Entries from August 2008 ↓

Sprint’s plans for the next 16 months or so hit the web today, and they pack news of a new BlackBerry, the 8350i. The stout new BB looks to be based on the Curve, with Wi-Fi and GPS along with Direct Connect push-to-talk support without a massive external antenna, which explains the portliness. Looks like a nice offering if your work requires you to be chirpin’ at all times, but sadly it doesn’t hit until Q4 2009. The rest is a mish-mash of low-end and workgrade gear, which is for your perusal below.

[BGR]

Often people start a company without any clear idea of what
a company is. Entrepreneurs closet themselves in the garage and start writing code.
While the modern tech world could not exist without obsession, artistic inspiration and crazy engineers,
there’s more to a startup than passion.

In this post, we explore the basics
behind corporate entities, stock, financing, and the key non-technical infrastructure
every company
should have.

To make an idea really powerful, a startup needs
to become a real company. In former days, this might have meant bureaucracy, and
lots of financial and legal infrastructure. Today’s
tech companies are simpler, but still require a set of rules, and you need a rudimentary
understanding of business law when forming a corporation.

Business Entities

There are several ways of conducting business in
the United States. The most basic is a
Sole proprietorship,
which is essentially self-employment. A sole proprietor, such as a grocery store or
restaurant, assumes full legal liability for the
business, but all income is direct personal income
and is taxed once.

Another form of business is a Partnership. This is a venture between several
individuals who share in the profits. Partnerships, and particularly Limited Liability Partnerships (LLP),
are created to address the personal liability issue with proprietorship. With LLP only one or a couple
of partners assumes the legal liability.

Corporations are a separate legal entity. When a corporation is sued, in
general the individuals
behind it (shareholders, directors, management) are not impacted. This legal protection
comes at a price – double taxation. Companies have to pay tax and only then can pay salaries and dividends to the shareholders.

In recent years, people have been incorporating in two principal ways – LLC and Inc. LLC is a limited liability corporation,
a hybrid between corporation and a partnership.

LLC enjoys the legal status of a corporation, but has partnership-like taxation. It is a great way to incorporate before you know how big your company
will become. The caveat
with LLC is that you can’t have more than a certain number of shareholders (typically around 70). For this reason, Venture Capitalists
would normally not fund an LLC because it’s impossible to take such a company through an IPO (Initial Public Offering).

Most tech startups end up being C-Corp or a corporation
(often,
you can start with LLC, then convert to a C-Corp right before raising substantial funding). A corporation
is the most sophisticated business entity. It is a powerful but complex vehicle,
with flexibility. 

Shareholders, Directors and Management

A company starts with incorporation – a process of forming. These days
it’s cheap (around $300) and straightforward.
You can either incorporate on your own or, better, utilise your accountant or lawyer.

You incorporate in a particular state, usually Delaware with its liberal laws and taxation policies.
You don’t need to live in Delaware to incorporate there, but you do need to also declare your existence to whatever state(s)
you plan to operate in. The corporate laws vary substantially, so ask your lawyer and
accountant about regulations in your state.

After incorporation, you issue a stock – a unit of ownership in the company. In startups before funding,
there is little reason to spend time on issuing shares, because when financing
comes you'll need to reissue.
Easiest is to declare that you have 100 shares of common stock and divide it between the founders as
agreed prior to
starting a company. 

There are three principal types of participants in every company – shareholders,
directors and management. Shareholders,
or the owners, vote and elect the board of directors, who set long-term strategic direction
and appoint executive management. The management (CEO, CTO, etc) is responsible for the day-to-day operation of the company.

While you might find this 3-tier structure initially confusing, it does make sense.
In large companies directors are mostly
outsiders. Directors represent the interest of shareholders and hold management accountable for the performance
of the company. In a large corporation, typically the CEO is also a President or Chairman of the board, but the rest
are directors outside the company. For small startups, the situation is simpler.
You are a shareholder, a director and a manager of your own company.

Key Documents

In a startup, you need to understand when to wear
the hat of a shareholder, director or a manager. Looking at a company from the perspective
of key legal documents helps you do that.

