Is investing this time in a startup worth it?

The problem is that he can only provide us about 1.5-3% maximum of equity of the company.

If you get paid enough to do the job you shouldn't care what the equity percentage is; then you can think of equity as a bonus.

Every day many startups "start up". Statistically, most startups fail, so you should assume there is a good chance this one will too. If it does fail, then equity percentage doesn't matter, because 3% or 100% of zero is still zero.

There are obviously many factors that go into making this decision, but before you make it you should figure out how much you can get paid per hour if you pick up a side programming job, and call that rate X. That should be your baseline.

From there, if a company is willing to pay you X and also give you some equity, that's great. If they want to reduce your hourly rate by giving more equity, that's negotiable, but don't go too low because statistically the equity will never materialize. (For example you may decide it's not worth it to go lower than half your hourly rate.)

Many startups try to get people to work for free with the promise of big future payouts, but most of the time that is similar to this game: You pay me $1000 and then we'll flip a coin. If it's heads, you get your $1000 back. If it's tails, you get nothing. If the coin lands on it's edge, you get $1 million. Wanna play?

First you should get a decent business proposal. This should list all assets and investments the startup currently has. It should also consider how much investment (time * your rate * risk-bonus = money) is required from you. It is important to clearly outline the extent of your involvment. IF you say you invest 500 hours and it is later discovered you should contribute more, you have a clear expectation to get paid more!

He can price in the Idea, but only to the extent it has currently been worked /developed on. So no napkin-drawing = $5 Mio!

This will give you a clear view of the fairness of the offer. If the Idea is sound he should also be able to get investors to pay you working full-time in exchange for your equity, so this is more a matter of preference and alignment of interests. If the professional investors stay away from it assume it is not worth as much as the owner thinks it is.

You'd have to have some idea on how to value the company. 3% of what? Is that 3% split between the developers? Is it 3% of the app or 3% of a larger business?

From my days in the Thunderdome, the rule of thumb was that 10% of startups succeed, so basically an investor needs to be able to make at least 10x. Likewise, you need to factor that into the value of that 3% -- you need to be able to see it being worth more than 10x the value of your time that you put into the company.

Is it equity or is it options? The details of these kinds of deals are typically not very friendly, so it's worth looking into what it's going to cost you up front (tax implications or price of option execution). The payoff needs to be big enough to offset your upfront losses plus the risk.

When it comes to startups, ideas are easy -- it's execution that matters. So one thing to consider is, do you even need this guy? Couldn't you guys create the app without him? I don't intend to sound backstabbing, but rather point out that the onus is on him to be competitive. So does he bring something to the table that even remotely compares to what you could do without him? It could be he has cash from other investors, a team that's solid and executing, some patents, and some industry expertise that you all lack. Would it cost you less than 97% of your own company to replace him and everything that he brings to the table? Could be... it's up to you to subjectively evaluate.