I know someone that I'd like to partner with, but don't know where to start.
Hi there,
I'm developing an app for Cornhole leagues (cornhole is an American yard game that's rapidly growing as a professional sport), allowing league directors to create a league and for players to register teams for that league and participate the league by updating their scores and participating in the weekly scheduled matches.
I'm heavily involved in the cornhole community and play semi-professionally myself. I have a great connection who happens to be a top league organizer in the nation and I'd like to ask him to partner with me. The issue is that I have no idea how to go about this.
I'm planning to go to beta within the next 2 months to make sure the leagues are able to run smoothly and seamlessly. I run a few of these leagues myself so it will be a great opportunity for me to start rolling out the app slowly. Since I haven't rolled out yet, I have no revenue generated from the app. I'm planning on a monthly subscription for league organizers to pay and this will be a tiered service on how many leagues they can run, as well as ad support and a paid ad free version.
- How do I go about approaching bringing in a partner?
- Do I make him buy in? If so, how do I value a buy in for an app bringing in nothing as far as revenue?
- What legal actions do I need to take when entering a partnership agreement?
- What needs to be outlined as far as what I expect for him to be responsible for?
- How do I ensure that all major decisions will be decided by me?
Thank you for your time.
Hey Phil,
I don't have any co-founders right now but if I did, I'd make sure I got spent a lot of time making sure we see eye-to-eye on as many aspects of the business as possible. I've heard horror stories of founder relationships going south and becoming quite toxic. His responsibilities, your responsibilities, and how hard you think you'd both work needs to be clearly stated and discussed.
It just depends. I've heard that when it's just two people and it's super early, the best approach is a 50/50 equity split regardless of who's idea it was. If you own 80% of the company and they own 20%, it could be a point of contention later on.
Honestly, at this stage, your app isn't worth much and a valuation of your business would be very low. Between the two of you, you should be investing enough funds to bootstrap the company until revenue can sustain it. So, you need enough capital to fund development, maintaining the app, and your operations (sales, marketing, etc).
I don't know your background but my experience is that most development projects come in late and over budget. If you're technical and doing it all yourself then certainly those aren't valid concerns.
Based on both of your posts, you might consider incorporating. A C Corporation protects you from personal liability and can help you raise funds with either equity or debt (owned by the company, not its owners). If you hire him instead of making him an officer then he has no say in the operations of the company. That also means he's not likely to invest in it either.
Corporations are governed by corporate officers with a chain of command (President, Vice-President, Secretary, Treasurer, etc). Those roles govern who controls what in the company as defined by the company by-laws. Startup founders and co-founders of corporations take equity positions in their companies.
My startup was originally going to be in the credit monitoring business and because of the risks and potential liabilities involved, I started a C Corporation. We've moved more into the app business since September and are shutting down the credit monitoring.
If you want to jump on a call and discuss any of this, I can make myself available.