I thought this was going to be a lame "I had that idea and told it to them at a bar" kind of thing. But it seems like it was more then just his idea, and he was involved in the initial version of the app. (The ghost icon makes so much more sense now too).

Idea guys: get your partnerships in writing, at least emails, so you're not relying on photos and verbal agreements for your case.

Implementors: beware 'idea guys' with inflated senses of their own value, and who may not have the skills/staying-power for all the detail and drudge work ahead.

Unless Brown is a total fraudster, I'd guess there was some legitimate contribution but then early falling-out. (The complaint identifies a contentious phone call in mid-August 2011 as the turning point.)

Assignment agreements and founder-vesting schedules exist for these kinds of cases... but given the speed and informality of today's ventures, can arrive too late to save teams from ugly court disputes.

With regards to founder vesting, it is worth pointing out that if the fallout happens before the one-year cliff he gets nothing (if the usual terms apply).

Indeed. I don't particularly like that common cliff, and think starting monthly vesting right away for those present (and initially equal) at the 'true founding' would be better.

These situations seem tough. I have a handful of artist friends who constantly give me great app ideas. They can do the logo and icon and other art, but it's going to be me doing 90% of the work. How does one include the original concept creator fairly?

By giving them 10%.

If (to your description) you consider the idea/logo 10% of the work then that's what it is worth.

10% may seem fair when the company is small but it will cause trouble later. What if the company becomes Facebook? Will future hires be angry that a short-time contributor gets 50x their equity upside? Will investors not balk at paying $500k for 10%, when someone else gets 10% common for having done a logo?

Imho, the correct way to compensate not-really-founders is with a convertible note for the market value of their services times an appropriate risk multiple, or, if you can afford it, cash. (I have actually done this.)

Yeah I agree, it really depends on if you are talking about single instance work (just a logo) or for prolonged support (permanent unpaid).

If I was asking someone to do logo and design work for free (and just that) I'd offer something like 10% of net income with a end of life maximum at $35,000. That would allow them to potentially receive much more cash than the time they invested. It also establishes an upper bound to prevent someone for getting 1% of a billion dollar company because they wrote some html a few decades ago.

It's a risk-reward on both sides. Companies die off all the time. The vast majority of people that do work 'for a percentage' are going to get nothing.

With all that said, cash is always easier

Through negotiation and an explicit contract. What's fair is what you can both agree on. Unfortunately, it looks like everything was verbal in this case, so it's going to be hard for either side to say what the actual agreement was.

If it is verbal, then it should be pretty cut and dry, right? Unless the different parties are claiming different verbiage was used...

Concepts are only the initial pieces. They're in abundance. Everyone has more than they have time to explore. It doesn't take long to come up with new ones. What is true is that in some cases a concept might determine whether a company is able to be successful, but even in such cases the execution is far more likely to be the "make it or break it" work. Logos don't make or break companies.

Slicing Pie[1] provides a simple and fair way to divide up equity in early stage companies.

[1]: http://www.slicingpie.com/

"I've got this million dollar idea. I need you do all the work but we can split the profit!"

"I don't know how to code. Lets hire a guy. You can be CMO and I'll be CEO. We'll be rich!"

This is probably the wisest parsing of the correct situation. If you want to work with your friend or another person and all they have is an idea, then include them and help them learn new things along the way.

It seems to me the skill-set you start with at the beginning of a startup will be significantly smaller and narrower than what you have at the end of a startup.

There is more to a business than code.

There is no Snapchat business without code.

The mindset of "code is necessary and sufficient" is blinding and will prevent you from being an effective team member, founder and/or executive. Small companies have existential threats around every corner and don't exist if they don't have lots of help.

I'm not arguing that code in and of itself is sufficient, rather that it is the one necessary fundamental for most online/app-based/saas style businesses.

Without code you don't even have a pig to put lipstick on.

That can arguably be reduced to "There is no Snapchat business"

I'm way late in adding a comment to this thread, but I wanted to say: well said.

Adding:

  I_HAVE_THE_CODEZ && AttractingUsers && RetainingUsers &&
  AttractingTalent && DoingPayroll && GettingOfficeSpace &&
  HavingARolodex && KnowingSalaries && 
  KnowingProductManagement && KnowingSales &&
  OhCrapWeveGotAConferenceComingUp && OurRockstarJustLeft &&
  *everything*

[Note: I'm a "developer"... ]

Kinda reminds me of Whartonite Seeks Code Monkey:

http://whartoniteseekscodemonkey.tumblr.com/

Always good for a laugh

It's such a simple concept though: remove the user's ability to determine how long they have file access for. You could apply that frame to any media; in this case the hot topic is photo sharing. I'm sure tons of people are already trying to make a 'Snapchat with video'.

You could do it with audio too. You could do it with GPS coords. You could do it with any data feed. Photo sharing is just huge right now.

If you think you're the type of person who might one day sue your business partners for being jerks, then maybe you should get more than a verbal contract about your role in the venture. The brief doesn't include any written evidence of any sort about their agreements and explains that the entirety of their contract was verbal.

IANAL but should that invalidate his claim entirely? An agreement is an agreement right? It might be he said/he said, but presumably he can show some evidence that he was involved as an operator. And if that's the case, he may be entitled to something and I wouldn't consider it total BS if that happened.

This strikes me as different than what happened with Facebook.

>An agreement is an agreement right?

I think what your really getting at is a verbal agreement is still enforceable. As is always the case in law the answer is: "maybe."

In order to be enforceable certain agreements/contracts MUST be in writing to be enforceable. It is a contract principle known as "Statute of Frauds", but despite the name has absolutely nothing to do with fraud. Some examples include contracts for the sale of real estate, contracts that will take more than a year to perform, and I think marriage agreements.

Although you are most likely correct, the verbal agreement might be enforceable here, but it is certain the Defendant's attorneys will argue the Statute of Frauds applies; therefore, since the agreement is not in writing it is unenforceable. To speculate on how a Judge would rule on this preliminary matter would be inappropriate without benefit of all the evidence obtained through discovery.

For Statute of Frauds to matter in this case, it will have to be proven that the terms of the contract must have taken more than one year, but not an indefinitely long time to perform. Otherwise, any type of verbal contract should cover this, whether that be oral or written or anything else.

>Although you are most likely correct, the verbal agreement might be enforceable here,

>but it is certain the Defendant's attorneys will argue the Statute of Frauds applies; therefore, since the agreement is not in writing it is unenforceable.

>To speculate on how a Judge would rule on this preliminary matter would be inappropriate without benefit of all the evidence obtained through discovery.

In both cases there was a verbal agreement. ConnectU claimed Facebook copied their source code, and they eventually settled.

Presumably Mr. Brown can prove he had a claim on the SnapChat/Picaboo source code and make the same argument.

What's more than a verbal contract?

In US contract law, oral contracts are just as legal binding as the ones written down.

True, but the plaintiff still has a burden of proof.

These guys always forget "Its never a Million Dollar Idea, its a Million Dollar Execution"

While I agree with your statement about execution, it sounds like he was involved with execution as well. According to the lawsuit, they agreed to create a joint venture, giving him a third of the company and then they lived and worked together until after launch. He also claims to have designed the logo, did much of the social media, and created the TOS, Privacy Policy, and FAQ, drafted and filed the patent application -- this isn't about ideas vs execution. I don't know what the other side of the story is, but this is a really good example of why nobody should ever rely on verbal agreements for things like this.

In ten seconds, the photographic proof will disappear, rendering the lawsuit groundless.