international startups

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international startups Ivan Z 11/7/12 8:30 PM
Hi all,

Does anybody here have experience/stories to share about setting up internationally? As in when a startup is founded in US or EU and wants to move or expand to SG (or the other way around). Setup as a branch here or an independent Pte Ltd or create some other structure? I know this is in the dont-do-this/dont-worry-about-it before xM in funding/revenues category, but still I'm very curious to hear what people do.

thanks,
Ivan

Re: international startups Juanita 11/7/12 8:56 PM
Ivan! :D

Are you asking what are the structures and types of relationships the two entities can have?

Or are you asking who has done it and what has it been like as an owner?

Or both :)
Re: international startups Ivan Z 11/7/12 11:52 PM
both, 
but stories where "cayman islands" are involved in a particularly creative way are of particular interest ;)
Re: [OpenFrog] Re: international startups Wei Leen Ng 11/8/12 7:47 PM
Hi Ivan,

I set up the Asia office for my previous employer 9flats.com. The company is from Germany and I set up our office here, registered it as a Pte Ltd and hired a small team to get us nearly 1,000 listings in a couple of months. We registered a separate entity for tax reasons (surprise surprise!) but as IT infrastructure was run from Germany we only had to focus on Marketing+Customer Service.
What sort of specific questions did you have in mind?



Regards
Wei Leen


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Re: [OpenFrog] Re: international startups Ivan Z 11/9/12 11:15 PM
Hi Wei Leen,

Thanks for sharing. That's exactly the kind of stories I'm looking for.
If you don't mind telling more, since the two companies are separate entities, what kind of agreements have you established between the two companies?

Thanks,
Ivan
international startups Kirill Chekanov 11/11/12 9:36 PM
Hi Ivan,

I can help you in this question

Do you mind having a Skype call?

Please let me know if you are interested

kirill.c...@gmail.com

Re: [OpenFrog] Re: international startups Wei Leen Ng 11/12/12 12:16 AM
Hi Ivan,

That's an interesting question and isn't easily answered. We didn't have an agreement per se. 9flats GmbH paid for everything via periodical cash transfers to a Singapore bank account while 9flats Pte Ltd was responsible for Marketing + CS as mentioned above. How the transfers were treated for accounting purposes (income? subsidies?) was left to our accountants to sort out.
Operationally, we were extremely scrappy. We had only a handful of people in Singapore but we did everything short of software engineering, which was taken care of in HQ. One day I could be responding to email interviews, and be on the phone for customer service after that. Formal hierarchy was not enforced. In some ways our satellite office was even more of a startup than the main office.

Correct me if I'm mistaken, but I feel like you're asking about international expansion that involves hiring 20-30 people immediately and building a sizable team as soon as possible. Is that the case?
If so that could lead us to a very interesting discussion about the relative merits of both approaches, but I am only familiar with the smaller project though.



Regards
Wei Leen


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Re: international startups Kirill Chekanov 11/12/12 5:47 AM
Hi Ivan,
 
I can help you with this. (you can use free Hippflow tools to expand worldwide)
Can have a Skype if you wish
 
Kirill
 

четверг, 8 ноября 2012 г., 8:30:02 UTC+4 пользователь Ivan Z написал:
Re: [OpenFrog] Re: international startups Guido von Westerholt 11/12/12 7:45 PM
Hi Ivan,
if Wei Leen is right and you're interested in rapid expansion and the related pros and cons I'm happy to share my experience as well if you like. We built a startup in Manila that grew to 270 people within 5 months.
Cheers,
Guido
Re: [OpenFrog] Re: international startups Ivan Z 11/13/12 4:17 AM
Hi Wei Leen,

Thanks again for sharing. I guess your're in a situation where your partners personally know and trust you and vise versa so that you can operate without any formal agreements and your investors (if you have any) are fine with that.

I'm still at a very early (seed-funding) stage. But I'm curious to know what people do with international setups before I get to "hiring 20-30 people immediately" problem.

Thanks,
Ivan



On Monday, 12 November 2012 16:16:29 UTC+8, ngweileen wrote:
Hi Ivan,

That's an interesting question and isn't easily answered. We didn't have an agreement per se. 9flats GmbH paid for everything via periodical cash transfers to a Singapore bank account while 9flats Pte Ltd was responsible for Marketing + CS as mentioned above. How the transfers were treated for accounting purposes (income? subsidies?) was left to our accountants to sort out.
Operationally, we were extremely scrappy. We had only a handful of people in Singapore but we did everything short of software engineering, which was taken care of in HQ. One day I could be responding to email interviews, and be on the phone for customer service after that. Formal hierarchy was not enforced. In some ways our satellite office was even more of a startup than the main office.

