Posted by mark.
Jul
14
Posted by mark.
How to start a startup – for developers
Creating your own startup is easy. You don’t need an MBA. You don’t need an expensive law firm. You don’t need an ‘older more mature CEO’ to hold your hand. And if you can afford 6 months without an income and $5k to get started, you might not even need a VC or Angel investor.
You just need to be OK with researching to find the info you need and acting on it. I’ve written this as a very basic guide to getting started for under $5k – or $4985 to be exact.
Inc yourself – $415 + $50 for Nolo books
You need to create a corporation so that you have a degree of legal protection. You get to choose from a C Corp, an S Corp or an LLC. Forget about partnerships or Sole Trader. I’ve always used a C Corp because it’s the only structure that lets foreigners invest in your corporation, and that’s a requirement of mine.
I’ve always Inc’d myself and not used a law firm. I don’t think it’s necessary and I’ve sold C Corps that I’ve Inc’d myself without any admin issues. Visit NOLO.com and buy a book for your state and do it yourself.
We are incorporated in Delaware and Kerry just sent me the following data for your enjoyment:
Delaware startup costs: $90 filing fee, $50 for a registered agent ($140 total)
Delaware annual fees due end of year: $60 filing and franchise taxes (up to 3000 shares authorized), $50 registered agent ($110 total)
You also need to file as a foreign corporation where the corp does business or has a physical presence. Washington fees are as follows:
Washington startup fees: $205 filing/license fees, $70 registered agent ($275 total)
Washington annual fees due end of year: $90 filing/license fees, $70 registered agent ($160 total)
Trademark yourself – $2,200
Sure you’ve got an awesome domain name, but if it’s cocacola.com you’re in trouble. Use a lawyer to do a trademark search. It’s going to cost you $300 to $500 bucks and it’s worth every cent. You can do an initial search on the USPTO website for free, but get a law firm to do this for you because there are more databases than just the USPTO.
It might come back with some pizza joint out in Smallville USA that has a name vaguely similar to yours – just ignore that. You’re worried about companies that target the same market as you do.
Then use a lawyer to file your trademark with the USPTO. Once you have it on file and can start counting down to that magical 5 year date when your trademark becomes incontestable. This will cost about $1,700
I had the unfortunate experience of getting sued over trademark infringement a few years ago, so this is now one of the first things I take care of.
Provisionally Patent your technology – $2,000
If you’re wicked smart and invented something new, then file a provisional patent. This buys you 1 year during which you must file a full patent. The provisional patent can cost as little or as much as you like.
You can write and file your own provisional patent for as little as $200. That’s a bad idea because when your company is worth something and it’s time to sell, and you’re doing due diligence with your future acquiror, they’re going to ask which law firm did your provisional patent and you’re going to say proudly that you did it yourself and the conversation will move on as if your little patent doesn’t exist.
Use a law firm.
The full patent that you must file within a year may cost as much as $25,000, but by that time you’re hopefully making so much cash out of your wicked smarts that you can afford that.
Do your own accounts – $300 (quickbooks pro license + course material)
I put myself on an accounting course a while back.I also did a quickbooks course. Once complete, I had enough knowledge to manage my own corporate accounts and promptly turned our books over to my amazing wife who now handles all our accounts and legal stuff. (evil grin) She’s actually lying downstairs reading a book on intellectual property as I write this. Crazy woman!
If you’re going to do your own accounts, learn the fundamental double entry system and basic accounting equation. Then also learn how to use your accounting software – Quickbooks is awesome for corporate accounts. Quickbooks abstracts a lot of the internal stuff away from you, like the double entry system – and that’s ok for a while, but eventually you’re going to hit something a little complicated and you need to have that basic knowledge to bail you out. Or you can just buy a CPA for $50/hour and get them to help you out when you get stuck.
Alternatively…
Just outsource your accounts. Quite a few of my friends do and that works for them too. Just make sure you get a competent accountant and at least have enough knowledge to ask the right questions and double check some of their work.
Learn basic finance – $20.00
Read this book. Read the whole book. Do not pass go, do not think you can outsource understanding your balance sheet or understanding the time value of money. You need a basic knowledge of finance.
Now, drop everything and just do it
Once you’ve got all this basic but necessary stuff out of the way, build your business as fast as you can!!
If you think it’s going to take a month to create your prototype, give yourself 2 weeks and do it in 3. Your time is your most expensive commodity, so haul ass and make it happen!!
