Life as a Startup #2 – 7 Steps to Establishing Your Startup
Founding a startup company has easily been the most terrifying, stressful, exhausting, most incredible experience of my life. In October 2013, I made the decision to leave my job and pursue my dream of becoming an entrepreneur, launching an education software startup. I have learned a lot on my journey so far, made a ton of mistakes, met some incredible people, and hurdled countless obstacles. Ever wonder what it’s like to start a company? Join me on the highs and (many, many) lows in the Life as a Startup.
The Hidden Hassles When Launching A Startup
One thing that I rarely seem to hear in discussions about launching a startup is the crazy legal process involved. Having no traditional business background or degree, most of this stuff was completely foreign to me when I set out to launch my company. Luckily, we have the Internet to turn to for our questions, but doing searches on how to launch a company only left me with deeper, more complex questions. Should I register as an LLC or a Corporation? How do I report this on my taxes? Do I need to get copyrights/trademarks/patents? Once you have your great idea and you’re ready to get started, where do you go next?
The short answer is, you’re most likely going legal advice. There are online resources like Legal Zoom that will save you some money once you’re ready to establish your company, but it’s definitely worth the time and possible money to get some personal mentoring on what options are best for you. I was fortunate enough to stumble upon the S.C.O.R.E. organization, which provides free mentors that have significant business experience. While the two mentors I met with didn’t have direct involvement with the education technology field, they were able to school me in some basic business knowledge and referred me to a lawyer in the area that worked with startups. Since I was referred by S.C.O.R.E., I received a reduced fee, and was advised to set up an LLC. I also highly recommend talking to an accountant as well, as mine was able to explain how an LLC would affect my taxes.
I am in no way a legal authority on these matters, but from my experience, here are the 7 steps you’ll have to take to establish your startup:
- You have your idea, and it’s awesome! You may not have all of the details worked out just yet, but you should start to develop your business plan. This doesn’t have to be something that is super official at this point. Start by writing down the basics – What is the story behind this product? What problem does it seek to address? Who is the target user for this product? How does it solve the problem and how will people’s lives ultimately be better by using your product? Starting to write these answers down now will help you fill out legal documents and create a formal business plan once it’s time to pitch your idea and talk to potential investors.
- Come up with a name for your startup. I hopelessly lack creativity when it comes to thinking of names for ideas and products. What I have found is most useful is to gather together anyone working with you on the idea, and possibly a couple of other close friends/colleagues that you trust (3-6 people should be fine). Order up a pizza and spend a couple hours discussing the questions above and try to capture the essence of the idea in the name. Use a white board and write down everything you come up with. There are no bad ideas at this point! Try mashing together a couple of words if you need to, and come up with your top few choices.
- Google the hell out of the name. The more unique idea, the better, but most importantly, make sure no one else is using that name. You want your idea to come to the top of searches once you have your site set up. Also, be sure to search domain names (at the very least, both .com and .org should be available), the copyright database, the trademark database, and social media sites to make sure your name isn’t taken. Check to see what has a similar name to your idea as well. (It may be a good idea to run the name by some potential future users to get their impressions as well. I’ll cover customer validation techniques in a future post.) Once you’ve cleared your name past all of these, you’re good to go!
- Establish your startup!! Whether it is an LLC, Corporation, or another option, you’ll need register your company with the proper State/Federal agencies. Again, I would seek some legal advice to figure out what is best for you and for assistance in filling out all of the paperwork. Alternatively, use a service like Legal Zoom to streamline the process.
- If you’re going to be hiring employees, you’ll need an Employer Identification Number (EIN) and insurance. So far, I have brought on my programmers and graphic artists as consultants, so this hasn’t been necessary for me (Make sure you get invoiced for their work for your tax records!). Either way, it is worth seeking legal help with drawing up a contract template for work that anyone will be doing for you to protect you and your idea.
- If you’re starting the company with other people, establish how much equity in the company each founder will own. This can be a tricky conversation, especially if you’re starting a company with friends, but trust me, this should be established early. Equity share can change over time, but consider how much time, money, and resources each person is contributing in this process. This should be drawn up in a legal document as well. I’ve heard stories of how not having this conversation early enough can lead to some heated battles down the road.
- Buy the domain names, file for copyrights and trademarks, and register social media accounts for your startup.
And there you have it! You have just established your very own startup! Woohoo!! It will take a bit of work and planning, some meetings, and a little money (should be under $2,000, give or take) to get you started. The knowledge on this list took me weeks, if not months, to figure out, so hopefully this will save you a good chunk of time. Once I got through this process, Stellar Learning Innovations was created, and ClassXP, the name of the software we had started creating, was copyrighted and trademarked.
Research and take advantage of free and reduced cost resources aimed to help startups.
This may seem like a really obvious thing to point out, but from my experience, it’s surprisingly difficult to actually locate these resources, at least it was for me here in Connecticut. I’ve found that Connecticut is a vacuum for talent and resources, which tend to move towards New York City and Boston, but it’s worth the time and effort involved to locate what’s available. S.C.O.R.E. was a fantastic resource to get me some basic business advice, and it was all for free. Since then, I found other organizations, like the State funded Connecticut Innovations and CTNEXT, that also provide free counseling and advice to startups. States want startups to continue to be established and grown locally, so I’m sure there are similar organizations in other states that can help you as well. Through some networking, I have even found some lawyers that do pro bono work with startups. In the long run, spending the time to locate these resources will save money, expand your knowledge and grow your network.
Did I miss something on my list? Have your own startup story or advice to share? Feel free to send your comments and thoughts to me directly at email@example.com.