How to open a company in the USA and attract investors: a step-by-step instruction
The topic of business in the United States and investment interests many and, at first glance, it seems to be a very difficult task - incorporation, lawyers, everything. The creator of the service short video Coub Anton GladkoborodovI tried on fingers to explain what and how to do.
In the early stage of investment, everything was already so simplified and regulated that it does not need lawyers and difficult negotiations. Everything was automated - there are a lot of online services for almost everything.
Where to register a company
If you plan to work outside Russia and attract money from American investors in the future, then the company must be registered in the USA.
American investors will not invest in companies incorporated in other countries. First of all, because they do not want to understand the laws of other countries. Russian investors, too, will not invest in companies registered in Russia (except for state funds, from which you should not take money).
How to register a company
There are several services that allow you to register a company in the United States. But I would choose Stripe atlas. Two weeks and $ 500 - and there will be a company with an account in Silicon Valley Bank. Fill in the form on the site and get a ready-made company at the exit. The second good option is Clerky. There are several other services if something does not suit you in these.
What is the legal part?
No need to invent anything in the legal design of the company. Do everything with standard conditions. Everything has been thought out a million times and well protects the founders even from each other.
Michael Sibel (CEO of Y Combinator) puts it: “Once again - go with Clerky or Stripe Atlas and they will set you down the correct path here. This stuff is very cookie cutter and doesn't require any innovation ”. (Take advantage of services Clerky or Stripe Atlas - they will prepare everything. No innovations are needed here).
Where to raise funds
I will say a commonplace - you need to attract in the Valley. There are many good investors in Russia, but most are bad. Bad are “non-standard conditions” (investors' rights) and “bad conditions” (little money for a larger share) and the first is worse than the second. I said above that it is not worth taking money from public funds, precisely because it will be “non-standard conditions”. There are still many other disadvantages, but this is the main one. About Russian investors, you can even write a separate post.
So, you will communicate with good investors in the Valley, and even if you don’t raise a round for some reason, you will at least distinguish between bad investors and good investors in Russia. There are more funds and money in the valley, so there are more chances to raise money.
How to look for investors
NFX launched Signal - This is the most convenient tool: you can see who can give an intro (watching your Gmail), what is the minimum, maximum and comfortable investment for an investor (which is very important). They immediately see who the person invested in. The disadvantages are that it appeared not so long ago and is only gaining momentum.
First, find the funds that have invested in projects like yours. If you think that you are unique and there are no projects similar to yours, then most likely you are an idiot. Of course, you have competitors. Investors will put you in your head on a certain shelf, and you must explain to them which one. If the desired shelf in their head does not exist, then they will not invest in you.
Now decide on how much you want to attract. This is a sowing round, so you need to aim at $ 300 thousand to $ 1,5 million. The maximum is $ 3,5– $ 4 million. All that is higher will be regarded as Round A, but everything is different. Accordingly, it is not necessary to add to your sheet those who invest large sums in the later rounds. You are interested in funds that invest up to $ 2 million, but the best is $ 100— $ 250 thousand.
Well, the third - location. We must look in what city they are.
Write yourself all in the plate with the priorities. You will kill a week for this.
- You have a list of investors. Now you have to spend time on each of them. Visit their website, carefully read their concept, then read about everyone in the team (we are only interested in partners). You have to understand who you are going to, what kind of people they are, how they look at investments, on projects. You are looking for partners for your company, this is important. Well, you can not come to the fund from the street, not knowing who they are. It's like getting a job at a company, not knowing what it does.
- After you find the right person that is right for you, go to LinkedIn.
- LinkedIn - the main tool in the search for investors. All investors use it. If the desired investor is not there, then hammer on him.
- We find the right person and see which of your friends can present it to you (by mail, of course, it makes no sense to write to LinkedIn). And here is the key point. You should have a lot of good friends on LinkedIn, and entrepreneurs.
