The 0.4% deal applies to Billy, as well. As I understand it, everyone is entitled to 0.4% of whatever venture follows from the work they'd collectively do over that weekend. It wasn't Billy who offered it, it was a friend of OP, one of the devs. Any of the devs could start a company as well and all of the other team members including Billy would have a 0.4% share in that, too. In fact the most sensible thing to do is for the 4 members to say 'let's start this thing up, take nearly 25% each, give Billy 0.4% and do our best'. They'd likely beat Billy in competition as they can iterate on the codebase, Billy can not without hiring a new team. If the devs aren't interested in running that startup then they'd still be entitled to 0.4% of what Billy is going to run.

(edit ignore the exact percentages, they ended up with a team of 8 devs than 4)

No, the relevant copyright law does not accept a 'handshake deal' to transfer copyright ownership as work for hire. Quoting from http://www.copyright.gov/circs/circ09.pdf :

> A work created by an independent contractor can be a work made for hire only if (a) it falls within one of the nine categories of works listed in part 2 above and (b) there is a written agreement between parties specifying that the work is a work made for hire.

Is access to the biz dev IP probably included by a handshake deal?

What sort of IP are you talking about? There's no trademark infringement, there's no patent. I didn't see mention of any trade secret, or anything that sounds like a trade secret (eg, "information which is difficult for others to properly acquire or independently duplicate").

If there's no law covering it, there's no IP.

From what I read Billy didn't make the arrangement, one of the developers did. The idea was that if the entire team of 9 didn't stick around to when the startup becomes successful then they at least get 0.4% equity for participating at startup weekend.