Firstbase founder Mark Milasitvsky on Scaling a Startup and the Importance of US Incorporation

you know, VCs are just more familiar with the structure of a US corporation. They kind of know, you know, the taxation of them and the legal implication of starting one or investing in one. But I would say that also applies to customers as well. And the customers that you're selling to, they're definitely going to be a lot more comfortable buying from a US Corporation or an LLC.

Hey everybody, welcome to this Founder Institute webinar. My name is Jonathan Gritchen, co-founder and CEO of the Founder Institute. We had over 400 or 500 or so people registered to this event today from all over the world, which is pretty understandable considering the topic of the event today. So if you are joining, please let us know where you're joining in from and engage in the chat. Myself and Mark, the speaker, we're just talking about this. These days you can learn anything on YouTube, honestly. We try to make these events as interactive as possible. You will notice as you join today, there was a networking room where you can meet other people. We'll go back to that networking room after this onstage portion of the event. But more importantly, we want to hear questions from you. At any time during the event, Don't be shy, throw your questions into the chat. We have a member of our team, Danielle, who's in the chat, who'll be feeding questions to us and we'll answer them. Try to pepper them in throughout the event, but definitely towards the end of the event, we will also have a ton of open Q&A. I'm seeing here already, CJ from Sri Lanka, thank you for joining. Bernie from Austin, Fabrice from Belgium, Darshan from Amsterdam, London, Israel, um, Belgium, uh, Cape Town, Utah, Manchester, Waterloo. Amazing, guys, uh, keep it coming. And, you know, again, make connections into the chat, okay? This is one of the, one of the biggest benefits that we have now, and especially, you know, across the startup space, is that your ability to recruit people, to team up with people to build amazing companies not only restricted to your geography now, connect with people all over the world. So I implore you to use the chat not only to connect to other people but to ask us questions to make this event as interactive as possible. So I am very excited about the topic that we have today, honestly, because at the Founder Institute we've helped companies launch from over 100 countries around the world now. And being a Silicon Valley, US-based organization as we are here at Founder Institute, obviously one of the common topics that we get. Honestly, one of the most common questions that I get from a lot of the entrepreneurs that we work with is, you know, how to set up a US corporation, what the complexities are in setting up a US corporation. And, you know, a lot of people do that to get access to capital, to get access to tools, and there's a lot of other reasons to do that. But it's definitely one of the biggest kind of pain points and questions that we see, especially from international entrepreneurs. So who better to help us tackle that topic than our speaker today? It's Mark Nalestevy. And Mark, I'll kind of welcome you up to the stage here. How you doing?

Good, thanks, Jonathan, and thanks everybody for joining us today.

Yeah, so Mark, and I'll give a quick introduction, Mark, but I'll probably butcher it, so I'll let you kind of fill in the blanks here, right? But Mark's the founder and CEO of a company called Firstbase. Firstbase has helped over 35,000 entrepreneurs launch US corporations, and I believe it's from over 175 countries. Is that correct?

Yeah, pretty much every country on Earth at this point.

Got it. All right. Even I know we always say like we're in, we're across 6 continents, but not 7. We don't have Antarctica yet. Have you guys gotten an Antarctic corporation yet?

No, I don't think so. But we do, you know, we do get quite a few interesting countries every once in a while. You know, you see places like Aruba, you know, you— a lot of people don't even know they exist, but they exist and there are founders there. And it's— yeah, I think it's definitely interesting to work with founders from everywhere. And I think the topic that we are talking about today is something that founders everywhere can relate to. Setting up a US business definitely helps you scale faster. We'll talk more about it today, but I'm very excited.

Yeah, excited to have you here too. And just so you guys know, we've partnered with Firstbase because we've had a lot of our companies already work with Firstbase to make it really easy to set up US corporations. So they are our preferred incorporation partner and we're doing a lot of interesting things with them to try to spread the education you know, spread new tools and things like that to help founders that want to kind of get through all of those legal and complexity hurdles to, to set up corporations faster. So I definitely recommend it to anybody who's looking to, to go through this process. Now, um, for today, uh, simple agenda, okay? First, uh, we want to go through kind of the story behind Firstbase, how Mark got it started. Mark went through an accelerator that some of you may have heard of, Y Combinator. So we want to get into that as well, but really want to hear kind of you know, the origin story behind Firstbase, because I've heard some of it myself and I think it's super interesting for any entrepreneur to hear. Uh, and then second, uh, and I think this will take up the majority of the event, is really to just get into some of the complexities, misconceptions, gotchas, things like that around setting up a U.S. corporation, um, so that we can help some of the founders in attendance today get access to some information that can help them right now. So again, uh, as we get into that, please Don't be shy at any time, throw any questions into the chat and we'll be peppering them in as we go. So with that being said, so Mark, I know, you know, it's kind of a classic founding story of Firstbase, right? It was, you're kind of scratching your own itch, so to speak. I think, so you're from Belarus, looks like you were kind of hacking away and building some products and services even when you were 12 years old. And at some point you got to the point where you were, you know, kind of getting locked out of some things, right? And you wanted to set up a US corporation. So like, tell me about what that experience was and what were some of the things that the issues that you were running into at that point.

