I’m in a dilemma – not sure if 
‘s dilemma is a good name for it but it is a bit like the Prisoner’s dilemma.
Few months ago an ex-colleague of mine returned to India from abroad and sent an email with the outline of an idea. He had earlier developed a healthcare-related app and exited / folded the venture and was looking for a new venture.
I quite liked the idea of working with him & also the idea he pitched as it is related to the field that I’ve been working on since past few years. Enthusiastically, I exchanged few emails about how this idea can be expanded to cover more needs that exist in the market.
Recently, we met to discuss things in detail. At the end of the meeting I realised he is not looking to incorporate a company and formalise the venture but he is interested only to develop the product and start selling it. When I asked if we would sign an agreement to spell out the work arrangement he mumbled something that sounded like ‘no’.
I think he works on many ideas with different people at the same time and would exit them within few years with no long term commitment in any of them.
Since I am passionate about the idea, I continue to provide inputs, insights, details, data, etc. to develop a product based on this idea. However, I have a nagging feeling that I may be cheated out of my time and profit if I continue to work on this with no formal setup and written agreement.
How do I avoid becoming a sitting duck and cover my bases without sounding pushy & distrustful? Would greatly appreciate your ideas & inputs!
Kartik Menon
One good advice (reiterated by many lawyers I have interacted with) is to get a basic founder agreement in place. The best is a registered stamp paper agreeing on each ones responsibilities, contribution to startup funds and the equity each one expects when they do incorporate. The least is an email reiterating these points in good faith. It better to be a little pushy now, rather than fight over it later on when expectations are not met.
There are quite a few templates online, but the good ones will list the above points at the very least.
asha chaudhry
hey kasthuri,
alok shared your post on his fb etc – do chk out the comments there
1) how much value is the time that u are giving to this venture ? Due to this activity are your other business interest suffering?
2) can u better utilise the time ?
3) also if some one who is not ready to do any paper work that means the person himself/herself can’t be trusted . Its like the classic marriage/ live in kind relationship syndrome.. In most cases if the partner is not ready for commitment it’s not worth doing ..
Kasthuri Kumaran
Thanks much Asha! I’m now following this conversation on FB & taking notes. Greatly appreciate!
Kasthuri Kumaran
“equity each one expects when they do incorporate” – What if this never gets incorporated? It’s an app and can it not be sold on platforms of Apple / Android / FB without incorporating a company?
Kartik Menon
It can be sold, but having some form of company is basic hygiene. It will help you with income tax and more importantly your liabilities considering its a healthcare app. Also if you don’t incorporate, who will own the app and its IP?
Devleena Bhattacharjee
Paperwork has its place but IMHO never start anything unless you can trust that person.A luck of trust makes everything complicated, even a normal casual chat. Maybe he needs some clarifications from your end as well. Confront the issue and ask some direct questions. You do not have to be uncomfortably pushy, a tough question can be asked in a friendly tone.