The first document is Articles of Incorporation,
which declares the kind of entity, state of operation, classes of stock, and number of shares.
The next is a Shareholders
Agreement, which typically discusses the rights and obligations shareholders have in
situations like sale of the company, sale of stock, or death of a shareholder.
And Corporate Bylaws is the guide by which
the board operates;
it specifies who can be a director, how often meetings are held, how voting is
done.

The employees of the company – e.g. CEO, VP of Design and Software Engineers – all sign
an agreement.
These days, employment agreements typically consist of a short offer letter and a lengthy non-competition agreement.
The letter outlines the position, salary, vacation, and other benefits. The letter
asks the employee
to obey standard corporate rules and regulations. In addition, a lot of startups offer employees stock options – a way
to earn the right to buy a stock in a company.

Legal and Finance

A first-time entrepreneur will find the
legal complexity and accounting for a corporation overwhelming.
It is essential to hire lawyers and financial professionals. There is a saying amoung startups
and VCs that a good lawyer pays for him or herself, despite the fact that hourly fees are
whopping.

There are three kinds
of lawyers needed in a tech startup. A corporate lawyer drafts the basic documents and
will advise on daily matters. A deal lawyer specializes in financing and sales transactions.
And
if you have intellectual property to protect, then you’ll need an IP lawyer.

Financials of a startup can be split into daily simple things and annual complex
matters.
For a startup, it is ideal to get a bookkeeper – a person to take care of payroll, monthly profit and loss,
and basic financial documents. You need an accounting firm for annual taxes and larger issues.

Accountants
are more expensive than bookkeepers, but since you don’t need to use them for daily operations, it makes
sense to have an accounting firm do your annual finances. In addition to taxes
the accountant
will product a compilation – a summary of annual activities. After you get funding, the board of directors
will ask for an audited financial statement – a full, certified financial review.

Venture Financing

To turn your idea into a big company, you will likely need to raise money.
This is essentially a sale of
shares to investors. A typical company goes through several financings – angel investment and then
a few rounds of venture capital. The angel round is typically small, traditionally less than a million dollars
and lately substantially less (thanks to YCombinator and TechStars).
In the angel (or seed) round, the founders may offer 10-15% of the company in exchange for a convertible loan.
Technically, this is not a direct sale of shares, but instead a right to buy shares in the next round of financing
at a discount, while accruing interest.

Traditional angels are wealthy individuals, often former successful
enterpreneurs and executives at
large companies. Each angel might be willing to put down between 10-100K, with 25-50K being typical.
So if looking to raise 500K, you would need to line up 10 or more angel investors. You can simplify
it if you find a local group, for example New York Angels.

The next round of funding, called Series A, involves Venture Capitalists (VC). A venture firm is essentially
a partnership that manages an investment fund. The fund raises money and invests
into startups and later stage companies.

The VC world is complex and it’s important to know how to navigate it.

The first rule – know what firms are right for you at what stage. The right firm will be the one that’s interested in the sector you’re in
as well as the size of the investment. VC firms manage anywhere between $150M – $1B, with
a typical
tech fund being around $300M. Since the time of each partner in the firm is limited, there
are only so many investments the fund can make. So, if looking for 500K, it doesn’t make sense to approach VCs.

A typical Venture Firm will look to own 20 – 30% of your company over its
lifetime. When the investors put money into your company, they will protect themselves in cases when the company
might not do well. They will ask to create a class of preferred shares (preferred stock) that will
be subject to different rules than the common stock (those you own). Preferred stock is paid first
in case of an exit, and it enjoys veto rights such as precluding you to sell the company, or the
opposite – forcing a sale.

It is common for a venture firm to elect a director on your board.
This is the partner you are essentially working with. In early stage companies,
a VC plays an instrumental role in mentoring the CEO and shaping the course of the
company. As the company grows and perhaps even goes public, the VC director steps down from the board.

More Funding

Each round of funding expands the number of Venture firms at the table and results in
dilution.
To understand dilution, one needs to understand the mechanism by which startups raise money. Each round of
funding
results in additional shares being issued by the company and sold to the investors.
Typically, investors are not buying
shares that you already have, they are buying newly issued shares.

The money raised is not going into
your pocket, it goes to the company. In some cases, when you’re doing stellar, investors would be
willing to
buy your shares – but this is atypical. As a result of each raise, founders and employees own less percentage of the company
(their number of shares remains the same, but the total number of shares increases). Prior investors are able to
maintain their respective ownership by buying additional shares (this right is given
via preferred stock).

