Monthly Archive for July, 2012

The impact of competition on entrepreneurism

Last May, a new Australian incubator said they were different from StartupBus, the “people accelerator” (which I call a foundry — more on that another time) that we’ve been building for over two years now.

…the Startup Bus concept – which is essentially a start-up competition – is flawed when it comes to women….”The whole approach seems to be based on a kind of testosterone, pump”

It was an interesting point because I’ve often thought about not just how to encourage more female entrepreneurs, but more successful startups. Is a competition a way to do that?

When we ran the StartupBus Americas competition this year (840 applicants, ~270 accepted), we had a lot of upset participants. Several in particular spoke to me personally about how they didn’t understand why their team and product didn’t make the finals. One of the teams who I actually personally believed should have won the competition (but never made it past the semi finals) wrote an email thanking us (I’ve appended it at the end of this blog post, to not distract the point I’m trying to make) which I forwarded to all the participants, to which I added

With emails like this from Raymond (below), the real winner of StartupBus makes me think is Wastebits.

As Greg (Florida conductor) says: StartupBus is harder than a real startup. If you can survive this, you’ll find a real business a walk in the park.

Well done everyone, I was so proud to hear last night how many of you are continuing on with your projects. There’s something to be said true entrepreneurs are ones that break the rules (I actually smiled to hear people ignored some milestones to focus on product) and don’t let stupid things like validation (ie, the competition) get in their way.

Three months on, what’s the verdict? Still too early to tell but this week, a talented designer  Scott (who actually designed the new StartupBus logo) sent me an email saying that he was working with the Wastebits team, which has become a real business. Another team that stood out for their quality (and actually was a business idea I looked into years ago) but didn’t make the semi final — Get Wished — I’ve been hearing how they are still working on their product with serious commitment. And today, Sohail (who I convinced to turn down a job at Google so he would work at a startup) paired up with James (who was on the first StartupBus) had a post on TechCrunch announcing Hiptype who have been part of the current Y-Combinator batch — which other than credibility and exposure, also means a guranteed $150k in funding. The product the post talks about was actually launched on StartupBus this year (original video seems to be down), but they didn’t make the semi finals.

That last sentence being key. James in particular was upset in how he didn’t make it the semi finals, and caused quite a dilema for me personally because I liked their product, I knew the team members well, and I wanted them to succeed. A dilemma because we had to create a process to bring down the 50+ products to ultimately one winner and it made me question our approach which was entirely my responsibility. But the dynamics of the competition forced outcomes that even I didn’t necessarily agree with.

Is a competition the best way to select winners? Nope. But is a competition process, whereby people miss out and they want to prove something, the best way to create winners?

Time will tell, but something tells me yes. True entrepreneurs break rules, want to prove people wrong, and don’t give up. As it was explained to me by my previous boss: ruthless ambition is what creates entrepreneurial success. And the resentment of not being selected, may ironically be the best way to feed that ambition.

On a related note consider this: I’ve been observing how some of the best entrepreneurs I respect (admittedly, only men but then again there’s only a few people I truly respect) all seem to have what I call ‘daddy issues’ that they acknowledge as what drives them. Not big family problems, but just didn’t see eye to eye and a sense of having to prove themselves.

Addendum: As promised, the email from the Wastebits team this March that I forwarded to all participants. There’s a lesson in there for what incubators really should be doing.

Elias
Thank you and the StartupBus team for an incredible experience. In my humble opinion, StartupBus has innovated THE new model for entrepreneurs.
StartupBus is the epitomy of iterative adaptation and flexibility…adaptation–>the single most important factor in determining the survival of a species (adapted from Darwin).
StartupBus IS the MBA for entrepreneurs!
StartupBus creates a unique immersive experience for entrepreneurs to LEARN THROUGH DOING. There are no bystanders!
Plain and simple, graduates of StartupBus (*hint* *hint*) are well prepared to be successful bootstrappers. And even more importantly, these graduates are well informed to spread the StartupBus aspirational philosphy AND continue building that sense of community.
Wastebits came into being BECAUSE of StartupBus … it was nothing more than an un-named idea two weeks ago. StartupBus provided the environment and super-charge for a team of aspirational entrepreneurs to breath life into that idea. And now today, a meer 7 days since last Tuesday’s kickoff…Wastebits is an incorporated company, with an awesome brand, a team of senior developers, a team of industry veterans committed to forming the management structure, scaling and supply chain partners (Blackberry expressed high interest just yesterday to support Wastebits premiering via a mobile rollout), AND, most importantly, a bonefied base of PAYING CUSTOMERS (we received our 3rd Letter of Intent this morning!).
StartupBus is what enabled this to happen…happen in less than a week!
THAT is a story.
And yet, I find myself highly curious how we as the StartupBus community will achieve EVEN MORE for 2013?!?
The future is ours to envision and create. Everything is possible when the right people are connected! That is what StartupBus re-affirmed for me.
Thank you for the experience and the opportunity to join such an incredible community.
I look forward to being a part of creating the vision for StartupBus 2013!
Humbly appreciative,
ray

