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Developer Contract for Prototype Help!

Hi Everyone,

I've spent the last 6 months brainstorming my next project. I've finally found one that has an unfair advantage with scalable growth and few competitors. It's something I believe in and am passionate about.

I'm just about to build my MVP. Im trying to retain as much equity as I can until I go to get angel funding. I don't want to give the developer a large amount of equity at this point if I can avoid it, unless I know the developer will be committed to the long term of the project and a true partner. Since all the programmers I know are working on other projects or have other jobs, I've decided to self fund the prototype and bring a programmer on as a salary plus a bit of equity later, once we have some funding and traction.

So, as a result, I need to pay a developer to help build me an MVP prototype that I can use to pitch. I luckily have enough to self-fund the prototype phase for a couple attempts (getting user feedback, then tweaking etc) to get it ready for pitching.

What I am concerned about is how to protect the idea. Does anyone have experience with contracts etc for this sort of thing? It seems to me the developer is the one making it, it would be easy for them to just take it etc.

I am interested in your thoughts, if you have any resources or suggestions for this type of contract.
Actually, Im interested in hearing your candid thoughts on my whole approach and line of thinking in general since I haven't started yet.

Thank you.

22 Replies

Ron Davis
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Ron Davis Entrepreneur
Founder, CEO: Tenacity
most law firms have some pre written forms for this sort of thing. Nondisclosure, IP, and non compete agreements.
Bon Franklin
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Bon Franklin Entrepreneur
Co-Founder of Morphid
What is your budget for hiring a dev and what is the nature of the application? Is it a niche industry or a business application or what? Without knowing this it is hard to give advice since those factors greatly impact the likelihood of finding the right person to help you.
Tim Maliyil
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Tim Maliyil Entrepreneur • Advisor
Managed Security Services Entrepreneur ★ Helping customers worldwide secure their data with our encryption solutions
Hi Bob,

It's important that you have the right paperwork in place before hiring anyone to write any code for you. Normally an employment/contractor agreement where it specifically has a "work for hire" clause should suffice, and you would want the forum for any dispute to be someplace favorable to you.

Of course this is tough to enforce if you're hiring anyone in a foreign country such as Russia, India or China. You should take the time to consult an attorney to give you such an agreement that meets your needs. This stuff is fairly boilerplate, and it shouldn't cost you much to get a good agreement.

While we're talking about it, I wouldn't get too caught up on the risk of someone taking your product to compete with you. Your company is much more than the application you build. The executing of strategy, the people and sales process are important, and someone simply stealing your source code probably wouldn't be able to compete with you when it comes to execution.

Good luck!
Tim
John Anderson
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John Anderson Entrepreneur
Senior Mobile Developer at Propelics
Check out http://www.ti-browser.com. It's designed specifically to help you get a mobile UI prototype up and running quickly, using 100% native UI components. i.e., it'll look EXACTLY like the final app will look, but without the time and expense of using a developer. This can then be used to pitch the idea to investors, but they will be able to see a living breathing prototype right in front of them.
Mariam Cook
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Mariam Cook Entrepreneur
Founder at PositionDial, Digital Consultant
You need the developer to sign a work for hire agreement, to say the IP and the code all belongs to you. I was a bit lax first time around with this but luckily my outsourced developers signed after the fact! I would recommend using something like Adobe Echosign so you have it all electronically recorded and traceable. Good luck with it all! Mariam Sent from my Samsung Note II
Rachel Ratliff
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Rachel Ratliff Entrepreneur
Voki Mobile
I was a corporate lawyer for 15 years, and I'm now in the middle of developing a mobile app as well. It is difficult in the early stages to find a technical person (or any other co-founder type) who buys into your vision enough to take stock rather than cash compensation AND devote the necessary time and energy you think your idea deserves. I gave up fairly quickly on finding that person (at least for now) and engaged a couple of local app design/dev companies to work on my idea. It's a lot more expensive that outsourcing ex-US, but since I didn't have any previous expertise, I didn't feel that i could manage people from afar. So, I agree with your strategy, but that's because I'm doing the same thing :)

On your question of protecting your idea/intellectual property - From a legal perspective, this is easy to do. If you work with a company of any size, they should have the necessary contractual provisions (confidentiality, non-use, assignment of all IP) in their form contracts which they will send to you to seal the deal. If you're working with someone small who doesn't have such a contract, I'm happy to send you a form of independent contractor agreement which will take include provisions for all of those issues.