Right. That's right. So I started my first business when I was 12. It's a, it's a pretty interesting story, but basically the very first product that I launched on the internet, it was targeted at people everywhere on the planet, right? And every other thing that I've ever worked on was a product that I was selling to people internationally. And maybe if we have more time, I'll be happy to get into stories behind some of those other projects that I worked on. But basically, one issue that I've discovered it's really hard to process payments. And I think a lot of people here, especially people that are from outside the US can relate to is that it's really difficult to process payments as a business if you have customers everywhere, right? Especially at the time. So at this point, it was years ago. And, you know, Stripe, I think was already a thing, but it was very, very small. And only customers in the US could use it. So I kind of looked at using Stripe. I've looked at using some other payment platforms, but, you know, the only way for me to use it as a founder was if I was to establish a US business, right? So I would have to incorporate in the US to be able to process payments and to charge my customers. And I met somebody on the internet who told me, hey, actually setting up a US business from any country on earth is quite easy. Yes, there are certain rules that you need to follow, but almost anyone can do it, right? So, and I decided to try it. I tried it and it worked. And I think this idea kind of just, you know, from working on one business to another, I always thought, man, it's actually a pretty fascinating business idea to try to to turn that into a product, right? This is a problem that I myself have experienced. And I think it was always in the back of my mind for, you know, close to 8 or 9 years until I ultimately decided to pull the trigger and turn it into a business. And I think what made me pull the trigger was that as I was scaling my other businesses, I realized that yes, starting a business in the US is actually quite easy. Anyone can, can go and do that. It's, you know, not rocket science. Depending on the state, you know, in some places it can be more difficult, in some states it can be less difficult, but anyone can figure it out in probably less than an hour. But starting a business is not just about incorporating a corporate entity, right? There's all these other things that come with this. You need to get EIN, you You need to figure out how to open a bank account, which still can be quite difficult if you're not in the US physically. Yeah.

EIN is Employer Identification Number, just folks. So for anybody, it's almost like you're just kind of, I don't know, it's like your Social Security. It's your ID number essentially to the government as a business, right?

Right. You just like you have your passport, your company also has a passport of sorts. It's, you know, it's a unique identifier of your business. That goes on a lot of government forms or when you hire somebody as an employee. So this is—

And if you don't have it, you hit so many forms online or whatever and you can't fill it out. So then you can't even go forward, right?

It's just, yeah. Yeah, you end up in a situation where you have a business, but you can't really do anything with it, right? So this is something everyone needs to get. And there's quite a few things like that. You know, if you, If you start a corporation, you want to know, okay, how many shares do I authorize? And this is actually something that you as a founder have to deal with after incorporating an NC, right? You incorporate an NC with a certain number of shares, but then you need to allocate those shares. And there's different strategies when it comes to doing that. You can have an option pool or not have an option pool, and you, you kind of want to be strategic about setting up that entity to be a venture-backed entity that, you know, VCs can invest in. Or if you're bootstrapping the business, you know, there are structures that would work better for you that are different. And all those things, you, it, I would say every founder eventually learns those things, but our mission is to essentially simplify it and And, you know, and we have a platform that basically does all of it for you. I'm not trying to sell Firstbase to anybody, but of course, if you want to use us, please do. And even after, you know, you issue stock, you have a company, you have EIN, you have a bank account, you're in business now, right? You can do things, but then there are things like compliance. All right, what are all the forms that I need file every year. And then, and that those can be different forms depending on the revenue of the business, the, you know, the scale of the business, how many employees do you have, what states are you actually operating in, and that can be quite hard to figure out. So we help with all those things, but I think, you know, definitely encourage everyone to start a US company. I think it's, it's, it's, uh, Yeah, definitely don't be afraid that how it's going to be too difficult. Luckily, there are platforms and not only Firstbase, there are other places where you can do it that will help you with those things. And, uh, I would say actually is I have experience starting business in other places. Still, the US is probably one of the, one of the more streamlined, has one of the more streamlined processes and still a lot easier than, than, um, honestly any other place I can think of.

For sure. It's one of the biggest questions too I get is like, oh, I want to set up a US company, does that mean I have to move there? The simple answer is no. But yeah, it's something where there's just so much, um, information. And yeah, you can go on Reddit, you can go on the internet and find this stuff, but it is, yeah, it's time consuming. And it's one of those things also as an entrepreneur that you don't really want to deal with. Right? Like, you got enough stuff on your plate, um, to start going through government documentation and stuff. That was not kind of why you, why you got into this, right? Um, now, so you, you're just getting into the story a little bit too, right? So you, you're from Belarus, you were starting a lot of companies, you were getting blocked on things like payments, right? How are you supposed to run a business, um, when you can't process payments in a lot of places? And then, you know, if you want to start solving this problem in an international scale, right? Yes, you're working with one jurisdiction, the US, but now you're trying to help founders, you know, now you're doing it in almost every country in the world. So how, you know, how do you— how did you go from, okay, I'm doing this from Belarus and I understand Belarus, now how do I start to, to scale this, right? Kind of understanding the problem, that part of the customer development and company building process.

