How to divide ownership and protect idea

**acorn0808** · 12-03-2010 11:01 PM

Hello everyone,

I have a question and I also think that a lot of other people have the same question.

See, I have thought of a new internet product, and I want to develop it and start a business.

HOWEVER, I have no--absolutely no--knowledge of how to develop the technology.

Thus, I plan to partner up with two local companies to develop the product. Basically, they will develop the technology I tell them.

I plan to be the CEO. I have thought of the new idea, and I plan to take care of getting future investments, getting clients, expanding, hiring, etc. And I plan to make these companies in charge of engineering. They will also pay for the development (around $20,000 at most.)

Now, I want to split the company ownership evenly. I will get 1/3, and the other two companies get 1/3 each.

My questions are as follows:

1. Is this a fair agreement.

2. When I tell these companies of the new idea, how do I make sure that they do not just steal it from me? Like, they could just take my idea, and then develop it independently among themselves, leaving me out! Do I need to write a contract of something?

Thank you so much.

**akula** · 12-04-2010 07:10 AM

hi, welcome!
yea, you've got the wrong idea about how tech startups work
the answers to your question are "no" and "don't worry about it"
i can't be bothered explaining everything as share allocation and IP protection have been written about ad infinitum on this site
if you want to have a discussion about commercialization with me, I need to know:
how old are you?
what are your qualifications?
what is your work experience?
what problem is your venture solving?

**acorn0808** · 12-04-2010 02:46 PM

Originally Posted by akula

hi, welcome!
yea, you've got the wrong idea about how tech startups work
the answers to your question are "no" and "don't worry about it"
i can't be bothered explaining everything as share allocation and IP protection have been written about ad infinitum on this site
if you want to have a discussion about commercialization with me, I need to know:
how old are you?
what are your qualifications?
what is your work experience?
what problem is your venture solving?

Thank you so much for your reply. i have read a lot about patents, etc. but I still have a question. You see, I fear that it will become like Facebook. you see, those two twins had the idea, but then Mark Zukerberg stole it. I fear this will happen to me too.

I am 20, in college, no work experience, no qualifications. But I have a good idea regarding a novel web application.

Thank you so much for your helpful assistance and advice. I wish you the best of luck in your own endeavors. Your wife is pretty, BTW.

**akula** · 12-05-2010 08:57 AM

aaa i see
yea, popular media gives a skewed picture for how startups work
there is no trick to successfully getting a venture off the ground
it has nothing to do with IP protection
what's required is for you to follow a standard step by step process
the process starts with you quantifying the problem that your venture is solving
what problem are you solving?

e.g. "The problem we are solving is that American homeowners are negatively effected by declining property prices. Over 200,000 households in DC area have seen the value of their household wealth decline by over 30% between 2006-2009. The average household has lost over $100,000 as a result of falling property prices. Declining household wealth is a serious problem because it directly affects people's ability to pay for their retirement. Our solution protects people from property price declines."

That's an example of problem definition. It identifies who your target is and quantifies the value of the problem that you are solving. You need to define your problem, or otherwise you can't proceed in the startup process.

**acorn0808** · 12-06-2010 06:33 PM

Originally Posted by akula

aaa i see
yea, popular media gives a skewed picture for how startups work
there is no trick to successfully getting a venture off the ground
it has nothing to do with IP protection
what's required is for you to follow a standard step by step process
the process starts with you quantifying the problem that your venture is solving
what problem are you solving?

e.g. "The problem we are solving is that American homeowners are negatively effected by declining property prices. Over 200,000 households in DC area have seen the value of their household wealth decline by over 30% between 2006-2009. The average household has lost over $100,000 as a result of falling property prices. Declining household wealth is a serious problem because it directly affects people's ability to pay for their retirement. Our solution protects people from property price declines."

That's an example of problem definition. It identifies who your target is and quantifies the value of the problem that you are solving. You need to define your problem, or otherwise you can't proceed in the startup process.

Hello. Thank you so much for your advice. You see, my startup deals with an e commerce problem.

I would like to explain more in detail, but as you know millions of people could be potentially reading this and I am worried that my idea will be stolen.

You see, I was just thinking of something. You know those youtube founders? Suppose they would have told their idea to s a company, and then that company developed youtube by itself? That is what I am afraid of here.

Do you suggest I take the risk, and explain my idea? Or is their any other way?

Thank you so much for your help. You are really been very helpful.

**akula** · 12-07-2010 01:25 AM

yea...you can keep the details of your solution private..it's not important
what I need you to do is to describe the problem that you are solving.

e.g. (if you were the founder of youtube)

"in 2001, over 100 million video files were shared by 200 million internet users in america. video sharing is a big problem. it's hard to share video files for three reasons.