- It should be understood that investors do not give intro to other investors - the question arises why they do not invest in you. But if an investor invests in you, then he will easily give an intro. Top-managers of companies are also meaningless, they are poorly connected with the world of investors.
- So the first thing you need to build a large circle of acquaintances among entrepreneurs. This is the main reason why accelerators are so useful. Come to the city and try to meet everyone you can, ask them to introduce you to others with whom you should get acquainted, and ask those who are next.
- Just one or two acquaintances - and the circle will expand exponentially. In two or four weeks, you can reach any person in the Valley (in other cities it also works, but in the Valley it is the main force; not investments, not institutions, but a huge number of entrepreneurs who are sincerely ready to help you). Well and most importantly - in the ass mitapy, only personal meetings.
- Now on LinkedIn with every person you need there is a connection. Ask him to introduce you, write a paragraph of text about your project in order to simplify his life - and hurray, you can make an appointment.
- Without an intro, your chances are close to zero. Investors believe (reasonably) that if you cannot find the intro, then it is not clear how you will continue to drag the company.
But still, I’ll say that it also makes sense to write to the cold (most people have postal addresses on the foundation site), if you are merged, then that's okay. Find the intro to the same person, and he will not remember you. Every good investor goes through up to 300 projects per month, and if you haven’t met with them, they don’t remember that.
I had cases when they poured me into a cold one, and then the intro to the same person turned into a good meeting. Separately, I will say that the very best top players remember everything and everyone, and they have everything written down, but I know only two such funds.
How to attract money
Dale made a major innovation in the field of early investment, coming up with SAFE. It stands for Simple agreement for future equity (simple agreement on the future share) and literally that means.
This is a paper in which you agree to issue shares to this investor in the next round. With the following conditions:
Discounted assessment in the round. In this case, it is not necessary to evaluate the company and bargain, just the investor will receive a discount on the cost. For example, you give him a discount in 20% (this is a big discount), for round A, the company's valuation becomes $ 20 million, and investors are issued shares valued at $ 16 million.
Or (more often) you agree on a cap. That is, the maximum value of the company when converting SAFE into shares. For example, you have agreed on a cap of $ 10 million. If in the next round you raise money below this estimate, the investor receives shares at a low estimate, and if more, the investor receives an estimate of $ 10 million. The investor does not risk anything here if you didn’t guess with the cost, then the envelope will be converted into shares at a lesser cost, if the cost is equal to the cap, you will guess if it’s higher, then this is already an income. The founders also risk nothing.
Sometimes an investor asks for a discount and cap - in the ass of such investors.
SAFE greatly simplifies the negotiations. It is necessary to agree on two things: the amount (this says the investor - how much you are willing to invest) and the cap (this is offered by you). Everything!
Do not make a convertible note, do not do price round (equity round). Convertible note is a lot of different, and it is necessary to attract lawyers, so as not to get later on hemorrhoids. If your investor wants a convertible note, then educate him about SAFE. In fact, SAFE is a convertible note without debt:
A convertible note is a debt, while a SAFE is a convertible note. It is a result that a SAFE does not.
(Convertible notes it is a duty as well SAFE - a convertible security that is not a debt. As a result convertible notes includes the interest rate and the repayment rate, and SAFE - not).
In the case of equity (that is, buying stocks at a certain rate), you also end up with legal hemorrhoids and time.
What share do we give?
It is important to understand that in the sowing round we give approximately 10-15% of the company, in rare cases - more (such as 20%). Everyone who asks, 30-50-70% are rogues. At the same time, we attract at least $ 300 thousand, and more likely $ 800 thousand - $ 1,2 million for this share.
Why investors take so little: if they own more than 50% of the company, then they have to manage it. They do not want to manage the company, they want to receive income on investments, to manage the company is a different business and other skills. They need the founders to be motivated. Another minority shareholders (those who own a small stake in the company) are better protected by a court (in America). As a result, if the investor is a majority shareholder (owns more than 50% of the company), then this is not an investor.
