Interview with consulted – Part 2

ABOUT THIS EPISODE

This is the 2nd part of the interview with Sebastian from consulted, who is a German entrepreneur in Silicon Valley. In this part we talk how he decided to headquarter his company in the USA, the strategic reasons behind his move. We talk about the application process for the company, how to set up an LLC in Delaware, as well as his own visa application process. In this interview you will also find out why he made Stanford University search for its seal.

You can find here the first part of our interview with Sebastian. 

Originally published on December 27th 2014

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Hey everybody, and welcome to a new episode of startup brand on aisle. You're a podcast show with startup news and interviews from Germany. Welcome back, sevestern. Hello Gon. Last time we talked about Consultedcom the marketplace, what you're providing as services, how you get your experts and what you do for the customers. This time I'd like to talk about a little bit more personal with you, because your German citizen and you set up a company in the United States. You provide us a little bit with an idea of the structure consulted actually has right now? Sure. So, the structure of fronside is pretty interesting. There is a ink, is a Delaware Ce Corp, as it is called in the US, which is headquartered in San Francisco, and this ink has a subsidiary in Germany, in Berlin, which is our it's a GmbH, German limited entity, and it's a hundred percent subsidiary of the American company. So from an external perspective, all the marketplace operations around by the by the ink and, for example, even the Invest Lands and so forth, would all go via the ink. And the German company is a let's a service service company which is exclusively operating for the ink. So that's all set up. So now that you have it, it sounds pretty easy. But when we talked about it before, basically you've been working with your wife in Berlin in in this startup and then you had the idea and I think it quite took some times and some steps to get there. I think you don't decide overnight, Oh let's do company incorporated in Delaware and set up a headquarter in Silicon Valley. That's that's not your first thought. That just comes to your mind. Right, it's correct. So what we did actually, when we came up with the idea, we looked at other marketplaces. So how do they wait? Right, and we came across only marketplaces, at least a larger ones, which are set up from the US or in the US, and we were actually in the beginning, quite puzzled. Why is that? And maybe it's just because these were first and other sort of countries. polly sort of, I did not produce any any company is initially in that specific sector. But in the end I think it's a combination of...

...this with another factor that in the US, I think when you want to create a global company. It's much easier to operate it from the US then, let's say, from a European country. When it comes to, for example, how you do the VAT taxation on the marketplace. Right so, and in the US there is no VAT on services, whereas in Germany or other European states, is right. So, when you think there's through, you would have a sort of communication issue and a pricing issue when talking to your customers on the marketplace. Right. So, for example, think of the use case. You have a Brazilian expert and a advice seeker from Singapore and suddenly there would be some European VAT involved in the transaction and they would be at least questioning why is this happening, whereas other marketplaces they may have used before, it's not the case, right so I see. And also in Germany we have nineteen percent value at attack. So it would increase the price by above twenty percent just for being located in Germany. Are are so the marketplace. So there's a portion of the total value create the marketplace portion. That for sure would. So that's one reason. The other reason, and it's it's not only one right and they also good arguments why you could actually do that in your right is always a sort of you have to weigh the factors. What's right for the business at that given time. Right. Another factor was access to funding. The network obviously in Cilicon Valley of Angel Investors, early stage seat financing, and so force is larger there as well. And then you have did you actually get financing? We got some financing, however, not from the second way. That was before we move physically out there, as we got some some initial angel funding from German Asian investors. Yes, okay, I see. And then you decided. Okay, so the Kim Valley is the place to be. And how did you actually get I just call it the legal umbrella and Delaware. So that's actually an easy part of once you make a decision to find a company in the US, it's super simple to do so. However, it's much harder to actually be able to walk down a right. So, to answer your question, that's convenient exactly. So you can pretty much, if you wanted, to do everything online and do it for a couple of hundred dollars. I don't know whether it's the small thing to do. We clearly did not do it like this. We got some legal help from an international law firm with offices in Berlin and Silicon Valley and many, many more around the world, which had US setting up the company correctly, and I think that's pretty much important...

...when you know some external financing, that you want to get your house in order, and we just wanted to get the set up right from the start. But, as I sat founding a company is pretty straightforward. It's more that you also have to be able to work there right and as in every jurisdiction I can think of in the world, you need some legal permit to do so. In Europe we are quite fortunate that we can, at least as a European citizen, move around and pretty much work everywhere we feel like it. So if you, let's say, want to work in Paris tomorrow, you can actually just go there and work without getting any paperwork, as far as I know at least. Ever, in the US what you need is a work from it. So, with that in mind, you have to apply for a visa. Now you can imagine that it's much harder to get a visa if you apply for with your own company. You just have found it because in general, if people move to the as work that it do this for existing companies, and existing company that typically they're larger, and think of Microsoft or an oracle or facebook or Google, and they have what is called blanket visas. It's sort of a frame agreement with the government in place where they have a certain allowance to sort of get people visa work with us very, very quickly. However, you don't have that as a small company. So what you got to do is you got to fill out the largest visa application which is out there for the US. It's about thick as a phone book, if people still remember those, but very big application, very thick application, and we got that done by working together with legal council in Washington, which prepared that application for us, and the American embassy who is reviewing it, and that's the one in Frankfort in case you do it from Germany. They really take care of reading through this application and ask some critical questions in your visa interview, sort of if you comply with the process, then you should also be able to get this visa and be able to work, and that was the case class as well. However, it's obviously not as fast as a tourist visa, and many Europeans didn't even need a tourist visa to go to the US. It's actually a process which took us from start ran around three months. Okay, it's so bottom line, you got to fill out a phone book for AK. I don't know what's in there, answer the questions and you're good to go. Yeah, this plus sort of. It's always a case by case decision. Right, it all has to make sense and they obviously want to prevent that somebody just pretends to have a company there. They need to be convinced as a real company. They need to be convinced that the business plan is at least somewhat sound. Right in it always helps if you got some external financing already lined up and...

