Fog Creek Software
Discussion Board




Friend's Idea / My Implementation

Didn't Einstein say "1% inspiration, 99% perspiration" ?

My friend has a technological idea for his domain; but no technological skills and not really a type of "marketing" type person.

I am a "marketing" type (intermingled within a developer) and have done a great bit of research; found the idea extremely marketable and am now embarking on building a product (subsequently, a company) on the idea.

My friend is, foremost, a friend; he's obviously in the domain and the experience would be valid. Ultimately, the core idea was his . . . but I don't necessarily see much of a "fit" for him within this company outside of just being the "domain" guy.

My tough question (you were expecting):
- What kind of partnership is this?

If not, how do I possibly approach him.
If it is, let me know I'm a jerk.  :)

Question
Friday, August 13, 2004

Thomas Edison said that.

Peter
Friday, August 13, 2004

Edison's right.  99% persperation, 1% inspiration.

If people recognized this, there would be far fewer IP-related lawsuits.  Most especially the "I sent my script into the movie studio and 5 years later they used the same exact idea in [insert name of holywood blockbuster here]" sorts of lawsuits where you just know that the idea of putting an African prince in NY to find a wife, while his father thinks..., etc. isn't exactly the hugest of inspiration.  And then writers wouldn't need to hire secretaries to screen their mail and shread without reading anything that looks like a screenplay or story.

Give him 1% of the company and your eternal thanks.  Unless he's also putting in work somehow for your company.  And he's certainly entitled to some occasional pay and/or compensation for having answered questions as a "domain expert".

But don't give him half of the company unless his contribution is 50%.

Flamebait Sr.
Friday, August 13, 2004

Unless he does something, forget about giving him a share. People get ideas from everywhere, including the papers, business magazines and even blogs.


Friday, August 13, 2004

"I am a marketing type/developer".

Uh huh.  Your really going to do 99% of the work.  Your post makes you come off like an ass.  if your willing to trash the friendship, go for it and don't give him anything.  But why couldn't he write a business plan himself, find someone whose more then just an "intermingled developer", and compete with you?

vince
Friday, August 13, 2004

I agree, you sound a bit assish.  What the hell is a "sort of" developer?  You either are or you aren't.  If your friend gave you the idea, then you ought to cut him in on the business at an equal share, and think about a third partner who knows what he's doing with code so that you don't end up with attractive vaporware.

In any case you sound like a real prick and I hope your friend finds someone with integrity to do business with and crushes your ass.

muppet
Friday, August 13, 2004

Tell him what you told us (his idea, your work), and buy him off with a residuals contract.  Give him x% of revenue up to $y, x/5 up 10y, etc, for a limited period (say, three years).  You could also structure it in terms of profit rather than revenue, but if he's smart, he'll go with revenue, which is much less susceptible to shady bookkeeping.  He gets money, you get him out of the way.

Create a spreadsheet showing him how, if the company brings in $100,000 in its first year, he gets, say $2,000; if it brings in $1,000,000, he gets $40,000.  Put some pretty numbers in front of him, emphasize that he's already done all the work he'll have to do, and get him to sign a contract licencing his idea to you without strings and in perpetuity.

If you do it right, it'll be fair to both of you, and you might retain a good relationship if he has another bright idea. :)

Justin Johnson
Friday, August 13, 2004

wow, JJ, you sound like a prick, too.

Is this how you treat your friends?  With shady licensing contracts?

muppet
Friday, August 13, 2004

`Didn't Einstein say "1% inspiration, 99% perspiration" ?'

Sure, if you're Einstein. If you're Joe Blow, it's 100% perspiration in vein, because without that 1% you're hopeless.

Let me put it another way - someone with a clever idea has a pool of millions of people that could competently execute it (in most domains). Someone who can execute has a pool of just a few people with clever ideas.

Dennis Forbes
Friday, August 13, 2004

Err...make that vain in the prior post. Sorry about any confusion.

Dennis Forbes
Friday, August 13, 2004

Oh, fuck off, muppet.

What I suggested was that he and his 'friend' come up with a mutually agreeable contract where his friend gets a load of money if his idea pans out with the OP's work, and the OP gets to develop the idea to his liking.  If they can't come up with such an agreement, nothing happens.

This is exactly how the best business relationships work: both parties get what they want, and the relationship is spelled out clearly on paper.  Nowhere did I suggest that the OP screw his friend.  In fact, what I suggested was that the OP make sure that his friend is exactly as monetarily successful as he is, according to the proportion of his contribution, which they agree on explicitly beforehand.

