I have no technical background and one company is proposing to develop my prototype under 50-50 partnership, should I go with the offer? What key points should I put before him in the contract if I go with the offer?
Do not do it. They are a company with a different business objective. Find a good partner that believes in the vision and will work the hard long hours its going to take.
No It company can demand you 50% of equity. For technical assistance and all that a maximum of 10-15 % is demanded. I have a Start Up of Mine. For Website + App + Maintance and all other technical work they only demanded for 12.5%
So negotiate with them.
I believe you should go with it !!!
Although the answer very well depends on what kind of product you have i.e. whether you have a tangible product which needs capital and machinery, I believe 50% partnership is not at all a bad idea, considering you will enjoy being at the helm of the affairs and have all the resources at your disposal. You will find it literally way more empowering if you get the steering wheel in your hands without having to work on the "how" of it rather than focusing more on What and when.
Otherwise if your product is more of a service line product, I believe you can definitely bargain to the extent possible.
If you do go with the contract, please keep in mind the following points:
1. Equity and/or REVENUE/Profit share. Understand the difference between Revenue and profit here. Always keep the things pretty clear here.
2. The level of commitment and expectations, your role and position should always be kept clear in documentation to the extent practical.
3. Future Exit/Entry route. Although it might sound negative, but one of the things to be put in, is the contingencies and exit routes and entry points of others. Can you or company exit or transfer holding to others. to what extent and what would be the residual commitments on part of each other in such an eventuality.
4. Tax planning.
5. Your voting and decision making powers and resolution of conflict mechanism. Possible arbitration avenues.
6. Any gestation/lock in period.
7. Whether you will get any remuneration apart from equity. the mix thereof.
There are numerous other things, but I will keep it short for the meanwhile.
Leave it. A prototype is a start. Finding product market fit and real traction is everything. A prototype would be more like 10-20%. If they commit to do all the changes and revisions needed to reach product market fit it would be worth closer to 50%. If they commit to do all that is needed to scale, have an exit or IPO you have found a real partner and 50% is fine.
I would suggest:
First clear with them, they are taking 50% for what? Only for prototype or for lifetime technical assistance and taking care of product ?
If they are asking for only prototype, than its not good. Drop this deal.
But, if they are becoming your partner for lifetime in this product, than I think it will be win-win situation for both of you. Because, in a startup, Technical part is also as important as the Idea is.
I'm also at the Idea stage of my Startup. I'm also looking for a technical guy or technical team who can help me for a long time.
u should go for it success is more important now u have only one company which is ready to invest in your product if u get success then u will have thousand companies who are ready to listen to your one idea and invest in it. if possible negotiate are else go for it
I would say it is too much and only for prototype. For so much shears they will need to build for all platforms and stay with you for minimum three years. And it is still to much! Do not forget that you will need other help and they can ask more shares.
Yes, if you aren't even past the prototype stage, partnering with them is gonna be a catalyst for you.
I agree with Ashutosh, you should negotiate with them. I think 50/50 is too high for just technical assistance.
Hi, I'm a software developer with morthan 10 years experience, connect me let's talk about your product and how we can work together if you will be interested.