Writing software on contingency?

February 28, 2009 10:49 PM

Developing software on contingency - how much should I ask for?

I'm going to be writing some software on contingency (I get a percentage of the income from the sales) and I cant really figure out what to ask for. It probably wouldn't take me too long to do (a week or two). Not a whole lot of unique talent is required for the project.

My guess is 30%, but I feel its a little too low. The company is small - one f/t person (founder), plus a bunch of p/t consultants as needed (myself included). I was also thinking about a two-tiered system, under some dollar amount its 20% and above a certain dollar amount (if we strike it rich) its 40%.

posted by SirOmega to technology (7 comments total)

As much as you want. Reasons to offer a lower rate would be their willingness to pay, their ability to find someone else, and that if you take too much they'll be less interested in actually making sales.

Also, you should ask for an advance on royalties, to make sure you at least get some remuneration from these guys, and that they are actually solvent.
posted by delmoi at 11:51 PM on February 28

Your two-tiered system is backwards. You're in as much as your in as soon as you deliver the software, and you can't ever take back the time and effort you spend. They're not risking anything. Ask for a big percentage up front, and a smaller percentage if it takes off.
posted by orthogonality at 12:10 AM on March 1

Agree w/orthagonality's thought that your tiers are backwards.

The percentage(s) should have some relationship to the risk / likelihood of success. You're essentially a venture capitalist who's investing time and effort instead of cash, and you should be paid accordingly.

You should make it very clear, in writing, exactly what you're getting a percentage of -- X% of gross sales, or of sales less particular expenses, etc.

It seems that you'd need some access to their books to be sure you're getting what you're supposed to get.
posted by jon1270 at 3:54 AM on March 1

Yea, getting access to the books could be a bit difficult.

I have written software for them before, so I know they're capable of paying, and they seem to have some moderately successful stuff going now.
posted by SirOmega at 8:40 AM on March 1

Frankly, if this is a software-based business and you're writing the software yourself... you should be treated as one of the founders of the company and should be paid at least as much as the other founders.

Ideas are cheap, but well implemented software is extremely valuable.
posted by meta_eli at 9:22 AM on March 1

And you absolutely need access to the books written in to the contract. That's pretty standard for someone getting a percentage. (Don't take my word for it, get a lawyer)
posted by meta_eli at 9:47 AM on March 1

I agree with most of the posts. Instead of fighting the access to the books battle up front, I would find out if they need venture capital once your software is developed or are they already profitable and have no need for VC. If they will not share this info with you, then I would not move forward. In essence, are they profitable or are they looking for more VC money? If they say that they are profitable (trust me, trust me) then I would have an attorney draft a doc. stating that fact as a part of your go forward agreement, with consequences for breach included. If they say they are not profitable and need VC, then I would ask for at least 33% of the stock (preferred) and a seat on the board. Then as a shareholder and board member you should have access to all critical docs. You can also help with strategic planning if you have experience and wisdom to share. Last, go over the next round due diligence docs with a fine tooth comb and ask any and all financial questions at the next board meeting. All discussion goes into the minutes and can be accessible if you unfortunately need them later on for legal procedings. Be smart, you really are an equity stakeholder in this situation.
posted by wts111 at 8:42 PM on March 1