Posts

LLC vs. Corporation: Which is Right for Startups?

If You’re Starting A Startup:

If you’re starting a startup, and you want to deal with equity, you’ll need to start something known as a C-Corp.*

The two major ways you can create a company are as a C-Corporation (C-Corp for short) or a Limited Liability Company (LLC). If you want to have equity in your company, then you shouldn’t start an LLC. An LLC is just for multiple partners owning a business. A C-Corp will let you take investment and have equity in your company.

Another important thing about a C-Corp is that you’ll have a Board of Directors. That might start out as just you and your Co-Founder, but as you grow and get more investors, they may join as board members as well.

For now, you probably don’t need to know about A-Corps or B-Corps (but if you want to geek out, we won’t stop you from Googling). Focus on LLC vs Corporation.

*Of course, for questions specific to your particular situation, it’s best to seek the advice of an attorney or accountant.

Key Takeaways:

  • If you want to take investment (and have equity in your company), you’ll need to start a C-Corp.
  • The two main forms of company structure are C-Corp and LLC.

What People Really Mean When They Say “I Want To Learn How To Code”

There are two important things to know about coding education:

  1. Most people don’t actually want to learn to code
  2. Learning to code doesn’t mean one thing anymore

It’s important to know these two things because otherwise the way we teach people about coding is wrong, and people won’t learn.

The first point I’ve seen over and over again. People who tell me they’re going to learn how to code, then they start learning, and they think it’s boring as hell.

I call it the coding fallacy. People think they want to learn to code but what they really want to do is build a product.

When we think about it, this should be fairly obvious. Knowledge of code in and of itself is not valuable if you can’t do anything with it. So for most people the biggest motivation for learning to code is building something (although a close second is getting a higher paying job).

That brings me to point number two. Learning to code doesn’t mean the same thing anymore.

It used to be that in order to code you had to know almost everything about computers (hence the term “Computer Science”). Then things were abstracted to the point where you didn’t really have to dive into certain topics unless you really needed to. For example, as a web application developer at this point I need to know very little about system administration because it’s mostly done for me by tools like Heroku and Amazon Web Services.

So when people say they want to learn how to code, most teachers start where they assume they should (where they always have), with data types, the various structures of a language, and help students develop a deeper understanding of computers.

The problem is that’s not what people want. They want to build something. And we should no longer take for granted that in order to build something you have to learn everything about computers or even coding in general.

For example, if someone is already working with a great back-end developer, it would make sense to just teach them the front-end, because that’s going to be the most useful thing for them. They will actually get what they want done faster, and they will be able to learn the back-end at a later point in time. By doing so we reduce the cognitive load on the student and enable him or her to learn faster.

There’s so much that could possibly be taught about coding that we need to start identifying at least semi-complete subsets that someone could learn. At the very least I want to pose the following important distinction I’ve learned:

  1. Web development
  2. Non-web development

When you’re developing for the web you specifically have to deal with:

— HTML — CSS
— Routing
— Databases
— Hosting/DNS
— Application structure

There’s a lot here to learn. And most of it is pretty irrelevant to non-web development (except databases and application structure obviously).

The way I see it, most coding education involves a bait and switch. It goes like this:

Student: “I want to learn how to code.” (But what they really — but don’t know enough to ask — is I want to build a web or mobile application.)

Teacher: “Okay let’s start with data types.”

Student: “…”

(2 weeks later)

Teacher: “Now we can design efficient algorithms.”

Student: “But I just wanted to make a cool-looking website!”

Learning to code will never make you this happy.

As teachers, we need to recognize that when people say they want to learn how to code, they often really mean that they want to build a web or mobile application.

That’s because to them, that’s what coding IS. It’s all they’ve ever been exposed to about coding. The problem is that they don’t know how to ask for it! So we shouldn’t just be taking everything they say at face value. It’s our job as educators to read between the lines.

I remember watching a play a few years ago in which a priest says that you have to tell the truth even in difficult circumstances. The person he’s talking to asks: “but what if someone asks you a question and you know the truth will hurt them?”

The priest responds: “When someone asks you a question, answer the question they are REALLY asking.”

In education as well, you have to read between the lines to figure out what people really want. If they’re asking some specific thing, you have to guide the person towards what’s going to lead them towards their ideal learning experience.

