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If I did another startup in Europe, I would incorporate in Delaware and raise US money from the get go. It's cool to see the YC terms borrowed directly, and ho

If I did another startup in Europe, I would incorporate in Delaware and raise US money from the get go. It's cool to see the YC terms borrowed directly, and hopefully that would be a shot across the bows of European investors. But to really give European founders leverage they need access to US valuations and terms. I think semi-philanthropic incubators like these could really help by guiding founders to form US entities or reincorporate as early as possible.

antupis 5y ago
yeah and then go after European engineering talent, try to get best of both worlds.
andy_ppp 5y ago
Yes same, even if I don’t get into YC I’ll be trying to raise on US terms. I’ve seen some really stupid startups in Europe end up with crazy dilution to the point where if they thought about it they’d realise they just had a job working for some rich people. US valuations are twice the amount for half the equity from what I’ve seen so why I wouldn’t do that rather than be screwed over I don’t know…
- 0xfaded 5y ago
  Make sure you incorporate in a form that US investors are comfortable with. Few investors are going to want to figure out what an ApS or GmH is just to make a seed investment in your tiny startup. It also gives tou better exit potential in the event of a M&A.
  - andy_ppp 5y ago
    I’ll probably do whatever Clerky tells me to, which is the service YC tells founders to use I believe…
inductive_magic 5y ago
From someone who hasn't interacted with the startup world much yet: what are some problems companies in Europe would have to deal with? What liberties are exclusive to the US? I'd imagine lots of complications of running a US-based company within Europe. I can't imagine moving to the US, and I'm sure that lots of smart people in the EU are in the same camp. At the same time, I'd be very interested in providing high value to and being part of a company with the velocity and dynamics of a start-up -- I just wouldn't move to the US to pursue the opportunity, as in: I'd not even consider it below ridiculous/unrealistic pay.
- dmitriid 5y ago
  > what are some problems companies in Europe would have to deal with? What liberties are exclusive to the US? 1. Market US: a rather unified single English-speaking market of 300 million people. EU: 27 different markets in the EU + half a dozen markets in countries freely associated with the EU (e.g. Norway and Switzerland) in different languages, cultures and expectations 2. Money US: unlimited unchecked runaway money. All the "unicorns" we keep hearing about can easily lose hundreds of millions and even billions dollars a year for decades, and still considered a success EU: less money, and you are expected to actually turn a profit at some point
  - danijelb 5y ago
    I don't think that the 27+ EU markets are a problem. I'm not even sure if there are 27+ different markets in the EU in the context of startups/tech, because if there were then each country would have their own isolated tech ecosystem which is not the case. Most EU countries are dominated by US tech companies. If different cultures and languages are not a problem for US startups in spreading to Europe I fail to see why it would be a problem for EU companies
    - oblio 5y ago
      You're missing the bigger picture. US startups <<grow>> in the US, the huge single market with a single language, then once they're big and can tackle the bureaucracy in order to get to the huge chunks of cash also available in Europe, they <<move>> into the EU. A not-so-huge startup by US standards can have hundreds of millions of dollars very early in its life, allowing it to switch to international expansion, while most of the equivalent EU startup would probably raise tens of millions by the same stage, if they're lucky.
L_226 5y ago
I am doing this right now, Stripe Atlas Delaware C-corp but operating in Germany. I could have incorporated a GmbH for €25,000 (goes into an account to act as collateral against future liability) - which uses all my savings basically, or a UG for €1 - but then I can't add other shareholders until I pay an additional €25k to convert it to a GmbH. For my startup, which is capital intensive, I have no choice but to use the US system.
- tluyben2 5y ago
  London could work depending on your business. Hope you involved an international tax lawyer; there can be a lot of issues with the German taxes in this setup if you did not do this carefully.
  - L_226 5y ago
    London probably won't work for me. I have not pulled the trigger yet, tbh I am less worried about German taxes than I am running a C Corp from outside the US. Mainly because of the litigation heavy US culture, opaque paperwork overhead etc.
    - hkt 5y ago
      Why not Estonia? Their digital e-residency stuff sounds great and their laws (including tax laws) seem pretty business friendly.
      - L_226 5y ago
        I have the e-residence, however from what I understand I still need to pay a local resident to act on my behalf for all company matters. Probably OK for a bootstrapped SaaS but I need to raise significant capital and want to make that process as streamlined as possible.
    - tluyben2 5y ago
      The problem with taxes and capital and incorporation is that usually fixing it beforehand is easy while after you start to make money, you are perhaps too late. We went for London because not as litigious, light on paperwork, cheap to incorporate and there is a lot of money slushing around. Not America sized investments but close enough. And easy ramp to the US if you wish. Taxes are quite high once money starts poring in but it is startup and investor friendly pre money.
macco 5y ago
This sounds interesting. Are there any prominent European startups who did go that route? Would you like to write a blog post about it?
znpy 5y ago
Depending on where you’re doing that and your nationality and fiscal residence, that might be illegal.
- Luc 5y ago
  Surely not? Could you name a specific combination of those 3 factors that make it illegal?
  - znpy 5y ago
    Italy, being Italian, not being fiscally resident somewhere else for more than six months. Esterovestizione is the specific term for that kind of fiscal crime.
    - Luc 5y ago
      Esterovestizione = "The fictitious location abroad of the residence of a person who lives or works in Italy, in order to enjoy a more advantageous tax regime." Yes, that is fraud. But one can do it legally by not lying about ones residence and paying taxes locally. It's complicated, so accountants will love you, but it's not illegal as far as I know.