Despite the fact that startups are reluctant to give up ownership to VCs, the economics actually make sense.
Even though your percentage of ownership goes down, the total value of the stock is higher after the financing, because
the value of each share rises. As long as the company is doing well, fund-raising makes sense and is beneficial to its employees.

Conclusion

There is a considerable amount of complexity surrounding building a company. Way more than just
a great idea
and elegant code is involved. But building a company, learning the intricacies, understanding the law and venture
world, is fun.

Instead of being afraid of this complexity, startups need to appreciate it and embrace it.
Most lawyers, accountants and investors are smart people whom you will
learn from. They will help you make your startup into a real company.

As a start point, you should create an LLC and not worry about much paperwork. Once you
get into investment, you’ll need to change to an Inc, get a lawyer, bookkeeper and accountant, and start diving
into the details discussed in this post.

There are two excellent resources to get additional material: Ask The VC -
a blog maintained by Brad Feld and Jason Mendelson; and Ask The Wizard -
a blog by former CEO of Feedburner, Dick Costolo.

As always we look forward to your questions and we also ask you to share your tips on the essentials
you picked up during your startup life. Join the conversation!

The Gadget: Brando’s Power Station, a portable battery pack for your iPhone that slides easily into your dock connection for charging away from a socket or a USB connection. The Power Station, in turn, is charged from ITS dock connection, so you can use the same charger for both devices. Comes in white and black.

The Price: $25

The Verdict: Works as advertised. In our tests, it charged our iPhone 3G from 10% to 60% in about an hour, after which charging stopped altogether because the pack was out of juice. We then used another pack to take our iPhone from 60% to 100% in about another hour. Great for emergency days when you’re low on power from a frantic 3G browsing session earlier that morning.

The only complaint we’d have is that unlike other chargers that wrap around the iPhone to secure itself in place, the Power Station only connects via the dock. This results in a flimsy connection that might snap off if you’re not careful. So be careful and don’t stick the phone in your pocket when this is docked.

At a price of $25, it’s the cheapest iPhone battery pack that we’ve seen. Despite its drawbacks (only charges about half the phone’s battery and is sort of flimsy when connected), we’d still recommend it as a backup battery for emergencies. [Brando]

Side note: The original unit Brando sent us was defective and would alternate between charging state and plugged-in state, eventually going to DRAINING state. If you get one of these, call them up and get a replacement as it’s obviously not supposed to drain your phone.

Well, this is just about the most amazing thing I’ve ever seen. It’s a lightning bolt that’s shooting down from the sky, shot in slow motion. I’m not sure exactly how fast this camera is, but it’s got to be shooting at a speed faster than the Casio EX-F1 can shoot at, at least at a resolution this high. Whatever, who cares? Just watch this and prepare to be blown away.

[Today's Big Thing]

Silicon Valley PR Guru, Brian Solis, has pulled together a conversation prism. He describes the prism as:

The conversation map is a living, breathing representation of Social Media and will evolve as services and conversation channels emerge, fuse, and dissipate.

We think the prism is very cool (although it looks more like a rainbow flower than a prism). It is not only easy on the eye but it also includes Hubdub. It is at the top and slightly to the right (it is worth one point if you are a darts player*) and labelled ‘Crowdsourced content’. We are sandwiched between Newsvine, Mixx, Reddit and Digg, so we are keeping in good company.

Here is Brian’s post on the Prism. And here is Duncan Riley’s amusing reply.

[Full disclosure: Brian’s company FutureWorks handled our PR in January when we launched at DEMO, and did a fantastic job]

* And here is a darts board for those of you who aren’t:

Ah, goatees. The preferred facial hair of nerds, fat guys, bikers and Mark Wilson. If you’re looking to make sure your goatee is as neat and even as possible, you’re going to need a little assistance. Say hello to the GoateeSaver.

The GoateeSaver is a little contraption you use by putting part of it in your mouth and biting down. This leaves the bulk of it on your face, making you look like you’re wearing a robotic respirator of some sort. This chunk covers up your goatee, allowing you to shave around it and achieve the perfect shape every time.