So it’s up to us as educators and as experts to guide people in the right direction and not just let them flounder. If we can do this, then we can empower a lot more people to do amazing things.

As a student: learn what you want to learn.

One of the best things you can do in your own learning adventures is learn a little bit about a lot of things — so you know what you want to dive deeper into later. Here at One Month, we’re launching a Learning Library in the new year, a free resource of videos, essays, and information on topics related to coding, design, and entrepreneurship. It is your first 1 minute, 1 day and 1 week of content for any subject.

Why Should You Incorporate Your Startup In Delaware?

Startup Series: Why Delaware?

Why should you incorporate your startup in Delaware, even if you’ve never been there?*

A whole lot of companies in the US are incorporated in Delaware, even if the company doesn’t actually exist there. One Month, for example, is incorporated in Delaware, even though we’re headquartered in New York (and we’ve never been to Delaware)!

The reason? There’s a body of law in Delaware where many court cases have already been tried, so companies and potential investors have more certainty about how different legal disputes will turn out. It’s riskier to incorporate your startup in a state where the outcomes for legal problems don’t have any legal precedent, and it’s unclear what would happen if a case were to go to court.

For investors, it’s also more attractive for them if they know you’re incorporated in Delaware, because this gives them more certainty. If your business has a legal question and it needs to be figured out in the court system, investors prefer the certainty of knowing that previous cases have established precedent (known as case law) in this state.

*Of course, for questions specific to your particular situation, it’s best to seek the advice of an attorney or accountant.

Key Takeaways:

  • Ideally, you’ll be incorporated in Delaware (you don’t have to live there to incorporate there) because many of the laws and cases have already been figured out
  • The steps to incorporating a business are fairly simple, and there are people who can do it for you.
  • If you try to do it the manual way, it can be more complicated, but still do-able.

More Links:

Startups + Fundraising Series:

Learn How to Launch An MVP In One Minute

Key Takeaways

A Minimum Viable Product centers upon the idea that you should release a new product ASAP. Don’t spend nine months building all the features. Instead, build the most important features — just enough to learn whether or not people even want the thing you’re making.

Repeat after me: an MVP means getting the most learning for the lowest amount of effort. Ask yourself, “How can I get this product in front of people as quickly as possible?”

Example of Minimum Viable Product in action

  • Dropbox started as an MVP
  • Here at One Month, we use Launchrock to build a landing pages, and to collect email addresses for classes that aren’t yet in development. This helps us learn which classes are most in demand.

How to Learn to Build an MVP Today

  1. Steve Blank, and Eric Reis: Read about the experts and follow them on Twitter (5 minutes).
  2. Data Drive Products Now! (slideshow): Check out this cool case study from on Etsy developer Dan McKinley (12 minutes).

Additional Resources

If You’re Not Embarrassed By Your Startup, You Launched Too Late

“If you’re not embarrassed by the first version of your product, you’ve launched too late.” — Reid Hoffman

If your startup is successful, no one will remember how ugly your product looked the day you launched. (And if it’s not successful, no one will care.)

When we think about successful companies like Google, Facebook, and Twitter, we tend to forget the modest beginnings from which they came. As Paul Graham recently wrote, “Think of some successful startups. How many of their launches do you remember?”

In celebration of modest beginnings, here’s a dose of reality: I recently came across the landing pages of some of the most successful companies we know. This is something everyone should see.

The moral of the story: don’t name your company BackRub. Also, don’t worry about making something pretty, worry about making something people love. As Reid Hoffman (the founder of LinkedIn) once said, “If you are not embarrassed by the first version of your product, you’ve launched too late.”

It’s easy to say “have a growth mindset,” and “follow lean startup principles.” It’s a lot harder in reality, when you have to launch quickly, and put out versions of your product that feel unfinished, raw, or even ugly. Take a look at the startups below, and how they launched their first product — and maybe you can launch a little earlier. Or a lot earlier.

(Credit goes to Phil Pickering for finding these.)