Yeah, definitely. So by the time I started Firstbase, I I was already in the United States, right? But I had this experience running a business from a different country, and I think that definitely helped me understand the pain of somebody from a place like Belarus or a place like Africa or India of starting a US business. When we started, I would say we started almost as a service business, right? And it was a pretty simple product. So right now we have 6 different products, but at the time obviously it was only one and nothing was automated. We're really, the idea behind Firstbase was that incorporation is a greatest way to partner with founders early. To then offer them other solutions that they need as they scale. And we always wanted to help them with ongoing compliance and taxes and accounting. But those are the products that we've launched years later. But initially the product was a simple incorporation solution. Like I said, it was pretty manual and initially it was just me and, you know, quickly became me and a couple other very talented people. That I've met. But the, in terms of the customers and how we approach acquiring the customers, which I think can be quite useful to people here. So today, Firstbase serves both customers in the United States and customers internationally, as you mentioned, it's about 50-50, but originally, you know, we were targeting founders, only founders outside the US. And the reason why was because there was a lot of founders looking for a solution, right? There's a lot of talented entrepreneurs everywhere in every country really. But there wasn't anybody that was offering a solution that could serve those folks, right? So what was happening is if someone in India is building a a B2B SaaS company and, you know, they're pretty serious about what they're doing. They, they, um, they want to raise money. They, they maybe had, have had some success in the past. They, they've scaled businesses before and now it's their new venture. If they, if they were to go and Google, you know, 4 years ago and search for incorporation in the US, um, nobody would actually compete for their eyeballs, right? No, no one was was targeting Indian customers or Nigerian founders or anyone outside the US really. And most of the platforms had tons of country-based restrictions. You could use it if you're physically located in the US or maybe a handful of other countries, but for the rest of the world, it was really not accessible. And I knew that Google because I've done it myself, I knew that you can start a business in the US as a foreigner. And for the most part, all of those restrictions that the platforms would impose on people, they were just more business decisions than anything. Right? So we decided, let's build this product and let's open up the platform to everybody. And our acquisition Customer acquisition initially was very much like a D2C e-commerce acquisition. We were putting a lot of money in paid search, 'cause like I said, there was a lot of people looking for a solution. There was nobody actually offering any solution to them. And I remember the very first customer at Firstbase, I believe was from India, signed up just, about 30 minutes after we launched the website and launched our first campaign. And that kind of, those customers that were, you know, very happy to find a platform that can support them. And that created kind of the snowball effect where they started recommending us to their friends. I'm sure, you know, people here, founders are friends with other founders. It's a very, You know, it's really a community, right? And it created the snowball effect where we went from, you know, incorporating that first company to incorporating 1,000 companies within just about 3, 3.5 months, right? And really a lot of our growth since then has been, you know, customer referrals and people just liking the product, liking the experience.

That's awesome. And when you say that you started really as a service business, case, from, from what I envisioned there, right, is, yeah, you got up a website, it was probably just a couple of forms and things like this, but really in the background you guys are doing a lot of the things manually at first, right? Right.

Yeah, exactly right. And I think, um, I would say, I would say, um, some businesses, they, they don't like this approach, right? Um, and I, I know some great founders that that have built businesses that essentially automate manual work and they've spent, you know, 3, 3.5, 4 years just automating all of this stuff before they launch the product. So, but we took a different approach. We decided to go to market quickly and also, you know, the, we're dealing with compliance, right? And this is something that changes quite frequently. So we saw this opportunity in the market, founders looking for a solution, not being able to find that. We knew it was not gonna last long. In fact, now there's tons of companies like Firstbase that do the same exact thing when it comes to incorporation, right? Setting up an es in the US, from any country, there's tons and tons of competition. So I think we were very lucky with timing. And I think the way we were able to outplay the competition is by integrating different solutions, point solutions in one platform. But I think the timing of launch was, you know, we were very lucky with that. And the only way we could do it is by doing stuff manually. And I think we, it helped us develop this muscle for automating things over time. And yeah, this is the approach that we took with pretty much every product that we have ever launched. And, you know, more recently we've launched our accounting and bookkeeping solution, which is, you know, was a lot of manual work on the backend that we've gradually automated with time. And, you know, some work is still being automated, but it is possible to do that. So I know conventional advice is, hey, do not do it. It's a service company. You're not gonna be able to automate it, but I know it's possible.

Yeah, it's something, I mean, we're Founder Institute just turned 15 years old. We're releasing some new products right now and I'm telling everyone on our team, hey, like you're a consultant, right? Like take that consultancy approach, do things that don't scale, right? And any of these kind of taglines you wanna take, But it's like the path to building something that's automated and scalable typically means that you need to understand it really, really well, which typically means that you need to do it manually first, right? Because literally by doing it manually, you start to build what the technical spec would look like to actually automate it. But also it, it allows you to get to market much faster, um, and start to understand the problem, right? So yeah, 100%, like, I couldn't agree with that more. Anyone in who's in Founder Institute, who's a Founder Institute graduate, who's on the line today will probably, you know, find that pretty, a thing that we preach, you know, from the rooftops to everybody that we work with. So I'm seeing here a lot of questions are coming in, seeing a lot of stuff about LLCs and stuff like that, which is awesome. So we're going to transition over to the incorporation space in just a moment. But One thing I wanted to just kind of talk about here too, right? So you talked a little bit about, you know, yes, incorporation was sort of this entry point, right? It's otherwise known as a wedge in the startup space, right? And that really kind of segues into the larger vision, right? So you can help companies incorporate, and if anybody uses their website, I mean, literally they've built it into— so it's like a forum. Right, almost like kind of a wizard of sorts to just help you do this and to sort through all of those legal complexities and stuff just through a series of questions, making it as simple as possible. Um, but really the bigger vision for Firstbase, which you guys talk about a lot, is this, this is business OS, right, business operating system. And, um, I'm not sure a lot of, you know, so first of all, I would ask, like, I'm not sure a lot of startup founders that are on the line today know what the concept of a wedge is, so I'd love to just kind of hear your definition of it, how you guys have used that. And then number 2, you know, how that kind of translates into the bigger, the bigger idea sort of behind Firstbase and what it is, you know, kind of the vision that you guys are doing every day as you're waking up and going to work and the bigger thing that you're chasing here.

