FairSoftware: Instant Software Companies

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.

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