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How do people start up with less than $20K? That's barely enough to cover basic icorporation + lawyer + equipment + website graphic design. If you need to hire

by rorrr 15y ago

How do people start up with less than $20K? That's barely enough to cover basic icorporation + lawyer + equipment + website graphic design. If you need to hire somebody professional (like sales guys), what do you do?

emmett 15y ago
Incorporation is basically free because YC does it in bulk, and uses their own in-house lawyer for it. Equipment is free because all you really need is your own laptop and Amazon EC2. YC companies are usually started by hackers who don't outsource graphic design, or if they do they do it cheaply because they do much of the implementation themselves. The $20k goes mostly to living expenses for the summer. You're expected to raies further capital after that. (As a side note, thanks to Yuri Milner and StartFund, you now get easy access to an additional $150k, but I can say from experience that's far from necessary)
smiler 15y ago
Someone can correct me if I'm wrong, but I believe YC provide an in-house lawyer for incorporation etc. They're probably expecting people to provide their own equipment, every company gets offered free hosting and they can also take a further investment if they want it
idlewords 15y ago
$20K is a LOT of money. You can form an LLC for a hundred bucks, lease a server for another hundred, and do your own graphic design at the outset (or hire a student for a couple of hundred). To hire a sales guy, just use the money from all the sales that are taking up so much of your time you need to hire someone else to handle them. That comes a little bit later...
- Smirnoff 15y ago
  I wouldn't suggest creating an LLC. I think it's a standard practice to incorporate all Y-Comb companies.
  - tptacek 15y ago
    * LLCs are corporations. * My understanding is all YC companies are C-corps. * That's because LLC's and S-Corps have limitations on shareholders and share classes. * The C.W. is that any major external investor is going to rip up your corp structure no matter what you do. * It's almost certainly not the case that YC would turn town a promising team because they were already an LLC. The principals just need to unanimously agree to convert. * You should get some kind of limited liability structure ASAP when you start, because until you do, most/all of your company obligations attach themselves to your credit, your assets, your mortgage, &c. * Of the limited liability structures available to you, LLCs are the fastest and cheapest. S-Corp and C-Corp only change taxation and equity structure.
- rorrr 15y ago
  $20K is NOT a lot of money. Consider that hiring anybody will cost you at least $40K/year. Hiring a senior level programmer will cost you $130-180K/year (counting his salary, benefits, taxes, accounting, work place).
  - idlewords 15y ago
    And a large corporate HQ will cost you in the millions. You can pay for all of these things out of profits (or funding) once you've successfully built a product.
pbreit 15y ago
Part of the point of the small initial investment is to force companies to be thrifty and resourceful. At this stage you are not hiring salaried employees. You are compensating in equity, deferred payments, recognition, favors, etc.

by rorrr 15y ago

emmett 15y ago

Incorporation is basically free because YC does it in bulk, and uses their own in-house lawyer for it. Equipment is free because all you really need is your own laptop and Amazon EC2. YC companies are usually started by hackers who don't outsource graphic design, or if they do they do it cheaply because they do much of the implementation themselves. The $20k goes mostly to living expenses for the summer. You're expected to raies further capital after that. (As a side note, thanks to Yuri Milner and StartFund, you now get easy access to an additional $150k, but I can say from experience that's far from necessary)

smiler 15y ago

Someone can correct me if I'm wrong, but I believe YC provide an in-house lawyer for incorporation etc. They're probably expecting people to provide their own equipment, every company gets offered free hosting and they can also take a further investment if they want it

idlewords 15y ago

$20K is a LOT of money. You can form an LLC for a hundred bucks, lease a server for another hundred, and do your own graphic design at the outset (or hire a student for a couple of hundred). To hire a sales guy, just use the money from all the sales that are taking up so much of your time you need to hire someone else to handle them. That comes a little bit later...

Smirnoff 15y ago
I wouldn't suggest creating an LLC. I think it's a standard practice to incorporate all Y-Comb companies.
- tptacek 15y ago
  * LLCs are corporations. * My understanding is all YC companies are C-corps. * That's because LLC's and S-Corps have limitations on shareholders and share classes. * The C.W. is that any major external investor is going to rip up your corp structure no matter what you do. * It's almost certainly not the case that YC would turn town a promising team because they were already an LLC. The principals just need to unanimously agree to convert. * You should get some kind of limited liability structure ASAP when you start, because until you do, most/all of your company obligations attach themselves to your credit, your assets, your mortgage, &c. * Of the limited liability structures available to you, LLCs are the fastest and cheapest. S-Corp and C-Corp only change taxation and equity structure.
rorrr 15y ago
$20K is NOT a lot of money. Consider that hiring anybody will cost you at least $40K/year. Hiring a senior level programmer will cost you $130-180K/year (counting his salary, benefits, taxes, accounting, work place).
- idlewords 15y ago
  And a large corporate HQ will cost you in the millions. You can pay for all of these things out of profits (or funding) once you've successfully built a product.

pbreit 15y ago

Part of the point of the small initial investment is to force companies to be thrifty and resourceful. At this stage you are not hiring salaried employees. You are compensating in equity, deferred payments, recognition, favors, etc.