Investors can write off bad investments and deduct them from taxes (in America), which gives them more investment maneuver.
What is the assessment to attract
No matter how ridiculous, most investors do not know how to evaluate a company. Even if you are interesting to the investor, he will say that he will wait for the lead (the investor who will lead the round, that is, will invest a large amount and make an estimate). But in the case of SAFE, the lead can not be expected, and the investor should not be evaluated. You just have to say that you are raising through SAFE and you do not have to wait for the lead, it will remain to agree on a cap and that's it.
If you have a couple of investors right now who are waiting for the lead, then feel free to call them, arrange for a SAFE, and the money will be in your account tomorrow.
What cap call? In general, this follows from the previous paragraph: if we need to attract $ 500 thousand, then it is 10% of $ 5 million. So we call a cap of at least $ 3-4 million (of course, depends on the stage). With $ 5-6 million it will be easy enough to raise, with $ 8 million more difficult, $ 10-15 million is difficult, but realistic. It is necessary to raise small parts, that is, $ 25 thousand - this is a normal amount, but more convenient $ 100- $ 250 thousand.
I see no problems in appointing a different cap at different stages of raising money. You can raise as much as you want by amount and as much as you want. That is, after a year you can continue to raise the round. They raised $ 100 thousand - you are already living, and then they are still giving up.
Or if they raised $ 1 million in the sowing round, and after a while they need money again, and to open the round And it's too early for you, then you can still raise a little by SAFE. This is a very important plus, which gives you a free hand, unlike equity.
How to make out
No lawyers are needed for SAFE, everything is ready. You go to Clerky, enter into the standard documents the conditions you have agreed on (cap and discount), send them through Clerky to investors, they sign - and tomorrow you have money in your account. Just like that.
What to do if you are refused
You did an intro, you sent a pitch deck, or you immediately made an appointment. At the end of the meeting, be sure to ask what are the next steps. Good investors respond the next day or within a week (usually a meeting of partners once a week). While waiting for the answer, add everyone who was at the meeting on LinkedIn, you will need them again.
You received an answer and there are some encouraging words - and it seems to you that the fund already agrees, but in fact if it does not say that they agree to invest, then this is a failure. Once again: if you were told something different from "yes", it is a refusal.
If investors are asked to send a business plan, financial statements and other papers, most likely they will not invest in you. In general, if an investor is going to consider all this in order to give you $ 100 thousand, then this is at least strange. Of course, it is necessary to send it, but in fact it’s a failure, the probability of a positive outcome is minimal.
An associate appointment was made with you, not a partner, this is bad. Think of it as a reduction in conversion by 50% to a positive outcome, but it can still be positive. If the associate offered to call you and not to meet, then this is a failure at 90%. Phoned, practice pitching from any unusual side, but don't count on anything.
In the end - failure, give up. But do not worry much, remember that there are more investors than good startups. We must go to the following, it is a matter of conversion.
If you have bypassed 80 and no one is investing, this is a problem. Your task is to bypass at least 50, and better 100 investors. Of these, at least 5% invests in you (if you are not breaking the price and you are normal as people). The other day I was talking to a friend who raised a little more than $ 2 million from 22 investors. All 22 should have been a minimum!
After you have gone through everything, you have a huge amount of contacts. You can write to them about your success with the product, traction and other company successes. This may push them to still invest in you in the future. Feel free to do it. Feel free to ask their intro to portfolio companies. Let them remember you.
Hooray! You raised money
A good meeting - and they gave you $ 100 thousand. Send via Clerky for the SAFE signature and wait for the money. Sometimes from the meeting to the money on the account passes 3-5 hours. Then we go and bring everything to the service for maintaining the capable table - for example, in captable.io.
There are so many investors that you cannot help but raise a round - it is a matter of time. It is done so simply that even if you are afraid of paperwork, you need to do almost nothing. Do not need lawyers and other difficulties. No need to invent anything, everything is already known and standardized.
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