Twitter’s first landing page:

Early Facebook screenshot:

Early Google homepage (from 1997):

The precursor to Google, BackRub:

An even earlier Google homepage:

Yahoo!’s homepage in 1994:

Early tumblr dashboard screenshot:

Early Amazon homepage screenshot:

Apple circa 1997:

AuctionWeb before it became eBay:

Burbn (a Foursquare clone) before it pivoted to… Instagram:

The first ever prototype of Foursquare (shown at SXSW in 2009):

Reid Hoffman’s original LinkedIn:

And finally… Reddit (some things never change):

What stands out to you? How would you have designed things differently?

It’s easy to think that you need to have a great design and get everything polished before you release it to the world. In reality, you should launch things as soon as you can, as quickly as you can, to get validated learning. The Lean Startup talks about this as validated learning — getting immediate feedback from users as to what they actually want, not assuming you know all the answers.

How can you launch a beta version earlier? Why is getting feedback on a somewhat-shitty design more valuable than perfecting a design that no one wants? Post your thoughts in the comments below.

Changing Careers at 30: Are You Bold Enough To Do It?

You’ve been dreaming about it for almost a decade. You see it so clearly it’s almost three dimensional. You can practically taste the sweet nectar of success.

Except that it’s nothing more than a fantasy. A pipe dream. One of those woulda, coulda, shoulda things you dwell on, that fascinates and scares you at the same time. It’s painful, but you can’t seem to stop.

You’ve been slowly wasting away at a job you loathe, letting it drain the life out of you, while you eye your friends with envy. You know, those friends that bit the bullet back in your glory days and dove head first into exciting career plans? Who never looked back, not even once?

You keep thinking, “Man, that could have been me.”

Except, well, it wasn’t. For whatever reason. Maybe you decided to take the more secure albeit less exciting route, or that well-paying “safe” job. Maybe you decided to start a family right out of the gate. Maybe you coasted for a few years, drifting from career to career, or project to project, but never really seeing results you’d hoped for.

No worries, friend. Whatever your situation, wherever you’re at right now, life isn’t over until it’s over. Now’s the time to stiffen up that upper lip and chase those dreams in earnest. But where to begin?

Have a Plan

Why? Because planning is cool. And because, well… if you fail to plan, you plan to fail. Really though, you don’t want to just drop your life and switch careers on a whim or start a new business without doing some due diligence. Quiz yourself. Ask yourself why you want to make this big change. Can you handle the pay cut that most likely will come (at least initially)?

Do you have the working capital you need to fund your idea? If you’re starting your own business, do you have a marketing budget? Do you need any sort of insurance coverage to legally operate? Assess all the required moving parts that will be necessary to make your career move a success, then ask yourself: Do you fall short in any of those areas?

Consider a Trial Phase

Perhaps your idea is something you can test the waters in first, before making a major move and potentially lighting bridges afire behind you. Ask yourself if the change you are contemplating could be something you could do on the side around your current job, just to make sure it’s viable.

For instance, if you’ve always dreamed of launching your own web design company, maybe you can start out with a couple of freelance projects during your spare time, and see where the waters take you. You might find web designing isn’t all it’s cracked up to be, and decide you want to focus your attention in another direction.

That’s perfectly fine too. There are no rules that say we have to settle on one career path, and one career path only. Variety is the spice of life, or haven’t you heard?

Deep Dive into Your Dreams

While it can be tempting to want to change careers simply because you see others around you succeeding at something, it doesn’t mean what they are succeeding at is right for you. We humans are a quirky lot, and we each come with our own unique gifts, talents, and skill sets.

Instead of being seduced by the lure of quick or easy money, or dazzled by a career that seems glamorous but doesn’t give you any kind of thrill, sit down and actually think about what you want to do. Analyze your passions, honestly assess your skills and strengths, figure out what lights you up and sets you on fire for life.

Then get to researching and find out if there’s a market out there that will let you somehow marry your passion and skills with smart business. If there’s a market for it, turn that idea into the best career move of your life, and don’t look back. But never forget, switching careers merely because you see someone else doing better than you at something is lame. Don’t do that.

Make Lots of Friends

A big part of changing careers successfully is making sure you have an established network of friends in place before you make the big move.

This is your social circle, your network of people that you know in the industry you’re trying to move into that can help make your transition a bit less difficult. In many industries, they say it’s all about who you know, and this is more true than you probably realize.