Sure, definitely. So as I've mentioned, we, uh, well, I had the idea for Firstbase years ago. Right. And it took me a while to pull the trigger. And I think I was at the point where I was looking for a business idea that I would be excited to build for, you know, 10, 20, 30 years potentially. And it just didn't feel at the time that incorporation was that idea. Incorporation of business was that idea. But I think eventually I realized that when you incorporate a business for somebody, you are kind of primed to tap into any other need that this business has as it scales. And you can really build this into a multi-product platform, which, you know, ultimately is great for the customers of the business. They have multiple tools integrated in one place. They all sort of interact with each other and the data flows from, you know, one product into another. So, you know, I'll give you guys an example. We have our compliance product called Agent, and we are also working on our sales tax solution as well, which we're introducing just in a couple of months. Um, when, when you register for sales tax in the US, you get a lot of notices from different agencies and, um, you want, you want, you want to make sure that you're on top of that, that you keep track of them. And all of those notices are typically sent to your business address in a particular state, which is something that you can use our Mailroom product for, which is our virtual address product. So now you have these two products that are integrated and two of them together is a lot more convenient than two of them separately, right? And instead of using two platforms, you can use only one. And the concept of a wedge is essentially, you know, what is the first entry product that enables you to build a platform like that, to, to scale it to, you know, a multi-product business, which I think is really what everybody wants to build in 2024 because all of the sort of single point solution ideas have already been built. And I know definitely now that we're in this kind of AI era, I think this is changing a little bit, but I think you can create a business, a great business opportunity by just integrating products in one place. And for us, this wedge was the incorporation product because like I said, the, you know, the, you were the very first service provider that the founder deals with. And in fact, it's kind of interesting. It starts as a B2C relationship, right? You, you are selling a product to an individual that later becomes a company. And then all of the future invoices that we sent to them, we're sending to that, you know, LLC or a corporation for all the other services. And we even had, I would say, I've mentioned that our customer acquisition, you know, initially was very simple. It was a lot of money funneled into Google search, right? Because nobody was competing for those customers. And that was sort of a wedge also where we said, look, we're not gonna go into all these different channels because, you know, we're not gonna be able to compete there. but there's this one channel where we know we can compete effectively because we are able to support people in more countries than any other platform. So, and really we're, you know, 4 and a half years in, we're still looking for, there's always a wedge of some kind with every launch. I've mentioned this, you know, Mailroom plus sales tax example, but I can give 12 more examples like that where you building one thing enables you to later build another thing. And ultimately this, you know, kind of integrated experience is better for the customer and less expensive, by the way, because you only have to acquire a customer once and then you have multiple things to sell to them.

Right. You only have to acquire them once. Number two, it's, yeah, you create ease of use, right? They only have to use one platform. But what I think, especially in the age of AI, and this as we're going into, you know, more of the stuff with the data is so important. I mean, you just— you'll, you'll have the ability to create all these integrations that'll make people's lives so much easier, right? Where you could say, okay, well, we know from this thing, uh, on your accounting side that you have these opportunities. Well, we can tie that into something over here, right? Like, it's just— it creates something that's— it's It's kind of, I think in the future, at least it already is, but especially in the AI age, it's gonna be like the kind of a critical component of creating those like aha kind of experiences to customers, right? Where it's things they're not even expecting, but because of the data that you guys have on a platform, you can create. So one last question here and then we'll get to the incorporation stuff. I'll do, I know we're getting some questions in now, which is great, but keep them coming. We're gonna, transition over there in a second. So Y Combinator, okay, um, how— at what point did you guys apply to Y Combinator? And, you know, what was the, you know, what was the overall experience like? And, and are you guys still kind of, uh, you know, getting— you know, how are you still leveraging that community right now? I mean, we have a lot of FYI graduates that go into Y Combinator, but obviously it's, it's an aspirational thing for a lot of people. So I think I'd be kind of doing some people in the audience a disservice if I didn't ask about that.

Yeah, for sure. For sure. The way we got into Y Combinator was quite interesting. I just met somebody randomly who happened to be affiliated with YC, and he was kind of just you know, calling me every day, trying to convince me to apply because he really liked the idea, right? And at the time, we were just this single and very simple product, but the vision was the same, an operating system for businesses. And he was very excited about this, trying to convince me to apply, and ultimately did convince me, and we did apply and got in, in 2021 in the winter '21 batch. Prior to that, we were bootstrapping. We did raise a little bit of money prior to YC, again, through some random connection with a person that later introduced me to other people and kind of one thing led to another, but we were a profitable business trying to bootstrap and at the time, not necessarily looking to raise money. But after we got into YC, I think you kind of just, you end up in a room, and that was during COVID So it was not an actual room with like walls and a window. But unfortunately, I wish it was in person, but you just end up in a room with like very ambitious people. And, you know, this, this idea of building a platform where you integrate 12 different tools in one place doesn't actually sound that crazy to those people. And that really helped us redefine the vision a little bit, learn how to talk about what we're trying to build better. And I think also created this accountability where you kind of have to show up every day and talk about the progress that you've made. And if you haven't made progress, you're gonna be embarrassed, right? You know, those people don't play around. So, and I think, you know, the very valuable thing from the YC experience, and there's many of them, but one I would mention is we realized that to build a platform that we're trying to build, we really need some money for that. And YC was very helpful. We raised our seed round post-YC within 6 or 7 days. So it was pretty quick. And I think the business operations tool a few years ago, you know, 2 to 3 years ago, it was a niche that a lot of people were excited about. Now everyone's kind of focused on AI, but it was different times. Um, yeah, we got, yeah, we got very lucky.

The COVID time, the number of companies were exploding. Yeah, I mean, that was sort of the fintech boom.

That's right. Yeah, that's right. More companies incorporated that year than ever before in history.

Yeah, it's crazy. Um, so yeah, some of it also, as you said, right place, right time. Right? I mean, honestly, I've never met an entrepreneur, at least an honest and not like kind of sociopathic entrepreneur, that didn't, that didn't attribute some of their success to luck. There's always some luck involved, guys. Like, and you know, but if you're waiting and not actually putting something out there into the world, you don't even open yourself up to the availability to like to capitalize on any luck, right?

Yeah, but you just need to be right. You need to show up and you need to be in the right places for that to happen. And, you know, I posted a blog post at some point, like a month after starting a company. Somebody reacted to it and later became our COO. And then he had a roommate in the past who knew somebody else who became our first investor. So you you really just, you know, you want to build out your network and get to know as many people as possible, but it's really, you know, it's really hard to do if you're just this kind of, you know, if you're just sitting in the room all day and not communicating with the world. So whether it's in person or online, I would definitely encourage everyone to just put your vision, you know, out there. And whether it's through content or just going to events, I think knowing people, and what you guys are doing at Founder Institute, I think is very valuable from that perspective.

