Now that TownSquared is an official corporation, I’ve had to go through all sorts of processes and forms to get things up and running.  I thought I’d share that process here in case others were curious.

First step is to get a tax ID from the IRS.  You do this with a SS-4 form, and it takes about 5 minutes to fill out.  With a tax ID number you’re able to open a bank account and start doing payroll and what not.

The next step is to choose a bank to bank with.  Silicon Valley Bank (SVB) is a pretty popular choice for startups because they don’t have any fees and they have a huge collection of services for both extremely small and extremely large companies.  I have heard of some startups banking with larger consumer banks, such as Citi, Chase, etc, but SVB seems to be the norm. From what I can tell, as long as you don’t get charged fees you’re good.  And of course, make sure whatever bank you choose will be able to support you as you grow.  For example, you’re not going to want the $5M from you series A to go into a checking account.

The founders also need to do 83(b) elections, which is basically a way to avoid getting taxed like crazy for the millions of shares you purchase for a very small amount of money.  Speaking of which, the founders need to write checks to the corporation to purchase their restricted stock that comes along with being a founder.

Lastly, something to be aware of, if you’re doing business in California (and probably other states, too), the founders will need to be paid minimum wage.  This usually doesn’t matter, but if founders don’t pay minimum wage and one of the founders gets asked to leave, they could technically sue the business because they didn’t get minimum wage.  From what I’ve heard litigation sucks.

What ends up happening is that founders will either not pay themselves and bank on the hope that they won’t get into a fight.  Or founders will give money to the company (via an official note) and pay themselves the California minimum wage.

Of course paying yourself means you’ll need to setup payroll, taxes, accounting, and all the other glorious things that I haven’t gotten around to yet.  I’ll write about them when I get there :).

Eric and I have been working out of his living room, for a little over two months now.  For most of those two months, we’ve worked together, just the two of us, taking breaks to be with our friends and loved ones, and to do the things that keep us sane (cycling, snowboarding, writing, etc.).  However, the last two weeks have been much different.  We’ve started spending time with other friends founding companies, which has inspired both of us and made us feel more comfortable.

The loneliness struggle applies to anyone who is self employed, working in an isolated space.  It’s a challenging part of working for yourself, and not for a company.  And it’s weird for those of us that have worked at companies for all of our career.  We’re not used to being alone.

Eric and I need to continue to get out of our “office” and meet other people in the startup ecosystem.  This is somewhat challenging, though, because so many startup meetups are completely over the top and not worth going to.  But we both have friends in the startup world, and we need to reach out to them more often.  To share anecdotes, war stories, technology decisions, etc.

The same thing goes with any of you who are self employed.  Get out of your office and hang out with people.  It’ll inspire you and remind you why you quit your job in the first place.  Validation from other people can be part of that light at the end of the tunnel.

Eric and I received the news yesterday that TownSquared, Inc. is an official corporation of the state of Delaware. The news was very exciting for the two of us, though the reality is that not much has changed.

At the state we’re at, incorporating really just means a bunch of paperwork and a big lawyer expense. Eric and I are both friends and trust each other, so we’ve never had concerns about one of us screwing over the other. Incorporating makes things formal, with well defined equity splits, board seats, etc. Incorporating also lets us issue NDAs and other formal documents on behalf of the company, and lets us have an officially place for all the intellectual property we create.

Don’t get me wrong, I’m very excited we’re official. But being officially incorporated is kinda like being official with your girlfriend or boyfriend — nothing day-to-day really changes.

Eric, my cofounder, and I have been having a debate lately about whether or not we should do our startup in New York or San Francisco.  I thought I’d share my first impressions, because Eric and I have had a significantly easier time getting meetings in New York than in San Francisco.  My impression so far is that San Francisco/Silicon Valley investors only want to talk to you if you’re raising a round.  Whereas New York investors are way more willing to talk to you, even if you’re not looking to raise money right away.

To give some background, my cofounder, Eric, wants to move to New York — he’s originally from the area.  I love San Francisco and want to stay here.  We’re not sure where we’ll end up yet, but we’re considering all possibilities.  Our product is at a point now where we can start having meaningful meetings with investors we may want to work with in the future.  We’re not looking to raise money yet, but we want to start building relationships and getting to know the investor landscape.

Eric and I have both been trying to get meetings.  So far, we haven’t had a single meeting in San Francisco/Silicon Valley, and we’ve had about six phone calls in New York, with even more meetings lined up for a trip we’re making in early February.

