Category : Entrepreneurship

Entrepreneurship

3 Ways We Got Screwed by Picking the Wrong Lawyers for Our First Startup

One of those oft-overlooked things that every startup needs is a lawyer. It doesn’t really gel with how startups think: everything we deal with, from new APIs to new companies, works in a super simple, user-friendly way. Law is complex, ugly, and old, and we are inclined to believe somebody should be working to “disrupt the law industry” too.

Once upon a time in 2012, for our first startup, we hired our friend to be our attorney. There were a few lawyers in our friend group, and a couple are very well-respected in New York. One of them does big corporate law, so I assumed I was in great hands when I hired him. I thanked him for taking on my fledgling business even though we didn’t have much money. My first mistake: I hired my friend to be our lawyer.

1. The Ousted Cofounder 

Paul Graham often says that 50% of startups fail because of cofounder disagreements; this nearly happened to us. Right after the check from our lead investor cleared, I started noticing some changes in my cofounder. I didn’t see any real work, the excuses began piling up, and I panicked. I brought on another dev friend on a temporary basis because I was afraid. A few weeks in, the new dev sent me a link that made my stomach turn: it was a Github commits graph, and it showed 0 commits from my original cofounder from the day our first check cleared to the present day, a period of nearly two months. My fears were confirmed.

I lost a lot of sleep that week. Should I fire my cofounder? I bit my nails to nothing. I shook nervously. I had my first real panic attack. I called our investors and they all said the same thing: the first guy needs to go. So I called up my attorney, and asked what the next steps were. He said the only option was to buy the shares. What?! Buy his shares?! I can’t afford that! I said. Why is there no provision in the Shareholder Agreement for this situation? You see, neither of the cofounders were on a vesting schedule. There was no way to simply “vote him out,” and it had been set up this way intentionally. My attorneys said this was to make sure our investor did not have majority control before our shares vested, and even though we asked for a vesting schedule, it never made it to the Shareholder Agreement.

To complicate matters further, we lived together, and I was not be able to terminate the lease without his consent. I ended up buying his shares for more than what was even in the company’s bank account at the time, with my own money. It sucked a lot.

2. Incorporating Outside of Delaware

It turns out that not every company in the US is incorporated in Delaware; many non-startup businesses incorporate in the state they’re from. We are incorporated in New York State. Literally every startup lawyer we have discussed this with has told us the same thing: this is really dumb. In a future financing round, we had to reincorporate in Delaware before we could close. It was expensive and time-consuming, because New York State has extra hoops for you to jump through if you want to leave. New York, I loved you, but you were breaking my heart.

3. The Check That Had to be Sent Back

The situation with our ousted cofounder severely delayed the next piece of investment we were expecting. It was corporate housekeeping that had to be finished before we could receive more capital. So after it was all cleared up, things seemed on track. An agreement was signed with our investor, the check was sent to our attorney’s office (seeing a theme here?) and then nothing. A week went by. I asked what was the matter, and my attorneys said that “regulations” prevented them from sending it. A full two weeks after they received the check, they wired the money back to our investor and they asked him to wire the money to us directly. How embarrassing.

Conclusion

When choosing a startup lawyer, fight the urge to hire a friend, somebody cheap, or somebody who doesn’t have any startups as clients. It sucks to have to spend a lot of money on something that isn’t directly growing your business, but the cost of choosing the wrong lawyers for us was surprisingly high. I am pleased to say that for this startup, we have amazing lawyers that are fast, incredibly knowledgeable, and have lots of startups as clients. We’ll never make the same mistake again.

Read More
Entrepreneurship

What We Learned from Tony Hsieh, Downtown Project, and VegasTechFund

I remember the day we stopped trying to move to Las Vegas. It feels strange to say that, because never in a million years would I have thought I’d ever want to move to Vegas in the first place. Tony Hsieh’s Vegas is a different beast altogether, however, than the glitz of casino lights on the strip. This was news to me as recently as 10 months ago, so I assume it is still news to a lot of people.

The Best Airbnb Hosts Ever

Let’s rewind to September of 2012. We were Airbnb hosting Justin from Airborne, the coolest dude from South Africa. It was his first time in the Bay Area so we wanted to show him some stuff he wouldn’t get a chance to see otherwise, namely, an Oakland Raiders game and Las Vegas (did I mention we are the best Airbnb hosts ever?)