Yeah, get out there. The worst that can happen is you get feedback, and that feedback can help you get to something that's better, right?

Yeah.

So, all right, so let's— I, I got a lot of questions coming in here about U.S. incorporation, so let's start getting into them. You know, I know that we have some gotchas and stuff, but let me just start here with a quick question because I know that, you know, this is something that, that is comments. So Sarah from, uh, from Lyon, France is asking, is it legally possible to set up a US company, uh, for the EU market, um, or do you have to find US customers as well?

Yeah, I'm, I'm not sure I fully understand the question, so I would—

I think, I think the question is, if I have a US cust— if I have a US company, does that mean that I have to serve US customers?

Right. Yeah. Okay. That's a great question, actually. Not necessarily. Right. So, and it really depends if you're running a physical business that requires a physical presence in a place or it's an online business. But if you're running a, let's say you're running a B2B SaaS company and you're selling subscription services, you can use your US entity to sell that service to anybody on earth, right? Except for a few places that are, you know, you cannot do trade with as a US incorporated company. But it's really a very, it's a very short list. Things change a little bit when you are running, let's say, a pastry shop, right? This, most of the time, you know, if you're running a shop like that in France, You would have to have a local French entity that would allow you to open a physical location, collect all the taxes, and, you know, remit those taxes to the government. But for online businesses, it's very common to use the US NSE to charge customers anywhere on the planet. Right.

And I think it's a good segue to kind of the first thing too, of like why somebody you would want to set up a US corporation, right? It probably wouldn't make a lot of sense to set up a US corporation for a pastry shop in France, but it would if, for example— and this is something, you know, it's, it's one of those unfortunate things during COVID and during all the pandemic years, there's a huge explosion of venture capital to, to a lot of international markets. And obviously the international thing is still continuing to grow, but a lot of that has pulled back a little bit from US investors, I should say, right? US, a lot of, especially the top US investors have the luxury of being a little bit picky on who they're going to invest in. And, you know, a lot of the time they are going to have just a lot more familiarity with US-type corporations, right? So at least the biggest use case that I see with founders who are looking to do that, or founders who are building venture-scale businesses, or at least something they, they hope will become a venture-scale business, and they hope to raise money from U.S. venture capitalists or angel investors even, right? At least that's the biggest use case that I see for at least international investors or international companies in incorporating in the U.S. Are there other ones that you're seeing? I know in the past, like things like payments and things like that. But what are some of the other use cases or biggest reasons why somebody would want to do that?

Right. And there's many of them. I would say payments is still a big one. I've mentioned for me, that was a trigger. This is why I decided, you know, back in the day to incorporate my first company here before I even moved here. But it's still an issue in a lot of places. In fact, a pretty significant portion of our customers set up a company because there's no other way they can charge people online for the services they're selling. They maybe have some local payment processing that processing company that is available in their country is nowhere near as robust as think Stripe, right? Or any other company that is available in the space in the United States. And it's still a pretty big reason for people to start a business here. Other things I would say, you've mentioned that VCs are just more familiar with the structure of a US corporation. They kind of know the taxation of them and the legal implication of starting one or investing on one, but I would say that also applies to customers as well. And the customers that you're selling to, they're definitely going to be a lot more comfortable buying from a US corporation or an LLC than, and no offense to whatever country I pick now, but let's say Mozambique company is, it's probably going to be the customers that you're selling to, they're going to look at it as, hey, I'm not familiar with this. I'm not sure if it's legit. And there's all sorts of questions that are going to pop up in their head. It's valuable. The reputation that the US has as a business hub really helps you sell better. I do want to say that the payments thing, it's really just about tools, access to tools. Payments is just one of the tools. But there's a lot of—

That's an incredibly critical tool.

A very critical one. Yeah. But I saw somebody mention, you know, carta here in chat. You know, if you are building a venture-backed or at least, you know, venture-backable business, you're going to have a cap table where you allocate shares to your employees. Co-founders, investors, advisors, and so on and so forth. Traditionally, it's a very difficult thing to do. Carta simplifies that. They only work with US incorporated companies. I think Singapore also that they support. But now think about the investor on the other side of the screen, or think about the advisor that is signing up to work with you for a year on some important project and you issue, you know, shares in an entity or entity structure that they're not familiar with, they're not going to be as excited about it. It's just too difficult and too stressful for them to deal with. But if it's a Delaware corporation, they've probably dealt with this 50 times before.

Yeah.

So it's a lot easier for them to agree to work with you. So it's Its reputation is the fact that people, investors, advisors, customers are more familiar with the structure of the entity and they just simply trust it more. And access to tools. We've mentioned a couple, but there's a lot more tools that are only available to US incorporated businesses still. And this is probably going to change. I think 20 years from now, I think the world will become a lot more global. Right? And, and, um, you know, some other countries will catch up, but as of right now, you know, US is the place to be as a, as an ambitious startup, right?

And you don't physically have to be here.

You don't?

No. Yeah, you can have the corporation. Um, so some other questions. Yeah, so LLC, and, and this is something we get so much, guys, right? Like they're an LLC, limited liability corporation here in the US. It's kind of like the easiest, simplest, fastest corporation that you can set up. Right. But and you talked about this a little bit before, Mark, like in terms of issuing shares, like in any professional investor, if you are seeking investment, they're not going to invest in an LLC. They're going to have you either convert it or or just start over, right? So is that one of the biggest things that you're seeing too? And, and what are the, the places and, uh, you know, the, the, the formations that you're seeing now? Delaware C has always sort of been the, the gold standard, so to speak, but I know, you know, it's been the gold standard now for probably 20 years, and there are new ones that are coming out for different types of businesses that are a little bit more friendly to specific kinds of businesses?