Even that guy you say hello to every day at the coffee shop might be a potential contact that could prove valuable in your business at some point. As an entrepreneur, you just never know when you meet someone, how they may affect your life and your business further down the road. Make friends, exchange contact information, expand your network. But do it with class, and don’t be an… well, you know.

Just Do It

Have you done all the research? Have you asked yourself all the tough questions? Have you mapped out some kind of game plan on where you’re going, how you’re going, and what you need to get there? If you’ve done everything you can think of to mitigate potential failures, it’s time to quit talking about the big plan, and do the big plan.

It’s easy to get stuck in some kind of holding pattern as you wrestle with a big life change. Any big life change, really. It doesn’t just apply to careers. “Should I? Shouldn’t I?” is the mental narrative that seems to loop on repeat.

It often triggers something I like to call procrastination assassination. I should know, I’ve been a victim of it myself. Don’t let that be you. Once you’ve reached a certain point, you just have to take a leap of faith. Or give it all up for good and resign yourself to your current ho-hum career.

But if you’re reading this post, I know you don’t want that. You want more than ho-hum. So how about you get busy, and make that long-awaited dream happen?

By my admittedly flawed calculations, I figure now is as good a time as any.

Famous First Landing Pages

“If you’re not embarrassed by the first version of your product, you’ve launched too late.” — Reid Hoffman

If your startup is successful, no one will remember how ugly your product looked the day you launched. (And if it’s not successful, no one will care.)

When we think about successful companies like Google, Facebook, and Twitter, we tend to forget the modest beginnings from which they came. As Paul Graham recently wrote, “Think of some successful startups. How many of their launches do you remember?”

In celebration of modest beginnings, here’s a dose of reality: I recently came across the landing pages of some of the most successful companies we know. This is something everyone should see.

The moral of the story: don’t name your company BackRub. Also, don’t worry about making something pretty, worry about making something people love. As Reid Hoffman (the founder of LinkedIn) once said, “If you are not embarrassed by the first version of your product, you’ve launched too late.”

It’s easy to say “have a growth mindset,” and “follow lean startup principles.” It’s a lot harder in reality, when you have to launch quickly, and put out versions of your product that feel unfinished, raw, or even ugly. Take a look at the startups below, and how they launched their first product — and maybe you can launch a little earlier. Or a lot earlier.

(Credit goes to Phil Pickering for finding these.)

Twitter’s first landing page:

Early Facebook screenshot:

Early Google homepage (from 1997):

The precursor to Google, BackRub:

An even earlier Google homepage:

Yahoo!’s homepage in 1994:

Early tumblr dashboard screenshot:

Early Amazon homepage screenshot:

Apple circa 1997:

AuctionWeb before it became eBay:

Burbn (a Foursquare clone) before it pivoted to… Instagram:

The first ever prototype of Foursquare (shown at SXSW in 2009):

Reid Hoffman’s original LinkedIn:

And finally… Reddit (some things never change):

What stands out to you? How would you have designed things differently?

It’s easy to think that you need to have a great design and get everything polished before you release it to the world. In reality, you should launch things as soon as you can, as quickly as you can, to get validated learning. The Lean Startup talks about this as validated learning — getting immediate feedback from users as to what they actually want, not assuming you know all the answers.

What Are Convertible Notes and Why Use Them?

Throughout our previous entries on raising funds as a startup, we’ve been talking about raising money for your company by sharing equity with venture funds.

When you’re a company in its early days, sharing equity is difficult. Moving equity from your company to another requires a lot of time to hash out an agreement everyone can live with and it requires lawyers to work out the actual contracts. The whole process can cost upwards of $50-$100K, which is a lot of money for a company still looking for its first round of seed money.

Rather than dealing with the hassle of transferring equity, a lot of venture funds find it better to offer funding to startups using convertible notes.

Convertible notes are debts that convert into equity when a startup raises an actual equity round of funding. In essence, the venture fund offers to give you a loan of whatever amount, but instead of paying them back in actual money, the startup agrees to pay them in preferred equity. The venture fund gets the same agreement as whoever has invested in the series A round, with a bit of a discount as a good faith offer for investing earlier.