After 3 days of the usual Vegas shenanigans, I sent a text on a whim to someone I’d met at Burning Man through one of our investors. He was apparently quite involved in the Las Vegas arts scene, and I was curious. I got a text back asking to meet at a place called The Beat at 9 AM the following morning, which came a lot quicker than I expected. Vegas.

At our 9 AM coffee meeting, I learned about Downtown Project and all the crazy projects that were happening in Vegas, including VegasTechFund, a new investment fund with a condition that you needed to relocate. My mind was pretty blown, because some of the initiatives sounded straight out of big cosmopolitan cities, and some were even pretty progressive by New York standards. I was implored to come back for First Friday, so we made plans to return in a month.

Our car Justice beside the Dusty Rabbit

The Email Intro

My Burning Man friend did an email intro to Andy White, a partner at VegasTechFund. VTF’s portfolio has some really great companies in it. And, interestingly, some of their investments are very “me-too,” that is, “I see a pretty thing in SF and want it here in Las Vegas.” I am a fan of this strategy.

Andy and I chatted a bit via e-mail, and he and hooked us up with Krissee Danger, our super-amazing tour guide/most enthusiastic person on earth. We read Delivering Happiness and got to brainstorming. My background is in publicity stunts, so this is often the lens through which I view things. This one was pretty epiphanic: “What if we built a speakeasy in a box truck?”

The team was jazzed and we made plans to build a speakeasy in a box truck as our First Friday contribution.

Let’s Meet Everybody 

Before you arrive in Vegas, you are emailed an itinerary. We were very strongly advised to go to every single event – we did. There are dinners, cocktail hours, happy hours, and tours, all with a vaguely North Korean vibe. If you are invited to visit Downtwon Vegas, I recommend meeting everybody. Everybody from DTP, everybody from VTF, everybody from Zappos, every funded startup, everybody from VFA, everybody.

Tony Hsieh Drinks Fernet Like a Boss

Tony Hsieh is universally described as being quiet and reserved. This is not true when he is drinking fernet, something we all tried for the first time in Vegas. It is often described as jägermeister mixed with Listerine. This is completely accurate.

 

The mockup

The Dusty Rabbit

Since Dustin had just joined the team, we nicknamed the box truck speakeasy, “The Dusty Rabbit.” Using some intel from our highly-placed friends, we determined that everybody whose attention we wanted was going to be at a SpaceX talk in some portables. We parked the truck immediately at the end of the ramp. Within minutes of the event’s end, Tony Hsieh, Will Young and Zach Ware were ordering cocktails in our box truck. That was pretty cool. We decided we had to bring it out for round 2 after First Friday. Here’s what happened:

Behind the Scenes of The Dusty Rabbit from Speakeasy.is on Vimeo.

The video was viewed 500 times, almost entirely by people in Las Vegas according to the analytics. It was a huge hit, and we thought we left a pretty good impression.

Our cease and desist from the NV DOH

(Except with the department of health, hah!)

The Third Trip

Our third trip to Vegas coincided with Halloween. No box truck this time, just a lot of meetings, strengthening connections, and generally trying to stay top-of mind. I gave a talk at The Jelly, the local downtown tech meetup. We also got to stay in the Ogden, which was pretty pimp. We were very pleased to hear we were advancing to “VegasTechFund Phase 3.” We recorded yet another video for this segment, and we were feeling like this was it, we’re in.

What Happened

Nothing.

We had another call with them and they said they were excited to see us after we launched.

So a couple months later, we launched.

Launch was amazing – 45 events in 3 cities simultaneously. Here’s a video:

Speakeasy Launch Weekend from Speakeasy.is on Vimeo.

We had a call scheduled with VegasTechFund 6 hours immediately after our last launch party (of 45) ended. I had picked up my rental car from a tow lot in Coney Island in the pouring rain and drove next to a Starbucks so I’d have wifi for the call. I reported our metrics and everything seemed on the right track. About a week later, we gave up.

Don’t Give Up

We did not give up because VegasTechFund said no. The last thing they said, actually, was “Come back with some more traction.” At that point, though, after thousands of dollars and huge amounts of time sunk into this mission, we decided we should cut our losses and focus our energy somewhere else. If we had kept at it, do I think we would have gotten in? Absolutely. But as an early-stage startup we have limited time and money, a couple more Vegas trips might have killed us.

We definitely drank the Kool-Aid (an expression that is used with alarming regularity in downtown Vegas), and we evangelize about Las Vegas to anybody who will listen. I can’t wait until the next time we get to check it out – I hear they have a bunch of shiny new toys. If you are looking to be part of an awesome community in the middle of the desert, downtown Vegas may be right for you.