Yeah, for sure. So I'll talk about kind of most common business structures in the US. You've mentioned LLC and C-Corp, and I'll talk about some of the states where our customers choose to incorporate. So for Firstbase, our customer breakdown is pretty much And it's very interesting. It's 50% international, 50% US, close to 50% LLCs and 50% C-Corp. Most of them are incorporating in Delaware. And we only do incorporation in two states because those are really the states where you want for your NC to be incorporated. And all of our e-commerce—

Delaware and Wyoming.

Delaware and Wyoming. Yeah, exactly. What we're seeing is most of our e-commerce companies, customers, they started an LLC. And our tech customers, absolute majority of them, with a few exceptions, and I'll talk about those exceptions because I think they're also quite important. But majority of them incorporated C-Corp, right? For the reasons that you've mentioned, you, in order to raise money, you have to have shares that you can sell. And in order to have shares, you need to start a corporation. With LLCs, you don't have shares. LLCs, LLC essentially doesn't exist. It's just an extension of the person or people that own it. It provides this liability layer, right? But It doesn't have to personally liable.

They can't take your house or whatever. Like, it's, it's, it's just, it limits your liability. Literally, limited liability corporation, right?

Uh, exactly.

Investors, when they invest, they're buying shares in your company. So if you don't have the ability to issue shares, you can't really get investors.

And, and look, I, I, we've seen some of our customers pull off some, you know, pretty unconventional structures where they issue a promissory note as an LLC to an investor, or, you know, they say we will convert into a C-corp eventually, which I'll talk about the conversion process in a few minutes. But you really don't want to deal with that. It's, it's, it makes things too difficult for you. I mean, if you're an early stage founder, it's hard enough to convince somebody that your idea can work, that you can hire a team, that you are the person to run this company. I mean, there's so many different boxes that you need to check off. You really don't want to get into this, uh, you know, unconventional legal structure stuff. Um, so why Delaware? So most companies incorporate in Delaware, um, because this— for the same reason actually as why they incorporate in the US, which is this is the structure that investors are the most familiar with. They know Delaware courts really well. They know their court system. It's known as a business-friendly court system. It's one of the oldest, or the oldest actually, in the nation. And the way the legal system works in the United States, it's based on precedents that had happened in the past. And then Delaware There have been a lot of them, right? A lot of business-related cases, and investors just have this trust in Delaware as a jurisdiction and its court system. But as far as the actual structure of the entity, it's essentially just shares, right? The company just has shares, whether it's incorporated in Delaware or not, and those shares can be issued to investors reserved for an option pool where you can issue stock options to your employees or advisors and so on. And important to keep in mind that you can always issue more shares if you want to. And this is called, you know, essentially you're diluting the entity by introducing more shares. Your, you know, your own stake in the company is now smaller, but, but you have additional shares to issue to investors and VCs, which is how most of the price rounds are done, right? New shares get issued and get sold to an investor, right?

And, and this is what's referred to as dilution for some of the people who've probably seen that word but don't understand it. Dilution is just, okay, I own, I own X percent of a company, but now new shares are required. So that means, or new shares are issued in the company. So now instead of the number of shares I have equaling this amount of money, now equals a less amount of money because it's a smaller percentage of the total number of shares. Now, one just quick thing that you mentioned there too, because I know we've been talking a lot about, okay, if you want to raise funding, setting up a corporation that can issue shares is important, but it is just as important for recruiting great people, right? It's same thing. It's providing those people with upside. And especially a lot of the best talent here in the US and a lot of places abroad as well, like they want to have some skin in the game, right? They want to be incentivized that, hey, if I do a really great job, this company gets sold, right? I want to be able to participate in that. And that's something that you need to issue shares with as well. So I've just seen a couple questions here in the chat where it's like, hey, if I don't want to raise funding, Do I need to set up this type of corporation? You know, in some cases, no. But in some cases, even if you don't want to raise funding, you know, if you want to attract really, really strong talent, you know, and you can't necessarily pay them a market price that they might get at a Google or something like that, then you're going to have to make up that gap probably on ownership, on shares. Right.

Right. And absolutely. And I think there's a couple of things there. You're absolutely right. If you want to hire the best people, you need to treat them like owners and they have to be co-owners of business. They have to have some upside if the business gets sold or the business gets acquired or it goes public. You want for them to be able to turn their shares into equity or maybe, you know, during the secondary round. And this is truly, you know, with how much Google and like some of those big corporations are paying, honestly, this is one of the only ways to compete for talent these days.

And I think what's interesting, unless you can pay them a ton of money and have help and have, you know, childcare and free laundry and all, right?

Exactly. And which probably applies to 0.01% of founders of companies. Most founders that I know, they, you know, they don't have money when they start their business, right? And it's a lot of risk also that they're taking on. They're de-risking that by bringing on great people. But the only way for majority of them to bring those people is is by giving them significant percentage of stock in the business if they're joining early. And what's interesting is, it is, you know, we have a team in the US, we have a team in New York, and then we also have a big portion of our team in Brazil and a few people in other places. And I've been noticing that in the past, even say 2 years ago, employees in other countries, they didn't really care about stock options. They didn't understand the concept fully. That is not something that is common where they come from, and because there is no kind of established ecosystem in those places. But I think now the rest of the world is kind of catching up. And this is, you know, one of the first questions that people ask during the interview or in sort of the negotiation stage of the offer is how many shares of stock will I get? You know, what will my stock option look like? And they actually quite well-versed in things like, in things related to shares and stock, and they understand different ways of of measuring the percentage of ownership that they're gonna end up having after they acquire this. So people in other places, definitely Brazil, I can say, because Brazil is kind of, I would say, one of the fastest growing startup economies these days.

