Thread by @davidmullings

Here’s a little lesson in business registration for my US and Jamaican followers:

Most US companies are gusteres in Delaware because it has the most favourable laws for businesses AND “has a separate Court of Chancery to hear cases involving corporate law”

No corp taxes either

Just read this - delawareinc.com/blog/facebook-…

Jamaica is nothing like the USA.

I can register in a different state and do business across each state with certain registrations and/or licenses. The USA is a union of individual states.

Most entrepreneurs setup an S Corp or an LLC in their home state, mine is Florida (no personal income taxes so a pass-through entity is preferred and we have Homestead Exemption too).

But that is just at the startup phase to keep over head low.

When VCs or large investors get involved in companies, they usually REQUIRE that you create a parent company in Delaware and transfer all IP to it from your original company, signed new Employment, Noncompete and Non-solicitation Agreements with new C corp

You can either have the original company become a wholly-owned subsidiary or mothball it.

Mothballing has zero effect because you can revive the company in the future by just paying a fee for EACH YEAR it was inactive as well as an additional fee.

1 payment and it’s active

We know that @runliveapp was always going to need VC so it was setup in Delaware from day 1.

@mahoeblue was an experiment and figuring out product/market fit and now that we have it, plus major investors joining, we had to setup in Delaware as a C corp.

If you intend intend to raise money for your business, a C corp is much easier because you can issue different classes of shares AND VCs/professional investors DO NOT buy Common Stock.

They get Preferred Shares.

They get their money back BEFORE Common Stockholders

Also, they get special rights depending on the negotiated terms with the lead investor.

In addition, the founders often sign a new agreement that has their stock VESTING over some period, often 4-5 years.

Yes, you no longer own all that equity

This is because serious investors need founders that are aligned with their long-term interests and if you leave then you shouldn’t get to keep all the stock.

That’s standard practice.

If you have a co-founder but they leave 6 months after you raise money from investors, would it be fair for that person to get to keep 20% of the Common Stock while you have to keep building the company?

It protects founding teams too

When @runliveapp raised money from @leADsports I had to agree to 4 years of vesting.

However, my lawyer Nanette negotiated for some of our stock to vest IMMEDIATELY in order to reflect the work to date, over a year, and funds put in/raised to date.

Try that out.

If you check the Florida database I probably have 10 companies affiliated with my name, most mothballed, 2 killed for sure because we dissolved 1 of them.

We let @realvibez mothball & then brought it back when @RealReelvibez launched so that Kaiel could have access to US credit

I have a personal holding company with my wife owning 50% that owns everything I have my hand in.

It makes our taxes simpler (she really really hates our precious tax returns because they were a bit complex).

One day I’ll reveal the name in an article.

A few investors asked to own a piece of everything I was doing, not because they thought it was all awesome...

But because they wanted “100% of your time needs to be focused on NOT losing 100% of our money”

Funny but true.

That’s how investors think

That meant that anything that showed up in the media with me being affiliated needed to be creating value for my shareholders.

Everything.

No side projects or side gigs.

Blackstone was founded the same way when Prudential backed Schwartzman/Peterson

Read “King of Capital”

When you get an anchor investor aka a lead investor, you decide if you want to accept those terms.

In my case, I did.

They liked diversification and the fact that they were uncorrelated but synergistic and few required more capital.

They said that “one of them must work!”

In future @blackwalletorg articles I will share in detail how we went about finding investors for different ventures, how we negotiated terms, what was required and follow the stories via a #StartupDiary series that begins in March.

I’m here to help entrepreneurs

#business

The most overlooked thing by entrepreneurs is the actual operations that must take place - the legal documents, the contracts, the bank account.

Eduardo Saverin handled that for Mark Zuckerberg at the start. Sean Parker came in after.

That COO role is CRITICAL

Your idea is worthless without the right legal setup.

It’s worth little without the right team.

It’s worth a bit more without the right timing.

Good idea (not ORIGINAL IDEA) + Good Team + Good Timing + Good Location + A little Luck = HUGE potential

Each of those matters

Google was not the 1st search engine.

Ever heard of Excite, Infoseek, Yahoo, Altavista, AskJeeves?

Google also was not the first to do PPC.

Ever heard of Overture?

Google built a better mousetrap

Facebook was not the 1st social network.

Heard of Friendster? MySpace? Brno? Hi5?

Better mousetrap

Companies like Apple, Microsoft, Google, Facebook, Lyft, Airbnb and so on could never be founded and grow successfully in most other locations in the USA much less outside the USA.

Ecosystem matters - the ground you are going to be planted in

You need access to talent - yes that can be elsewhere (Eastern Europe and India especially)

But you need the right legal system and tax policies

You especially need RISK CAPITAL that isn’t fixated on private equity-style Discount Cash Flow (DCF) analysis

Most tech entrepreneurs in #Jamaica know quite well that few investors there are going to invest in a company with no clear business model or revenues and only take 20%.

That’s normal for American investors, especially angela.

It’s why Peter Thiel is a billionaire - Facebook

Thiel made more money from Facebook than selling PayPal bedore that.

He bet on the JOCKEY not the horse.

He mentored Mark and sponsored him by opening doors.

That is what angel investors are supposed to do.

Take calculated risk, help the jockey, trust the jockey

Tessera Venture Partners has co-invested in a deal with Thiel and we are excited to see what happens (no guarantees obviously) but that is what we need more of in the Caribbean, in Orlando and in other parts of the world.

Risk capital, sponsors, better legal systems for startups

The talent is sitting there. #Jamaica for example routinely places in the top 3 of the Microsoft Imagine Cup every year!

We win or place in the top for the International Business Plan Competition.

No VCs are coming there.

If we do, we are gonna make the founders do Delaware

Probably add a Barbados, St. Lucia or Cayman blocker too.

Depends on where the company plans to list or if it has no such plans.

The location matters more than entrepreneurs realize.

It’s not about growing where you are planted. It’s about planting yourself where you can grow

I get to both be an entrepreneur and an investor (hence why I’m called “the entrepreneurial investor”) and VCs also have to do fundraising.

It’s different but we pitch too. We go had in hand to investors too.

Can’t wait to share my experiences and knowledge on @blackwalletorg