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Summary:

FairSoftware, one of the TechCrunch 50 finalists, is up and running and accepting alpha participants (although it’s marked as alpha, registration is open to anyone). The company hopes to give entrepreneurs yet another function they can outsource: that of actually providing a corporate and governance structure. […]

FairSoftware: Start Your Virtual Online Business - Mozilla Firefox (Build 2008092414)FairSoftware, one of the TechCrunch 50 finalists, is up and running and accepting alpha participants (although it’s marked as alpha, registration is open to anyone). The company hopes to give entrepreneurs yet another function they can outsource: that of actually providing a corporate and governance structure. It’s an interesting notion, though I’m not 100% convinced that it will make sense for the average small software project (though in theory you could use their structure for any company, right now it’s tuned for those selling software online).

After you set up an account with FairSoftware, you can create as many projects as you like. Each project has participants, and you assign shares to them to indicate their share of the profits. There are mechanisms for share vesting and voting on proposals, as well as payroll and sales tracking – the idea is that you form your team, you build your product, and you sell it via FairSoftware: you can have a purchase button on your own site, but all sales must go through FairSoftware, who take a cut (9.9%) of each sale to cover their expenses and profits.

There are certainly attractive points to this proposition, especially if you want to only build software instead of building a company at the same time. Having someone else handle the details of sales, credit cards, tax reporting, and splitting the money can free you to focus on your core skills of design and development.

The whole structure is governed by the Software Bill of Rights, a legal contract that you enter into with the other project participants. This is where things get a bit iffy for me: this is 3700 words of legalese which, like any other legal agreement, I would urge you to get professional advice on before signing. One thing to note is that the agreement is explicitly opposed to open source projects. Another is that there is a mechanism for throwing people out, which might give some pause (though it’s always a good idea to be explicit about how a contract can be ended). On the plus side, the contract is also explicit about how a project can get out to another legal entity entirely.

All in all, I like the idea of outsourcing some of the e-commerce and tracking functions for a small startup, particularly one that’s just throwing something against the wall to see if it sticks. But I’m less sanguine about the prospect of using a one-size-fits-all contract to manage these functions.

  1. You raise some good points in the article. Clearly, the benefits of one-size-fits-all is the reduction in cost: we can have people create virtual corporation for $0. If you need manual intervention, then there is always going to be some non-trivial fee involved.

    You bring up open source (btw, you could also argue that the GPL is one-size-fits-all). The Software Bill of Rights is not so much “opposed” to open source projects. Of course, anytime you talk about making money from software, you are not directly in line with free software. But as long as you obey the terms of the open source license you use, you could host your project with FairSoftware. Just be aware that someone else could use your code to give away the same product.

    Just like Red Hat was not really writing new code so much as packaging freely available existing code, but still making money from doing so.

    Anyway, thanks for the feedback and keep telling us where we can improve. This is just an alpha after all.

    Alain.

  2. Alain, section 5 of the agreement reads in part “You represent and warrant to each Project Participant that…to the extent Your Project Contribution consists of or contains Code, such Code does not (i) contain any Open Source Code…” That seems to me to preclude using the service for open source projects. If your lawyers have a different interpretation, I’d love to hear it.

  3. Mike,

    You are quoting the language of the SBR properly. You can’t contribute open source code under the SBR license, because technically, well, the open source license wouldn’t allow you to relicense it. But as long as you contribute your knowledge of how, for instance, to link open source code to the rest of your executable, so that it obeys whatever open source license that code is using, then you are good, and that can count as a contribution from FairSoftware’s point of view.

    A layman way of saying this is that you can’t contribute open source code because you don’t have copyright on it, but you can build a FairSoftware project which uses open source. If you obey the terms of the open source license.

    We wrote the language so that people are reminded that they don’t own open source code, and they can’t freely relicense it. But it doesn’t mean you can’t use it.

    I know my answer sounds complicated. Ask again and maybe I’ll be clearer?

    PS: I’m assuming we are discussing open source code that you didn’t author. If you are the author, then you can always dual-license it.

    Alain.

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