This way you risk only $3000 (or less) instead of $8000, and the developer will be much more motivated to build it knowing it's already an idea with a real potential market.
One has to optimize for the 'harder' thing being done. So if the challenge is getting the MVP written, then this order makes sense, the risk on the $3000 is less than the risk on the $5000. If the challenge is getting people to understand it, then doing the landing page first makes sense. From hmexx's point of view $8,000 is at risk either way, except he "knows" he can do the customer acquisition part but doesn't know if someone can do the "MVP" part.
One of the realities this discussion has highlighted is how little young engineers (and some older ones too!) value the whole marketing/customer acquisition thing. But the beauty of it is that when the risk arbitrage is low enough, that doesn't matter. One has to ask is there a 'funding round' that is earlier than a 'seed/angel' round? Maybe an 'idea' round. Two people come together, one proves they can execute on building an MVP and one proves they can execute by acquiring customers, then the pair take the next step (assuming the thing works and customers are found). This really side steps the whole "I've got a great idea if I could just get it off the ground" discussion into "What are you willing to bet?"
That nails it perfectly. I like the OPs proposition. I like it so much that I'm now wondering what would be a better counter offer, and I've failed to come up with anything so far. This little trick could kickstart a whole new phase in the start-up world.
Unless the OP turns out to be Jason Calacanis ;)
First mover advantage, sometimes you show the Johnny-come-latelys all the mistakes they can avoid, and how they can improve upon your product by examining your weaknesses and flaws because you rushed it to market.
If you are a first mover, consider having in your business plan what you do when the 'heavy hitters' decide to copy your product and do it better. They most likely will so plan on it. Do a total quality management on your product and improve on it every chance you get before the copycats do it better.
As someone said here earlier, idea is just a multiplier of execution.
The Amiga was basically a launch platform that went away for many niche market software. If the companies that developed those for the Amiga had developed them for the Macintosh, they'd still dominate today.
So do I. Remember Pagemaker vs. Quark Express?
Anyone remember Calamus? Great DTP.
If this were a book deal, the author would be assigning copyright to a company in exchange for an advance and a non-controlling share in that company. And that company's business plan is premised upon the dilution of the author's equity.
Once there's dilution, the author remains with the company at the pleasure of a guy he met on the internet and some other investors. They may be swell people, they not. Likewise with the the author.
Yes, the value is probably zero. But in this scenario, the possibility of an upside is not just dependent upon the product's success but also upon their being some lucky alignment between his financial interests and those of the other shareholders - and they are likely to have multiple intermingled financial arrangements.
May be you are trying to make a point but this statement is clearly NOT true. It all depends on how wide the area are you talking about. Are you talking about California or Kansas or entire US ?
Unpublished authors talk about the one big break they need to be a success, and all that is standing between them and success is convincing a publishing company of their merits. The same applies in film making - it is the small guy currently waiting tables up against 'the man', who is holding them back from being a successful movie star and actor.
We don't have that in the entrepreneurial community, at least not to that extent. Without the perception of gatekeepers entrepreneurs know that the reward correlates to the work you put in.
I like the funding ideas that don't propagate the story that all you need to be a successful entrepreneur is to convince somebody to give you money.
First, its a great deal, both for hmexx and folks who take him up on it. Frankly I think it could be revolutionary. My reasoning is as follows;
Many "products" over the last couple of years have been fairly straight forward web "apps" built on top of existing infrastructure. They provide some basic customer value, they tend to be fashionable (moderate lifetime), and generally take less than a year to produce.
That is almost exactly the same as the book publisher model.
So hmexx sets himself up as an MVP "publisher" and pays "authors" $5000 up front and a 50% interest in the proceeds going forward. Now lots of new book authors would love that deal because they know how to write books but they have no idea how to promote them into bookstores and Amazon's top lists etc. Unlike books though web apps don't pay out a revenue stream on per-unit sales. Instead they tend to either a pay a chunk via a buyout, or they generate income over time with advertising/partnerships. If we're talking about "apps" for mobile then there is a revenue stream very similar to books.
So I reason its a good deal because the content creator has a much better chance to benefit from their creation than previous generations of artists had.
Now as an illumination, the whole 50/50 thing shines a light right into the core of the startup 'dream' mentality. It is the idea that you will start a company that becomes the next Facebook and you become a billionaire over about 10 years of nights. 50% of zero is zero, 50% of a billion dollar company is $500M worth. The closer reality is that if the idea has 'legs' then you can expect a series A round that will reduce both of you to 33% and then a series B which takes you to 20% to 25%. If you get there you're probably making a decent salary and have some small but non-zero shot of a return.
Every year somebody makes over $50M on one of the big lottery games in the US, its only like once in 5 years that people make over $50M from their startup. The good news is that fewer people have the chops to "buy in" to a startup lottery ticket.
So that is the reality. If you want to make some money, buy a house, raise a family. Go work for Oracle or Apple or Microsoft or Google. Don't do startups for the money, do them because you are passionate about what they are trying to create. If you do them for the money you will become bitter and depressed.
But this offer, to be paid $5000 in exchange for a half interest in the lottery ticket you create? Given the 'two, three month' worth of work estimate. There is not a whole lot to complain about.