It seems effective enough, although it clearly wouldn’t work with more adventurous goatee shapes. What if you want to make it pencil-thin? You know, for the ladies? And what if you want to let your goatee go down your neck under your chin? Well, in that case you’ll need to just rely on your steady hand. [Product Page via Las Vegas Sun via Dvice]

On Monday, Facebook released a sample site that demonstrates how Facebook Connect (previous coverage), their new authentication methodology for logging into third-party web sites, will work. On the demo site, instead of registering for an account, you’re presented with an option to use Facebook Connect instead. The Facebook team built the site so developers interested in using this technology could see how it works. The source code was provided as well.

The sample site is called The Run Around and it’s just a simple site that lets runners log their runs and chart progress on their workout routines. From the homepage, you’re presented with two options: on the left, you can login with a username and password and on the right, you can click the Facebook Connect button.

Of course, before you can login, you have to register. When you click the link to register, you have the option of filling out the fields to provide your username, password, name, etc. Alternatively, you have the option of clicking Facebook Connect.

When you do so, a dialog box appears and all you need to do is click the “Connect” button to authenticate with the site (assuming you’re already logged in). Note there’s also a checkbox that you can leave checked (the default) or uncheck. It reads: “Let this application publish one line stories without my approval.”

Click the button and you’re in.

Once you’re logged in, you’ll see that your Facebook friends already using the site will already have been added for you. Although you know that’s one of the main purposes of this technology, it’s pretty amazing to think that at last, the tedious process of finding and adding friends will finally be over.

You’ll Never Have To Add Friends Again – You Just Have To Add Them To Facebook

Let’s assume for a minute that Facebook Connect really takes off and is available on every social web site you can think of. If that’s the case, then the only way to really make that friend graph of yours portable and easy to use is to add all of those friends to Facebook…does anyone have a problem with that?

Not long ago, Facebook established itself as a place to share your personal activities on the web. Here, people share family photos, videos from social gatherings, and post personal comments on each other’s walls. Facebook, at least back in the beginning, was a social hangout – not some place where you would want to “friend” all of your colleagues, or heaven forbid, your boss. In fact, people using Facebook tended to use it for personal – as in “real life” – friendships only. Not a place where they friended everyone under the sun. (That was MySpace, if you’ll recall.)

But on the new social web, nothing is really private anymore. People are lifestreaming their every action and friending complete strangers on sites like Twitter and FriendFeed solely because they share the same interests. If those relationships are valuable enough to you that you want them to be portable, then you’ll need to start friending everyone on Facebook, too. Since that’s the case, it looks like you might want to dig into those privacy settings after all.

The world of video APIs continues its impressive surge, with 40 video APIS now listed on ProgrammableWeb, up from the 30 video APIs profiled in February and more than double the 19 video APIs from last fall. And more video mashups appear every week, now with 340 video mashups listed.

Among the notable new video API entries are:

Vodpod is a video sharing site, and with the Vodpod API you can programmatically do most of the same things that you can with the site. Use the API to create a video widget, get a video list complete with metadata and player, upload videos, get thumbnails, and retrieve your activity list.

Ustream.tv is a live video broadcasting and video chat room site, and its Ustream.tv API allows broadcasters and end-users to share, show, or browse the video database. A developer can search broadcasters for a specific name, retrieve a popular show, and start streaming a show.

Medioh.tv is also a video search and sharing site, and the Medioh.tv API lets a developer search, filter, and sort the video database, give users custom channels, and access titles, descriptions, tags, and other video information.

Permission.tv is a software-as-a-service video delivery platform aimed more at organizations and businesses that mange their own video. Its Permission.tv API gives developers a way to prepare and manage videos, create players, reports, utilities, and web components.

The video meme also pops up in related services like the Palbee enterprise videoconferencing API and the GamesRadar videogame database that includes videos of the games.

It’s clear that the proliferation of ways to access video – traditional mainstream video, user-generated content, marketing video, internal corporate communications, and personal lifestreaming – will continue apace, and it’s also looking like having an API is becoming a requirement for any online video service today.

Keep tabs on the fast-moving space with our video mashups dashboard. Here are all the APIs tagged with video that we have to date – if you see any missing, use our API Share page to add it.