How to become a “full time” foreign entrepreneur in the US

Today I hit my third anniversary in the United States. I moved over here for a startup and learnt a valuable amount of things in my two years there (which was always intended as a job to bring me to America and give me a start); and this last year I’ve had the privilege to be mentored by one of the most successful venture capitalists in the world (George Zachary) has invested $150m over 17 years and returned $1b, mostly recently Yammer selling to Microsoft and Millennial Media listing publicly) working for one of the oldest venture firms in America (CRV or Charles River Ventures).

This month however marks a new beginning: I’m now a full time entrepreneur in the US. And I take great pride in that, because I’ve spent many countless months — years even — trying to work out how to play by the immigration system to enable that.  I’ve worked with lawyers, Googled the hell out of the Internet, and collected dozens of anecdotes from other entrepreneurs who have all experienced the same misery that only another expat can appreciate.

Visa’s generally favour a limited supply of talent that tends to bias the multinational company. There is no such thing as an ‘entrepreneur visa’. Silicon Valley screams out about the need of a “startup visa“, which to be honest, I have serious reservations about as it limits the potential of an entrepreneur (ie, you are required to raise funding from a major investor like a VC firm — that’s like saying you are required to get a bank loan to be able to start your business).

But after spending years pulling out my hair out trying to work out how to get around the rules legally, I’ve developed the following solution with my intent in sharing it so as to prevent the wasted opportunity that entrepreneurs after me may experience. Even some small sentences in this post I’ve spent many hours trying to validate. I hope you waste that time on marketing for your product or enjoying life, as time wasted on visas for entrepreneurs is the least productive thing society has ever invented.

As a disclaimer, I am not a lawyer. I’ve just leveraged my background in the English language to understand the rules myself, which has successfully resulted in three separate visa’s for myself and 1.75 for employees of mine.

Step one: read Geoff’s post

My friend Geoff wrote in detail the process from his own experience. This is the best summary I’ve seen to date and highly recommend you read it. My advice below is a bit bigger picture (as opposed to procedural) and tackles some of the conceptual issues (and ones that I actually disagree with Geoff on).

Step two: Get to the US.

It’s simple, but the more time you spend in the US, the easier it becomes — even if it’s for three months at a time on a visa waiver as a “visitor”. For example, you build a network of people who can support and advise you; you can build up your credit history which takes on year minimum (tip: get a secured credit card); you can setup a bank account which is near impossible to do remotely. If you move over with a job, you get a social security number issued immediately (well, that’s a separate story — it takes over a month on arrival and your life is on hold until you get one), a huge benefit given how key it is to all things regarding your identity. Ultimately, you learn how things work.

Step three: Setup a company

The US operates in a very decentralised manner, as seen by how its company law operates. As a consequence you get a lot of  innovative forms of entities being invented by states like “B Corps” and “L3C’s”. Ignore them — most companies are either C-corps or LLC’s.

An LLC will do, as it’s the lightest-weight incorporation you can get, and in some cases, might be the only option. (Certain corporations like S-Corps require you to be a tax resident of the United States…something hard to do if you’re not present in the country for less than 183 days).  It doesn’t matter where you register it: “Deleware” simply markets the brand of their state, due to the legal system having experience and other factors. Truth be told, a company is a company. Have some fun and register your company in Nevada so you can do your annual shareholder meetings in Vegas — heck it’s not a crazy idea as Nevada not only has zero income tax (a thing levied by some states and the Federal government) but it also is one of the most difficult states in which to “pierce the corporate veil.”

