The company, #4 Entrepreneurial journey
Previous episode, #3 The Design: https://medium.com/travelerapps/the-design-3-entrepreneurial-journey-7fe5c693af20
In order to launch a proper startup, you need a company. I came back from Hong Kong the 23rd of December, and after Christmas, a week of vacation and New Year Eve, I went back on working on the app.
My plan was to open a company called a SAS in France, meaning it is an equity-backed company, but the simplified version of it. This the most used legal form to launch a startup in France. The reason is that it allows great flexibility and freedom in defining the articles of the company (for decision making among the shareholders etc.).
I had quotations from developers to develop the app. It was ranging from 3000 to 20000 euros. I obviously didn’t have the money myself.
And I didn’t want to go see investors already, because I wanted a proof of concept to show to potential investors. So I had to find money to finance the development of the app.
I decided to use love money (money from friends, family etc.). I convinced one of my friend back in Hong Kong to invest in it. Because he liked the concept and identified himself as a potential user of the app, he agreed on investing 1500 euros.
I talked to my older brother, who has been a great advisor so far, and who already offered me to help me financially speaking. He decided to invest 1500 euros.
My father invested 1000 euros. My mother 500 euros. All of this accounted for 4500 euros. I put 1500 euros more (after the first 2000 euros for the design, that I managed to pay back using my first client’s money from Cloud Enterprise).
During a lunch with close friends, I showed them the design, explained the concept, and one of them decided to put 1500 euros.
I raised 9500 euros in total, 2000 euros of which were already gone in the design. I asked most of the love money I could use, and I had 7500 euros left to make something.
Your friends and family will always be your first supporters. Don’t even think about raising money from investors when you don’t have a proof of concept. You can of course start the networking, but the first money that you’ll have to start will come from your pocket, and from your friends and family who are crazy enough to follow you.
After raising this money, I had to officially incorporate the company. This journey lasted 2 months. First, I had to write the articles of the company, stating the right of each investor, how decisions are made, and what will happen in many scenarios, such as when an investor wants to sell his shares.
In order to write the articles of the company, I asked a friend of mine studying law to help me writing them down. I found a template online, copied it, adapted it, and asked my friend for advice. He helped me a lot.
Couple of days later, my mother called me, and told me she knew someone who knew a lawyer. I got in touch with him, and he helped us so much. Since he had the experience already, he identified parts of the articles which were weak, and gave us advices.
Finally, our company’s articles were good. Next step, the bank. I’m going to pass on this part. Same for the official company creation part. They are long, annoying, and I haven’t much advice about it.
I also called two accountants that my father knew. My issue was that I already spent money before the creation of the company (the 2000 euros for the design). And if you want to import this to the company, so that you get shares for it, you need to go through a special process which is costly.
So instead, I lowered the amount of the company’s share capital from 9500 to 500 euros. The rest of the money was sent to the company’s bank account as a debt. I did this so that I could keep majority on the 500 euros. I only brought 310 euros in cash, and had majority. This wouldn’t have been possible if everyone brought between 500 and 1500 euros, and I could only bring the last 1500 euros that I had (still because of the 2000 euros I spent already on the design). I would have given away majority straight at the beginning.
You see here, I got free help from two accountants and a lawyer. It is very important at the beginning to seek for free help. Don’t spend money on lawyers. Keep it to develop your product. Ask around in your network, and you will eventually find great help.
By April 2017, the company was officially created, and we were ready to rock! Creating the company cost us in total 300 euros, we had 7200 euros left.