I believe there is one true lesson that matters for anyone running a business in whatever space you find yourself in. A skill that if you learn the manage techniques in executing them, are transferrable to any business. Thee core concept is called “working capital”, and although they teach this as a basic accounting concept — the meaning of it is not something you can learn, but simply feel have to feel as a CEO founder.
Have you ever had to worry about not being able to pay payroll next month? Have you ever had to raise financing to *continue* (not start) the operations of your business? That’s what I call the working capital burn. And while the tech press is littered with “acquisitions”, the truth of the matter is that the majority of businesses that get acquired knew their future was limited and/or their working capital was running out. An acquisition is a failure in the ability (which may also mean fatigue, not just lack of skill) for an entrepreneur to expand their working capital.
Working capital is a deep concept that incorporates a lot of skills in order for it to successful function. It means fundraising and revenue; it means cost control and hiring. Working capital management is one of the three core functions any CEO — big or small business — that s/he needs to be responsible for outside of setting the strategy and building the team. But the truth is, it’s something everyone in the businesses needs to be responsible for — it’s just the CEO is the only person who has a true picture of the operations.
One of the sad things about the recent financial crisis that has had many economies go into deep recession, is that thousands of businesses went bankrupt despite existing for many decades in some cases. And the reason, was because the banks stopped lending when even $20k may have been enough to boost the working capital of an existing business to continue its operations. Because you see, working capital is not something you solve once you graduate from being a startup — it’s the thing you need to think about from the first day of starting the business and the last day of ending the business.
When I hear of a CEO who is hiring staff faster than the revenue growth of the business, I shake my head. When I hear of a person giving me advice on how to run my business about investing the businesses’s cash in a certain direction despite more short-term challenges being apparent — I dismiss them because they clearly have never had to *feel* the stress of the working capital burn. When I have people claim “profit” is bad even in non-profit organisations, I can only put my hands up in despair because they don’t understand that business has costs — many of them indirect — which you need to always be thinking about and building up the cash reserves on seemingly unrelated activities.
The working capital burn is a thing that all entrepreneurs that have experienced can relate to, and why they can connect despite decades between them in age and a world of difference in terms of what business they work on. And I have to admit, despite my six years of tertiary education and three years work experience to become a chartered accountant where working capital was just one of many accounting concepts I had to learn; it wasn’t until I started my own business that I *felt* the working capital burn and really understood it. Which is why before I can trust anyone in a position of authority for a business I run or a business I invest in, I look to see if they not only get working capital, but if they’ve felt the working capital burn before.
One of the StartupBus teams this year was interviewed by Y-combinator. They were turned down. Why? According to the team, it was because they were not a billion dollar company. This is something I’ve warned StartupBus teams before when they pitch investors so it doesn’t surprise me. But there’s a lesson here that I hope all entrepreneurs understand.
Professional investors are in the game to make money. Their motivation is to generate a multiple on the fund they have raised.
Why is that a problem you may ask?
Well, who cares if a company makes a billion dollars? Apparently from sounding cool that you built something like that up, as a founder, you will be so diluted through multiple rounds of funding that you will probably have a 5- 30% equity stake in the business, depending on how capital intensive the business is and how many co-founders you have.
A VC however, not only makes money on a billion dollar exit, but they get to brag about it to limited partners and to attract new entrepreneurs, which helps them raise new funds and get new deals. The way it works in venture capital is that it is all about the brand and communicating your successes. Any investor that doesn’t admit to not knowing what they are doing are full of shit. Because billion dollar exits come in two forms: entrepreneurs who successfully played a game to take advantage of the current market (ie, an acquisition today that had it not happened may not have become a sustainable business) or fundamentally disruptive businesses that no one saw coming. I can think of many examples of the above, but I’ll hold back as my knowledge of various companies are not mean to be public — however, all that matters is the point that billion dollar exits are either due to a confluence of market factors or a fundamentally disruptive business model. You can’t predict for that. Which is why the safest strategy, as an investor, is to back a proven entrepreneur who knows how to make opportunities like that happen.