Correct me if I'm mistaken, but I feel like you're asking about international expansion that involves hiring 20-30 people immediately and building a sizable team as soon as possible. Is that the case?
If so that could lead us to a very interesting discussion about the relative merits of both approaches, but I am only familiar with the smaller project though.



Regards
Wei Leen

Re: [OpenFrog] Re: international startups Ivan Z 11/13/12 4:28 AM
Hi Guido,

No, I'm in a much slower evolving industry.
270 people in 5 months -- impressive. (When do startups stop calling themselves startups?)
Did you grow only in Philippines or internationally? 

thanks,
Ivan


On Tuesday, 13 November 2012 11:45:46 UTC+8, Guido von Westerholt wrote:
Hi Ivan,
if Wei Leen is right and you're interested in rapid expansion and the related pros and cons I'm happy to share my experience as well if you like. We built a startup in Manila that grew to 270 people within 5 months.
Cheers,
Guido

Re: [OpenFrog] Re: international startups Wong Meng Weng 11/13/12 5:06 AM
On 13 Nov, 2012, at 8:28 PM, Ivan Z <van...@gmail.com> wrote:

(When do startups stop calling themselves startups?)

A startup is an organization formed to search for a repeatable and scalable business model.

Once that organization has found a sustainable and scalable business model, it stops being a startup, and becomes a real business – a high-growth company on the order of Google and Facebook.

Note that a business can scale through technology or through people. See Karim Faris's comments about Groupon.

"It's a business that scales with bodies, with humans," said Karim Faris of Google Ventures, which invests in online coupon company WhaleShark Media. "I'm a technology investor, and I like businesses that scale with technology."

If the organization finds a sustainable, but non-scalable business model, it stops being a startup, and becomes an SME.

It is notable that many people fail to distinguish between a startup and an SME. This lack of understanding may be see in, for example,

The distinction between startup and SME is articulated at

Steve Blank elaborates the multiple kinds of startups at

If the organization finds a scalable, but unsustainable, business model, it is typically a FNAP (a feature, not a product) or an PNAC (a product, not a company); it typically exits to a larger company, in which context it makes more sense.

Re: [OpenFrog] Re: international startups Ivan Z 11/13/12 5:24 AM
(When do startups stop calling themselves startups?)

My bad, shouldn't have asked the question in this thread.

Hopefully we can get more stories here on how to setup internationally distributed teams to maximize the chances of building scalable businesses.

Re: [OpenFrog] Re: international startups Wong Meng Weng 11/13/12 7:36 AM
On 13 Nov, 2012, at 9:24 PM, Ivan Z <van...@gmail.com> wrote:

Hopefully we can get more stories here on how to setup internationally distributed teams to maximize the chances of building scalable businesses.


I've been very happy with the opensource approaches to building effective online communitiies, using tools like mailing lists, IRC channels, wikis, occasional phone calls for core team meetings, BOFs at conferences, and very occasional IETF meetups.


In the 1990s I participated in the Perl community mostly through IRC.

During the 2000s I helped lead the SPF community mostly through the mailing list.

Hackerspace.sg is a vibrant community both online and offline.

Now the JFDI initiative is scaling through those kinds of tools, including the JFDI blog and the community calendars hosted by SGE and thelist.sg.

It seems to be working.

There remains a need for a watering hole specifically for the startup community, so we'll launch the Minimum Viable Café at Blk71, featuring the Barista for a Day.


Re: [OpenFrog] Re: international startups Ivan Z 11/13/12 7:35 PM
I've been very happy with the opensource approaches to building effective online communitiies,...
 
Agree, open approaches are very efficient for building and grow communities including for-profits.


Thanks for the links. So yes, enough examples of successful distributed teams if communication and culture problems are under control.

The question is not whether it's possible or not, but what startups do when they decide to setup internationally. Wei Leen's answers about 9flats.com is very useful (setup as independent entities). It would be good to hear more stories with other setups (branch/representative office/...) both from business owners and investor perspectives.

 
There remains a need for a watering hole specifically for the startup community, so we'll launch the Minimum Viable Café at Blk71, featuring the Barista for a Day.

+10 for MVC. Can I put a feature request for a Minimum Viable DJ?
 
Re: [OpenFrog] Re: international startups Wei Leen Ng 11/13/12 9:23 PM
Great sharing Meng, Ivan. After reading one of the quora links, I should add consistency in company culture and communications were certainly very helpful for me at 9flats. "We're almost done" or "We're satisfied with progress" has to mean the same thing across the organization.