For sure.

They definitely understand stock options well enough. And even if you're building an international team, you can say, well, I'm not building a team in the US and no one's gonna care. No. People are going to care. And even if they don't, you still want to make them owners. They're going to, they're going to stick around for longer and they're just going to be better employees for your business.

Yeah, definitely. So I got a couple more questions here. I know we're running a little long, but a lot to cover. So, so quickly, I know you mentioned and we see this a lot, right? Converting an LLC to a C corp. Okay, in the US, this is something we see a lot. I mean, I've had several LLCs personally. I've never, never converted one to a C corp. I've just started a C corp fresh. But that process is something, especially when founders come into Founder Institute, a lot of them have just set up an LLC, right? But now they're like, okay, well, now I want this to be venture scale. One of the most common use cases is, oh, they have a consultancy, right? Or some kind of service business. And they're like, oh, well, I'm helping all these people, whatever, solve this problem. Manually, right? I think I can make startup out of this, and I think I can actually make a venture-scale business. I want to convert this. So what is that process usually like, and how does Firstbase help people through that?

Yeah, great question. So I've mentioned that majority of our tech customers, um, who happen to be B2B SaaS businesses primarily, they incorporate as a, incorporate a C corp in Delaware, but with some exceptions. And I would say those, those exceptions fall into two different buckets. One is kind of regulatory. If you are in Brazil, for example, it's in, and some other places in, in Latin America, it's actually not the best structure for you, starting a Delaware C corp. You're a lot better off for tax purposes setting up a Cayman entity, and then that entity becomes your, you know, the main corporate entity that your business is using. And then you kind of attach an LLC to that entity for things like payment processing, we're using Stripe. And so you have an entity in the US, but it's not your main entity, and your Cayman entity owns the LLC. And there's a couple of places outside of Brazil, places like India, for example, where yes, you can absolutely set up a company in the US from India, like a lot of our customers do. But there is some structures that from the tax perspective can work better for people. So even if you're a tech company, even if you're a very ambitious startup that wants to raise money, there are some alternative structures that people can explore. But I would say it only applies to a couple of places on Earth. For majority of the countries, the founders, let's say two founders, they can just start a Delaware C-Corp, you know, own the shares of the C-Corp, maybe reserve a little bit for the stock option. Now, what does it have to do with actually converting an entity? So I would say, and I would say that to founders in countries, including Brazil and India, that the process of converting an entity is actually quite easy to do in the US. So even if the structure with which you start is not ideal, you will be able to change the structure later. So what we're seeing is some companies starting as an LLC, but then they converted to a C-corp, or maybe they just changed the general corporate structure later on for tax purposes or some other reasons, or which is happening quite often with our customers, especially our SaaS customers, they start as an LLC, it's just two founders in a garage. They kind of, you know, they want to see if this idea is even go, isn't even gonna go anywhere, right? They're not making any money. They start a business, they set up a Stripe account, they start selling to customers, the thing takes off, right? And all of a sudden they have some traction, they're collecting some payments, the business has grown, and then they get approached by a VC. The VC says, hey, I'm gonna put $500,000 in your business. It has to be a C-corp. Pretty easy for them to switch from an LLC to a C-corp. It's not a complicated process. We actually do this quite often for our customers, just free of charge. Whenever someone is asking us for help, we do it for them. It's definitely a small portion of our customers. Majority of them just start a C-corp if they're a tech business, but But I do want to say that don't be too scared, don't be too scared about choosing the wrong structure because it's quite easy to change later on. If your business is a scale-up with thousands of employees and millions of dollars raised or tens of millions of dollars, that makes things a little bit more complicated. But as a teeny tiny startup, it's really not that big of a deal.

Okay, and then just 2 questions here. So Josh is asking, and I know the answer to this, but it's similar, right? Josh is from Detroit. You can open a business in Delaware, but don't you need a physical address there? And that's a registered agent is what it's known as, right? Do you want to describe that to some people? I mean, because Josh is in Detroit, but for the same reason why somebody in Michigan uh, can start a Delaware company, and it's the same reason why somebody in, you know, Sri Lanka can start a Delaware company, right?

Right.

Yeah.

So I would say there's two addresses really, um, that you need to set up. So one is your business address, you know, like your main corporate address. It has to be in the United States. Um, and even if you're a a foreign founder, you need to have some sort of US address that you can put on all of your forms, right? And we give our customers exactly that through our service called Mailroom, where we have 8 different locations, including places like New York and California, where you can set up your business address. But then there is also a concept of a registered agent, which is essentially, A person or an entity that is licensed to provide registered agent services that you just appoint in the state of formation as your, essentially a legal representative of the business. They don't have any ownership in the business. They don't make any decisions. Their sole job is to basically just get the notices from the government. You know, you're late on sales tax or something. You, They're going to notify your registered agent first. They're not going to send it directly to your business address. They're going to send it to your registered agent, whoever you appoint as your registered agent, and then your registered agent will then forward it to you. Right? So this is what registered agent is. Majority of, I think actually all 50 states require for the registered agent to have physical presence in the state. Right? So if you're in Detroit, you're not in Delaware, you can't be in two places at once. So you have to have someone in Delaware licensed to provide this type of service. And you appoint them as your registered agent, you put their name on the form, and the government will now know that this is the person that has to be notified about, you know, anything That is important. I don't want to make it too scary. You know, if you— there's not going to be a lot of notices if you're, if you're doing everything right. But as the business grows, there's all sorts of things and you want to make sure, you want to make sure that you're properly notified about it. This is— I want to make it clear.

Yeah, totally educated guess on my end, but probably 95+% of US startups that have raised funding in the United States, whether they're from New York, Florida, Texas, Colorado, Silicon Valley, wherever, or Delaware corporations. And they don't— they're not in Delaware, right?

