Entries tagged “startup”

Registering a Limited Liability Partnership

Last evening we received the final bit of paper required to function as a legal business. HasGeek is now a fully legit Limited Liability Partnership. The process took just under 110 days. I thought it would be instructive to lay down the timeline for those considering the startup route.

Phase 0: Decision

As a sole founder I could have settled for a sole proprietorship, but decided to go for an LLP because I did not see this as something that would work without partners, and switching in future would be a hassle. A sole proprietorship does not require registration to do business, but does need sales and/or service tax registrations to handle money above certain limits. Those registrations cannot be transferred when you incorporate.

HasGeek was built on the experience of running Barcamp Bangalore, where all of us were volunteers sparing a few hours over weekends. I learnt from there to regard volunteers as significant contributors, and wanted a legal structure that allowed rewarding them for their efforts. With an LLP, they can become partners.

NoDateDescriptionDays
1. Oct 18, 2010 Initial discussion with legal advisor on registering a startup -17
2. Oct 31, 2010 Decision to register an LLP -4

Further reading:
Quora: What are the pros and cons of a Limited Liability Partnership (LLP) registration over a Private Limited registration for Indian startups?

Phase 1: Partner Registration

The “Designated Partners” of an LLP need to be registered with the government before the organization can be. My wife Zainab Bawa stood in as the second partner with a small share.

NoDateDescriptionDays
3. Nov 4, 2010 Authorization to legal advisor to start the process. Primary motivation: have a bank account ready before DocType HTML5 in Chennai on November 27 0
4. Nov 9, 2010 First notice from llp.gov.in that I’ve registered for a Designated Partner Identification Number (DPIN) 5
5. Nov 10, 2010 First notice from llp.gov.in for Zainab’s DPIN registration 6
6. Nov 11, 2010 Both DPIN applications come back asking for us to sign across our photos. Zainab is away so we return the attested photos the following day 7
7. Nov 17, 2010 DPINs still not ready. Reason given: LLP department is upgrading to new e-form system 13
8. Nov 19, 2010 Zainab gets her DPIN. I don’t 15
9. Nov 24, 2010 My DPIN is rejected because my father’s name is written differently on my PAN card and driving license. They say it has to match the name on the driving license (id proof document) 20
10. Nov 26, 2010 My DPIN is assigned 22

Phase 2: Incorporation

An LLP is essentially a registered agreement between the partners. The agreement can pretty much say anything, even granting specific partners special powers. However, the agreement is not private. It has to be shared with the bank and possibly other service providers, and they must be notified of changes to the agreement, which includes addition and removal of partners. Each change requires re-registering the document with the government.

NoDateDescriptionDays
11. Nov 24, 2010 Legal advisor asks for a few paragraphs listing all business activities, to go into registration documents for the LLP. Requires me to imagine everything HasGeek may potentially do years from now, since amending in future can be a hassle 20
12. Nov 24, 2010 Legal advisor sends a draft of the partnership agreement 20
13. Nov 27, 2010 Event day: DocType HTML5 Chennai. Our lead sponsor agrees to pay in advance, but we can’t receive without being registered. We are way past the expected date for all this to be complete 23
14. Dec 4, 2010 Event day: DocType HTML5 Pune. More expenses with no inflow in sight. Audience turnout is twice what was expected, so our expenses double too. Zainab has been hospitalized a couple days prior and I coordinate the event from her bedside. I lose my voice thanks to the stress and the sore throat picked up in Chennai 30
15. Dec 6, 2010 I finally revise and send in the partnership agreement. My sore throat starts to lift and I can speak again 32
16. Dec 8, 2010 Minor amendments to partnership agreement. We submit signed and scanned copies for registration 34
17. Dec 15, 2010 HasGeek Media LLP is incorporated. llp.gov.in sends us an unsigned PDF of the certificate 41
18. Dec 28, 2010 After much pleading, a scanned copy of the signed certificate is finally emailed to us. A signed copy is necessary to apply for a PAN card and open a bank account 54

Phase 3: Permanent Account Number (PAN), the tax id

Despite having become a legal entity, the company cannot receive money (beyond a low limit) until it has a PAN card, or at least proof of having applied for one.

