Forums: Discussions for entrepreneurs and small business.

I just joined this community, so I`m not sure if this is the right forum to ask this question.

I have a unique idea for a web2.0 site, and right now I`m writing a business plan and site specifications. I`m not a programmer. I found a company (a personal acquaintance) who are interested in my idea and we may form a company for the site. They have the programmers. After an initial phone call, my friend (and co-owner of this company) told me he thinks it will take 5 man-years to develop and test the site.

The big question  is: how shall I negotiate the equity share between them and me? I have the idea (and the domain name), a detailed business plan within a few days, they have all the programmers. How shall I value their "sweat equity"?

Or the business share is simply what they and me invest in the new company upfront? (say, 60% - 40% initial capital)

I don`t live in the States (I`m from Hungary, and my friend`s company as well) - but the principle is probably universal.

thanks for your insights

Csaba
(Hungary)

Firstly - I would get a couple of development estimates, I`ve built and worked on numerous Web1.0/2.0 site(s) and 5 man-years sounds like a pretty big project. The last BIG site I worked on took 15 developers 18 months to create from scratch - front-end was built on ruby-on-rails, back-end CMS was based on Plone/Zope and used web services calls to communicate between the two. That site is the last big e-health web site that launched about 18 months ago.

Any hoo .. back to your question, after you get a couple of estimates and I look to see if there are open-source products that you can use as your "base" product which you would then have development build mods/extensions to that product (that might get you where you want to go without all of the development time)

And how to estimate development `sweat equity`?

I would guess that your business plan should answer that question for you. Development Costs, + hosting costs + marketing costs + PR + bus dev + graphics + editorial (maybe) + overhead + sales + executive earnings + advertising  = Start Up Costs

Income - Start Up Costs = Profit over whatever time period you`ve scoped your business plan

Profit is divided between share holders.

Don`t give away shares if you don`t have to.  Not knowing anything about your company, I would hazard a guess that you will want to keep at least 60% of your company.

good luck

- barb

UNLESS they also happen to be the VC 40% is LUDACRIS for development. Also 5 Man-Years? Please don`t agree to that deal...holy cow.
best wishes,
~ fellow 2.o `er



-------------------------

All the best,
~Nathan M.

615-974-7609
nmaggard@gmail.com

We do custom apps...5 years is ways too long.  I have never seen that..but the problem here...is a lot of "entrpreneurs  have of a "good idea" but can`t tell you anything else..So does the entrepreneur get 60% of the company when the develpment team is doing 90% of the work...Which most of the time...is the truth. If the entrpreneur is tech savvy and can map out what he wants...maybe...but most of the time....not the case. The entrpreneur can hold on to more of the company if he consults with an architect first..pay for consulting blue prints...then speak to development team...but in most cases the entrpreneur won`t pay the money as it will tell him the "truth about his good idea". But if you spend $10,000-$20,000 in blue prints...it will save you development costs..and tons of money in time...in proofing your good idea.  Hope this helps.

also...if you are making specs...for a site that takes five years to build..It takes more than a couple of days for specs.

5 years is way too long.  In this age of ever changing technology the website you design today will be out of sync with technology in 5 years.

Question....

I am currently in the process of backing up a huge site I had built, there are still bugs to work out... my developer is in India, and has simply stopped responding to me..???

So... how difficult would it be for a new programmer to work out the kinks?

Thanks,
Social Farmer