A collegue and I have been discussing ideas for a new product and we are thinking about starting a company developing this idea and releasing it for sale
We will most likely be burning the midnight oil, since we cannot guarantee to succeed
I can do the SW and HW, but he's more a project manager guy with good knowledge of production and also a good handle of mechatronics
But, I fear I will be swamped with work, and I would like to setup some kind of work division, that will reflected in the ownership of the business. So the person with large workload will be paid accordingly (if and when it makes a profit)
I could do it all by myself, but a product has bigger potential to succeed if more people are working on it. Better to have a part in a success in a team, than having no success and being alone.
Anyone been down this road, how to setup a small team like this?
We will setup legal documents to explicitly note who owns what in the company
You each own 50%. Anything else will end up ugly. Have an exit plan ready too, since if you both disagree on dissolving the company you will have problems.
Before you go too far down the line check your existing contracts of employment *very* carefully to make sure that they don't lay claim to everything you invent under the contract as their intellectual property.
Plenty of corporates have such a clause buried in the small print. You can work around it but you don't want to find yourself in the position of having a successful business wrested from you by a former employer.
Depends how much the other guy is willing to shift. 50:50 split is easiest but you could agree to share it in some other ratio.
Advice I was given at the outset is that once you go into business with someone and especially with friends you have to ensure that who owns what IP and the service contracts to the company are clear. It becomes even more important if external finance and an IPO are on the cards.
I have checked that, no fine print. Just as long as I do not make a competing product
Yes, problem is just finding the split, before even having worked on the project. Not knowing exactly how the workload is going to be
Yes. And better to have that discussion up forehand, than battling it out afterwards. I bring in all my equipment to the company, so that needs to be treated seperately, perhaps just rented.
You might consider doing only the minimum work to demonstrate the product is feasible, then finding a customer that will finance the development by paying a portion of the cost up-front. This will allow you to hire some help, but the biggest value is to answer the question of whether there is a real demand for the product. Most product ideas are duds, so answering the real-demand question can save you a lot of time over the route of fully developing the product before attempting a sale.
The approach can also reveal if you are developing the product because you are just personally enamored with the development - a common malady for engineer-entrepreneurs. It's OK if you are, but it's not necessarily a business idea.
This method should also give you an idea if you are associated with the right partner. Selling up-front will require some immediate hard work from them, and could reveal problems you might be sorry about later. It's easy for someone to sit back while you do the heavy lifting of product development on speculation.
For me, I pretty much won't develop a product now-days unless someone is willing to at least partially finance the first one. If a customer lays down their money for a product not yet even developed, then I know I've got at least a chance at a good product. If someone will buy vaporware, then how much easier will it sell once it is a developed product? It saves me a lot of market research that I can't really afford and might find unreliable in any case. Customers willing to lay down money separates the real needs from the nice-to-haves.
If you are thinking that this approach might kill your idea, then you're right. What is needed is not a single beautiful idea, but a portfolio of product ideas which you can then weed out to find the ones customers will buy.
On your contract - I suggest you consider what you want if/when you close down the company and make sure those desires are reflected in the contract. Your idea of renting your equipment would be a good example. Another would be to make sure that such resources you bring are clearly separated from corporate ownership.
ElectronDepot website is not affiliated with any of the manufacturers or service providers discussed here.
All logos and trade names are the property of their respective owners.