Just don’t forget to listen to your customers and let them shape your product because they are, after all, the only reason your business exists. More about that in a future entry.
Disclaimer: This is not legal advice and I am not a lawyer.
There are 9 comments to this post.
Kevin had this to say,
Jul 14, 2007 @ 11:02 pm
Awesome post – love that it’s full of very specific tips from someone who’s done it (successfully) before.
AK had this to say,
Jul 14, 2007 @ 11:04 pm
Very Good Buddy.
presents a lot of video tutorials and podacasts. Check out
Robbin Block had this to say,
Jul 15, 2007 @ 3:55 pm
All good info, but it’s a good idea to see if your idea has legs first — before you even spend the $5K. Check out the feasibility checklist on my resources page. The link is on the right under the picture, or just go to: http://www.blockbeta.com/feasibility.htm
Jordan Mitchell had this to say,
Jul 16, 2007 @ 8:51 am
The advice on your accounting/books is sound. However, I’ve always preferred to focus on the biggest risks — the things most likely to kill your startup — which isn’t your books. I am living proof that you can release a product, raise money and build a company without initially having your books in order — I’ve done it 3x. I do not advise this, but if you do it keep all the right paperwork (checkbook, exp reports, invoices, etc.) so you can easily backfill this task later on.
Randall Lucas had this to say,
Jul 16, 2007 @ 9:40 am
Mark, good post. I would highlight a couple things from within your own post, and add a couple things:
1. When Mark says “drop everything,” he means it! I don’t believe it’s possible to get a startup moving until and unless it’s the sole full-time pursuit of all the founders. You can do everything else on this checklist on nights and weekends, but when that cruft is done, quit your day job and RUN.
2. Mark’s also right to point out when and where to use “pro” talent. The IP may (should?) outlast the company, whereas the operating company itself has many ways it can die off. I tell all my startup-bound friends that incorporating means zero, and that, with some seriousness (especially for consulting or project-based deals) you should close their first sale, and then incorporate /only/ once you need to put the name of the company on the contract! Too many startup manuals, etc. focus on cruft (like incorporation) and ignore that having a corp filing is neither a necessary nor sufficient condition for making dough.
3. That said, and especially if there are other people involved in the business (co-founders, or anyone you anticipate giving an equity position), you /must/ read “Getting to Yes,” and you /must/ figure out a vesting schedule — get one done by a lawyer. This is a way to dole out the equity interests of the cofounders over time, and with provisions for (unfortunately, this happens) gracefully parting with guys who can’t or won’t go the distance.
4. From day one, have a written (operating, internal) business plan, however brief. Revise it as needed. I have discovered that writing something down hugely increases the chances that it will happen. This doesn’t need to be long or detailed — probably a single-digit number of pages, depending on the kind of business. But putting it on paper forces you to face up to your commitments to yourself. (If you insist on being all-digital, then at least commit each revision into SVN or the like.)
Brad Belanger had this to say,
Jul 22, 2007 @ 11:36 am
Mark, I apologize for upsetting you by posting your article on my blog; that was sincerely not my intention.
I really enjoyed your article and my blog is mainly a place where I cache articles that I like for my future reference; I get very few readers of my blog besides myself. I know I’m off the fairway as far as copyright laws and general courtesy/protocol go but this is the first time I’ve had someone ‘complain’ in over two years of blogging. I added a link to your blog entry in mine and I hope you can take my post as a compliment (imitation being the sincerest form of flattery, and all that kinda stuff).
However, if you are still upset I will ‘remove’ the article from my blog.
Shannon Moore had this to say,
Jul 30, 2007 @ 2:00 pm
Fantastic post Mark!
I’d like to add one thing – it’s not required to hire a trademark attorney to have comprehensive research conducted. Nor is it required to have a trademark attorney file the application. There are a number of companies offering this service for much lower costs.
Just be sure that it’s clear that you’re getting a comprehensive search done – this entails looking for similarities in Sound, Appearance or Meaning in the US Federal & State trademark files as well as the US National Common-Law files.
Also, there are a few other preliminary sites folks should check out before paying anyone to do further work:
* http://www.nameboy.com
* http://www.smartpages.com (leave the city, state boxes blank)
* http://www.hoovers.com/free
* http://www.thomasnet.com; Must register (free) to search their database
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Great post Mark. Keep it up.