Revenue sharing in Software Product Collaboration

My initial reaction was that 75 / 25 was a rip off given that everything is equal except the initial idea. Coming up with a good idea for something to build isn't tough, its actually building it and completing the project that is hard to do.

My initial thought was 60 / 40, but I think you're probably more right on with 55 / 45. Ten percent seems like the most fair amount. For what its worth I've been at it a little more than 10 years and have split projects with partners in the past.

You must both fully agree on a repartition or this is going to be one thing that will be used in future arguments all the time.

Arguments are triggered by too much or lack of money, and also lack of commitment of one of another. Don't fuel them by early (hidden) disagreements.

In my partnership, I split shares by amount of money put in. This include money converted by existing stuff bring in the company. If there is a strong difference, you could always emit warrants. Warrants is a sort of "right" to purchase shares at the same price as you.

Please note that since the one that put money at the beginning take more risk than the one that will have the warrants, the price of the warrant should be adapted accordingly. Unless the beneficiary is the key person in the company and can't put the money.

However, since you have same responsibilities, your salaries should be equal.

No one can see the future and these deals always start out with the best intentions. I had the same question and referenced a Seth Godin answer: “Today, right now, your contribution is worth 5% of the company and my creation of the company is worth 5%. The other 90% is based on what each of us does over the next 18 months. Here’s a list of what has to get done, and what we agree it’s worth…”

http://officialbuziness.com/how-to-divide-up-equity/

Don't kid yourself, in a small biz, if you don't have 50%, you're pretty much an employee b/c you don't have any decision making power.

My advice in regard to the value of the idea: completely seperate the concern of the value of the idea from the concern of the value of production.

Ideas and concepts have only limited value, until they are actioned and demanded. I don't know of an artist or composer or engineer who ever got paid simply for an idea; they actually had to produce something that represented that idea first, then they might receive per reproduction or subsequent performance a fee. That is why in a broader sense ideas compensated through some form of license or lease grant per use royalties or periodic, flat rate payment. Remember the phrase by Edison about genius and 1 percent inspiration and 99 percent persperation. There is backstory and context to that adage, but the general idea should be applicible. As it stands, a 75:25 split, gives the idea 50 percent of the value you produce. That is more than excessive, unless the idea results in cold fusion or warp drives or time travel or some other science fictiony unobtainium.

As @Pierre 303 suggested, you need to value your investment if it will be an effective partnership, and he gives excellant concrete advice. To expand and explain a little bit, you both value your time, even if you are not and will not collect a regular paycheck in the immediate short term. This does not mean you shouldn't keep track of time spent on the effort, as it is not necessary less valuable than if you went to work for someone else to collect a paycheck without the hassles of ramping up and maintaining your venture, and despite a promise of equal effort, those kinds of promises are easily forgotten or misinterprutted.

Perhaps, there are certain tasks that are more valuable, and for those tasks, whoever is performing them is acting in a certain specific role. It may be appropriate and agreeable to incentivize and compensate those business oriented role-based activities differently than a coding/developer role.