While investors look for the 15 deals that generates 96% of the returns in a year, let’s bring this back to the entrepreneur only making $300m. Put another way, a billion dollar business is more like a $300m business for you financially speaking (assuming you have 30% of the entity, a best case scenario). But if you are a $300m business pitching a VC, you probably won’t meet the investors cost of capital (ie, their fund is $300m+) and so therefore they don’t get the returns to justify their capital. Putting that into context, a billion dollar startup that a founder has a 30% equity stake in and a $333m startup that a founder has a 90% equity stake in — is, financially speaking, the same. And what I mean by that, is the people who will make that “billion” dollars (the founders) will need to work three times harder for the same return…meaning by raising financing, the market problem that needs to be serviced needs to be three timeS bigger so that people sitting in the backseat (the investors) make just as much money out of it.
Which means absolutely nothing about the problem you are solving in the world. The fact the entire silicon valley ecosystem is influenced by the investor industry, at a time when the costs of doing a startup have dropped dramatically — is a misalignment that will change one day.
If an investor says your business isn’t biggest enough, it means 20% of your hard work isn’t high enough to meet their capital hurdle of providing a certain return to their limited partners which will impact the investors future fundraising. And sadly, this fact is lost on a lot of entrepreneurs who feel they need a sense of validation despite having identified a real market problem. Which ironically, I think is what separates the true disruptive entrepreneurs from the rest. They are the ones that say “fuck you, I’m going to make this work”. And they end up disapproving the assumptions the investors falsely asserted when rejecting the teams’ vision because fundamentally disruptive businesses are never obvious from the outset.
US immigration is a subject that all foreign entrepreneurs in the United States have lost quite a bit of sleep over. Over the years, I’ve spent days researching, talking to lawyers, listening to stories of survival — and despite solving my own situation, it’s still to this day something that sits at the back of my mind as I’m constantly counseling entrepreneurs with their own situations. The reason this is so hard is because the only way I could be an entrepreneur in the US (in the mould I wanted, which is a bootstrapping one), I needed to work for a US corporation and at night build my businesses: which is exactly what I did and how I did it (two years in the making). Its taken three years to get to a point where I can now focus on what inspired me to move to America: to build a big, global enterprise.
The entire startup visa movement frustrates me because it’s dependent on raising funding: I believe the best businesses bootstrap and raise funding when they actually need it. Hopefully this post can lead to a more productive dialogue in government policy, coming from someone that directly is impacted by all these discussions.
The US visa system has a few categories that entrepreneur’s can “hack” to make them legal.
H1B: this is the standard work visa that foreigner’s go on, with several variants like the E3 visa (which Australian’s uniquely get). Of the H1B’s, about 65,000 new visa’s are issued every year and most of the people that have them work for big corporations. To satisfy the requirements of the visa, you need to file a petition which means three separate advertisements go out in newspapers allowing American citizen’s to apply for the job — only if no one applies and accepted that the petition satisfied.
O1: awarded to individuals with extraordinary ability.
L1: Individuals who are executives, managers or staff of a US affiliate (ie, a multinational).
E1 and E2: A treaty visa only available to a few countries (ie, the next in line E3 mentioned above was due to the US-Australia free trade agreement), and which are the trader and investor visa respectively. With the E2, the rule of thumb is if you bring in about 100k of capital into the country…however, it’s more complicated than that. It’s the closest thing to a entrepreneur’s visa, but it has some difficult hurdles.
EB-5: This is a greencard (or permanent resident) which is probably the best type of visa for an entrepreneur as it gives them complete freedom. The catch? You need to bring $1 million into the country first.
Pretty much all the above employment-based visa’s (H1B, E3, L1) require three things. The first is that the foreigner needs to be paid above the prevailing wage for similar employees in that occupation and city. (The thinking here is that a foreigner needs to be paid more than local’s, so that firms are not motivated to hire cheap labour to the disadvantage of US citizens.)
The second is that the person satisfies educational and work experience. You need to have a US equivalent undergraduate degree or 12 years work experience (a year in college is calculcated as three’s in the workforce for every year of study) in the field you are working in. Actually, the L1 is exempt from this, which is why it’s the main alternative for people without degrees…though it comes with the challenge of an existing business in your home country that’s been operating for over a year.
The third is that a US firm is “sponsoring” you. Basically, what this means is you have a job offer.
This all sounds reasonable. right? The US should get to cherry pick well educated foreigner’s working at companies that have a real need and which won’t disadvantage US citizens. Yes, it should — but when you get into the details, this is when this system falls apart.
Problems with the visas
Did you know a fashion model can easily get a O1 if she has appeared in a few print magazines, but an entrepreneur has to basically have won a noble prize? I could write a book about the issues each of the above visa’s have, but I want to keep this post light as it’s a complicated subject.