• AOL Video API: AOL Truveo Video Search
• AOL Video Upload API: Video upload and sharing service
• Blinkx API: Video search service
• Blip.tv API: Video upload and sharing service
• Cellblock API: Real-time Multimedia File Sharing
• Dave.TV API: Video distribution network
• ffwd API: Video sharing and discovery
• Flickr API: Photo sharing service
• Flixya API: Video, photo, and blog sharing platform
• GamesRadar API: Video game cheats and guides services
• Grouper Video API: Video sharing service
• HeyWatch API: Video encoding services
• Internet Video Archive API: Movie trailers, music videos, and game trailers service
• Ipernity API: Media sharing service
• Joost API: Online television
• Kyte API: Streaming interactive television service
• LiveVideo API: Video repository and user community
• Medioh API: Video search service
• Meebo API: Web based messaging platform
• Mefeedia API: Video feeds and community
• Nirvanix API: Internet storage service
• Opensubtitles API: Movie subtitles service
• Orb API: Digital media remote access and management
• PalBee Mashup API: Conferencing and collaboration services
• Pando API: File delivery and management services
• PermissionTV API: Video distribution platform
• Phanfare API: Photo and video sharing service
• Revver API: Video services
• Seesmic API: Video dashboard and community
• SesameVault API: Video sharing service
• Skype API: Internet communication
• Userplane API: Communication software for online communities
• Ustream.TV API: Live video streaming service
• Veoh API: Internet television, video, and social platform
• Videodetective API: Film trailers, cast, images, and related information
• Vimeo API: Video sharing service
• Vodpod API: Video sharing and discovery
• Yahoo Live API: Live video streaming service
• Yahoo Music API: Music and musician info and videos
• Yahoo Video Search API: Video search
• YouTube API: Video sharing and search

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Ext 2.2 has been released, and it has features to complement the usual maintenance bug fixes and performance updates (Ext now works better in Firefox 3).

New features include:

CheckboxGroup / RadioGroup

Technically, while the individual Checkbox and Radio controls are not new, they may as well be, considering the overhaul they have had in this release. Gone are the ugly standard browser input controls, now replaced by attractive, visually-consistent Ext-ified versions (a long-overdue improvement).

In addition to that, we’ve added group controls for both that support complex layouts with just a config option or two. Previously in order to accomplish similar grouping layouts you would have had to create a container with a ColumnLayout and manually place your controls across multiple column configs.

History

Another component that has been missing in Ext is a browser history utility to enable history stack navigation within your single-page Ext application. The new Ext.History singleton makes it extremely easy to do exactly that, and it uses an event-based API to notify you when the browser history as changed.

MultiSelect / ItemSelector

These two components were contributed to Ext by community member TJ Stuart (thanks TJ). The MultiSelect is a traditional list control that allows for selecting multiple list items, and the ItemSelector combines two MultiSelects into a more sophisticated control that includes drag-and-drop list selection and bulk selection and deselection among other features.

FileUploadField

This is an official extension provided as a sample for implementing a useful form component. Not everyone needs a form upload component, but if you do, you can’t live without it. This control is fully styled and has an API consistent with other Ext form controls. It also supports both Text+Button (read-only text) and Button-only modes, and can participate fully in form layouts.

XmlTreeLoader

This official extension provides a great demonstration of extending an existing Ext component to provide functionality that you need in your own application. Again, loading an XML document into a tree is not needed by everyone, but if you do need something similar, this should be a great demo.

GMapPanel

This extension was originally written up as a demo for one of our previous blog posts. However, it proved to be such a hit with the community that we transformed it into an official extension. This is another useful example of extending a standard Ext component, in this case to interface with an external API.

At ProgrammableWeb we have been monitoring the emergence of mashups and APIs since 2005, and while there has always been steady growth, this year has seen an accelerating acceptance of APIs as a business strategy. The most recent evidence is that over 60 API entries have been added to our database in the last 30 days.

As recently as April, we were commenting on reaching 40 entries a month. It’s clear that APIs directed to the consumer have reached a level of maturity and widespread usage among the Web 2.0 upstarts and major Internet players, while enterprise usage is following right behind.