NoDateDescriptionDays
1. Dec 28, 2010 Legal advisor sends copy of PAN card and Service Tax applications, for us to print, sign, stamp, scan and submit 54
2. Dec 31, 2010 Zainab and I return from vacation two days ahead of schedule to submit the documents 57
3. Jan 9, 2011 NSDL sends email to acknowledge receipt of application for a PAN number 66
4. Jan 12, 2011 HasGeek’s PAN number is assigned. We get email notice 69
5. Jan 17, 2011 PAN card arrives in the mail 74

Phase 4: Opening a bank account

My legal advisor handled everything relating to incorporation and taxation, but opening a bank account fell to me. I figured I’d go with ICICI Bank since they have a branch across the road from home, and I already have a savings account there.

NoDateDescriptionDays
1. Dec 13, 2010 I approach ICICI Bank to open an account, but they can’t proceed until the company is incorporated 39
2. Dec 31, 2010 I submit all documents, including the necessary seals on the application form. My LLP agreement says I will be the sole authorized operator of the account, but the sales rep insists on Zainab’s photo and signature on the application form. He also wants Form 49, despite the company not yet having a PAN number. He refuses to accept Form 60. I tell him we have applied online and the acknowledgement does not say it is Form 49, but he wants a copy anyway. Says he will come home on Monday and pick it up 57
3. Jan 3, 2011 Sales rep fails to keep his appointment 60
4. Jan 4, 2011 Sales rep calls at 9 AM and says he will come by 11 AM. My house is 200 metres from the branch. He does not show up at 11. I call him, but he does not answer the phone. I call again at 12:30 and he’s confused about who I am and what appointment he had. Finally he remembers and says he had a meeting and could not come. I ask him when he’s coming. He says he’ll come at 3. At 4 he’s still not arrived and is not answering the phone again, so I go to the branch and insist on sitting there until the paperwork is processed. The sales rep is there but does not remember me at all. Another sales rep takes over the interaction. He says the account will take 3-4 working days, so it should be active on Monday 61
5. Jan 10, 2011 No news. I visit the branch around noon to check up. They check their systems and say there’s no update. They have no idea what the status is 67
6. Jan 12, 2011 I visit again to check status. They say the application came back the previous day with two issues, but the sales rep did not bother to call me. What are the issues? 1. One of the documents has my middle name (which I rarely use) and another does not. They want to confirm both are the same person. 2. Zainab’s name is listed in the account despite the LLP agreement saying I was the sole authorized operator. Now they want to take it out 69
7. Jan 20, 2011 After a few more trips to the branch to sign and re-sign various documents, the account is finally activated. The branch manager issues me a written apology for the delay, citing confusion over my name as the reason. This is not the first time my middle name has caused trouble. It takes another fortnight to get all the standard features enabled so I can start using the bank account 77
8. Jan 21, 2011 I make the initial deposit into the bank account and leave for DocType HTML5 in Hyderabad. More expenses, and we still can’t receive money because we need to charge for service tax but don’t have a service tax registration number 78

Phase 5: Service Tax and Tax-deduction Account Number (TAN)

We are a product company, but our product is not physical material. In tax-speak, that makes it a service business. Any business that grosses 10 lakhs (INR 1,000,000) in a year must collect service tax, for which it needs a service tax registration number. We were set to pass that figure in the first two months. Service tax registration requires proof of address in the name of the company, but the address on the incorporation certificate is not good enough. It has to be a bank statement or a phone bill. Since we had charged sponsors service tax, they could not pay up until we quoted the service tax number (or at least showed proof of application), but we could not apply for this number until the bank issued a statement for the account. I had expected the account to take 3-4 days, not 20.

A TAN number is required to deduct tax at source for consultants and employees.