The first big issue, is that the entire visa system biases established large corporations. To explain this point, I can share with you how hard it is to be a foreign startup employee by the simple requirement of being “sponsored”, which means you need to have a job waiting for you. If you’ve ever applied for a job, you’ll appreciate it’s not that easy…and if you live in another country, I can assure you, finding these jobs is even harder. Multi-nationals have professional departments where they can talk to overseas colleagues and get recommendations, but if you’re applying to work at a startup in the US you’re starting from scratch with the added communication barrier. You’ve basically got to come on “holiday” to the US and prove yourself in what is a cliquey community, so that a startup will hire you.
So why does it matter that the visa system biases the large corporation? Because startups breed startups themselves and are the best training ground for the next generation of entrepreneurs. Startups are not like normal businesses and founders are more selective about the people they hire, given how much risk there is. The extra effort of hiring someone from overseas (relocation costs, lawyer costs on visa’s, etc) only to find they are a dud, means it’s a bigger commitment to take on a foreigner. Again why is this relevant? Because making the visa process easier for startup employees, will indirectly lead to a lot more startups as foreigners tend to be a lot hungrier and research has shown a lot more entrepreneurial.
The second big issue is that you need to be paid a salary if you are to employ yourself in your business. Why is that a bad thing? Because it means I need to hire one less person. To work fulltime on my projects which have become two operationally independent businesses, I need to pay myself above the prevailing wage, which means I have to hire one less person that probably would free my time to grow the business.
The third issue is that it’s not practical. The E2 visa for example was designed for an industrial age, where you would take leases out on offices and invest money in capital expenditure on a store front. (In the information economy, the biggest expense are employees.) More problematic with the E2, is that you need to have an *already existing* business in the US, and of the $100,000 you need to invest in the economy (it’s more complicated than that, but it’s a good standard number), you need to have already *committed* to spending the cash. To rephrase this, you need to have already signed a lease to an office (which you can’t do without a credit history and operating history), spent a bunch of money, and THEN you will be eligible to get the visa. It’s a domino effect here, like the fact you can’t get a social security number without a visa, which means you can’t open a bank account, which means you can’t get US customers to pay you. And what business man would sign a 12 months lease during their three month “holiday” to show a commitment of funds, when they don’t even have the assurance they can let back into the country?
The fourth issue is that it limits the types of people that are eligible. I used to have a portfolio company (a dozen employees, over a million dollars in capital raised) that couldn’t keep their 19 year co-founder in the country and who’s making headlines in Silicon Valley with his work, simply because he doesn’t have a degree (and so it invalidates that important test for an employment visa). This makes perfect sense for employees who are resources to grow something, but for entrepreneurs that start something? They are the rebels. The college drop out mythology of Silicon Valley where companies like Dell, Facebook, and other household names led to the creation of billion dollar businesses is incompatible with the fact foreign entrepreneurs need to have a degree.
The reason visa law is such a problematic area is because US citizen’s view foreigner’s as stealing jobs, who in turn vote out politicians who are seen as not creating jobs for them. It also creates a risk where a new liability gets brought into the country, as residents can claim their share of social security which is already bankrupt. I totally understand that.
However, this is where there is a fundamental misunderstanding about the threat of foreigner’s and what they need. Using me as proof, this year, I’ve had three American citizens on my payroll and I plan to increase that as my cashflow grows. When it comes to entrepreneurs, all we really want is the freedom to operate in the United States. I quite happily will pay taxes and not get any rights to pensions, so long as I have the freedom to live in the US and start my businesses. What entrepreneur’s need is a self-employment visa, where they don’t need anything but themselves and time to create the value they are motivated by.
It really is simple to solve this: give entrepreneurs freedom to travel in the United States, to get into agreements, and to interact with the US economy. Require them to check in every so often to prove they are not secretly working at Burger King and using that money to party in Vegas. Restrict any rights to benefits (like social security) and have them pay taxes. And allow them to graduate into new visa’s (like a greencard) once certain milestones have been hit like revenue thresholds (tax paid) and employment (aggregate demand in the economy increases).
Immigration is so complicated that its taken me 1800 words to write this and I have only skirted the issues. But the solution is honestly simple: enable foreigner’s to generate wealth and jobs by removing the roadblocks. Give them freedom to operate, that’s it.