Early investing venture funds often find working with convertible notes preferrable to working with equity transfer for a few reasons:

For one, issuing a convertible note is easier. It can take weeks of discussion to transfer equity, but you can really issue a convertible note in only a couple of days. They also make it easier for the venture fund to work out the valuation of the startup by putting the discussion off until the series A round, when there is actual data to base their valuation on (rather than just a hunch). That considerably lowers the risk of their investment.

For startups, the convertible note also simplifies things. Convertible note agreements are short, maybe ten pages at most, and they can often be found online and modified according to the template.

Instead of the high cost of hiring a lawyer to transfer equity, the documents for a convertible note can often be found online. As a result, they can help generate quick funding in exchange for onle a few hundred to a thousand dollars. For a company that has limited time and financial resources, that is a tremendous advantage over complicated agreements.

Key Takeaways:

  • Convertible note are a form of debt taken on during seed funding that converts into equity when a startup begins an actual equity round of funding (usually in series A).
  • Convertible notes are preferrable to startups because they are quicker, easier, and cheaper to issue than equity. They are better for venture funds because they make valuation more flexible.
  • You can find a lot of online templates for convertible notes that you can use. Usually a lawyer is only needed in a limited capacity when working out a convertible note agreement.

Links

Why You Shouldn’t Care About Competitors

One of the more overwhelming entrepreneurial challenges is seeing someone else, someone better funded, better equipped, or with better name recognition than you, tackling the same idea you have. But imposing competition should never immediately discourage you from pursuing your startup. You need to be realistic about the challenges you face in relation to your competition, but bear a few things in mind to make sure you never psych yourself out.

No One Succeeds By Default

Just because a competitor has a lot of funding or name recognition does not mean that they automatically beat you. From the Wright Brothers to Amazon Local, funding and support is never the deciding factor. They certainly help, and it’s scary to think you might be going up against Amazon — but it’s not enough of a reason to simply give up before you get started. There are countless examples of underdogs absolutely crushing their competition, based on the amount of superior effort, belief, and more thoughtful approaches they put in. You can look at Simon Sinek’s Ted Talk on the Wright Brothers, or Malcolm Gladwell’s book on the subject for a series of case studies.

Fight On The Beaches

Where startups succeed or fail is, ultimately, in the execution. Whether it’s approaching the problem in the wrong way, going after the wrong segment of the market, wasteful spending, or simply lack of forethought, there are any number of ways a large, well-funded, secure-seeming team can fail. In any one of these ways, you can improve and innovate on what other people are doing, and that will give you an edge. So, if you take away nothing else from today, remember this: don’t give up before you put in the hard work.

Dr. Do-Your-Due-Diligence

But that hard work takes several forms. There’s actually running your startup, producing a product, or developing an app. Before even that stage, you need to do some research. The one hurdle that’s very difficult to overcome is when a well established company already has a very strong presence in the space you want to inhabit. If you have an idea for something, for goodness sake investigate what might directly or indirectly be addressing it. It’s highly likely someone else has or is already trying your idea. The fact that you haven’t heard of them is probably a good thing — it means they have broken through to get your attention.

Everything Is Not What It Seems

Remember, too, when you’re assessing competition. that you’re on the outside looking in. The way that a company appears to you is never the full story of how they’re doing. Companies can look incredibly successful one day and be gone the next. A big name shouldn’t necessarily scare you. What should, is if someone has figured out a viable business model and has a lot of traction. This, again, is where research comes into play. Take the time of doing a full critique of a company that failed to attack your idea, or has stayed pretty small-time. There might be a reason for it that has nothing to do with you or any other company. It might be the health of that particular market, or the viability of that particular idea. You need to figure out who’s already competing and what challenges, if any, are holding them back. Because those are going to be the challenges you need to overcome.

The Only Thing To Fear Is… Well, You Know

The point of all of this is that never let yourself become intimidated without hard facts and a firm understanding of your competition and their market conditions. Don’t let your fear of getting beaten prevent you from doing something that you believe is a good idea. That conviction — that your startup idea is worth doing — can carry you through the challenges which may cow bigger name or better funded players, not to mention all the incredibly hard work of getting a company off the ground. The game’s not over until it’s over. Just make sure you have a good idea of what you’re getting into, and what strategies you can develop or refine to help you succeed where others have failed.