NoDateDescriptionDays
1. Jan 24, 2011 I return from Hyderabad and get a statement from the bank, then pass this to legal advisor 81
2. Jan 25, 2011 Service tax application is submitted 82
3. Feb 5, 2011 Event day: DocType HTML5 Ahmedabad, which means more expenses without income 93
4. Feb 8, 2011 Service tax number is assigned 96
5. Feb 9, 2011 Tax-deduction Account Number (TAN) is assigned 97
6. Feb 11, 2011 The big payment cheque finally arrives! 99
7. Feb 19, 2011 Signed copy of service tax certificate arrives in the mail 107
8. Feb 21, 2011 Letter informing us of TAN allocation arrives in the mail 109

In 109 days, HasGeek became a registered business, crossed 10 lakhs in revenue, made over 1000 contacts in real life (with double that in the database), and will close the first financial year as a cashflow positive business. Personally, I went as far as 3.75 lakhs in debt, at a short term financing cost of about Rs 12,000. If I had known this would take 100+ days, I would have borrowed from friends and family or broken out savings. At pretty much every step in the process it looked like it would take at most another week to get everything in place. My credit card issuer decided this justified doubling my credit limit. They are now offering me 100% advance on a car loan.

My legal advisor was NovoJuris. I recommend them to anyone considering a startup. They took care of everything, letting me focus on my work. They went out of their way to prod government machinery into action, without which this would have taken much longer. However, the big lesson for me is to never let an external entity define my timelines. HasGeek was nearly killed before it was born because I allowed apathetic third parties (government and private sector bureaucracies) to control my cash flow. From now on, we will put things in place months before they are actually needed, with redundant options from other providers, whether for payment gateways or data cards.

HasGeek

In August this year, I started working on a conference around HTML5. DocType HTML5 went live on October 9 with 200 participants, out of over 450 applicants. The event was the first coming out of a concept I had been toying with since the middle Barcamp Bangalore period in 2007. DocType HTML5 was an unexpected success. None of us thought it would go off as well as it did. Until two weeks before the event, we weren’t even sure it would happen.

The event helped shape the startup I had long wanted to do, to fix a personal problem: the lack of spaces in which to have in-depth technical conversations. HasGeek was named over a dinner conversation in one of the DocType HTML5 planning meetings, and our first act as a registered entity is to take DocType HTML5 across India. Registrations are now open for the Chennai (Nov 27) and Pune (Dec 4) editions, with upcoming editions in Hyderabad, Mumbai and Delhi scheduled for Jan and Feb 2011.

I expect that this event series will point to some aspect of the modern web that deserves a deep examination in the March-May 2011 period. Early feedback is pointing to the canvas tag.

Talent shortage? Or, does your company treat you well?

Over on Silk-list, Kragen Sitaker forwarded an article by Kevin Barnes titled Finding coders on the subcontinent, about the shortage of tech talent in India. It’s a well written piece that describes a real problem without being condescending about it. It sparked an interesting discussion. However, at some point I couldn’t help but feel that it was rather one-sided, finding fault with the people seeking jobs without saying anything about the companies that seek to hire them.

Here is my rant:

Sure, demand outstrips supply, and there’s a vast pool of unqualified people trying their best to get their foot in the door, but surely this doesn’t mean there are no qualified people?

If you’re a company seeking to hire and retain talent, you’ve got to know how to hire and retain talent. You can’t blame the supply for your shortcomings. You can’t just turn up in a new place, setup camp, and expect the best to gather in your tent, because, after all, you’re cool and they want jobs. In my experience, well qualified people are not hard to find if the job deserves a well qualified person. The myth of talent shortage needs reversal.

First, the startups.

Sturgeon’s law applies here. 95% of all startups will fail. There’s no escaping it. If you’re seeking to work with a startup because you’ve heard the stories of valiant struggle before success, of glorious riches, of the freedom and responsibility and growth such a job affords... you’re likely totally unqualified to tell if the company you’re associating with will be one of those stories.

In other words, your company will fail. Cut and run before it takes you down.

Before you join, demand to be explained the business plan. If it doesn’t make sense, leave. They don’t know what they’re doing.

If the company declares it confidential, leave. They don’t have a plan.

If you tell them it doesn’t make sense and they tell you that you don’t understand and they know what they’re doing, leave. They’re pompous assholes.