Then there is the question of whether or not to patent, which provides an extra layer of protection if you do have a novel idea. If it's truly novel and fabulous and people are going to kick themselves that they didn't think of it first (doesn't happen very often, really), then a contract won't be enough protection to keep some people from stealing your idea. Practically speaking, they may decide to breach the contract and take the risk that you a) won't find out, or b) will, but don't have the money to take it to court. If you really think this is your case, then you should check with a patent lawyer as to whether it is a patentable idea, and how much it will cost to do so. Patents aren't cheap. Then if you file a patent, your ownership of the idea is clear. You may still have to take legal action (ie spend money) to enforce your rights, but you won't have the more difficult task of proving that someone breached a confidentiality clause.
Panos Kougiouris
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Panos Kougiouris Entrepreneur • Advisor
Founder at NeatSchool
Of course you should do all the right legal things but unless you have unlimited budget and time to prosecute violators you cannot really protect an idea legally.

However ideas are almost worthless. What matters is execution. The best way to protect an idea is to execute fast and always be ahead from your competition. Treat whoever steals your idea as just another competitor and you will be fine.

Software becomes outdated very quickly and the best developers do not want to work on other people's code. The biggest problem you will face by outsourcing the engineering function is that you run the risk one day to have source files that you do not know what to do with and nobody you trust to help you out.

Like you, your partner will have a vesting schedule so I do not think you need to be so concerned about his/her commitment. Of course there is risk but there is risk with everything.

Rob Gropper
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Rob Gropper Entrepreneur
Director at PetHero, SPC - Member at Eastside Incubator - Principal at Tuxedo Technologies Group
Bob;

we have some docs that we use - happy to share. you can DM me at Robg at PetHero dot com. Then you can ask an attorney to tweak if necessary. we start with an NDA for detailed discussion purposes. Our NDA happens to include an IP assignment provision that in the past i have been grateful for. We then have a "work made for hire Agreement" that was designed specifically for what you are doing - contract development or are you really going to HIRE this person as a W-2 employee? I'm no lawyer and this is not legal advise (see, i sound like a lawyer already :), but IP seems to be treated differently with employees than with contractors, but can't hurt to have some strong IP assignment wording ether way. I was surprised to learn that even if you write the specs and have someone write code to your specs and pay them for their services they still own the IP unless they explicitly assign it to you - so don't forget the assignment provision.
Marcus Matos
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Marcus Matos Entrepreneur
Software Development & Information Technology Professional
1.) Don't work with a developer you don't trust.
2.) Don't work with a developer you don't trust.
3.) Success is about execution, not the idea.
4.) Most good developers will not sign an NDA just to hear about your idea/project. It's risky, and what if they'd already heard the idea before or were already working on a similar project, etc etc etc?
5.) Don't work with a developer you don't trust.
Corey Butler
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Corey Butler Advisor
Entrepreneur, Consultant, & Web/Data Engineer
As a founder and developer, this concern surfaces a lot in my world.

NDA's and IP can protect you to a degree, but it's usually tough to obtain enough IP protection pre-prototype. The bottom line is if you don't trust the developer, then don't use them. Look for firms instead. A firm is in the business of consulting/contracting. They're not going to pivot into your business... they're already entrenched in their own venture and are prepared to protect their client's IP.

Here comes Candid...

I'm a serial tech cofounder with recognized work in web/software development. I'm also a consultant. That combo has attracted more non-tech cofounders than I can count. Seriously, I've heard this story hundreds of times. I've taken the approach many VC firms do... show me an NDA/non-compete, and I'll politely yet immediately show you the door. It's a red flag that says "I don't trust you, but I want you to build the core of my business for me while Ihedge my own risk". You have to invest something of value in the developer if you want them to invest value in you. Sometimes that investment is trust and a non-stressful working relationship.

If the idea can be created by a developer without you, then it probably isn't as strong of an idea as you think. Someone has to be the subject matter expert and visionary that can build the market/brand/messaging/etc. If the developer had that, they wouldn't talk to you... they'd already be busy making it.

That said, I have no idea how strong your idea is and I'm not commenting directly about it. Instead, I encourage you to review the barriers of entry someone would have if they tried to do the same thing you're doing. Try to think of the non-tech hurdles... all the stuff you've figured out over the last 6 months.

I hope that helps.
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