Friday, January 16, 2015

Startup Infrastructure

I get a lot of questions about the setup we had at Namo Media: "What did you use for accounting?", "How did you do payroll?", and so on.

As a startup founder, it's important that you get a lot of the startup infrastructure out of the way as quickly as possible. There's little time to waste while your angel or seed funding is ticking down. Cleaning up the mess later is costly and wasteful, so getting these right is important. Back at Xobni in 2007, we hired a full-time admin who managed payroll, catering, and so on, but in most cases you no longer need a dedicated person for these activities just after your first big round. The good news is that there are now all sorts of great tools to get the administrative work done. 

Keep in mind we were based in San Francisco. If you're elsewhere, these might not apply to you.

Lawyers: If you're starting a new company, this is the first thing you'll need. I could spend hours singing the praises of Trevor Knapp at Gunderson Dettmer. He helped me through both reMail and Namo Media - incorporation, term sheets, exits, the whole nine yards. He just made partner so his help is now pricey, but totally worth it. He won't waste your time and will have actionable and useful advice.

Bank account: This is the second thing you'll need. At Namo Media, used a Wells Fargo corporate checking account, as they had partnered with Founders Den and offered us a great deal. Wells Fargo has amazing service, but honestly, a run-of-the-mill small business checking account would have sufficed. At reMail I used Citibank which was pretty much the same. I've also heard good things about First Republic.

Credit Cards: Initially, we used secured credit cards from our Wells Fargo account, which was a waste of time and liquidity. Eventually, we switched to using an American Express Gold Business card, which gives you travel rewards for the dollars you spend - well worth it if you're running an ad tech business and need to fly back and forth between NY and SF. 

Office Space: At the start, we were based out of Founders Den, which is in a great location and has useful events where you can meet investors and accomplished startup people. It has a cappuccino machine but no lunch. We moved to The Hattery which offers a great vibe and serves lunch, but the coworking space can get a bit loud. Next, we considered a number of different spaces to move into, including Runway, which is coincidentally in the same building as Twitter. However, we decided to sublet from another startup for a while, before finding our own space. Eventually we rented our own office at 185 Berry (the same complex as Dropbox), through a commercial real estate agent named Jerry Adamson, who came through a personal recommendation and had office space ready for me to tour the very next day. Office space in San Francisco is expensive, so get ready for sticker shock. You'll likely need a real estate lawyer to negotiate your lease, but the one we worked with I wasn't happy with so you'll have to find your own.

Accounting: We used Xero which was great. It makes it easy to set up, import your bank feeds, reconcile, and write invoices. Make sure you get started on accounting early - most professional investors like Google Ventures (they were our lead investor) now require quarterly statements at the seed stage. As a side note, at reMail I used QuickBooks, but Xero makes QuickBooks look like a dinosaur.

Accountant: We worked with Barlow&Hughan because I've been a happy client there for many years.

Cap table management: We let every one of our employees early-exercise their shares. In retrospect, I wouldn't have done that, since the amount of paperwork involved is extreme, and even the smallest mishap can cause major headaches in due diligence for M&A or the next round of funding. But even if you're just issuing options, you'll need to get this right. I've heard good things about eShares, which will automate a lot of this and will let you view your cap table in real-time.

409a: We worked with Intrinsic Valuation and they were quick and professional. Cap table management services like eShares now offer 409a's as a subscription, which may be a preferable setup and something I would look into.

Payroll: We used ZenPayroll which was awesome. Great online dashboard, super-responsive support, very professional. Most of what you'll want to do you can do with Zenpayroll. Your employees can do log into a portal do download pay statements and W-2s. Your accountant can log in and easily pull payroll reports. At reMail, I used Paychex, which is bad, complicated, and has a human calling you in the middle of the day to authorize your payroll.

Health insurance: We used SimplyInsured but had a rocky start as their systems weren't up to ZenPayroll-level perfection, and some of the stuff on their dashboard was misleading. It got a lot better towards the end of Namo Media. You may want to consider going through a run-of-the-mill small-business insurance agent. Don't economize on health insurance since that's the last thing employees want to have to worry about.

Signing contracts: We used what is likely the highest-margin business in the world, HelloSign. Their dashboard is amazing, and it's easier to use than DocuSign. They will charge you $40 a month for the privilege, mostly because they can and because it's worth it. If you're an old-time YCombinator founder, you can dig up a code in the mailing archives which will give you a slight discount. We signed literally everything with HelloSign, even our M&A paperwork.

Catering: I would have liked to use Zerocater, but we didn't qualify because they had a 10 person minimum requirement (we were 8 people), so we ended up going with, which was a OK. They had some suppliers that show up an hour or more late, by which time I was having a hunger attack. Your mileage may vary with any of these companies, as they all tap into the same pool of restaurants.

This is about it - once you have all this set up, you and your co-founders will be well on your way. Don't forget to focus on your product and your business because it's not the infrastructure that makes you succeed.

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