...at yeah, I think the only other requirement is that you have to be from a treaty country. So they don't allow that from every country in the world, and Germany is happens to be one of the treaty countries, I see. So basically, what you also should put in your application is a letter from is the x and Y, who adds a bank statement and says, out of this money, I do commit fiftyzero years to the set up of consulted yeah, you actually have to commit it right. It's it's not enough that you say you want to. It's actually have to prove that you already have and it needs to be. They call it evrocably committed to the ventures and take it out afterwards. You. Basically vice would be, if you want to do it in the US, work with someone who has some understanding of it and helps you to guide through the process. Yeah, I think that the first advice I would give is be very sure that you it's actually require art for your business to do so and really know why, why you really need it, because obviously it's much easier to just found a business where you are and just get going. Have be convinced that they enough reasons out there to go down that process and path before you attempt to do so. I'm just trying to imagine the officer who interviewed you and ask what you set that up if the United States and you said, hey, you don't text that that. But, as I said right, taxation is maybe one part, but it cannot be the only reason why you do it right. It needs to be compelling, a compelling business story right, and taxation alone would have not made us move. Right. As one factor which makes it obviously easier than there's financing and you have access to some great people in the valley, the network you can you have there. The fact that most all of the larger marketplaces, global marketplaces, are based in the valleys not an accident. I think it's by design. So that's something you have to keep in mind. Yeah, the whole set of factors which go into the decision right. Also, I think we did not do it this time in the first episode, but you actually take some cut out of the the the money the expert gets, in order to finance your business. That's how you generate your where. Yeah, it's pretty much common for a lot of market places. I think Ebay does that. Even Amazon does that when you sort of sell as a third party, cello and Amazon. It's very typical for market places to make money like this. Right, and there are some other more, let's say specialized market places which do that. In addition, they charge for some value added services like, let's say some I know of legal marketplaces...

...who do that, where you can feature your own profile by paying some money. I think ebay client and siding right, the German and yeah, small effortise, correct and service advertisement. Absolutely, they allow you to pay x Euros to get your whatever you want to sell, being featured all the way up in the stream for a certain amount of time and take guarantee more views by paying a little bit extra money. These are the two typical revenue sources market places of right, cut of whatever transaction wheue there is plus, maybe some value edit services, and right now we focus on the first part, which is the cut. I assume you're already quite professional in filling out paperwork made be in English or in German. Rate. Yes, yes, okay, and when we discuss this upfront your you just to highlight some of the complexities they're involved there. You told me the story about the intern from the uns or right. He wanted to hire in Berlin. Can you tell just this story as a kind of example, what complexiteeth lie in there if you do decide to make a start up on two continents at the same time? Yeah, it's I think that's not so much about whether it's two continents or one, but it's you've also been here in Germany long enough fight in in the in the workforce, to to understand and appreciate. In Germany there is a tendency for a lot of forms and a lot of sort of loops and hoops to jump through, and I can see your my wing. You say that and yes, TOT leader right. So the same as true if you apparently want to hire interns from abroad, from outside of Europe, you certainly can and there's a process for it. But are bites are intour, which sort of the employment agency in Germany. They have a team which focuses only on approving those type of work. So you need a work from it and it's granted by the team for interns who come from abroad, and that process is well described. However, the already saying the applicate papers, it can take up to six to eight weeks to get in a pool. Now you probably know from your own times as an as an intern, very often you didn't have an internship lined up eight weeks in advance, let alone having time to apply for a we learned going through all of the motions there, and that's something, yes, which certainly makes it, let me put it some nice way, harder for companies who have excellent people who are willing to work...