Most importantly though, I learned that jumping through a bunch of hoops to prove you’re a good “community fit” is still not as important as what founders should really be focusing on – getting traction.

Follow us on Twitter Follow @getspeakeasy

Read More
Entrepreneurship

Do Things That Don’t Scale

image

Of all of the indispensable essays penned by Paul Graham, the one we are feeling the most is the latest one, Do Things That Don’t Scale. This is one of the things Y Combinator often tells their startups, and a piece of wisdom we have heard before:

In The First 1000 Days of Airbnb by Brian Chesky, Chesky tells the rollercoaster story of the company, from losing cofounders to sleeping on couches, to briefly becoming a cereal company around the time of the 2008 election. However, the most important part of the story is when Paul Graham asks the Airbnb founders where most of their customers are. They replied that they are mainly in New York and DC, and Paul Graham says, “Then what the hell are you still doing in Mountain View?!” and they booked a flight for the next morning. 

At that point, the founders went to New York and started selling their product literally door-to-door. They went to people’s houses and asked, “Do you know how much you could be making off this extra room?” 

That level of hands-on attention is not possible when you are a big company, but the point of “Do Things That Don’t Scale” is that as an early-stage startup, this is perhaps the best thing you could be doing, especially as a company building a marketplace product. 

This sometimes flies in the face of what engineers are naturally trained to do – they are often looking for some kind of technical solution for a human problem, and have a sort of built-in disdain for doing things like calling customers on the phone, or attentive hand-holding. However, these are possibly some of the most important things you could be doing as a young company, and it’s important to break the habit of email-and-text-only communication that has come to define our generation.

The best takeaway of the whole piece is this eternal quote: “Go out and manually recruit your early users, even if it seems tedious and inefficient.

Read More
Entrepreneurship

Speakeasy Presents at Vegas Jelly

Speakeasy @ Vegas Jelly November 1st 2012 from Get Speakeasy on Vimeo.

Last week we were honored to be invited to speak at Vegas Jelly, a weekly tech meetup in downtown Las Vegas about startups and entrepreneurship. The talks were quite varied and engaging, especially FandeavorBetaspring, Clickthrough TV and Ubiquita.

Instead of just pitching our product, I wanted to tell the story of how Newmindspace created a global event brand, how that spawned Speakeasy, and how fun helps build community. I didn’t get too deep into the citybuilding part this time, but perhaps I can deliver that to a less tech-oriented crowd at a later time – I hear the number of talks in downtown Vegas is about to increase dramatically.

Direct video link

Read More
Entrepreneurship

Advice to Canadian Entrepreneurs: Copy Bay Area Startups

by Kevin Bracken & Alex Gold 

Having lived in Toronto for many years, Canada is always top-of-mind for us. From a business perspective, Toronto is always looming in the distance as a huge market. It’s the fourth largest city in North America, is quite wealthy and diverse, and Canadians are some of the most wired people on the planet, so we’re willing to say it’s an even bigger city than Chicago in a way.

Despite the obviousness of Toronto being a massive market, it is sorely neglected when it comes to consumer startups trying to get traction. Most startups begin trying to get traction in the Bay Area, then expand to New York (or vice versa) and then a handful of top-tier American cities before they even think about Canada. (Or emigrate to Silicon Valley, like our friends at Couple.) As Alex says from time to time, “There have been numerous American startups that have entered the Canadian market to much success. Sometimes even greater than their homegrown counterparts.”

The fun fur market is underserved

This actually presents a Canadian entrepreneur with a unique opportunity: the ability to copy the business model of a popular SF startup that has no immediate plans to expand to Canada.

Lyft comes to mind as something that Toronto desperately needs, and a company that is going to expand into Toronto eventually, after they have tackled a bunch of second-tier American cities first. If a Toronto company can own the “unlicensed drivers with fun fur on the car grille” market, it is quite possible Lyft (or whoever wins the unlicensed driver space) will simply acquire the Toronto company to gain the traction they need. A good example of this is Airbnb’s acquisition spree following their Series D funding, including acquisition of London-based Crashpadder.

We would even go as far as saying there ought to be entire Canadian seed funds based around this concept: it’s good for Canada because Toronto, Montreal and Vancouver will get to play with new consumer tech earlier, and good for business, because it will present exit opportunities when these larger American startups raise massive later rounds or IPO.

If we were starting a new company in Toronto and weren’t sure exactly what problem we wanted to tackle, this is exactly what we would do.

Read More
1 2