PS. Do I sense a proliferation of M-V-things? First product, then cafe, now DJ. Maybe you could replace DJ with Disco, Ivan. ;)


 

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Re: [OpenFrog] Re: international startups Guido von Westerholt 11/13/12 9:42 PM
Hi Ivan,
haha can't tell you when you're out of the startup phase - matter of attitude I guess ;)
Besides that don't think you're losing out by not growing that fast - the numbers sounds impressive but so are the problems you encounter and the experience actually made me appreciate the saying "if you want to go fast, go slow" a lot more! While a certain drive and willingness to make mistakes for the sake of faster learning makes sense one has to be very careful not to overdo it and create unnecessary problems that could have easily been avoided. Taking the time to build a solid foundation from which to accelerate more rapidly is well worth the effort and time well spent in my eyes.
Cheers,
Guido
PS: This was only in the Philippines.
Re: [OpenFrog] Re: international startups JasonOng 11/13/12 10:28 PM
I believe another option for well-funded startups is to buy up companies to expand internationally, ala Groupon?

Slightly off-topic, I've heard of startups get around US work visa issues by acquiring their developer's company/business so they can do an inter-company transfer.


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Re: [OpenFrog] Re: international startups Juanita 11/14/12 12:28 AM

On Wednesday, November 14, 2012 2:28:23 PM UTC+8, JasonOng wrote:

Slightly off-topic, I've heard of startups get around US work visa issues by acquiring their developer's company/business so they can do an inter-company transfer.

Oooh interesting, do you have any details on how this works?

It sounds like you are saying the developer already has a company he/she is working for and has a US visa under that company so a purchase of the employing company allows the visa to be transferred instead of a new visa application being submitted. yes?

I am wondering how this would work since the employing company being bought would likely have more than 1 employee so the visa holding person would need to be someone with a fair amount of control of the employing company.
Re: [OpenFrog] Re: international startups JasonOng 11/14/12 10:14 AM


On Wed, Nov 14, 2012 at 12:28 AM, Juanita <juanita....@gmail.com> wrote:
It sounds like you are saying the developer already has a company he/she is working for and has a US visa under that company so a purchase of the employing company allows the visa to be transferred instead of a new visa application being submitted. yes?

I don't know the implementation details but I should go find out coz it's an interesting hack. For those uninitiated, most devs outside of the US got companies to sponsor a H1-B visa. Problem with that is the quota always gets filled up and for those who are lucky enough to get it, can't enter the US till October. So what I've heard companies/startups try to get around that by either setting up a branch office in their target candidate country or just acquire his/her company so the candidate can get the L1 visa which is really meant for inter-company transfer to the US.

Another hack that I've seen people do is to go for the O1 visa which is meant for folks with "special abilities".  I know of someone who wrote a javascript library, travelled around Asia, wrote and published an O'Reilly book so he can get the accolades to be eligible for that visa. As you can see, it requires patience and tenacity.

Juanita I'm wondering if these hacks can be applied to Singapore since you must know visa situation here better than I do. :)
Re: international startups Juanita 11/14/12 8:33 PM
The 3 most common I see are:

- Service company (either subsidiary or two companies unrelated except by shareholders/directors)
- Independent company (invoices costs back and forth)
- License/Franchise agreement

Ivan, was our discussion at HSG useful the other day around these options (where to put IP, how accounting happens and flexibility of options)? I could add it here, just have not had time to type it. 
Re: international startups Ivan Z 11/15/12 6:07 PM

- Service company (either subsidiary or two companies unrelated except by shareholders/directors)
- Independent company (invoices costs back and forth)
- License/Franchise agreement

What's the difference btw "unrelated service company except by shareholders" and "independent company"?
 
Ivan, was our discussion at HSG useful the other day around these options (where to put IP, how accounting happens and flexibility of options)? I could add it here, just have not had time to type it. 

Juanita, thanks again for the discussion. Of course it was useful.
Unless I'm the only clueless on such matters here, writing it down would be extremely helpful. 
Hopefully it will trigger Meng to add a section on possible companies structures to the excellent JFDI's rtfm resources.

Re: [OpenFrog] Re: international startups Juanita 11/15/12 8:11 PM
On Thursday, November 15, 2012 2:14:33 AM UTC+8, JasonOng wrote:

Juanita I'm wondering if these hacks can be applied to Singapore since you must know visa situation here better than I do. :)

Purchasing a company to get its EP holders working for you adds some complexity and cost to your reporting and compliance requirements to the tune of a minimum of $3000 - $5000 extra per year. Its possible, but the company would have to be highly motivated to keep said person as both companies need to be kept live, the EP would not be transferred over to the purchasing company.

This option would definitely speed up the 'acquisition' of the talent but if the company being bought is of a simple enough structure that you don't have to dismantle anything to sell it then I would question why the star employee does not just bill his cost of work to the purchasing company on a fixed contract basis and invoice the purchasing company. That would save quite a bit of time and money.