...for them from abroad that they actually can sort of cap into those into those resources from abroad. Right, it's unnecessarily difficult and complicated because, if I remember correctly, so I did actually two internships in Singapore and I had my work permit within twenty four hours and I got it via pdf, via email, and I printed it out. I went there, I could migrate into the company, into the country and I got a little green card which is which is basically your work permit that you're allowed to walk down. So it's possible. Do you remember it come correctly? From my side? It took eight weeks. I had to ask a Chinese friend to help me to fill out all the four and if I would none have been an intern with the Chinese government, I think correct it would have never worked. But I'm totally with you that right. So usually tiresome process. So so it's and I also worked in the US as a student and it also was much quicker to do so. The point is this. There's probably very good reasons why certain processes are in place and they make a lot of sense when you think them up. However, in this day and age, you need to as a country compete globally with all the other trees right in the businesses within those countries. have to make do with what is there, right and based by example. If there are other countries who can just do it in one day versus eight weeks, it doesn't make sense that it should take eight weeks. Right, you should at least put in some effort to cut down the time to some more meaningful time framework connection work within the business. Right. I'm still fine if it's like two or three weeks, but certainly two months is something which it's just not feasible, right, if you want to work with interns, especially for the internship. I do agree with you on that. On on the other hand, I do think they they maybe on the right way if they have one team who works for the all the international interns. It would be, I think, much more of a nightmare if you always had to go to the people on the ground, for example in Berlin or in Frankfort or everywhere, and just work with them and they've never seen something like that before. Okay, fine, so I'm I agree that they at least made some right decisions, right, but that still as a lot of things which are broken, right, for example, that you still have to present physical paper with your signature and companies stamp on it, or you get have to get university certificate of that student, that that student actually studies there,...

...with the official seal of the university, right, and we got this from standfords or intern came from Stanford and they actually had to look for where that seal is in the university to actually issue that correctly. It's it's not to come and that's right. I cannot write it and you really have to ask yourself that. Obviously this is something very nice to have, but is it really necessary to do that, because you have to get a physical paper somehow from the West Coast to your company, then you have to sign it and you have to get it physically to the team and bond which then physically reviews it. And I'm sure you can think of some smarter and faster process to do that. And that's probably true for many, many more processes when you go found a company, right. So just another example which is maybe interesting to the listeners is when you set up so we set up two companies, right, we set up going in the US and we set up one in Germany. In the US you can literally do everything from from your laptop, even signing all the papers to found a company, to put it in legal effect, have a basically you just fill out forms online and then you confirm your email. Is it something like that? Thing like that. I think that's a say. There's some tracking involved with your Ip address to authenticate, but pretty much that's it. Right. So so there is some some law in place where the online signature is sufficient, whereas here you have to not only sign in person but as was set up and Notary Appointment and be physically present, and that not only takes your time, it also takes time from somebody else, and obviously that time doesn't come for free. So founding, the whole process is longer and much more expensive than it can be in other countries. Right and yeah, and I do remember, for example, there's there's one question when he set up some form of limited in Germany, that the person who will be the CEO has to confirm that he's never been into psychic psychiatric treatment in a clinic, stuff like that, that he's mentally stable and in sometimes very strange things, which usually generates a laughter when you go through it. So I'm not too sure why it is still in place. So I think that's true for many things. Right. They have grown organically and they are always are good reasons why they're there and they're very hard to take out of the system again. Well, at least they were in the past some good reason. Correct those swoops and loops are they're correct, correct. So netnet is that you have to spend a lot of time while founding a business, with a lot of activities which are not really your business,...

...right, and that's very unfortunate. And whatever you can do as a country or as a region to be more efficient makes everyone in the system happier. Yes, I would totally agree with you and that would you have some more that you want to share with our listeners? All, should we come to the end of the interview by just asking you for the advice you would give to somebody else who shows up you do right now and says, okay, I want to set up a company. What should I look out for? Sure, I mean the thing I think most the foundation of everything, or funding a company and sort of making it a success as a very strong and well working found a team. Right, it's very hard to do it alone and it's very hard to do it with the team, which is not a hundred percent working together right. So there are companies founded in a way that the founder team has met by a meet up, at a meet up two weeks ago and they decide to found a company and that may work but very likely will not. So what I've seen is also with founder of Friends of mine, is that the initial team there was some prior connection to the founders and I think that's very important and we have something similar. The reason for that is that funding a company, in creating a business and putting it out into the world, this in itself will throw at you so many difficulties that you cannot afford to have some friction within the founding team. So that, I think, would be my number one advice to everyone who is like at the edge of should I found should I not? I would say go get one, to create co founders who are equally convinced about the idea and do it with them and don't start with some something where you're not hundred percent comfortable. One last question. You talk about two or three Co founders. Would you be opposed to company who says we have ten founders with what do you think is the optimal size of a foundry team? That's a good question. I think ten co founders. That's interesting. I think I have never seen a company with ten co founders. I have for sure seen companies where you only have one co founders or the founder. Right. That clearly can work. However, I think a sweet spot is around two to three people, right, because the reason for that, I think, is in the beginning, the first I don't know, five, six months, you have to move mountains where you don't get the usual pay or your or you have weekends or you have normal workouts, and to do that alone is very difficult,...

...right, and finding ten people who are willing to do that is probably impossible. So what really makes sense is to this three people, get a close working team together and get it done. They are okay, Great. Thank you very much, Sibson. Was Pleasure talking to you exactly two times and I hope you come back in some time and we can talk about the success of your company. Sure, let's do that. Okay, thanks, but.

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