At an iPhone developer Meetup a few nights ago, an iPhone developer asked me a key question: “how much equity in my project should I offer to the technical writer that I need to finish my app?”
His gut feeling was that as the main developer, he of course should keep most of the revenue.
There are two ways to approach this question. You should use both. If they lead you to similar numbers, you have your answer. If not, something is wrong and you need to understand why before you proceed with a revenue sharing deal.
Be Realistic About Who Needs Who
Everyone tends to have a high opinion of their work. That’s a problem when trying to reach a fair deal.
As a developer, you know how tough it is to write good code. To you, English writing doesn’t seem like a big deal – although you are not willing to do it yourself.
Well, the writer on the other side thinks the same way. It all goes down to negotiations and who can walk away from the deal.
Ask yourself this question: if the writer was to quit when the first version of the app is out, would it be a problem or not? Or will you need them to stay around and improve the product?
This is the key question that tells you the difference between a co-founder and a contractor.
Obviously co-founders deserve a significant amount of shares. Contractors want to be paid, but they can be replaced.
Be realistic about the fact that you indeed need a good writer. Your app’s quality may depend on it.
At the car dealership, you must be willing to walk out three times to get a good deal. Equity negotiations work the same way, except that once you reach a deal, you need to actually spend time with the other person. So you can’t burn bridges.
Discounted Value of Future Revenue
The second exercise is to look at the potential income and check whether it’s in line with compensation. If the writer is expected to put about a month of work full-time and you offer 1% of an app that may make $20,000, that’s a total compensation of $200 for the month. It just doesn’t compute.
No need to go back to business school and run a fancy analysis about discounted values and risk factors, but it’s clear that anyone who works for revenue share is taking a risk. So even the $200 above is a best case scenario.
In reality, there is a possibility that the app never makes it to the market, so the writer makes $0. The app could do ok and generate a few thousand dollars. The writers makes less than $20 (the price of a dinner).
The Number
So what is the right number? In the case of that developer, the amount of work expected of the writer was significant (a month, probably more with updates, changes and what-not). The job was more that of a co-founder, not a hired gun. My recommendation: anywhere from 25% to 40%.
What do you think? Is that the right number? Is too much or too little?
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