If they try to impress you by making you feel small and promising great heights if you associate with them, leave. They’re condescending assholes.

If they tell you that your expected take is more than you deserve, leave. They have no respect for your abilities.

If they offer you stock without giving you decision making responsibility, leave. The stock is worthless and you’ll be signing away the rights to your career.

If they’re offering a decision making responsibility but no stock, leave. They’re control freaks and you’ll get shafted when they realise how dependent they are on you.

If you send them a referral and they pitch to that person singing paeans to the wonderful things they’ve heard about them, raise the alarm. They’re desperate and think nothing of lying in their pitch.

If they say anything about how they’re in your part of the world because the costs work out better here, run like hell. They only want you because you’re cheap. There are few things worse than a job where your most attractive feature is your price tag. Do not ever work for a company that is in your area while the market is elsewhere because it’s cheaper here. Globalisation wasn’t meant to be to your advantage. You’ll get walloped by the glass ceiling before you know it, and then they’ll toss your burnt out body on the road.

In summary, working for a startup is generally a very bad idea. It’s no wonder most startups only find the most desperate candidates, or the brilliant but naive ones who will inevitably burn out. Stop whining that people have no risk taking appetite. They’re being sensible, you’re not.

I didn’t make up any of this list. They’re from actual experiences I’ve had.

For a far simpler but 100% effective test, ask to see the founder’s working space (if the founder has a fancy title like “CEO” or “CTO”, laugh at them before you run, for a fancy title invariably means they have no key staff). If it bears any sign of being superior to the spaces of ordinary employees, any sign at all, whether glass cabin, better furniture, even view from the window, say thanks and walk away. You won’t regret it. The only admissible difference is that they have vacant space around them to accommodate people for meetings. Startups are expected to be disorganised, but not to have visible hierarchies. (The successful startups I’ve worked with invariably had egalitarian working spaces even after having grown several hundred strong.)

Not that established companies are generally any better. When you treat your employees as replaceable unit labour, what better can you expect but to fill your vacancies with replaceable unit labour?

Look at the HR policies most companies have. The big shops all treat their “fresher” recruits as bonded labour. (The contracts are worded to pass the bond off as training fees.) These aren’t mere formalities. I once had a person come running out of a BigCo, three months into the training period, to work with me at a startup. About the most brilliant person I’ve had the pleasure of working with, and a good friend since. He couldn’t stand the place for the way it treated folks, by policy. He told his HR manager as such before leaving. She said she would have to file him as absconding, because otherwise it would be a hassle for her to explain. BigCo sent a lawyergram, threatening a civil suit for violating the bond unless he paid up. (They didn’t follow up, suggesting it made no economic sense.) In the same period, that same company was all over the press as among the best performing companies and one of the best places to work. The press detailed what was most repulsive about the place (“deskilling labour”, aka “leave your brain at the door”) and celebrated it as its unique strength, the engine of its growth. It was disgusting.

As for the startup? The team did some brilliant work that’s caused lasting ripples around the world (as measured by a Google Alert on the name of the product, which continues to turn up new results every few weeks), but the place didn’t escape Sturgeon’s law. Their HR policies were so insane, the best ran for cover at first opportunity, while the brave fought until they burnt out. How bad could it be? Consider this: they had a single phone in the premises, which the “director” personally answered to screen all calls. He’d refuse to pass the call if he thought someone was getting too much phone time. When he left for the day, he locked the instrument in his drawer. This was at a time before cell phones were ubiquitous. The startup had this very expensive, large, open space for an office, one whole side of which was a glass wall with a glorious view. Two thirds of the floor was unoccupied, reserved for future expansion, while everyone got packed into the other third with approximately two and a half feet of personal space, without even cubicle walls. The only place to keep a backpack was to hang it off the back of the chair, or on a designated shelf at the other end of the floor. All this, despite that they paid excellent salaries. Management didn’t think better conditions were needed given the kind of work they did.

(I won’t bother to describe the power politics, aka mutual backstabbing, that characterised the place. This startup wasn’t even the worst disaster I’ve seen.)

