My company is dealing with software product development. Till now we have developed products for more than 50 customers and almost all product is success.
Recently, I got a chance to interact with one of the people from Europe. He is having an excellent product idea but lacking finance. The offer I have is to work with him on equity sharing.
Now, my problem: I am not sure how much he is good at executing an idea and how much he will invest (in terms of efforts) for that product once it is finished.
I have asked him to go for min Cost + Equity (this is normal practice at my end). But he does not looks "ok" with this option.
If anyone has such scenario, please advice what should I do?
This is an excellent example for which Mike Moyer's Slicing Pie approach http://slicingpie.com/ is an excellent way for participants come up with a dynamic equity allocation that accommodates ongoing contributions. Check it out: http://slicingpie.com/learn-slicing-pie-model/
Under this model, if one of you stops working on it, the other can go forward and both are protected for at least getting a bit of the pie appropriate for their work or (in his case) the conception of the idea.
I would expect him to put more skin in the game. Otherwise, it's not clear if he is committed to the idea.
How much is your minimal cost? Maybe it's a bit too close to a full price? If you keep it below your cost and take some equity, it shows commitments from both sides and this would be something worth trying.