Justin Johnson
Friday, August 13, 2004

I disagree Dennis. The world is full of people with "great ideas" and people ready to write a "great book." But few are able to actually do it. The reason is that doing it is the hard part.

The person who can and does do something has the power.

This reminds me of a quote I saw from a writer once. A dentist at a party told the writer he intended to write a book when he retired. "Funny," replied the writer. "I intend to take up dentistry when I retire."


Friday, August 13, 2004

That's not what you said at all.  You suggested he give his friend 2% of the revenue, or something nearly as paltry.  Anyway.. thanks for the vulgarity.  The thread's all yours.

muppet
Friday, August 13, 2004

`The world is full of people with "great ideas" and people ready to write a "great book." But few are able to actually do it. The reason is that doing it is the hard part.'

Ask some of those people what their "great idea" is for a book sometime -- the reality is that in the vast majority of times, they have nothing novel or original at all. The reality is that truly novel, innovative ideas are truly rare, despite indications to the contrary (i.e. people claiming they thought of something clever. I remember my brother once certain that he made a stunning invention -- it was basically what I saw in an informercial a couple of days prior).

In the case of Einstein, do you remember the various gopher scientists who helped him carry out his work, or do you remember Einstein?

Dennis Forbes
Friday, August 13, 2004

Which is double what the Edison quote specifies as his friend's contribution.

It was an example.  Get over it.

Justin Johnson
Friday, August 13, 2004

> if the company brings in $100,000 in its first year, he gets,
> say $2,000; if it brings in $1,000,000, he gets $40,000.

So he gets 2% for the idea? Nice. Show your friend some more respect than that for the idea.

Matthew Lock
Friday, August 13, 2004

I have no idea how much the idea is worth.  The numbers I put out were pulled out of thin air.  There is no intrinsic percentage of revenues that the idea is worth, anyway; it's a matter of negotiation, and what each side feels is fair.

If I were the OP, I would offer a percentage of revenues on a sliding scale, perhaps with bonuses based on profitability.  Say, 2% of revenues, plus 10% of gross profits.  If the business makes $100,000 in its first year, but has no profits (very likely), I wouldn't want to suck a bunch of money out of it because it just makes it that much harder for the business to succeed if they're paying a huge tax for the idea.  On the other hand, if the business makes $10,000 of profit on revenues of $100,000, then the idea man walks away with $3,000 while I make $9,000, in addition to the paid employment for the first year.  That doesn't sound all that bad to me, from either side.

Keep in mind that the idea man provides the *initial* idea.  A lot of intellectual capital gets added to the idea in the time it takes to develop it into a marketable product, so that by the time the money starts rolling in, the idea man has only provided a portion, perhaps a minority portion, of the final amount of intellectual capital.

Regardless, the numbers aren't based on anything, and if they were to actually draw up a business plan and a contract, then you could worry about the fairness of it because you'd have something concrete to argue about.

Justin Johnson
Friday, August 13, 2004

+++On the other hand, if the business makes $10,000 of profit on revenues of $100,000, then the idea man walks away with $3,000 while I make $9,000, in addition to the paid employment for the first year.  That doesn't sound all that bad to me, from either side.+++


wait.. $3,000 from $10,000 is $9,000?

Wow, I need to hire YOUR accountant.

muppet
Friday, August 13, 2004

1. Your friend purchases your services, but this might lead to "bad blood" later if the product takes off an you're stuck with a check and your friend makes millions.

2. 50/50 partnership. This should alleviate any bitterness over whose contribution was more valuable.

www.MarkTAW.com
Friday, August 13, 2004

Well, now we know just how bad your reading comprehension is, muppet.

If the deal is 2% of revenues, plus 10% of gross profits, then the math goes like this:

2% of revenues of $100,000 = $2,000
10% of profits of $10,000 = $1,000
$2,000 + $1,000 = $3,000
$10,000 profits - $1,000 to the idea man as his share of gross profits = $9,000 profit for the OP.

Was that really as hard it looks?

Justin Johnson
Friday, August 13, 2004

Ah, but you're not paying him from revenue, are you?  Aren't you paying him from profits?  Unless you consider his revenue share to be overhead.

muppet
Friday, August 13, 2004

That's exactly right: if you have a revenue sharing agreement, then his share is a business expense, and comes off the books before profits.

Justin Johnson
Friday, August 13, 2004

your friend designed and architected the project. and you want to run with it.

nice.

i don't think you have any technological insight as to how involved this project is.  otherwise why would your friend tell you about it?

jesus h. christ just talk to him about it. what are your concerns? seems like you haven't done a single lick of work at all yet.

with friends like you who needs enemys?