1) first of all, to share a file, you have to upload the entire file to the internet, either via an email attachment, or to a server if you have a hosting account. most email applications do not allow large attachments and most interenet users don't have hosting accounts. this makes video sharing very difficult and people have to break up their videos into small clips. this ruins the viewing experience.

2) then, even if you can send your video file to a recipient, often, they have to wait a long time to download the file to their computer, because they can't watch the file unless it is fully downloaded.

3) and then, if the file downloads successfully, often the recipient can't view the file because the file is incompatible with their video player.

our video sharing website solves these 3 problems using a new technology. it allows people to reliably share large video files in one piece without having to wait a long time for the dowload to finish. "

that's an example of problem definition. it doesn't say anything about youtube, what it looks like or how to make it.

what is your problem definition?

**acorn0808** · 12-10-2010 06:41 PM

Thank you so much for your helpful reply. I am so sorry to take so long to respond.

My startup will help websites make money. The problem here is that websites are having difficulty making money. I will help them creates, ads, products, etc.

I would just like those two companies to develop the software and such, and i will cerate a detailed plan that they will follow

Thanks so much again for all your help. You are very helpful.

**acorn0808** · 12-12-2010 08:08 PM

Any suggestions anyone?

Thanks

**akula** · 12-12-2010 11:55 PM

acorn, there is little to say. you don't seem to understand what it is that you're supposed to be doing.

the startup process is very simple and very intuative.
it works in 4 steps:

a) you identify the problem that you want to solve, specifying the people who are experiencing this problem, the reasons why they are experiencinng this problem and the reasons why this problem hasn't been solved
b) then, you survey those people by calling them up and asking them to sign a letter of intent saying that they would buy your solution if you can provide it.
c) you take prepayments from your customers and use that money together with consumer credit, trade credit, loans, savings and donations to finance the development of your product. if you need capital, you use the survey results and signed LOIs to convince people to give you resources.
d) you sell the product, collect balance of your accounts receivable and reinvest your revenue into growth.

And that's that. No bullshit "partners", no headaches.
That's how real startups get off the ground.

In your case, what you don't understand is that nothing is gonna go anywhere untill you figure out your problem definition.
You can't do steps b-d without doing step a.

In that respect, "The problem here is that websites are having difficulty making money" is not an acceptable form of problem definition.

What websites are you talking about? Why are they "having difficulty making money"?

**acorn0808** · 12-17-2010 06:21 PM

Originally Posted by akula

acorn, there is little to say. you don't seem to understand what it is that you're supposed to be doing.

the startup process is very simple and very intuative.
it works in 4 steps:

a) you identify the problem that you want to solve, specifying the people who are experiencing this problem, the reasons why they are experiencinng this problem and the reasons why this problem hasn't been solved
b) then, you survey those people by calling them up and asking them to sign a letter of intent saying that they would buy your solution if you can provide it.
c) you take prepayments from your customers and use that money together with consumer credit, trade credit, loans, savings and donations to finance the development of your product. if you need capital, you use the survey results and signed LOIs to convince people to give you resources.
d) you sell the product, collect balance of your accounts receivable and reinvest your revenue into growth.

And that's that. No bullshit "partners", no headaches.
That's how real startups get off the ground.

In your case, what you don't understand is that nothing is gonna go anywhere untill you figure out your problem definition.
You can't do steps b-d without doing step a.

In that respect, "The problem here is that websites are having difficulty making money" is not an acceptable form of problem definition.

What websites are you talking about? Why are they "having difficulty making money"?

Hello. Thank you so much for your suggestions.

See, my company will first have to develop the website and technology first. It is an ad company I am thinking about, offering new ways for local business to advertise on websites. So, I first have to develop the whole system first, no? And to develop the system, I need to get partners, and I was wondering how to divide up the company.

Thank you so much for your help, you have been very helpful.

**akula** · 12-18-2010 04:27 AM

Originally Posted by acorn0808

Hello. Thank you so much for your suggestions.

See, my company will first have to develop the website and technology first. It is an ad company I am thinking about, offering new ways for local business to advertise on websites. So, I first have to develop the whole system first, no?

no..not really..

what you're talking about is the "build then sell" approach
this approach always fails because you are gonna end up building the wrong product, for the wrong customers, and you will market it in the wrong way and sell it at the wrong price. what's gonna happen after is that you will try to fix up the mistakes but by this time you'll be too exhausted and you'll quit. all of these mistakes are what happens when founders try to build a solution and then fit it to a problem.

to avoid failure, you need to follow the "sell then build" approach that I have described in the posts above by selling your product before it exists, you will make sure that you are selling the right solution, to the right people and in the right way.

**veikoh** · 12-18-2010 06:39 AM

Look, idea does not have any value at all... if you could write the specifications down, you could apply copyright for it and that's all... the execution matters!
That's why you should not be a CEO because you need someone experienced to execute it.