We no longer live in an isolated world and the freedom of the labor force to move around the world is one of the great benefits of globalisation. If the US can recognise that, it will remain the land of opportunity attracting the world’s best to continue America’s status in the world economy. But until then, I’m going to continue watching the sorry state of the US economy by politicians who are left with no option on how to get out of this mess and shutting the door on the very people who can help save America.
Last night I was at a dinner on a long table of accomplished entrepreneurs and some investors, having an open discussion about entrepreneurship with the guest of honour Kevin Rose. Among many discussion points, the question was asked to the table: what traits do you look for in a founder?
Before we get to that, let’s start with what does it actually mean to be an entrepreneur? Well, quite simply someone who organises resources to create a product that customers pay for. A lot of people have enterprising personalities and so could fall under this definition, but a successful entrepreneur in my eyes is someone who is able to make an income from a product they created (whether from cash flow or from investment). How much income, well that’s a personal question but the point is you’re making money because of you.
But what is it, from a DNA point of view, that makes someone a successful entrepreneur? Someone who takes on “risk”? Someone who is a generalist in their skills? Good at delegation? Yes and no: these are descriptive traits that don’t define the entrepreneur. I think there are actually two things that makes someone a successful entrepreneur, and both these points I learned by one of the most successful entrepreneur’s I know, Steve Outrim.
The first is thinking long term. At a table with people like Gower Smith, Sam Morgan, and several other accomplished people I’ve come to respect — Outrim asked the question on what was the single most important trait in success and he identified the ability to think long term as the key to his success, which everyone nodded in agreement.
The second nugget of wisdom, was shared earlier this year by Outrim at a house warming party to a few of us and he was insistent that was understood him. He pointed to his head: it’s the ability to not let anything affect you mentally. It was a point that took me some reflection to truly appreciate the implications of what he meant.
Think about that. Even if you don’t have your own business, let me help you relate.
On thinking long term, what do you plan to do with your life? For some of us, that freaks us out and for others we have a meticulous plan on what. Entrepreneurs think about their company and 10 years from now. A long term vision, with assumptions that need to get validated, which translate into activities today to enable those assumptions.
The emotional mind, is a tougher one to explain but something all true entrepreneurs will relate to more. As a point of comparison, imagine you are in a relationship and you have your heart broken: most of us have experienced that at some stage in our life. It’s horrible and like a gas that infects your thoughts that you can’t control. Likewise, the feeling of being in love (if you’ve truly experienced it) can uplift you in ways that words cannot explain. Both those highs and lows reflect your emotional self, what all normal human beings experience. Let’s call them “intense” thoughts.
For the entreprener, that experience happens on a daily basis: you start the day with your heart broken and you end the day on a high. Imagine going through intense thoughts every day for years at a time? Can you imagine what impact that has on a person?
Bravery, commitment, and intelligence (specifically, the ability to learn quickly) are three other traits that I think define a sucessful entrepreneur. But its the ability to think long term and deal with the demons in your head that I think separates the boys from the men.
Indeed, I believe the role of a CEO is very similar: my experience is that the best CEO’s think strategically into the long term, but also, have a strong emotional control of their mind. But a CEO is also a job.
Think about it as an employee, where you worry about your bonus or getting promoted. That anxiety is what entrepreneurs face, but from the other perspective: making sure there is enough cash in the bank to pay their staff bonuses and have them rewarded so they can keep them on deck. As an employee, you can face resentment if your expectations are not met; as a CEO founder, you could face jail time if you don’t manage expectations.
I will leave you with this one thought, which is how do you develop these two essential traits which are more than just skills but a state of mind. As Confusion says:
By three methods we may learn wisdom: first, by reflection, which is noblest; second, by imitation, which is easiest; and third, by experience, which is the most bitter.
Markus Moonie, the Swiss founder of Alakaboo (a vegetable photo sharing site), has announced that Facebook will be acquiring the startup he founded for an undisclosed amount. The two time entrepreneur who previously sold his first startup to the Non-profit Creative Commons, says he found Facebook to have a unique view and aligned passion for what he was building.
“Starting a business is hard. Creating a website with a ‘to be launched’ page, pivoting three times, feeling importance in being able to hire and fire people, and talking to investors who have no idea in picking the next big star but backed me because I’ve got good SEO on my blog and look like a good bet along with my Berkeley, D-Combinator, Creative Commons branding — means I have the right to talk like I know what I’m doing”. Moonie says that the decision to sell was based on what he thought was best for him, a refreshing change as most entrepreneurs are working to make their investors money and represents a nascent trend in how the power has shifted to entrepreneurs in today’s market.
