This was recently published in Techcrunch. It is so good that I felt like sticking the whole article here but that would be really unfair to the writer and ofcource Techcrunch would be really mad at me so I’m just giving you a little something. Click on the link provided to go through the whole deal. This is really good stuff.
James Altucher is an investor, programmer, author, and several-times entrepreneur. His latest book, “Choose Yourself!” (foreword by Dick Costolo, CEO of Twitter) came out on June 3. Follow him on Twitter @jaltucher.
This is going be a bullet FAQ on starting a business. No joke. If you’re a lawyer, feel free to disagree with me, so you can charge someone your BS fees to give the same advice. If you can think of anything to add, please do so. I might be missing things. If you want to argue with me, feel free. I might be wrong on any of the items below.
There are many types of business. Depending on your business, some of these won’t apply. All of these questions come from questions I’ve been asked.
The rules are: I’m going to give no explanations. Just listen to me.
1) C Corp or S Corp or LLC?
C-Corp if you ever want to take on investors or sell to another company.
2) What state should you incorporate in?
3) Should founders vest?
Yes, over a period of four years. On any change of control the vesting speeds up.
4) Should you go for venture capital money?
First build a product, then get a customer, then get friends-and-family money (or money from revenues which is cheapest of all) and then think about raising money. But only then. Don’t be an amateur.
5) Should you patent your idea?
Get customers first. Patent later. Don’t talk to lawyers until the last possible moment.
6) Should you require venture capitalists to sign NDAs?
No. Nobody is going to steal your idea.
7) How much equity should you give a partner?
Divide things up into these categories: manage the company; raise the money; had the idea; brings in the revenues; built the product (or performs the services). Divide up in equal portions.
8) Should you have a technical co-founder if you are not technical?
No. If you don’t already have a technical co-founder you can always outsource technology and not give up equity.
9) Should you barter equity for services?
No. You get what you pay for.
10) How do you market your app?
Friends and then word of mouth.
11) Should you build a product?
Maybe. But first see if, manually, your product works. Then think about providing it as a service. Then productize the commonly used services. Too many people do this in reverse and then fail.
The article has 101 killer and logical points.
Read the full story at Techcrunch. Must read for all wannabe entrepreneurs.