Should I sign this agreement?

TL;DR This is my personal experience as a programmer working on a pre-startup project with an EMBA student at school. A few months in, my co-creator asked me to sign an NDA, and enter the term as an unpaid student intern. At the end, I did not sign it.

People who might find this post relevant:

  • International student who wants to start a business in the states
  • Non-technical founder who wants to start a technology-enabled venture
  • Developer who is proposed with a business idea

Edit: this is also a follow-up on my previous post on Ask: HN

Edit: Current discussion on HN


Below is the whole story and my lessons learned from this experience:

To begin, let me first introduce our individual skillsets. My co-creator had a background in business and had been working in large financial corporations for more than 10 years. At the time, I was a senior engineering student who had been coding for fun and had a post-grad software developer job offer. Both of us were international students.

We first met at the CS research fair on campus.
It was a place for CS professors to showcase their research and find CS students who wanted to participate in their research projects. But in recent years, more and more professors had grown interests in mobile app development; many professors were also doing mobile computing, security, or other hardcore CS research topics on mobile. One of the professors I worked with even implemented a client side app that communicated with their amazing algorithm on the server (you can check it out here: Dogsnap by Professor Peter Belhumeur).

Business students also utilized the research fair as an opportunity to find students to help with developing their apps (covering design, client app and server), for which they had showcased wireframes. Although it sounded like a lot of roles for a single developer, I thought it would be a great chance to do an MVP (with potential business application) in what would be my last semester of undergrad. Plus, my co-creator and I were able to incorporate the application into a class project for an entrepreneurial course (focused on launching ventures) at my university's business school.

My co-creator and I reconnected via telephone to sort out the time commitment for the whole development. In the meantime, she had also changed her idea, and I really supported the new idea. I registered in the class with the idea that I could spend more time on coding while my co-creator would be able to do the pitches and work on her business model.

During the semester, we worked independently (me focusing on the tech side of things and her concentrating on the business proposals, models, etc). To better track my progress, I used an Excel spreadsheet to track a priority list of tasks with time estimations; and I proposed to meet at least weekly to go through the tasks. Although this was the standard practice from my past internship, it did not seem to work out between the two of us. Part of it was because my co-creator never showed up in class (later on, I found out that she had not even been registered in the class). So, we didn’t see each other weekly. And the Excel spreadsheet turned out to be only monitored by me without any feedback on each individual task.

Rather than having the weekly meetings, I utilized testflight to update the app remotely for testing and keep her in the loop, but even then, during the few times we met, she downloaded the updates during our meetings and went through what features were missing without prior preparation. However, often the missing features were either in progress or of a lower priority (and this problem only became worse later1).

Towards the middle of the semester, my co-creator brought up the issue of having me sign a Non-Disclosure Agreement. I hadn't had any experience with the signing of legal documents before and was extremely reluctant to go through with it. This dampened the progress of the development over the next couple of weeks as I decided how to proceed. I decided to pose the question to the HN community:

TL;DR I made an iOS ecommerce app, along with backend server and a simple web-app POS system. My co-creator asked me to sign a standard NDA agreement except it specifies that I am an unpaid intern. My instinct tells me not to sign it.

Here is the whole story:

I am a senior engineering student. This is my last semester at school, and I thought it would be an excellent experience to be in a venture course and try something different.

The course is offered by the school's business school, and it is taken primarily by business students who have had professional experience and are seriously considering starting a venture. The speakers, pitches, and quality of the students' participation have been a great learning experience for me so far.

My co-creator, an EMBA student, and I are taking the course as a way to iterate through our product and process. She is in charge of the business model, and I am doing the coding. Our professors urged everyone to start talking about equity splitting as soon as possible; and my co-creator had a really simple answer to that: "I should have 100%," she said.

She knew that I had accepted a full-time offer prior to starting the class and that started this project with her because I saw it as a chance to learn more about business. So far, I am on my final testing of the iOS MVP app, getting ready to submit to app store anytime this week.

Along with the app, I also wrote the backend to support all interactions for the iOS app, and another simple inventory POS web-app. She just sent me this NDA to sign, specifying that I enter the agreement as "an unpaid student intern". Everything else seems rather standard, but I'm not sure if I should sign it. Any thoughts?

See the whole discussion on Hacker News
and another similar discussion

The HN community gave a great discussion on where to begin, and it came down to these points

  • What is a "standard" NDA? 7
  • The scope of the NDA 2
  • The intellectual property3 / copyright4
  • Employee contract versus an NDA7
  • Effect on my future employment (similar to the scope of the NDA)

Here is the link to the actual NDA with company name sanitized that I was asked to sign.

After much consideration, I decided that it all came down to one question:

NDA complications aside, what exactly was I looking for?

  • I wanted to see my project take off and be a part of it
  • I wanted to learn more from the business side of a project

While I was certainly learning a lot from the business class, all the HN discussions about this NDA seemed to be cautioning me from being a part of this project with my co-creator in the future. Furthermore, I was worried that the NDA might have broader implications for my future employment. To understand the significance of all the terms of the NDA without a lawyer was beyond my ability. However, I knew that if we were not able to get past this, the start-up would not even reach its first stage, which was to get intial tractions. Unfortunately, as I mentioned earlier, we did not see each other regularly and this was a particularly uncomfortable and inappropriate conversation to cover through emails and text messages.

