Sharing Equity Question

Discussion in 'Indie Business' started by SymbiantStudios, Sep 11, 2012.

  1. SymbiantStudios

    SymbiantStudios New Member

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    Like many people on this forum, we're a small studio with big ideas...and very little cash. We'd like to attract a decent animator, and we'd like to offer equity instead of payment.

    Is there a good post somewhere on how to do this? We don't want to offer equity to someone who works hard for three months and then disappears. Further, what happens if they just work on the one game...do they own a piece of our company for every game we make?

    Any advice?
     
  2. Nexic

    Indie Author

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    Depends on the contract. Don't think giving a share of the actual company is wise, you'd probably just want make it a revenue share for that particular title. Get the contract setup so that they'll need to complete all the planned work before they are entitled to their share. Just be warned, not many people who are good at what they do will be happy with a revenue share unless you've got proven track record of decent sales from previous titles.
     
  3. SymbiantStudios

    SymbiantStudios New Member

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    Thanks for the warning. Are there any other incentives you could suggest that WOULD attract people who are good to a particular project?

    A secondary question...how do you keep them on schedule? I've heard it said in other quarters that developers for instance are required to work X number of hours contractually. Any ways/means that you can think of enforcing that?
     
  4. Nexic

    Indie Author

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    Unfortunately, the only incentive that will attract a professional quality person is cash.

    You should ideally make a list of everything you want the contractor to do, then agree on milestones with deadlines. Offer a bonus for completing each one on time.
     
  5. Morgan Ramsay

    Morgan Ramsay New Member

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    The litmus test of an entrepreneur is his/her ability to recruit a team with only a promise. That means you should have strong relationships which you can tap to leverage their expertise. Do you need a full-time animator? Can you bring an animator aboard as a cofounder? If you don't need a full-time animator, could a part-time animator or freelancer suffice? Think about your problem and write down all of the ways you could solve or eliminate that problem. I'd recommend using a mind map to organize your ideas.

    If you're set on offering equity, talk to a lawyer. With an at-will hire, you can fire a poor performer, but if you offer equity, you need to ensure that your hire is a solid contributor and meets a minimum standard to qualify for an equitable return. If you don't have the terms and conditions explicitly spelled out at the start, you would be putting yourself at risk of a major lawsuit.
     
  6. lennard

    Moderator Original Member Indie Author

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    I'd try to scrape together a bit of cash and offer an advance on royalties. Like Nexic says, have a finite list of resources so somebody knows what they are getting into.
     
  7. dannthr

    dannthr New Member

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    When I was in college, I created a pretty fair system that avoided the mess of valuing one type of work over another.

    This was to award blocks of profit share based on engagement in development--or rather maintaining activity--being productive:

    Members were to meet every week to participate in development discussions, if the members were active/productive then they would be awarded a block of profit currency, so to speak.

    Each week the members were present and active they were awarded 10 additional blocks
    Each month the members were present and active the entire month, 200 additional blocks
    Each year the members were present and active the entire year, 1000 additional blocks

    An additional monthly bonus of 50 blocks could be awarded for participation above and beyond.

    Participation assumes productivity/activity, and in this way, team members are awarded for longevity. A team member who worked a full year, assuming no bonuses on their monthly, would have accumulated a total of 3,920 Blocks of profit share.

    But it also fairly percentages out people who don't stick it out, for example, if a member participated on the from September 12th to December 8th (about three months), as you mentioned, assuming no bonuses on their monthly, would have accumulated a total of 120 Blocks (assuming you do only full weeks) for Weeks, 400 blocks for October and November: 620 Blocks.

    So if the project then drew a profit of say $10,000, then the share would be split even between each block (4,540 blocks in total), person A would get (10,000/4540*3920) $8,634 (and change) and person B would get (10,000/4540*620) $1,365 (and change).

    Not a completely even split of 4/5 and 1/5, but the system is designed to try to get people to stick it out and keep helping. But it also allows for people to come and go from the project as needed (which was important in college).

    A system like this could be adapted very easily to any other project scheme, it's very fair and really difficult to argue against--and larger bonuses could be offered to entice people who are only being asked to work a small amount (like if you need someone to do something specific for just a month, you could create a signing bonus to give an incentive against not allowing them to participate longer, just be conservative with the math).
     
  8. SymbiantStudios

    SymbiantStudios New Member

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    Thanks everyone!