Throw ESOP into it and things may get a bit complicated but not overtly so.
Re: international startups Juanita 11/15/12 8:52 PM
On Friday, November 16, 2012 10:07:35 AM UTC+8, Ivan Z wrote:

What's the difference btw "unrelated service company except by shareholders" and "independent company"?
 
Using USA and Singapore as an example, some important characteristics:

Unrelated service company except linked by shareholders
- Same shareholders in both entities OR one shareholder who is the nominee representing all the other shareholders
- Same directors in both entities
- Both entities are 'partners' but are linked by an intercompany agreement, not actually by one owning the others
- Assuming USA is the head office, intercompany agreements treat the Singapore entity as an 'engineering arm' or 'sales arm' of the business
- Costs of the Singapore entity are borne 100% by the US entity, subject to a 5% markup to meet transfer pricing requirements
- Revenue is received only by the US entity
- Others than specific work (e.g. engineering/sales) any other unrelated expenses are charged to the US company
- Employees get stock in the US entity
- This entity usually gets purchased by the US entity and becomes a recognised subsidiary once funding is received so that initial costs associated with a subsidiary are delayed until the company can afford it
- Singapore entity pays company tax on the 5% markup, USA pays company tax on revenue less all operating expenses (incl Singapore costs) 

Independent Company
- No same shareholders or a nominee
- May or may not have same directors
- Both companies are separate trading entities ie both generate their own revenue and do their own projects
- If the Singapore company does any work for the US company, it will be as a consulting company invoicing for consulting time
- Costs of running the Singapore entity would generally not be 100% paid by the US entity but would be partially paid from other consulting contracts
- Revenue is not shared by each entity in any way
- All work done by the Singapore entity would be paid from Singapore entity income
- Employees get stock either in the USA or Singapore entity, depending where they are hired
- This entity may or may not get purchased by the US entity, it is independent and could spin off to be its own business at any time 
- Each entity pays company tax in their own country, based on their individual revenue less expenses
Re: international startups Ivan Z 11/17/12 10:58 PM
Juanita, thanks a lot.
I'm loosing count of how many dinners I owe you.

Re: international startups Juanita 11/18/12 1:43 AM
barter trade systems! will someone please build? :)

On Sunday, November 18, 2012 2:58:33 PM UTC+8, Ivan Z wrote:
Juanita, thanks a lot.
I'm loosing count of how many dinners I owe you.

Re: international startups Ray Wu 11/19/12 10:47 AM
Anyone knows if there is any restriction on Chinese nationals registering co. and applying for work permit?

On Friday, November 16, 2012 12:52:14 PM UTC+8, Juanita wrote:
On Friday, November 16, 2012 10:07:35 AM UTC+8, Ivan Z wrote:

What's the difference btw "unrelated service company except by shareholders" and "independent company"?
 
Using USA and Singapore as an example, some important characteristics:

Unrelated service company except linked by shareholders
- Same shareholders in both entities OR one shareholder who is the nominee representing all the other shareholders
- Same directors in both entities
- Both entities are 'partners' but are linked by an intercompany agreement, not actually by one owning the others
- Assuming USA is the head office, intercompany agreements treat the Singapore entity as an 'engineering arm' or 'sales arm' of the business
- Costs of the Singapore entity are borne 100% by the US entity, subject to a 5% markup to meet transfer pricing requirements
- Revenue is received only by the US entity
- Others than specific work (e.g. engineering/sales) any other unrelated expenses are charged to the US company
- Employees get stock in the US entity
- This entity usually gets purchased by the US entity and becomes a recognised subsidiary once funding is received so that initial costs associated with a subsidiary are delayed until the company can afford it
- Singapore entity pays company tax on the 5% markup, USA pays company tax on revenue less all operating expenses (incl Singapore costs) 

Independent Company
- No same shareholders or a nominee
- May or may not have same directors
- Both companies are separate trading entities ie both generate their own revenue and do their own projects
- If the Singapore company does any work for the US company, it will be as a consulting company invoicing for consulting time
- Costs of running the Singapore entity would generally not be 100% paid by the US entity but would be partially paid from other consulting contracts
- Revenue is not shared by each entity in any way
- All work done by the Singapore entity would be paid from Singapore entity income
- Employees get stock either in the USA or Singapore entity, depending where they are hired
- This entity may or may not get purchased by the US entity, it is independent and could spin off to be its own business at any time 
- Each entity pays company tax in their own country, based on their individual revenue less expenses
Re: international startups Juanita 11/19/12 9:42 PM
There is no restriction on company incorporation by a foreign national.

For the work permit are you just referring to any work visa or specifically the one called a Work Permit? Each type of work visa has its own individual requirements for application and approval. The Work Permit requires you have a ratio of local manpower to apply for one foreign manpower slot.

More details at MOM!