

Ask HN: Startup a company or a department? - zeratul

Recently, I talked with my sister. She wants to start a company and hates corporations. I love corporations and I would like to have my own department there.<p>Let's say you have a job and you have a good business idea. You can do one of two:<p>* Quit your job, create a business plan, work on a prototype, get funded by VC, hire people, grow to become a corporation or become a department in some corporation<p>* Stay, propose a plan to your CEO, work on a prototype, get funded by your CEO, hire people, become a department with its own budget or form a subsidiary company<p>Do I have it "more or less" right? Why there seems to be an advantage of creating a startup company over creating a new department if eventually your "core" idea becomes a department in a company one way or the other? I also notice that most advices for a company founders apply also to department founders.
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teyc
The real question to answer is whether "are you willing to go into a business
with your sister", and "is the relationship strong enough to withstand
problems in business."

Remember, if the business runs into trouble and the two of you argue, then you
will have lost a business and a sister.

Also, if you work very hard and your business becomes successful, are you
still willing to share the rewards with her.

Here are some general thoughts:

1\. Is your sister an "ideal investor"? Does she have sufficient knowledge in
the are of business you want to enter. Does she have contacts, potential
customer lists?

2\. What will happen if your idea fails? Is she able to sustain the losses?
Most angel investors lose money on 80% of their investments.

3\. Does she have any experience herself? Do you see her as a wise person? Can
she act without emotion.

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zeratul
We have two separate business ideas. She is an artist. I'm a computer nerd.
She lives in a different country now then I do. But we want guide ourselves.
Share problems and help out. The thing is that I advise her to execute her
idea within a corporation since it can minimize the risk somehow. That's how I
want to execute my idea. Although, before I do that I want to understand what
is the benefit of a company startup versus a department startup. Maybe my
sister is right. Maybe some ideas are good for spinning new department while
other for spinning new companies.

This is naive but if there was someone at IBM that would see great value in
Steve Jobs's idea wouldn't it make sense to execute it there? Isn't that a
win-win situation?

~~~
teyc
If you execute two businesses in a single company, you subject each other to
increased risk. Somebody suing her company will go after your assets. My
advice is to set up separate companies. You can share facilities etc. But
don't ever run them under the same company if they are run by two different
people, doing two different businesses - unless cost is important and you want
to save $1 of legal fees keeping them separate.

Steve Jobs: it doesn't make sense. In a company every idea will have to fight
for funds and resources. If your idea is funded on its own merits then there
will never be this issue.

Anyway, you are putting the cart before the horse. Go and sell something.

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hkarthik
The big advantages to the startup in this case are the following: 1) More
potential for upside since you own it yourself and can potentially reap the
financial benefits more easily. 2) Potentially less oversight and freedom to
pivot/pursue different directions (depends on how your startup is financed).
3) Freedom to use different technology, personnel, and office space than in
the parent corporation.

I think #2 and #3 are the main things that are driving people to start
companies today.

~~~
zeratul
Thank you. I understand that office space, personnel, and financial benefits
are big advantages in startup company. The other points you are making might
become disadvantages, especially for those that do not have good outside
guidance.

My understanding is that organizations like YC help you "trim" your ideas and
stay focus. One might even think that YC is something like a board of trustees
or senior management. Obviously, without the part where if everyone thinks
your approach is really bad idea they will not let you do it.

