Negotiations with Sales Team … Are these valid concerns?

Got in touch with a sales person and my dev team has developed an app for a SaaS product. We decided that my company will handle the tech and his company will handle the sales and marketing.

Now they are asking us for:
1) Ownership of app because no investor will touch them if the app is licensed and not owned by their company.
2) Exclusivity i.e. my company cannot sell this app to anyone else because they don’t want competitors in the market in the future.
3) Vetting rights i.e. we have to ask them for permission every time one of our customers wants something similar. They will agree to its use only if our customer is not a direct threat to their company.

We are talking about revenue share (20% tech and 80% sales since sales is a bigger cost than tech, app is already developed by us at a very minimal cost and maintenance is not a big cost as per them), a straight development cost or a mix of both . I am willing to go as far as co-ownership, nothing else beyond that. They wanted this in a co-owned entity but I don’t want their expenses on my head.

Are their concerns valid? Is their a middle ground where we both could agree upon?

  • Who paid for the app? Who requested the app to be built?

    If the sales people paid you to build the app, it’s theirs. If not, you are paying them to sell your stuff which means you should not have built it if you don’t have a customer or one in mind that you yourself will approach. You wasted a lot of time building something when a customer or sales person didn’t request it.

    True sales people aren’t going to ask for complete ownership unless they are willing to pay for true ownership. This means, they cut you a check or you two start a company together. The sales person can’t sell something they don’t own or have the right to sell on your behalf. So if you aren’t in a company together or they aren’t willing to pay you upfront for the software, you are wasting their time. If they can’t afford the software, you need to place the software in an entity you both own.

      • Sell the product to them first, with a maintenance contract minimum attached. If they want exclusivity they have to pay to buy the product. The posted agreement is rubbish. One thing I’ve learned is to never trust the sales people and their “numbers”. Sure 20% of a million doesn’t sound bad for a small dev shop, but what if it’s 100K, and then they lose interest selling?

  • Offer them a performance based contract. They get exclusive license to the code for X period. During this time they need to either a) close a funding round of Y or b) pay you Z to keep the exclusive license or else the license becomes non exclusive and you get to do license the code to anyone else.

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