    Dan, that's EXACTLY what I was looking for, thanks!
     
  9. TylerBetable

    TylerBetable New Member

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    Hey Dan,

    I really like your system but it seems really complicated. How would you condense this and explain it in a few sentences so prospective applicants "get it" immediately?

    Tyler
     
  10. lennard

    Moderator Original Member Indie Author

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    How does Dan's system account for differing work productivity and value of skill set?
     
  11. SymbiantStudios

    SymbiantStudios New Member

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    That was his caveat... the system assumes everyone's work is valued evenly.
     
  12. lennard

    Moderator Original Member Indie Author

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    avoided the mess of valuing one type of work over another

    Right there at the top, sorry I missed it. Personally I'd be concerned about joining this team if it wasn't a fairly even mix of talent & drive. For example, if you have a high end art director and a couple of intern/new graduate level artists working with that person then you are going to have a problem keeping your art director happy over time.
     
  13. SymbiantStudios

    SymbiantStudios New Member

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    I'm guessing you just allocate the blocks different. The interns get 1 per week and the art director gets 20.
     
  14. dannthr

    dannthr New Member

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    It's basically creating a micro-economy--call it TylerBucks, everyone gets paid with small equally weighted pieces of profit sharing--people who work more, get a greater percentage of the profit.
     
  15. dannthr

    dannthr New Member

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    That's a valid question, one that wasn't really important to engage in when I was in college and no one had any real experience. As I mentioned earlier, this is basically creating a micro economy.

    However, if it were my project now, assuming I was operating a profit sharing system like this with participants who had wildly disparate experience levels, I would aim for total transparency and be extremely tactful when valuing member participation over others.

    I've worked on projects where newbies are freaking champs at getting work done and where genius, highly qualified participants barely lift a finger.

    Personally, I would only get involved in a profit sharing scheme on an indie project with fewer than 5 people and every single one of them would have to be pro. It would be the only interesting project to work on.
     
  16. chaosavy

    chaosavy New Member

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    In my project what I do is I pay up for each asset - I pay a "token/honorary" fee for art, which transfers the ownership of it to me (in the US at least - there has to be a transfer of something of value for something of value for a contract to be valid), this way if the artist (I do the coding myself) drops off of sight (which happens) I still own the art, so I can be sure I can use it for the release. That's really the only way I can imagine this working. Under the royalties or equity sharing deals if the arist drops off the map and I can't get legal standing to use the art then its worthless therefore pointless.
     
  17. luggage

    Moderator Original Member Indie Author

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    I'm not sure that's true about the value thing, certainly in the UK. You have to explicitly assign your copyrights over when doing contract work. If it's an employee of the company there's no need but for someone outsourcing I believe it has to be explicit.
     
  18. SymbiantStudios

    SymbiantStudios New Member

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    In Canada, we use a term called "consideration" to denote something of value given in exchange for signing away your rights. But you can pay someone a dollar for the rights to all the assets used in game--you don't have to pay per asset.

    But, chaosavy, those terms don't seem very favourable to the artist. Do you ALSO pay them a portion of the profits? How do you decide what to pay them?
     
  19. dannthr

    dannthr New Member

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    Personally, I would never get involved in a profit share oriented project unless I was a partner. In my opinion, the true value of a profit-share situation IS NOT that you are crowd-sourcing to a bunch of interns or cheap labor, nor trying to merely scrap together a budget game, not at all, rather I believe the value lies in each team member making an exceptional and personal investment into the success of the project--which is absolutely brilliant if you have a small, motivated team of professionals.

    I can write music for your game and you can pay me handsomely for my time, but if I'm a partner, then my time is MY investment into the project, and if the project has a budget, then the budget can be spent on production value instead of time--partnering maximizes the value of any initial investment funds.

    As far as valuing skill-sets, I know that is controversial around here, but I don't believe in any single discipline actually being worth more than the other, so long as content is created at a professional level. Though, I do find that many people are satisfied with less than professional products. To each their own, I suppose.
     
  20. chaosavy

    chaosavy New Member

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    SymbiantStudios - as far as something being favorable it depends on the future - Will the project be completed? Will it make a profit? Will it get on Steam? etc - and if I could predict it then I'd be buying lottery tickets or stock. At least in terms of the token fee there is something tangible that the artist gets, with profit sharing there's usually nothing, so comparision wise I think its more favorable than profit sharing.
     

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