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i am here to start a small discussion for the given topic, as i am in the position right now and try to make a decision which turns out to be harder than i thought.

Back in 2018 i joined a very promising startup (SAAS product), as the two founders were searching for a tech-founder. Back then, it was just the two founders with their idea and a good network of people, which helped a lot to find paying customers today. I think it is a great product - i love the idea.

I own no share in the company but got paid a small amount of money for the past half year for my time investment (part-time) and when starting, we signed a contract that the code belonged to me.. The other two founders got paid by a startup incubator and worked full-time. Back then, because we did not know each other, we signed a contract that states the code is my property until they would buy the code from me.

The current state of the product exceeds the MVP i had finished in the third quarter of 2019. Today, it features many more functionalities, a dashboard for monitoring and controlling everything that runs the business and more.

We are currently looking for an investment of 500-600K USD, are already talking to VCs and Angel Investors and have paying customers. This would have not been possible without the work the other two guys did. But also not without the product i built.

I hope this explanation features enough background information.

Now to the problem: as we are talking with investors it looks like we will have quite a lot working capital soon, which we have not had in the past year. This also means that we will be able to pay us decent salaries. But now there is this discussion about the product ownership. One of the founders asked if i still wanted to get paid for the product i built because they wanted the product to be owned by the company, which is of course crucial for the business and should actually not belong to one of us in the long term.

As i think of the problem, it does not feel right to give my work away for free as they could possibly sell the company without me getting anything. Sure, these are some negative thoughts but i learned my lessons in the past... Furthermore, i invested much time in this (spare time, after my main job) and this is definitely not rewarded enough by the small amount of money i got paid.

On the other side, as i plan to work there full time, i do not want to take out much money that shortens our runway right from the beginning. If i had built all this for a client of mine, this could be easily worth 60-70K.

I really appreciate any constructive thought on this! Thanks in advance.

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    You either want us to tell you what to do, or elicit opinions out of which neither can really be more correct than others, so I have to VTC, as I also don't know how/if this question can be salvaged. – Tymoteusz Paul Mar 23 '20 at 22:18
  • Thanks for your answer! I am looking for your opinions about that. I know i need to make the decision myself, but i thought you could give me some other perspective. – revilo2020bw Mar 23 '20 at 22:35
  • Perspective on what though? If you just want an opinion, well, that's off-topic here as everyone has one, and neither is more or less valid than someone else's. – Tymoteusz Paul Mar 23 '20 at 22:36
  • But i think the people should underpin their opinion with valid arguments. That will help i guess. – revilo2020bw Mar 23 '20 at 22:39
  • @JoeStrazzere when starting, we signed a contract that the code belonged to me. The small payment was to compensate the time investment. – revilo2020bw Mar 23 '20 at 23:24
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You would get shares in the company. You will need a lawyer for this.

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  • Thanks for your answer! Not to get shares was my personal decision. I do not want to tie myself to the company completely. I learned my lesson not to do so... – revilo2020bw Mar 23 '20 at 22:36
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    If you don't get shares, sell it for an amount of money you're happy with. There's not much else you can do. – Omegastick Mar 24 '20 at 1:23
  • Can you explain how owning shares in the company "ties" you to it in an undesirable fashion? – Glen Pierce Mar 25 '20 at 5:03
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You may want to consult a lawyer. Here is one way to try to reach a fair price.

Treat the payments you received while you were working on the software as an advance of part of the purchase price. Estimate the full market value, what you would sell it for if you had received no money from the company during development. Subtract the payments you did receive.

If that is too much for the company to pay in its current situation, you may offer them an installment plan, where they pay you some now and some each month for an agreed period.

In any case, keep the software sale completely separate from the job. They are different types of income, and the obligation to pay for the software should continue even if they lay you off from the job.

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I'm a bit confused about the options you have.

  1. Sell the code. This seems like it will get you some money but probably not much.

  2. Don't sell the code but become an employee. I don't understand what happens in this case. What right does the company have to use the code that you still own?

  3. Give away the code. Why choose that? If you're worried that they can't afford you pay you, then ask for shares.

  4. Trade code ownership for shares. This seems like it's potentially lucrative and does not immediately reduce company capital.

Since you asked for opinions - I'm of the opinion that you should only work for a startup if you're getting shares. Startups - whether you're just an employee or not - are apt to involve hard work, long hours, and a certain amount of bad work/life balance, and the shares are the lottery ticket that make it worth trying.

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