antupis 5y ago

yeah and then go after European engineering talent, try to get best of both worlds.

andy_ppp 5y ago

Yes same, even if I don’t get into YC I’ll be trying to raise on US terms. I’ve seen some really stupid startups in Europe end up with crazy dilution to the point where if they thought about it they’d realise they just had a job working for some rich people. US valuations are twice the amount for half the equity from what I’ve seen so why I wouldn’t do that rather than be screwed over I don’t know…

0xfaded 5y ago
Make sure you incorporate in a form that US investors are comfortable with. Few investors are going to want to figure out what an ApS or GmH is just to make a seed investment in your tiny startup. It also gives tou better exit potential in the event of a M&A.
- andy_ppp 5y ago
  I’ll probably do whatever Clerky tells me to, which is the service YC tells founders to use I believe…

inductive_magic 5y ago

From someone who hasn't interacted with the startup world much yet: what are some problems companies in Europe would have to deal with? What liberties are exclusive to the US? I'd imagine lots of complications of running a US-based company within Europe. I can't imagine moving to the US, and I'm sure that lots of smart people in the EU are in the same camp. At the same time, I'd be very interested in providing high value to and being part of a company with the velocity and dynamics of a start-up -- I just wouldn't move to the US to pursue the opportunity, as in: I'd not even consider it below ridiculous/unrealistic pay.

dmitriid 5y ago
> what are some problems companies in Europe would have to deal with? What liberties are exclusive to the US? 1. Market US: a rather unified single English-speaking market of 300 million people. EU: 27 different markets in the EU + half a dozen markets in countries freely associated with the EU (e.g. Norway and Switzerland) in different languages, cultures and expectations 2. Money US: unlimited unchecked runaway money. All the "unicorns" we keep hearing about can easily lose hundreds of millions and even billions dollars a year for decades, and still considered a success EU: less money, and you are expected to actually turn a profit at some point
- danijelb 5y ago
  I don't think that the 27+ EU markets are a problem. I'm not even sure if there are 27+ different markets in the EU in the context of startups/tech, because if there were then each country would have their own isolated tech ecosystem which is not the case. Most EU countries are dominated by US tech companies. If different cultures and languages are not a problem for US startups in spreading to Europe I fail to see why it would be a problem for EU companies
  - oblio 5y ago
    You're missing the bigger picture. US startups <<grow>> in the US, the huge single market with a single language, then once they're big and can tackle the bureaucracy in order to get to the huge chunks of cash also available in Europe, they <<move>> into the EU. A not-so-huge startup by US standards can have hundreds of millions of dollars very early in its life, allowing it to switch to international expansion, while most of the equivalent EU startup would probably raise tens of millions by the same stage, if they're lucky.

L_226 5y ago

I am doing this right now, Stripe Atlas Delaware C-corp but operating in Germany. I could have incorporated a GmbH for €25,000 (goes into an account to act as collateral against future liability) - which uses all my savings basically, or a UG for €1 - but then I can't add other shareholders until I pay an additional €25k to convert it to a GmbH. For my startup, which is capital intensive, I have no choice but to use the US system.

tluyben2 5y ago
London could work depending on your business. Hope you involved an international tax lawyer; there can be a lot of issues with the German taxes in this setup if you did not do this carefully.
- L_226 5y ago
  London probably won't work for me. I have not pulled the trigger yet, tbh I am less worried about German taxes than I am running a C Corp from outside the US. Mainly because of the litigation heavy US culture, opaque paperwork overhead etc.
  - hkt 5y ago
    Why not Estonia? Their digital e-residency stuff sounds great and their laws (including tax laws) seem pretty business friendly.
    - L_226 5y ago
      I have the e-residence, however from what I understand I still need to pay a local resident to act on my behalf for all company matters. Probably OK for a bootstrapped SaaS but I need to raise significant capital and want to make that process as streamlined as possible.
  - tluyben2 5y ago
    The problem with taxes and capital and incorporation is that usually fixing it beforehand is easy while after you start to make money, you are perhaps too late. We went for London because not as litigious, light on paperwork, cheap to incorporate and there is a lot of money slushing around. Not America sized investments but close enough. And easy ramp to the US if you wish. Taxes are quite high once money starts poring in but it is startup and investor friendly pre money.

macco 5y ago

This sounds interesting. Are there any prominent European startups who did go that route? Would you like to write a blog post about it?

znpy 5y ago

Depending on where you’re doing that and your nationality and fiscal residence, that might be illegal.

Luc 5y ago
Surely not? Could you name a specific combination of those 3 factors that make it illegal?
- znpy 5y ago
  Italy, being Italian, not being fiscally resident somewhere else for more than six months. Esterovestizione is the specific term for that kind of fiscal crime.
  - Luc 5y ago
    Esterovestizione = "The fictitious location abroad of the residence of a person who lives or works in Italy, in order to enjoy a more advantageous tax regime." Yes, that is fraud. But one can do it legally by not lying about ones residence and paying taxes locally. It's complicated, so accountants will love you, but it's not illegal as far as I know.