We need to educate ourselves.

Such a startup weekend would be a wonderful occasion. Why organizers do not draw up a simple legal checklist is beyond me.

Just drafting a paper signed by the whole team at the beginning of the event stating "I am going to put ~30 to 40 hours at my hourly rate of $X and thus my contributions can be bought for $Y", or whatever stock terms float your boat, would set clear expectations. They actually were less naive than most since they had that "handshake deal", but they should have gotten it in writing.

That, and realizing "Applicant tracking system in an original niche" is not a revolutionary idea. They owed that Billy guy absolutely nothing and should probably have kicked him out.