My impression is that San Francisco/Silicon Valley investors get way more incoming investment possibilities than New York investors, making for a more rushed and formal investment process.  In New York, the people we’ve spoken to are super excited to hear what we’re doing and super willing to make other introductions, even though they know we’re not looking to raise money.  Whereas in San Francisco and Silicon Valley, every person in my network I’ve asked to do an introduction has told me it’s too early.

I believe there’s a few things going on here.  First, I expect Eric and I come off as good people to bring to New York.  We’ve each spent our entire professional career in the Valley, and I expect the New York community would love to have more Valley people.  And second, all the meetings in the Valley that I’ve tried to get have been through extremely capable entrepreneurs that want me to avoid bad terms with an investor, urging me to wait as long as possible to get investment.

All said and done, Eric and I have lots of New York meetings lined up.  And we have zero lined up in San Francisco/Silicon Valley.  So far, New York is a better place to get investor introductions.  Not what you’d expect, right?

For those of you reading that are entrepreneurs, I’d love to hear your take.  I’m also open to any introductions you’d like to make ;).

A few friends have asked me what I do for health insurance.  I started doing COBRA, which lets you continue the health insurance from your previous employer at the same group rate your employer paid.  My bill was north of $400 for a PPO dental and health plan.  Way too much money.  After two or so months of COBRA, I kept my PPO dental plan because I have a tooth that still bothers me, and I dropped the PPO health plan in favor of an emergency plan, with a $5,000 deductible and a max coverage of $2M.  The new health plan is a little more than $100 a month, and is only there to help with health emergencies that would cost huge sums of money.  I found and purchased the new health plan through eHealthInsurance.com, which I’ve been happy with.

I’ve always had the dream of doing my own startup.  Little did I know that by pursuing that dream, ironically my dreams would begin to keep me up at night.

Background and Updates

My good friend Eric and I have been working on a website for a few months now.  Up until a few weeks ago all we had were three dudes writing code and a partial implementation of a website.  Eric and I believe that what we’re doing could be as big as Facebook, but thus far I’ve been hesitant to call what we’re doing a “startup” — we don’t have an office, we’re without salary, we haven’t launched a product yet, and we don’t have employees.  Although recently our “website” has begun to get far more serious.

First, we decided to hire a corporate lawyer to help us incorporate.  Originally a lawyer friend of mine was helping us in his free time, but he has so little free time that he wasn’t able to provide the service that we needed.  Our lawyer is an awesome dude and he’s great to work with, but lawyers are expensive.  The legal and incorporation fees will be the first major expense Eric and I will pay out of our pockets.  And it’s scary.

Furthermore, the third guy we were working with parted ways with us — the decision was mutual and the whole process was very sane.  (The third guy is probably the nicest, most selfless person I’ve ever met.  He’s an awesome dude and we’re sad to not be working with him anymore.)  Yet seeing work relationships develop and unfold is making our website feel pretty damn real.

And lastly, the product we’re building is very sophisticated in its simplicity, which is causing us to work for months on end with no product launch.  Not to mention Eric and I are new to Ruby on Rails.

Keep Going

This whole startup thing is really hard.  Not having a salary is stressful.  Paying for services out of pocket that enable the business is worrisome.  Cranking on a minimum viable product (MVP) of a sophisticated product that isn’t launched requires internal motivation and inspiration.  I’m not sleeping well, constantly thinking about technical problems that still need solving.  I’m writing this at 4am, after sleeping from 10am-midnight and working from midnight to 4am.

But it’s all worth it in the end.  Never have I felt so sure about what I’m doing with my career and professional life.  Eric and I are working together very well, and we’re having an awesome time.  Even if our product fails, I’ll have learned so much about myself by doing this that it’s all worth it.

What keeps me going, in addition to having a blast building the product and a dogma that what we’re doing will make peoples’ lives better, is remembering the time I spent sitting at a desk, with a job I knew wasn’t my passion — remembering what it feels like to be building someone else’s company, to be doing someone else’s work.  I’m putting myself through this insanely stressful process because it’s the price I need to pay to do what I love.  And it’s all worth it in the end.

I’ll close with a story from my 207 bike ride.  The sun was setting behing me as Keith and I descended into the evening after the last tough climb, Sierra Road.  I had been riding since 5am, climbed a total of about 18,000 vertical feet over several mountains, and traveled over 150 miles.  40 miles remained, I was cold, we rode through pitch darkness, our headlights the only light for as far as we could see.

Between my shivering I asked myself why I was doing this — why I signed up for this ridiculous bike ride.  The answer was because I could.