We finally had a chance to sit down and talk three weeks later and my co-creator told me her side of things regarding the NDA. Being aware that I had received a full time job offer from a company, she said that due to my future employment status, she was assuming more risk in the start-up than I was. She said it would be impossible for me to work on this as a side project and even brought up her mortgage payments and the large risk she was taking on of registering a business as an international student [here is how that's possible5; this also means that she needed to have the business sustainable within 12 months (her visa duration) to apply for E-2 Visa to extend her stay].

So what did she want from me?

The first two lines of the agreement said it all:

I, ___________________________, am providing consulting services to [Company Name], a Sole Proprietorship with its principal place of business in New York (the “Company”). I am making this agreement in consideration of my engagement as an unpaid student intern (“Consultant”) for the Company during the Spring 2014 Columbia University semester.

This agreement shall be binding on the heirs, successors and assigns of the parties. The Company may assign this Agreement to any party at any time. The Consultant shall not assign any of its rights or obligations under this Agreement without Company's prior written consent. Any assignment or transfer in violation of this section shall be void.

Claiming that it was illegal to compensate an international student, and trying to classify the app as solely a course project, she wanted the whole thing for free.

I entered into this project thinking that it had began at a certain level of partnership, but it turned out I was completely wrong.

And I was really insulted.


After many conversations with numerous individuals including the course professor, a CS professor and my co-creator, I was left with a few options:

  • Walk away and lose nothing (but be the bad guy)
  • Keep working on it as an advisor, but ask for a reasonable percentage that vests over time. ( legal for an international student8)
  • Revise the NDA to something that we could agree on, but would have to include a form of compensation either in cash (it had to be undocumented, otherwise it would have been illegal) or equity
  • Sign a mutual NDA as a partner

My thoughts were that if this whole project was solely a course project as my co-creator was putting it, there would have been no point to discuss issues such as intellectual property and non-competes. However, she saw it to be much more [and unfortunately, these things are what the business students are advised to consider as early as possible these days (from business professors who remind us Mark Zuckerberg's experience)]

To me, the whole process had been a co-creation process, and I will give credit to my co-creator for coming up with the idea, but no points at all for the teamwork. As the idea was a technology-enabled company that focused on e-commerce, the operational/logistical aspect should also have been incorporated into the application. But my partner was soloing on the business side of the project, and I am soloing on the technology side of the project.

If we had spent more time on bringing in ideas together, we would have had our product evolve with ideas.

At the end, I got really worn out from all the discussions with my co-creator 9. I drafted up an agreement for both of us to sign, and gave her the code for free.


Lessons learned

  • First and foremost: everything from reading the NDA
  • There are different types of NDAs (For example, Orrick's startup tool kit provides three kinds 7). And if someone is entering as an employee or consultant, it should specify the compensation.
  • International students on an OPT can sponser themselves by creating a major-related business5
  • International students can hold equity of a company8
  • It is not a good sign for a new venture when co-creators don't meet with each other often
  • It is better to have overlapping skill sets so that co-creators can work on problems together or split the work between the teams.
  • Roles evolve with time. Although it is easier to determine who does what in the beginning, it is hard to be fair over time, and therefore
  • Note that I have been using "co-creator". I should have clarified these designations from the beginning.
  • Important for developer: when a business person approaches you with an idea, always ask for a complete business proposal that at least addresses the first year business plan, the target market and a few years of financial tragection.
Thanks to the HN community who spent time commenting on this; it was really helpful and they gave me a great start to thinking about how to face the problem. And thanks to the CS professor who offered to connect me with other startups after reviewing my code. It meant a lot to me.

1. I started to write a new priority list on my own reminder instead. To give a sense on how detrimental the feedback cycle has become, I first developed the whole app using angularJs on ionicframework. But I ran into a major problem as I could not figure out how facebook-cordova plugin could not log user out. Surprised by how fundamental this problem was and how unfamilir I was with javascript while scared of the potential future unknown, I quickly re-coded everything in Objective-C. And my co-creator only commented "yea it feels smoother."
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2. Why I Won’t Sign Your NDA |
(http://blog.jpl-consulting.com/2012/04/why-i-wont-sign-your-nda/)

4. (HN) Intellectual-property law basics for contract professionals |
(http://www.oncontracts.com/docs/Toedt-IACCM-ATE-intellectual-property-law-for-contract-professionals.pdf#page=29)

5. (Quora) Is there any legal way for international students on F-1 visas to incorporate and run their own startup while maintaining the F-1 visa status? |
(http://www.quora.com/Startups/Is-there-any-legal-way-for-international-students-on-F-1-visas-to-incorporate-and-run-their-own-startup-while-maintaining-the-F-1-visa-status)

6. (USCIS) Understanding E-2 Requirements |
(http://www.uscis.gov/eir/visa-guide/e-2-treaty-investor/understanding-e-2-requirements)

7. Orrick's Start-Up Tool Kit: Start-Up Forms: Technology Related (NDAs) | (http://www.orrick.com/Practices/Emerging-Companies/Startup-Forms/Pages/Forms-Technology.aspx)

8. Starting a Business in Which an F-1 / H-1B Visa Holder is a Shareholder or Owner |
(http://www.hooyou.com/news/news092311business.html)

9. The process was really painful, and it wil take another blog post to describe the whol process.|

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