Moonie considered the funding environment, which is going gangbusters — and what it would take to execute on his vision like an actual product that people want. He believes that it would make much more sense if he was to sell as a talent acquisition so that he can get name brand recognition of Facebook, the 2X tag that puts him on par with other entrepreneurs as successful, as well as stock options in a company that actually has a future. The fact he had no cash left in the bank and couldn’t raise additional money was a secondary consideration, according to Moonie.
We reached out for comment and Facebook declined to comment other than saying they will be shutting down Alakaboo, firing all the non-engineers in the team, and putting Moonie in a Operations manager role for a role that requires relationships with the Creative Commons and nothing to do with vegetable photo sharing. Once again, yet another win for Switzerland and D-Combinator, who produce title-but-not-substance ‘founder’ engineers and inspire the next generation of snake oil producers.
All names, entity’s, and events in this post are fictional.
…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.
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!
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.
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.
People often think I’m joking when I say I’m not successful. They perceive the jobs I’ve had, the education I’ve gone through, the media exposure I’ve generated, and other fake indicators of success as somehow meaning I’ve made it. Not quite, status symbols are not what I consider success.
If you’re not quite sure what I mean, let’s say you measure success on money — then how much is enough? Or for those that consider fame to be success — how many media mentions is enough?
A few months ago, I did my first ever meditation and came up with an amazing insight on some thoughts that had been stewing in my head. It was what I realised was *my* meaning to life — what I needed to be happy in life. Today, I Tweeted a summary version of that insight and have had several people retweet and favourite it, flagging to me that maybe my meaning to life is actually something that a lot of other people can relate to.
Success is when I can experience life fully (existence), can do whatever I want whenever (freedom), improving the world for others (impact).
So here it is my thought process; who knows maybe it can help you define your own success.
What’s the point of life if you can’t be alive to enjoy it? That one question should pretty much explain what I mean by this — and you can broaden this to mean more than that. For example, our mental health is just as important as our physical health — family is something we consider a chore, but I personally consider an emotional need. Good nutrition, regular excercise, a close connection with your family, good friends around you, being in control of the demons in your head: each of us can interpret our existence in different ways, but they all fundamentally point to the same fact that without your full and able self, there is no life.
When I went backpacking in 2005 for nine months, I would often start the day not knowing what country I would end up in. I was in between finishing my university degree and a guaranteed job at PricewaterhouseCoopers; I was living off my savings and had no need to work that year; and had complete freedom to do whatever I wanted whenever. I had never been happier.
Freedom to me is a relative term: personally, if I lost the functional use of all of my limbs or was convicted for a life in prison, I would die on the inside because my personality perceives those aspects for my life as essential to my freedom. That’s not to say I correctly perceive it, but that’s my own personal interpretation to freedom. And without drilling down into this any more with the many anecdotes to guide this insight for me, having creative control can be one of the most liberating experiences you will ever experience and can bestow on someone. I call that freedom.
If you drill into the psychology of great entrepreneurs, it’s not money or fame that drives them even though they may say it is. It’s the fact they are building something of value. We’re all like that — our self esteem benefits from knowing we’ve done something that improves our surrounding. That’s why charity is deep down such a selfish act: it makes us feel good.
Again, impact is different for different people that no one person has the right answer. For me, I’ve come to realise the impact I want to have on the world is something that improves the quality of life for us all in society. What that means, is something I’d rather save for when I do it and can look back but in essence I get extreme satisfaction that I’ve played a role that improves life on this planet by enabling the entrepreneurs and scientists who have the potential to do that.
The American forefathers may have not only already come up with this before me but put it much more eloquently. Life, Liberty and the pursuit of Happiness. Whatever you want to call it, it begs the big question: what does existence (life), freedom (liberty), and impact (pursuit of happiness) have to do with success? Money is not success. But income is: because that enables freedom. Fame is not success. But influence is: it enables you do perform the actions you believe ought to occur.
Success, like religion, should be a personal thing. There isn’t a right answer — but above, I believe is the framework that we can all apply to our own lives to think about what we want to do with our lives. Instead of thinking of what should you do, instead ask yourself — how can I exist more fully, have more freedom, and have a bigger impact with my being? This framework might not be the right one, but it’s a start to asking ourselves all the right questions that lead to the answer.