A passion in software usually starts with a job at the bottom of an organization, slaving over lines or code or mocks in Photoshop. Yet many of us long for moving up in an organization — we want to be leaders. We’re hungry for more responsibility. We want to make an impact. There will come a time when many of us at the bottom move up to the top. I’ll call this the transition. And success is gated by letting go.

Most leaders tell people what to do. They believe they’re right (smart leaders often are) and expect others to listen to them and follow their every command. I think I speak for everyone when I say that working for a micromanager is terrible. There’s basically nothing fun about it at all.  Working for a micromanager forces you to not think, to not do my best work, to not be excited about working, and to ultimately be unhappy with your job.  I’ve never met anyone that actually enjoyed working for a micromanager.

I don’t blame smart leaders for micromanaging. They’re in a leadership role because they’re smart. They probably know the right answers, which they then dictate to the rest of the team.  What I’ve explained is a completely natural tendency, which is why so many leaders are micromanagers.

Micromanaging makes a team only as smart as the leaders, and no more. Actually, it makes the team less smart than the leader. We all think differently, and when we’re forced to think like someone else we’re worse. Furthermore, micromanaging makes people unhappy because their responsibility and impact potential is completely removed from their job.

When someone smart makes the transition, they need to let go of their belief that they’re always right and challenge their team to do their best thinking. If a leader thinks they have all the answers and hopes for everyone to do as they’re told, people will be unhappy and far less productive. Let go of your intelligence and give your team the opportunity to be smart, to try things, to fail.  People do their best work when they’re given an opportunity to fail.

Letting go is no easy task. You think you’re smart and you’re probably right. But if you want to be a leader for the long run, where your employees are challenged everyday and absolutely happy because of it, you need to let go and pass the responsibility onto others. You need to build on debates with “yes, and” responses instead of “no, but” responses. And you need to trust your team.

The transition isn’t easy. But think back to the times when you were unhappy with your boss, where you wanted to be more responsible and impacting. Remember how you felt. And treat your employees how you wish you were treated then. If you fail at this your team will only be as smart as you (or probably less smart) and they won’t be excited to come to work every day.

In light of Steve Jobs, I want us to remember why we’re here today. Steve took a risk to start Apple, NeXT, and Pixar. Yet the risk and all the odds against him didn’t prevent him from achieving what was true in his heart.

During times of stress, worry, and fear, let us remember that we’re here because we’re following our hearts. Somehow it knows the way forward. We need to trust it, trust ourselves, and success, in whatever form it takes, will come.  We are different than other people because we believe in something bigger than ourselves.  We believe in something no one else truly understands.  And only by listening to our heart, by letting it guide us, can we grace the world with the creative beauty we all are capable of.  Throw away the status quo, the feedback of critics.  None of that matters.

Let us always remember this. Never forget why we’re here, why we’re taking this risk. We believe in something big. And that belief will guide us through hell and back, through endless lines of code, through constant torment from skeptics and competitors, to something beautiful and bigger than all of us.  Never forget this, no matter how dark times get.  Never let your creativity be shunned by anything.

Update: Fred Wilson has a nice farewell piece which compliments my post.

Steve Jobs passed away today.  He has always been an inspiration, but I could have never guessed how much impact his death would have on me.  I suppose it’s because all of us entrepreneurs dream to be like him.  We hope we can make an impact as drastic as his – that our crazy ideas and vision can one day become a reality and change the world like Apple’s products have done so today.

To remember Steve, I watched his Stanford commencement speech, which I’ve always enjoyed and taken inspiration from.  I suggest watching the video in full if you have the time.  If not, I’ve documented my favorite parts below, which are the principals that sit underneath everything amazing Steve has done for us.

You can’t connect the dots looking forward.  You can only connect them looking backwards.  You have to trust in something — your gut, life, karma, whatever.  Believing that the dots will connect down the road will give you the confidence to follow your heart even when it leads you off the well known path.

You’ve got to find what you love.  Your work is going to fill a large part of your life.  And the only way to be truly satisfied is to do what you believe is great work.  And the only way to do great work is to love what you do.  If you haven’t found it yet, keep looking.  And don’t settle.  As with all matters of the heart, you’ll know when you find [the right work]. Keep looking.  Don’t settle.

Our time is limited.  So don’t waste it living someone else’s life.  Don’t be trapped by dogma, which is living with the results of other people’s thinking.  Don’t let the noise of others’ opinions drown out your own inner voice.  Most important, have the courage to follow your heart and intuition.  They somehow already know what you truly want to become.  Everything else is secondary.

Stay hungry.  Stay foolish.