Ask HN: Lost – Please Help (Side Project)

https://news.ycombinator.com/item?id=7574196

by anonaquire • 12 years ago

11 14 12 years ago

news.ycombinator.com

I'm a regular user here that's currently (somewhat) happily employed.

I also have a side project that makes between $800 and $2000 / month (varies by season), and I've been talking with a company about a possible acquisition of this, and hiring me. We are decently far along in the process.

I'm completely lost on what to expect / what makes sense / what to watch out for (I don't live in any big 'tech' areas, and feel a little out of touch). Have any of you been through something similar, and have any pointers? I can discuss privately if you need more details (see my email in my profile).

edit: Hacker News is throttling my replies - they're coming, just slowly...

lutusp• 12 years ago

I've been talking with a company about a possible acquisition of this, and hiring me ...

Okay, your description is short on details, but it looks as though you have an intellectual property or "idea" (a) and some personal skills (b).

The people you're negotiating with may be trying to get (a) by offering (b). It works like this -- if they hire you, any ideas you have past that point belong to them. All they need to do is claim that you had your idea (or substantially developed it) after you were hired as their employee. And as their employee, any ideas you have belong to them (a common condition of employment).

I'm not saying this is the only possibility, but it is certainly on a list of possibilities. So ... be careful about giving away your ideas in exchange for employment. Good luck.

anonaquire7• 12 years ago

To be clear, they are offering to hire me, and give me a sizeable (at least I think, no clue what would be 'standard') starting bonus for the side project. Basically, they would own the side project after I start.

Are you describing them hiring me, and not acquiring the side project?

chippy• 12 years ago

They could hire you, take the project, then fire you. What would you do?

Look over any contracts. The words in contracts are actually important and they are not EULAs to skip over.

Estimate what the worse case is worth for you.

anonaquire7• 12 years ago

I've actually been wondering this. I've seen higher profile acqui-hires in the news, but never an explanation on how they work. Should I expect the bonus to vest over some amount of time? Should I expect anything to protect me from (a)?

fsk2• 12 years ago

Suppose the product revenue is $10k/year with negligible time spent by you on support. (Deduct the cost of time you spent from the $10k.)

If you value 20x earnings, that's a valuation of $200k for your project.

Since the employment is (presumably) at-will, just value the cost of selling the side-project. If you want, factor in the value of any raise you get by switching jobs.

anonaquire7• 12 years ago

I have the site pretty well automated, so I can maintain it with a few hours a month. Any work I spend on it is to grow revenue. How do I come up with a value multiplier? I'm not strapped for cash, so $200k now vs. earned in the future isn't a huge difference to me.

That's true that I probably need to factor in the income from selling the site, and the base income separately. Factoring in the raise is a little difficult, as I'd be moving, and expect a higher salary in the city I'd be moving to.

fsk2• 12 years ago

Google's P/E is 30x. So, 30 times one year's earnings is reasonable. Do you expect better earnings growth than Google? Then use 50x or more.

If the new job is typical at-will employment, I'd assign a value of $0 to that.

Would they hire you without buying your webiste? Would they buy your website without hiring you? That would help you value each component of the offer.

$200k now is better than $20k/year for 10 years, because you can invest that $200k. The question is the relative value of investing in the stock market, vs investing more in your product.

busterarm• 12 years ago

Would you be happy with the bonus that they're offering you to give up the project completely and walk away from the project AND a job.

There's always the possibility that you don't like working for these people or it doesn't work out.

Also, I think you should talk to an accountant/lawyer about whether you want to be paid for the product as a bonus or as a separate sale for the IP. If they want to pay you for it as a bonus, there may be seriously negative tax implications for you...but if you sell it you want to make sure to shield yourself from liability.

anonaquire7• 12 years ago

That's the thought that's on the back of my mind throughout all of this. I do think talking to a lawyer could be a good idea, but I'm not sure how to go about doing this. My Uncle runs a small business, so I'll see if he has any suggestions - is there anywhere I can look for a lawyer? I'd be willing to spend some money to make sure I'm doing this right, I'm just not sure where to look.

anonaquire7• 12 years ago

Thanks for all of the great comments - I'm still going through and replying to them.

Another thing to keep in mind:

I've spoken vaguely about the site, and how it works, but nothing specific. They'd like me to come down, and discuss what I'd be doing, and go through some of the code behind the site. Is there any way to protect myself from them just copying my idea, and stopping talking to me? I signed an NDA, but that just protects each of us from discussing how the other's business works with people outside their business. Is there any way to protect myself from this?

I pretty much asked them this exact question, and they basically said 'they talk with a lot of companies, and if they did so, word would get out, and no-one would talk to them', which is true.

awor• 12 years ago

You need to talk to a lawyer.

anonaquire7• 12 years ago

I agree, I'm looking into this now.

sgy• 12 years ago

I honestly would recommend some insightful reading over some PG's essays, they are priceless (http://www.paulgraham.com/articles.html). Here are some that are related to your case and might be helpful:

http://www.paulgraham.com/love.html

http://www.paulgraham.com/investors.html

http://www.paulgraham.com/equity.html

http://www.paulgraham.com/disagree.html

Ask HN: Lost – Please Help (Side Project)

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