
Ask HN: Startup outside the US - cerebrum
Hello,<p>I&#x27;m in the process of starting a startup, but I&#x27;m outside the US. Does it make sense to go through ycombinator.com or should I choose some other entity? I&#x27;m not sure if I want to be incorporated in the US.
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no1youknowz
You need to decide for yourself if the hassle in incorporating in the US is
worth it and also if there are other reasons for doing so.

Like you, I am based outside of the US. I'm currently in the UK and yet, I am
incorporating in the US.

The five reasons for this are :-

1) 99% of my customers are there.

2) 100% of my vendors are there.

3) Potential investors are there.

4) 99% of my financial transactions are in dollars.

5) My Bank is in the US and no currency conversions eroding profits.

Of course, some will say why don't I go to London and seek out investment? I
have looked into this:

1) The mindset of a UK investor is vastly different than that of a US
investor.

2) They sum of monies for potential investment is greater for a US investor
and so is the level of risk. The sum of equity is greater for the UK investor.

3) The US investor has many more connections than the UK investor.

4) The US investor has made many more bets than the UK investor and therefore
has much better advice going forward.

I could go on... But there is 0% chance that I will be starting up in the UK.

Here's what I have found so far:

US | YC - $120k in return for 7% of the company's equity.

London | Bethnal Green Ventures - £15,000 in exchange for 6%.

London | Founders Factory - £30k for around 7%.

London | IGNITE 100 - £17,000 in return for 8%.

London | Oxygen Accelerator - £20,000 for 8%.

There's probably more, but I doubt you'll get to YC levels of funding and
influence in London.

If someone knows where I could get a better deal on funding, equity and terms.
I'd love to know!

What I am doing, is bootstrapping until I'm ready to onboard an investor.

I can't really offer you advise, as I don't know your full situation. But
hopefully what I have found offers some insight!

~~~
behrendtio
Nice summary. As a German running a company in the UK, I'm also thinking about
a US based corp using Atlas from Stripe.

May I ask in which sector you're working, goods or services?

How do you feel about the hassle that comes with an US based corp compared to
the ease of a UK one?

~~~
no1youknowz
> I'm also thinking about a US based corp using Atlas from Stripe.

I was thinking of Stripe as well, but unfortunately they don't support LLCs as
yet. Which means I'll be doing all the leg-work myself.

I will be noting down all my steps and will one day blog about my whole
startup experience.

That said, since stripe now works with US based companies. I may apply when
they do roll-out LLC support so then I can get some of the benefits. That is
of course, if they'll have me!

> May I ask in which sector you're working, goods or services?

I'm launching a SaaS very very soon. It's actually ready now, but I'm still
not happy with certain aspects.

> How do you feel about the hassle that comes with an US based corp compared
> to the ease of a UK one?

I have held LTDs in the UK in the past. It was trivial to incorporate with a
3rd party service and then retain the services of an accountant to deal with
HMRC.

I have this same view for the LLC. The only issue I have so far, is dealing
with long distance calls. Some vendors are happy to talk on Skype which is
great. But the majority always want you to call them.

In addition, I have dealt with lawyers, accountants, opened and closed
businesses and bank accounts before, all in different countries, the US, UK
and EU. I am not too worried about whatever the process will throw at me. My
mindset is, if something happens. Just deal with it and move on. No point
worrying about it.

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behrendtio
Thanks for the in-depth reply!

> That is of course, if they'll have me!

Go ahead and apply. You don't have to actually purchase the company, just
because you applied. We already got accepted and can now go ahead, if we want
to, at any point. Also, I don't think they are too picky. We got accepted
within 2 business days.

> I have this same view for the LLC. The only issue I have so far, is dealing
> with long distance calls. Some vendors are happy to talk on Skype which is
> great. But the majority always want you to call them.

Yeah makes sense since most of your customers are US based. Good point, didn't
think about that.

My first concerns were more towards dealing with lawyers, accountants and
potential lawsuits as well as taxes in the US. Lawsuits are way more common
their and taxes are quite complex due to federal/state/city laws, compared to
the kindergarden-level flat tax in the UK... But yeah, I guess that's why
people have accountants.

> My mindset is, if something happens. Just deal with it and move on. No point
> worrying about it.