PopCulture
Friday, August 13, 2004

oops my bad in my first glance I missed that your friend didn't have any tech insight either.

In that case, you're both doomed to failure, 2 "marketing" types going after the same thing- a vague non speific tech "idea".

You deserve each other!!! u will go far!!!!

PopCulture
Friday, August 13, 2004

A 50/50 partnership is insane given that this guy is doing 150% of the work. Do you give your real estate agent 50% of your house's sale price? Does your 1 share of IBM stock entirle you to a seat on the board? Get real.

If you get really rich, give him some friends and family stock.

But you don't owe him anything if all it is is a verbal idea.

If he drew up some design documents and has been working with you to develop the idea, that is something else entirely different and you should say so.

Ideas are a dime a dozen. If you are the one developing, implementing, marketing and selling the idea, you should own 100% of the product.

Recall the story of the little red hen who planted the seeds and milled them and baked the bread. It was the foxes idea to make a loaf of bread but he didn't do any of the work.

Worker Bea
Friday, August 13, 2004

I'm not looking at this from a business point of view, but from a friendship point of view. Some things should be thicker than money.

www.MarkTAW.com
Friday, August 13, 2004

Now that was a muppet moment we can all enjoy!

.
Friday, August 13, 2004

I disagree with Dennis' assertion that ideas are more valuable than the people to properly execute them.

Of course, there is no statistical proof but plenty of anecdotal evidence to suggest that most ideas are not new, are not novel and are not unique.

Calvin Coolidge once remarked that "Unrewarded genius is commonplace." An idea is just that. It's an idea. Whoopee.

To do anything productive with an idea takes work, and that is who should reap the majority of the benefit. The people that bust their chops to make it happen; not the guys who sit around and dream up ideas. Dreaming up an idea is easy. Everyone's done it. Implementing that idea is the hard part.

Now, I'm mainly referring to business ideas and not the recipe to medicine that cures all cancer. Those types of ideas are themselves borne out of hard work and research. I'm referring to that "Eureka!" type of idea that hits you in the shower. While it might strike you as unique, chances are 30,000 other people have already thought of it.

Stalin
Saturday, August 14, 2004

"I disagree with Dennis' assertion that ideas are more valuable than the people to properly execute them."

"Properly execute" is a very important particular in that sentence -- if I think up an idea, let's call it X, and you're an expert in the field of X with a long history of success in executing new ideas in X, then in a partnership it would often be a 50/50 type arrangement (certainly not any absurd 1-2% as stated here).

If, on the other hand, you have absolutely no expertise or knowledge in X, and merely bring to the table some marginal general industry experience, then you're nothing more than a labourer. At most your contribution is "lending" your work for free in return for an equity stake in the company. People in that position often are minority holders -- they're basically low paid employees who made a bet and thus got a little more.

Dennis Forbes
Saturday, August 14, 2004

Dennis, Carmack and crew weren't the first people to think of the idea for 3D games on PC's, but they were the first to do it well, so they got the money. Do you think they should pay money to all the bozos who used to say it would be a great idea?


Saturday, August 14, 2004

I could argue over poorly applied analogies until the cows go to roost and the eggs come home, however it comes down to one simple question: If the idea is so tangential to the OPs business, then why go with the friend's idea in the first place? If there are so many great ideas out there, and so many so eager to part with them, then just move on and this whole thread would be moot.

Dennis Forbes
Saturday, August 14, 2004

Err, instead of analogies I should have said "examples". Apologies.

Dennis Forbes
Saturday, August 14, 2004

Dennis, because most people lack imagination and can only understand the potential of small percentage of ideas. And even then they really don't understand how much time and effort it takes to execute even a simple idea in the marketplace and the risks they'll face. Read the book MouseDriver to get and idea of how much work is involved with bringing something as simple as a novelty computer mouse to the marketplace.

Ideas are worthless, execution is everything.

ronk!
Sunday, August 15, 2004

Wow, aren't you in the wrong place to ask advice on how to deal with the guy who has the "THE IDEA". First of all , you are not giving us enough information.
My 2cents worth is that you are stuck on the small details that in this stage of the company are irrelevant. You are trying to divide the pie before you even have it. If you are really serious, stay away from a Partnership at all costs, do a Corporation, S-type, give your friend an agreed amount of shares and go on with your work. If you need him, pay him in stock options plus some regular money. At this stage, stock options are just funny money because if you do eventually get VC or go IPO, you will have enough money to buy your friend out if you want to have his shares.

In the mean time, don't quit your day job.

Lavrenti Beria
Tuesday, August 17, 2004

*  Recent Topics

*  Fog Creek Home