Step four: elect a board

Don’t forget, that your E3 or H1B visa is an employee visa — so you need to make sure you an employee. Advice I heard from the top tier lawyers suggested you needed at least three board members (assuming you are one of them), so that you could be “over-ruled” and theoretically fired by a majority vote of the other board members. This was recently clarified by the US government:

USCIS indicates that while a corporation may be a separate legal entity from its stockholders or sole owner, it may be difficult for that corporation to establish the requisite employer-employee relationship for purposes of an H-1B petition. However, if the facts show that the petitioner has the right to control the beneficiary’s employment, then a valid employer-employee relationship may be established. For example, if the petitioner provides evidence that there is a separate Board of Directors which has the ability to hire, fire, pay, supervise or otherwise control the beneficiary’s employment, the petitioner may be able to establish an employer-employee relationship with the beneficiary.

Step five: In your job offer to yourself, pay yourself above the prevailing wage. For real.

US Immigration is partly designed so that American’s are protected from foreigners stealing their job. Hence the need to satisfy the ‘prevailing wage’ case which requires you be paid above average from what an American would be paid, as defined by official statistics done by occupation and region. You can use this online tool to determine which job you need to match yourself to: http://www.flcdatacenter.com/

You can be creative here, but don’t be too creative: hiring yourself as a “secretary” at $29k a year (2012-2013 period) when you are clearly the CEO is not something I’d risk. A General Manager though is much more like a founder CEO, which is $73k —  much better than the CEO pay rate of $212k.

But just because you get your visa application approved and a visa, doesn’t mean you can fake this rule. I know of an entrepreneur that “deferred” payment of his salary — which is completely legal but were he to apply for his next visa (or reenter to the US) and have no evidence of pay checks, there would be  complication. (Athough if it took you more than two years to raise funding — the length of the visa — maybe you have bigger problems.)

I’ve actually been asked at US borders to show proof that I have been paid a wage in past — as in, actual pay stubs or bank statements. Eventually, you are going to need to prove you were paid not just above the prevailing wage…but actually paid.

Other comments

  • You should appreciate how the visa system works: the visa itself is simply a travel document; whenever you re-enter the United States, you are reissued form I-94 which is the actual work permit. Technically, you could enter the US a month before your visa expires and the I-94 that you are issued allows you to legally work in the US for a full two years (only one nerdy customs official ever did this to me, most border officials don’t even realise this rule themselves). The only catch with this of course, is that it’s a one way ticket when leaving the US and you don’t have a valid visa for re-entry: out of practicality, labour movements at check points are how governments seem to be able to enforce their immigration policies.
  • Australian’s have a God-send in the form of the E3 visa which is plentiful in allocation, has less hoops to jump through, and even allows a spouse to get a visa as well. The default option for all other foreigns in the H1B which has its own complications. Other options include the B visa (business travel) but that’s a temporary solution — the O visa (for extraordinary achievers) is an option for people who have a public profile, but expect to spend a lot of time with the lawyers preparing this submission.
  • If you don’t have a degree, things are a lot harder for you. Your only option would be the O Visa (which means you need a lot of press) or the ability to prove you have ‘equivalency’ in work experience. One university year of study is equivalent to three years work experience ie, you need 12 years based on a four year standard US degree).
  • At least for the E3 visa, the first time you ever apply for it you need to do it from your home country. Subsequent visas you can do it in other jurisdictions.
  • ADDED April 11 2014: Something I forgot to mention here is the L1 visa which not only is a great visa but the best solution if you don’t have a degree and if you want ‘dual intent’ which means you want to eventually apply for a greencard. The only catch with the L1: you need to have been ’employed’ by the company for one year before initiating the ‘transfer’

All in all, all expats in the US have war stories to share about how they managed to secure their living in the country. The above solution, as simple as it sounds, is also not that simple as it requires real capital or revenues to be able to pay yourself — but with that said knowing three years later this is a legitimate solution is something I would have paid good money for. It’s still not easy, but then again maybe it shouldn’t: little did I appreciate, getting to this point has me now appreciate what a true entrepreneur is. Seeing this as an obstacle that can be overcome will be what Phil Libin, the CEO of Evernote, is looking to hear from real entrepreneurs.

Good luck. Now, you can focus on what really matters: finding your market.