I’ve been expelled from an organisation for incompetence on more than one occasion. In moments of self examination, I’ve wondered: was I really that incompetent, or was there something about the place that was so inhibiting? It’s been painful acknowledging one over the other, but with the passing years, I’m increasingly convinced that most companies are really lousy places to work at. They make glorious statements about what their people mean to them, but they usually don’t know what those statements mean.

In the last half decade, not one company has managed to convince me to become a full time employee. I’ve remained a consultant even when heading their tech departments, choosing to work with no job security, no perks, all-work-related-expenses-are-my-own,-please-just-pay-me-this-lump-sum,-thank-you-very-much, because, guess what? It actually works out better than to be an employee, given their policies. Have you seen the employee contracts most companies have?

What’s that? You have an entrepreneurial streak and would like to make the most of it? Well, screw you. You’re the company’s property and you do what you’re told. Don’t you dare be good at anything else. (Don’t believe me? Read the fine print on your contract.)

What’s that? You’ve some errands this morning and will be in late? But you said the same thing yesterday. Well, yes, we have flexitime, but we’d like it if you were in office 9.30 to 6 each day. Please don’t compel us to review our policies.

Heck, most companies don’t even know how to make a consultant’s contract. I’ve worked with companies for years without one and it doesn’t bother me anymore. There’s a standard pattern to how this plays out that is comforting. The working relationship survives without a contract on the basis of trust. Or more accurately, on the basis that if I quit, they’re in deep shit, so the pay cheques had better keep flowing. The contract invariably comes out in a hurry when one shows signs of disillusionment.

Last year, a startup tried to convince me to sign one that said if they had a successful sale of their product, I’d refrain from indulging in that line of work for the next two years, in addition to the 18 months I was going to stay off such work should I dare quit. They saw nothing wrong with it. Just protecting their interests. A non-compete clause, you see. Would they agree to a clause specifying that they pay me a stipend for the period I was mandatorily off work? Hell, no. Not in their interests.

A few months later, that startup folded.

As for those who accept the muzzle of the contract, look at how they’re treated. “Spec it till there’s no room for creativity”. Lower level staff are menial labour. Their ability to think is an inconvenience. How do you upgrade their responsibilities? That’s easy. Give them a simple task, one they can’t possibly fail at, then make congratulatory noises about how they’re so valuable to the company and taking on such important work. If the employee isn’t insulted and manages to complete it without panicking over how they’ve utterly failed to understand the task because surely it can’t be as trivial as this, throw another task at them. If they’re failing to cope, take the task away. The task has to be done on time within budget. That is most important. Work is worship and customer is king, you see. Don’t waste time on fiddly thoughts like how demoralising such a demotion can be. On second thoughts, don’t even bother telling them they’re no longer in charge. There’s no time. They’ll figure it out eventually and understand that it’s all good. The explanations can wait for the performance review. Let HR do it. We’ll give the person some responsibility again when they seem ready for it. Can’t risk them screwing things up.

Performance review? What’s that? Not once in all my working life have I had a performance review, except when being reprimanded for failing to deliver on responsibilities flung at me. Performance reviews are these mysterious events that only happen to other people, never yourself.

Take a person who’s been through this cycle enough times, put them in a decent work environment where they’re treated well, give them responsibilities commensurate with their experience, and ... what? You don’t know how to do this because you never actually got to this part of the job before? In all these years?

Well, is it any surprise when you find yourself interviewing such a candidate? That you find yourself strangely lacking what ought to have been standard experience?

Companies think they’re doing employees a favour by giving them work. They think employees have no business questioning the nature of the work when they’re getting paid for it. They don’t understand that employees have resumes to fill, and if you’re making a habit of giving them bit jobs that are hard to explain, they’ll go elsewhere seeking a better job description.

They think nothing of stuffing people into cramped workplaces with standard issue computers (ugh!) and really bad ergonomics. I’m yet to see a workplace anywhere in this country that understands ergonomics. The table is always too high, hurting your shoulders when you reach for the keyboard, leaving your feet dangling, and the chair is never the right size for you. There’s always some kind of supporting structure under the table that smashes into your knee two times a day. Bad back from the posture? Well, you really ought to take better care of your health, you know. The company can’t oversee your personal life.

