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I have a software product I developed completely on my own over the span of many months. I spent a lot of time marketing, and redeveloping the application. The application is now a top downloaded app on the Android Market in the Finance section. I have begun development of an iPhone version of the same product, and have already spoken with a coworker on a joint venture whereas he will help me develop the rest of the iPhone version of the application, and we will incorporate a web service component that he is writing on his own as a separate product. He would like to use my user base to get a jump start on brand recognition for his service.

I wanted to find a software development joint venture agreement and modify it to suit my needs. However, I'm not sure this is what I want to use because I do not want to give up any of my rights to my product. I also have no money to give him, but I did say that we could work up some sort of profit sharing on the iPhone version ONLY once it's published. I would like to protect myself against him stealing code and writing a competing app, trying to get a portion of my Android profits, trying to have any rights to my "product" or brand, and anything else you guys can advise me on.

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Avoid "joint ventures" like the plague. They're really complicated and both parties always end up feeling like they're doing too much of the work in exchange for too little of the profits.

Programmers love complexity, and they're always excited to jump into complicated arrangements. How bad could it be? But just like programming, the simpler the code, the more likely it is to work. And the simpler your agreement, the more likely it will be to work.

Here are the bugs in your joint venture that I can see just from a 2 paragraph description:

  1. He wants to use your user base to get brand recognition for his service. Two brands? That's something you're going to fight over.
  2. This web service component that you're sharing? Sounds like another thing to fight over. You're going to need feature X 6 months down the line and he won't care about feature X. Or there will be a bug that just won't be a priority for his business, but it will be killing your business. Conflict.
  3. Profit sharing? Oh my. That means you're going to have to agree on how much profit there is. Your going to want to deduct all kinds of expenses. He's going to say those expenses are unjustified. Argument. Fighting. Unpleasantness.

Forget this whole joint venture thing... it's a formula for unhappiness. Start a company with the guy and split the equity 50-50. Or find a way to pay him for his services, either scrounging around for the cash or paying him with IOUs if you don't have the cash. Keep the agreement simple and traditional, something that has stood the test of time. Partnerships have been around for tens of thousands of years. Purchase agreements and IOUs have been around for almost as long. Joint Ventures that You Just Invented Yesterday... not so reliable.

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If we start a company, and we split the 'equity' 50-50, that is unfair to me if we are including all the money I'm currently taking in for my Android work. I have also developed about 40% of the iPhone application myself, so I was only going to give him a portion of those profits. Keep in mind that ALL the money we make off of the application is considered "profit". We are doing this in our spare time after/before we go to our real job. I'm not going to allow any "expenses" or anything like that. The only other thing I'm worried about is taxes. – Christopher Perry Jun 16 '11 at 1:49
Scieneprodigy, you don't have to split 50-50. If you've put in most of the value, maybe his portion is only worth 25%, or perhaps even less. But, this arrangement is also much simpler. Alternatively, you split 50-50 with a debt from the company to you for what you've already put in, so you get your investment returned before he gets anything. – Elie Jun 16 '11 at 16:21
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Join ventures are a great way to move forward. Successful join ventures are usually the first step in merging or acquisition.

I have done them several times in the past and today I think it's the easiest & safest way to do business.

Joint ventures contracts are very common. But you need a good lawyer. If you are doing this on a spare time, you may not be able to afford one.

If you want to go for a joint venture, please check those requirements:

  • Ensure that in case of separation, each entity can continue to do business separately. This means for example that in case one of the entity is writing source code, the other party should be allowed to use it for the next twelve months to be able to replace it in time.
  • A joint venture means one brand, not two. If you maintain two brands, then it's more a partnership.
  • It will only work between people that can see their value, and are not focused the value of the other. This will prevent many conflicts.
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