That sounds quite british :) Good luck then! Do you have a blog already, so I
can subscribe or something, to see the post once you release it?

~~~
8draco8
> Yeah makes sense since most of your customers are US based. Good point,
> didn't think about that.

Skype allows to buy US phone number and will receive incoming calls to it.

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gdilla
Apply first. You don't have a decision to make until you've been accepted.

~~~
hutzlibu
I disagree. I think you should be sure to want it, if you apply. Otherwise it
is half-hearted.

~~~
pedalpete
Your chances of getting an interview or acceptance are so slim, you have
nothing to lose by applying and thinking through the application process could
help clarify parts of your business.

Think of YC as a customer, as all investors are. You're selling them the
investment.

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dazhbog
We are outside the US, but incorporated in Delaware, without even going to the
US. We did that to keep our options open in case of raising, but we are slowly
becoming more and more against raising. Anyways, it was cheap enough (~$700)
and now with Stripe Atlas its even easier/cheaper.

It really depends on your idea, where your customers are and the way you want
to execute. In our case we were lucky enough to have had some government
grants from various countries, gone through some accelerators and now we are
trying to organically grow.

Good luck!

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contingencies
SV is _undesirable_ for visas, general overheads, regulation in some sectors,
and segments like hardware. Basically YC seems to be optimized for software-
focused startups within 3 months of market seeking SV, US or at least English
speaking investors, usually with a US initial market.

For hardware startups I can strongly recommend considering HK/Shenzhen, as I
can personally attest that sourcing, consulting, manufacturing, and capital
are readily and cost-effectively available.

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dotcoma
There are a number of good programmes in many countries, from the usual
suspects (London, Stockholm etc), to places that could surprise you (take a
look at Bulgaria, for example).

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demircancelebi
If you can be selected to YC, it almost definitely makes sense. The important
question is, will you be able to go through it whether than it makes sense or
not.

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bsvalley
Why do you want to start a startup? What will a startup do for you? Are you
working on something besides starting a startup?

Without these answers I'm affraid we can't really provide any valuable
insights for you.

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amorphid
Growing a business takes money. Silicon Valley is (for now) where the most
money is. It makes sense from that perspective.

Good luck with your venture:)

~~~
brianwawok
Although if he is bootstrapping the MVP, maybe he can bootstrap it all. 100%
beats the investor treadmill in some ways.

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Lordarminius
Related question: How do taxes work for companies which are incorporated in US
and operate in a second country ?

~~~
soloadventurer
Can you clarify the meaning of "operate?" Do you mean operate or is being
managed?

If you mean "operate," then there isn't really much to add. If you are
performing some sort of SaaS (like Netflix), the US company will pay tax on
worldwide profits. The other jurisdiction may assess a withholding tax, but in
practice it is difficult to collect it from consumers. If you have people
selling things in another country and concluding contracts, you may have a
permanent establishment in that other country and be required to file branch
financial statements and pay tax thereon.

If you mean "managed from a second country," things get more complex. If the
"mind and management" of the company is in another country, that country will
probably take a position that the US company is subject to the local tax laws.
For example, if you are a Canadian that owns a US company or corporation and
you control it from Canada, then Canada will deem that company or corporation
to be a tax resident and you must file a Canadian corporate tax return in
addition to all your US filings. You will need to look at the US-Canada Tax
Treaty carefully to see how this plays out. In particular, the tie-breaker
rules and anti-avoidance rules.

I'm a tax practitioner. I shudder when I see how many people are opening US
companies without looking at their home country rules. Before you consider
opening a US company, ask yourself:

(1) What is my foreign affiliate disclosure requirements?

(2) Will my US company be liable for tax in my home country? Will my US
company be a tax resident in my home country?

(3) What are the residency rules and tie-breakers under my country's tax
treaty with the United States? (If you don't have a treaty, it should light up
as a red flag.)

(4) Do I have a budget to pay for local tax advice and compliance, and US tax
advice and compliance, each year?

Tax is not simple!

~~~
Lordarminius
> Can you clarify the meaning of "operate?"

Thank you _soloadvnturer_

I had in mind YC companies. They are required as a matter of procedure to
incorporate in the US before funding is released.

I always had a nagging suspicion it is a more complex issue than meets the
eye.

In many cases these companies (operating in markets outside the US)also
frequently incorporate in their home countries (which host their target
markets) eg India, South-Africa, Nigeria as the case may be

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jksmith
Have you gotten any feedback from anyone who has honestly met their definition
of successful?