Several years ago, I considered someone “successful” because he had sold a business to a brand name technology company. Recently, I discovered he practically made no money from it. He’s still successful in my eyes, but when it comes to giving people advice on building a successful business I hold his opinion just as high as any other reasonably intelligent person — but no more.
This is a common issue for people living in Silicon Valley that they can relate to: Smart people that “sell” their company and become celebrated entrepreneurs. As a case in point Facebook has quite openly said they only acquire companies for the talent and not for the business itself. What this means is that the products the startup built isn’t the reason they exited; instead the value of the people in the business are what was acquired. If I was to start a solar company and buy expensive furniture — only to be “acquired” for the value of that furniture and nothing more, that’s not success; that’s just money being shuffled around.
I’ve been observing a trend where smart engineers think they are founders. They start a company, but they lack essential skills that makes the startup gradate to a sustainable business: which is what the entire point is for a startup (the search of a business model, which it can then execute on). These smart engineers are smart engineers — but they are not founders. And because there is a talent crunch, these companies will get “acquired” and be considered a success, distorting the story that will inspire and help future entrepreneurs.
A ponzi scheme built on snake oil
If a company is acquired before it generates positive cash flow or even revenue, it means what they build wasn’t a success in the context of “let’s copy that model”. As to why they were acquired, there could be multiple reasons: talent acquisitions are just one example, but there could be strategic value in acquiring a company as it complements the acquiring company’s existing product line. A product is a solution to a problem, and often people build great technology that is better classed as a feature. An acquisition gives these feature driven technologies a fake sense of validation. It’s a ponzi scheme.
Economically, this ponzi scheme doesn’t hurt so there is no need to regulate it: these founders cash out something and the company that acquires them can likely absorb the losses. In fact, the maturity of the information technology industry now has allowed for outsourced innovation which I think is a great thing. (Innovating in a big company is practically impossible if you ever meet someone who has lived to tell the tale, and now Silicon Valley giants can acquire disruptive innovation rather than solely relying on it to be generated internally.) But it also creates a fake understanding of what success is. An externality of this are small ideas and nothing game changing, the higher calling for those that can change our world.
A true measure of success
I’ve come to realise that the only metric that matters in business is cash. Not revenues, not number of employees — but cash that sits in the bank and the inflow of it that will grow it. I get nervous when I see companies hire ahead of their revenue growth and skeptical of companies that boast about revenue but sugar coat their margins. Cash is king, and any evaluation of a business is useless without understanding its cash position.
Which leads to why the ultimate goal of a startup is to be able to generate enough cash from customers so that it can fund its operations. You may want to change the world and that’s an honourable goal for a startup — but if you are not sustainable, you’re not going to last long enough to have that impact.
When we hear about smart people selling their companies, stop to ask are they really successful? Technology allows us to automate processes, but this simply allows us to scale operations due to reduced cost. But scalability is irrelevant in the same way revenue is irrelevant for a professional services firm that relies on the hourly input of its staff. If you’ve built something that improves society, while at the same time return increasing profits despite a constant investment — you’re a success and you should be ranked according to the fundamental value of the asset you build. And if you sell your company for whatever reason, you’re still a success: just don’t go around rubbing that snake oil in people eyes, because that’s not the medicine we need to foster the next generation of great businesses.
Michael Arrington has written about the current bubble in Silicon Valley: the angel investor. He suggests a war is occurring with this new class of investor, and that entrepreneurs need to pick their faction. I don’t doubt the politics is real, and I’m sure it exists between the angels themselves – let’s hope they realise that united they stand, but divided they will all fall.
But I think this “conflict” is really about a change in times. Much like how the traditional gatekeepers of information – the newspaper industry – are battling the process-journalism innovators that we call ‘bloggers’. (Like, ahem, TechCrunch.) No one appointed the Venture Capital industry as the gatekeeper for technology innovation, which is similar to the arrogance of the newspapers that think they ‘own’ the news and deserve special protection because of it. Maybe these over-sized funds should take a lesson from the newspapers and realise the times have changed and their model needs to change as well.
But where I differ with Arrington’s perspective is his prognosis that this is bad for innovation. Conflating this with ‘bigger ideas not getting funded’ is wrong. The point is, is that more innovation can get funded, more veterans are being developed, and more value is being created in the long run. This should be analysed not by the growth of a single tree, but the overall development of the entire forest.
We need more seed-accelerators, more super-angels, and more incubators – because inevitably, it will lead to more startups. And whilst not all will hit a home run, the odds of ‘the next big idea’ happening will improve dramatically.