And then they don’t understand why you prefer to work from home, where you’re in charge of the environment. Shirking duty. Hanging out with your girlfriend while claiming to work. If you pull this stunt again, we’re marking it as your day off.

Or force them to fill a timesheet that takes half an hour each day and demands details that no one can possibly provide, except by fabrication (“how much time did you spend on each task?”). Cut off their distractions. Filter their Internet access. Don’t let them visit sites that are unrelated to their work. Send them a list each week and demand explanations for what they were doing on those sites. Structure their workplace such that they have no privacy. They shouldn’t be able to tell if someone is staring at their screen from across the room. That’ll keep them focused.

(All real experiences.)

You know what? Enough with this bullshit.

We’re in a booming economy now. This is an employee’s market. Don’t be held down by companies that can’t respect you. There’s always someone else out there who will treat you better. Companies that actually treat their people well are few and far between. If a company doesn’t go out of its way to prove it to you, don’t waste your time with them. Move on.

For companies that claim people are their most valuable assets, ask yourselves this: are you willing to treat HR as the most important function of your company, far more important than the actual line of business you indulge in? If not, screw you. You deserve the rabble you whine about. You are the very source of what you despise.

Mobile technology companies

I’ve come across these mobile technology companies in the last few weeks:

  • Tantra Telecom is a brand new Bangalore-based startup, barely a couple months old. Entrepreneur Rajiv Poddar hopes to build a business around an open source architecture for cellular handsets, for both hardware and software. He expects an alpha prototype to be ready by August. Rajiv is also actively involved with the Bangalore chapter of Mobile Monday, a community of mobile professionals. A Mumbai chapter recently opened.
  • Xtend Technologies is a Cochin-based developer of telecom hardware and software. They’ve been around a decade. Partners Jayakrishnan K and Kurian Thomas first gained notoriety for ShellSock, their replacement driver for Windows TCP/IP that allowed graphical browsing over then-monopoly ISP VSNL’s shell accounts. It may not seem much today, but caused significant tremors in its time. Xtend’s primary offerings today are developer toolkits for SMS reception and Interactive Voice Response Systems (IVRS; must check how they compare against Asterisk), and hardware to hitch mobile phones to office phone exchanges or bill printing machines.
  • Hasta Solutions is a Bangalore-based developer of Indian language interfaces for Palm PDAs and Java-enabled phones. CEO N S Vaidyanathan said he got into this space initially working on the Simputer. The technology’s nifty, but Mr Vaidyanathan got shifty when I asked about Unicode compliance. He tried downplaying Unicode’s importance and the difficulties in building an implementation from scratch. Unicode’s not a simple 16-bit character stream. There are 17 “planes” of 16-bit characters each, the common encodings UTF-8 and UTF-16, the processor-specific byte order and Byte Order Mark (BOM) header in UTF-16, rules for complex character sequences, particularly for Indic scripts, and font-specific interpreters for these sequences. No wonder the world is littered with flawed implementations. While Mr Vaidyanathan would not confirm the encoding used by his current software, he suggested it was ISFOC compatible. ISFOC is the render-only encoding for ISCII. It is not suitable for storage. Here’s hoping he gets his Unicode compliance quickly. There’s a glaring gap in Indian language support for handheld devices.

Any others you can add to the list?

Training session at Mahiti

Training at Mahiti
At Mahiti Infotech, Domlur, Bangalore, November 2004.

For at least the first half of this decade, Mahiti operated as a low-margin technology services provider to non-profits, primarily in the form of building web sites.

Because of the unusual nature of this operation in a soaring economy, Mahiti had to keep costs low — including employees’ pay, use open source everywhere, and focus on pioneering use of rapid development technologies.

An entire generation of computer programmers found their footing in the industry at Mahiti. Most moved on to better paying jobs. I trained one batch in 2001 and subsequently worked with some of them at other companies. Mahiti’s “graduates” are now to be found at pretty much every Zope and Plone company in India. Mahiti continues to rock on, now even organising events worldwide, and still seeing rapid turnover in their staff.