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Andrew Mason asking for advice on "selling a website idea" (2006)

http://www.sitepoint.com/forums/showthread.php?440070-Selling-a-website-idea-What-to-expect

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Selling a website idea: What to expect

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Selling a website idea: What to expect

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Thread: Selling a website idea: What to expect

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Nov 23, 2006, 16:05 #1

picnichouse * View Profile * View Forum Posts

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Selling a website idea: What to expect

Hi folks,

I created an idea for a website that has gained the interest of a private investor with deep pockets. He wants to pour a lot of money into the site and hire me to front the project for the time being.

Note that it's just a business plan at this point -- no actual product. That will be developed in the first six months.

He has offered me a percentage of the shares of the company and a reasonable wage. I have no idea if what he is offering is standard, generous, or if I'm being taken advantage of.

I'm going to hire a lawyer, but I don't know what kind of lawyer to hire.

Can anyone help give me an idea of what I should expect, of how these deals usually divide up between the idea guy/developer and the business man?

Thanks in advance, and Happy Thanksgiving!

Nov 26, 2006, 00:32 #2

Anat * View Profile * View Forum Posts

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Wow, must be very exciting for you! I am not sure if there is even a standard for these things. I guess it also depends on how unique your idea is. It sounds good to me, being as he is the investor who is pouring in the money, but maybe a lawyer can negotiante the percentage you'd be getting better than you could?

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Nov 26, 2006, 04:16 #3

psalzmann * View Profile * View Forum Posts

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Originally Posted by picnichouse

Hi folks,

I created an idea for a website

Good move.

Originally Posted by picnichouse

that has gained the interest of a private investor with deep pockets.

Even better.

Originally Posted by picnichouse

He wants to pour a lot of money into the site and hire me to front the project for the time being.

"for the time being"? -- Extremely bad idea. Pouring "lots" of money doesn't really accomplish anything sorry to say. You can either do the project on your own in 6 months or not. Your idea will be his idea when he's finished with you. You are an "Idea Man" and if you have the knowledge to "Make it" then why the heck do you need some investor? You tell him when the project is complete, you'll license it to him AND others. If he wants exclusve rights, he'll need to settle with you something terrific in value that works for you. You will get hosed otherwise.

Originally Posted by picnichouse

Note that it's just a business plan at this point -- no actual product. That will be developed in the first six months.

That's how it all starts

Originally Posted by picnichouse

He has offered me a percentage of the shares of the company and a reasonable wage.

Hehe, shouldn't you be offering him something instead? so what, he'll fund you with some good cake for 6 months then you are on your own. It's your idea, not his. LICENSE it to him or SELL him the entire project / idea. Don't become involved unless doing it yourself 100% (with the intent to sell it as many times as possible when it's done). That's what's he's looking at. You should be too.

Originally Posted by picnichouse

I have no idea if what he is offering is standard, generous, or if I'm being taken advantage of.

Your question has been answered .. by yourself. Think about it one other way for a moment:

He's just one fish in the sea. How MANY other deep pocket investors will want in on this? You'll be working for him, he'll be selling it big time and you'll get pissed off just like the other members on sitepoint that follow the same rule you are about to do. Become the owner, wear the pants and take your knowledge to the next level (or potential investor).

Originally Posted by picnichouse

I'm going to hire a lawyer, but I don't know what kind of lawyer to hire.

That usually means you don't need a laywer because at this stage of the game you don't even know if you are getting hosed. Obtain legal counsil when you and your investor come to somewhat of a verbal agreement. A laywer should be used when it's time to get your feet wet and to help you make the final decisions for whats only in YOUR best interest in legal binding form, signed sealed and delivered. You'll first need to figure out something that is in your favor with the investor. When that happens, make it legally binding with a IP laywer.

Originally Posted by picnichouse

Can anyone help give me an idea of what I should expect, of how these deals usually divide up between the idea guy/developer and the business man?

Extremely horrible. Your idea, your talent, your knoweldge, his payments to you for few months, BIG DEAL. If he wants it that bad, advise him you will license it to him for his own use and tell him you are interested in seeking out further investors to take your project to a higher level. Mention you have been debating on obtaining a patent (if that is even feasible).

You see, investors are investors for one reason only -- to make more money. That's why when you say to him "I'm looking for an extremely positive outcome for this project, and you yourself being an investor already knows that obtaining additional investors will take this even further". You'll see what type of response he'll give you. He might even go red in the face because he's unaware that you are on the ball when it comes to things other than the idea and the project. Your future. 6 months is 50% of an entire year.

Don't put this in his hands. That's what you are doing and you don't even know it yet.

Lead, do not follow. They will come

Good luck.

Nov 26, 2006, 09:02 #4

covantage * View Profile * View Forum Posts

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Just dont let him take advantage of you. He has the money, but you have the idea and skills. You both need each other!

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Nov 30, 2006, 20:36 #5

MTbiker * View Profile * View Forum Posts

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Originally Posted by covantage

Just dont let him take advantage of you. He has the money, but you have the idea and skills. You both need each other!

If only it was that simple...

Originally Posted by picnichouse

He has offered me a percentage of the shares of the company and a reasonable wage. I have no idea if what he is offering is standard, generous, or if I'm being taken advantage of.

That sounds kind of backwards. It sounds more like it will be his company from the beginning and that you'll be expendable.

In most situations with VCs, angels, etc. (if they indeed like the plan) they'll give you lots of money, encourage you to spend it, and then they'll own a very large portion of the company. They pick the ROI they want, but you'd be doing all the work and deciding wages.

But on the other hand, I don't know any specifics of the situation, so you could have found a perfect investor!

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Nov 30, 2006, 20:48 #6

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There are lots of ways to structure a deal but you can't wait for him to dictate all the terms. You need to list out what YOU want (and your priorities) then you can begin effective negotiations about the deal from a well considered position.

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