Ask HN: Should I sell my software to my employer?
Fast forward a few years and my software is currently running this sector of the business. I have significantly streamlined a historically unreliable process. While I developed it in my own free time, I am now salaried at a level that is high for the industry but low for an engineering position. The company is going through rapid expansion, morale is low, and burnout is a constant threat.
The CEO has indicated that they would like to "control their destiny" and as such wants ownership rights to my software. They've offered $10k, which is not a life changing amount of money for me. I suspect that rejecting this offer may eventually lead to a termination of my employment.
I like my job and the autonomy it affords me, but I do not have an interest in sacrificing my side project for the enrichment of my employer. Should I sign their agreement? Would this sale preclude me from offering a similar SaaS product at a later time? Is there a way to appraise software to improve this judgement call?
19 comments
[ 3.6 ms ] story [ 56.9 ms ] threadFor instance you could get some % of revenue from the product, get stock in the company, or something like that.
E.g. for bespoke process optimisation software sold to a single huge enterprise customer I've seen a $xxxx fee per "batch" that the software processes, plus an additional annual fee for maintenance and support.
The concept of "batch" was domain-specific and related to the customer's goal, the software might need to be run 1 or 100 times in order to complete a single batch (with user intervention etc to tweak parameters or correct input data errors), it wasn't simply $xxxx per API call.
10K is less than peanuts for software. Go sell your software to his competitors for $x0,000 per month.
This seems too low to me, although without more details about your side project and how much revenue it generates, I can't say this very confidently.
> I suspect that rejecting this offer may eventually lead to a termination of my employment.
How much are you earning from your job in the first place, versus the amount you earn from this software?
I think there are a few possibilities: you can counter with a higher number if you like the company you work for, or you can counter for the same number plus a significant equity stake in the company, so that you retain some upside. If you want to get creative, you could even sell them a license to use your software along with source code access, but keep selling to third party companies yourself.
If you don't really want to sell it in the first place, then don't. I think a $10k is wayyyy too low to force a sale unless your software is trivial to replicate.
If I was in this position I’d stop talking to my employer about this until having consulted with an attorney specializing in this field. Definitely do not sign anything between now and then.
The real value to the business of your system, if they thought about it fully, would probably be 150% of the quoted cost to replace it by an unknown quantity at some time in the future.
Perhaps evaluate if it’s time to swap the cushy job for more upside and control over your destiny. Most importantly, have an employment attorney consultation to see if this is even possible based on whatever agreements you have with your employer and your state’s labor laws around IP ownership while an employee. Once there’s clarity with regards to your ownership position, you can evaluate scaling or selling.
You don't say who is using your software. Is it your company's clients? Your company? Others?? How much are they saving, paying?
First step is to establish a discounted cash flow monetary value of the benefits of your software. About 20% to 30% of that might be an appropriate price for it. This estimate depends on numerous factors which are beyond the scope of a HN reply.
If the amount is much more than $10k, then you might have a viable business to establish a startup. In which case you should seek out competent legal advice and test the waters for potential investors.
Or, you could consider $10k as the starting point for negotiations. Based on the above estimate of its value you could counter with a far larger price. In any negotiation the first amount discussed is simply the starting point. As a basic principle you never accept the first offer, but counter with something far above what you think is reasonable. If you are uncomfortable with such heavy negotiations, then you could pay a suitably experienced lawyer to negotiate on your behalf for say 15% of the final amount.
The CEO/company presumably has:
* a known brand/trademark
* customers and relationships
* salespeople?
* a location, equipment, capital investment
* some industry know-how
You have:
* some software, that helps them capitalize on all of the above somewhat, with more efficiency / lese cost or something?
Is there something special about you and your software? Or, if you and your software disappeared tomorrow, could the CEO get some other developer to write more or less the same software?
Conversely, if the company/CEO disappeared tomorrow, are you in a position to utilize your software elsewhere?
Who do they plan to take over that job? What agreement will you have in place for future updates?
A better option would be to license the software to them.
You could even sell them a lifetime license to the software,and give them the code and allow them to modify it but not re-sell it.
This should allow them to do anything they want with or without you, but you still retain ownership rights to the software.
Then you charge a yearly maintenance fee to keep the product up to date and patched. Software improvement projects are scoped and charged separately.
If you want to sell use a lawyer to handle interactions.
Regardless of what you choose things can go sideways and your position might not be safe. So don't base it on that.
If you don't sell he may try to replace it and you. If you do sell they may start treating you differently and the autonomy may disappear. Being the highest paid makes you a good target in the type of company you describe. The fact that he wants to buy the software now is a red flag that they are thinking of replacing you anyhow.
I would say to the CEO don't worry you already control your destiny because I work here and I can't see that ever changing. We are a family.