Let’s look at how the 60 break down by number in each category:

• 8 in the Social API category
• 5 in the Search API category
• 4 Music APIs, and 4 Government APIs
• 3 Mapping APIs, Medical APIs, Reference APIs
• 2 each under Internet API, Photo API, Other API, Travel API, Email API, Messaging API, Feed API, Financial API.
• 1 Storage API, Enterprise API, Game API, Video API, Blogging API, Tools API, Telephony API, Sports API, Advertising API, Postal API, and Shipping API.

The community category has grown through location-based services APIs (Rummble, Brightkite) and social sharing APIs (Postrank, Flixya), while search has seen an uptick with the interest in semantic, topic, and vertical searches (Sindice, KISTI, Simply Hired).

Among the notable APIs we’ve covered in July are the business postal service PostalMethods and the business information repository from TechCrunch. The traditional mapping category has seen improvements from the major players, with Yahoo offering search along routes, Google introducing transit feeds, and a new API from enterprise GIS vendor ESRI.

Sixty home runs in baseball stood as an unassailable record for 34 years – we’re betting it takes less than that number of days for the 60 APIs of July to be bested.

For reference, here’s the rundown of new API listings:

• 43 Places API: Social travel goals
• Australian Business Number Lookup API: Australian business number refernece service
• Baby Names API: International baby naming services
• Bit.ly API: URL shortening service
• Brightkite API: Location sharing service
• Campaign Monitor API: Email List and Campaign management service
• Coghead API: Web based development platform
• Comprehensive Knowledge Archive Network API: Community driven open knowledge database
• CrunchBase API: Directory of companies, people, and investors
• earthmine Direct Data API: Programmatic access to street-level imagery
• earthmine Flash Viewer API: Street-level imagery services
• EB-eye Search API: Lucene-based search services
• Elastic Server Manager API: Online storage services
• ESRI ArcGIS JavaScript API: Mapping services
• Fantasy Football Nerd API: American football draft rankings
• Feedoor API: Feed aggregator services
• Flixya API: Video, photo, and blog sharing platform
• FreeAgent API: Accounting application services
• GamesRadar API: Video game cheats and guides services
• Get Satisfaction API: Distributed product support services
• Glam Apps Platform API: Women-focused content and social network
• Gnip API: Ping and data portability services for user data
• Google Finance Portfolio API: Investing portfolio services
• GovTrack.us API: US Congress database service
• HeatMap API: Heat map generator service
• KISTI API: Topic-centric search service
• KnowMarkets Address Verification API: Postal and area code lookup services
• LinkPoint API: Customizable payment processing services
• Live Nation Event Data API: Live music and concert information
• Lonely Planet API: Travel guidebook content services
• MediaSock API: Photo management and sharing service
• Meetup API: Social events service
• Mobilize Central API: SMS mobile marketing services
• Myplaylist API: Photo slideshow for music services
• NHS API: UK National Health Service
• NPR API: US National Public Radio
• Office for National Statistics API: UK neighborhood and census data
• openDada API: Social music service
• OpenX API: Online advertising management services
• Orange Contact Everyone API: Mobile contacts service
• Orderwave API: Order retrieval and management services
• Padpaw API: SMS text messaging services
• PermissionTV API: Video distribution platform
• Piins Contacts API: Web based contact management
• PostalMethods API: Send postal letters service
• PostRank API: Community driven rankings and bookmarks
• Presdo API: Social events service
• Project Vote Smart API: U.S. political data lookup
• Qualified Address API: US address verification service
• Rediff API: Social networking service
• Rummble API: Location-based services
• Simply Hired Jobs API: Job search services
• Sindice API: Semantic data search and extraction service
• Singapore Geocoder API: Singapore postal code geocoder
• SoundCloud API: SoundCloud is a music & audio platform for the web
• Tangler API: Discussion forums services
• Tell Them What You Think API: UK government consultations database
• TextMarks SMS API: SMS text messaging service
• Tipjoy API: Aggregator monetization services
• TriMet API: Transit tracking service for Portland, Oregon
• UniProt API: Protein sequence and annotation services
• Watchdog API: Political data lookup
• Web API for Biology API: Biological sequence search and analysis
• Yahoo BOSS API: Customizable search service
• Zemanta API: Blog authoring extension services
• Zooomr API: Photo and text message sharing service

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