone quitting and still owning a giant chunk of your company.
As for how much of a split is fair, well, I think the idea is worthless. It really is. What's worth something is working full time on it. If you both quit your jobs and work full time on a new idea, you both deserve an equal share of the company.
It is really tough if what you have is mostly the idea and business plan, but no cash to pay a developer. In my experience developers do expect too much and it is for this reason many people recommend every founder - with web projects anyway - learn to code, even though you may have no natural proclivity for it. There is also the problem of sustainability - how long will the developer have to hang around to make your venture a success - usually these things have to go threw several iterations at least.
Best bet - make some agreement that involves mutual benefit, but doesn't involve you giving away a huge chunk of your business at an early stage. Agree to do marketing for the developer, for example, in exchange for his or her coding services.