They're not. No, no one, no one is in Delaware. Nobody. Yes.

Delaware's— nothing against Delaware. This is a very— I think it's the second smallest state in the U.S., but it's, you know, like they've made themselves a safe haven for companies. And that's, that's what they do. And that's it. They do a really good job of it. It's super smart of them to do that, right? And that drives a significant amount of revenue to the state, but super tax-friendly, super business-friendly laws if any litigation comes into play, um, you know, and just, just super business-friendly processes and all of that kind of stuff. And that's why they've done that. Now Wyoming, you mentioned, is another one now. Um, that has come up. And, and similar to how you said before, you know, a lot of countries are catching up, a lot of states are starting to catch up too. Um, we're even seeing— I mean, there's Indian reservations that we've seen as well in the U.S. that are kind of starting to, to set up, you know, kind of corporate havens as well. But what, what is the biggest attraction to Wyoming?

Yeah, for sure. And I just want to add you guys may have seen in the news that Tesla, for example, reincorporated from Delaware to a Texas entity. I think when you're at that scale, it really doesn't matter what state you're incorporated in. It really matters more in the early stages for the investors and everybody else to be more familiar with the jurisdiction. But There are some founders that use Firstbase that know for sure that it's not a venture-backable company. That's not really what they're about. Maybe it's a service business, maybe it's a consultancy. So what they're looking for is, is the structure that is just the cheapest and easier to manage, right? So that's why a lot of founders choose Wyoming LLCs. The annual fees are slightly lower. So they save a little bit of money. And also Wyoming LLCs provide full anonymity. So no one is going to know who's behind the entity, who's the founder running it. It's important for some people, but I would say that for the most part, the customers that choose Wyoming LLC when they incorporate with us, when they start a business with us, those are the, I would say, I would say not kind of not venture-backable or not venture-backed businesses.

Got it. Okay. Last question. Thank you for staying longer. This is just a product of the number of questions that I'm getting and I'm trying to synthesize here, but a specific one from, uh, Messara from Sri Lanka is, you know, very specific to Firstbase, right? So after paying the $399 for an LLC incorporation in Wyoming, um, you know, what would be the kind of the annual and monthly recurring costs, uh, after that? And, and I, I would imagine it's a combination of, hey, like, you know, these are just costs that go to Wyoming, right?

Some of it. Yep.

Yeah.

Okay, sure. Um, so our pricing is, is quite simple. So when you pay $400 to Firstbase It covers everything related to incorporation itself, right? So we establish your business. All those other things that I've mentioned are also important and a little bit more difficult, such as getting an EIN, especially if you're a foreign founder, it's a whole process. And, uh, you know, the IRS tends to lose those. It has to be physically submitted. The IRS sometimes will lose this letter. So we need to call them. Uh, you don't want to deal with this. We'll deal with this for you. And and we'll give you your post-formation documents. So if you're a C-Corp, for example, you'll be able to generate your stock certificates, issue stock to yourself or your co-founders, and all of that is included in that price. Um, and then we have our other products. So I've mentioned registered agent being, um, a formality that is actually quite important and required in majority of the places. So we have our own registered agent license in 47 states. So in those two states where we incorporate businesses such as Delaware and Wyoming, but also in other places, which means when you buy our agent product, then you want to eventually expand to other places. The most common use case is you just want to hire an employee. So let's say You're a Delaware company and you want to have a little office in New York City and a little office in California. So now you have to register in two different places, have to file paperwork in two different places at different times, different sets of paperwork. So we deal with all of that. We let you expand into more places. And the way we charge for that is What I recommend is just our $250 plan, which is called Autopilot. Essentially what it does is it puts all of your business filings in the state on autopilot, right? We will collect the information that we need in order to file something. So let's say there's an annual report filing in Delaware that is coming up. We have some information on file, we'll use that information. If we don't have it, We'll ask you for it. We take that data, we put it on the form. If there's a payment associated with the form, we'll just charge you directly for that. Let's say your annual report fee, it really depends on the structure of the business, but usually it'll be a few hundred dollars, right? A few hundred dollars a year you need to pay to the state of Delaware. We'll charge you a few hundred bucks and we will send that exact amount to the state of Delaware on your behalf. So you don't even have to think about this. And we do this for all states. We advertise it as 56, it's really 47. There's a couple of states that we don't work with. But so that's how we charge for agent. I've mentioned our business address product. So mailroom is pretty simple. Depending on the plan that you choose, it's $35 or $50 a month. You get a business address in one of the locations that we offer. And some of them are, you know, quite nice locations. We have an address on Broadway in New York City. It's really great, you know, if you're selling to enterprise customers and kind of want to look serious, you know, when they look at the invoice or they look at your business address, they see an address on Broadway that helps. But really the fundamental function of the product is to make sure that all of the business that all the mail that your business receives is stored in one place, which can be quite a lot. So it's, yeah, $35 to $50. We also have our accounting product depending on how big your business is. It starts at, or we're actually about to change the price in a few days, but it's gonna be starting at $250 a month and it goes up to a few thousand dollars a month depending on how big your business is. Essentially, if you're using our other products and you're using accounting, our accounting product, you can forget about your financial reports. All of this will be taken care of on your behalf. So what we do is we offer you a software platform where you can send invoices, categorize transactions, and so on. And we also pair you up with a licensed bookkeeper who will work with your account to help you categorize that and, you know, do 95% of that on your behalf. So those are our key products right now. I've mentioned that we're also launching a sales tax solution. So I'm very excited about that. We'll be announcing that in a couple of months. But I think for the founders here in the audience, kind of early-stage founders, really what you need is you need an en corporation, Uh, you need your address and you need your registered agent, and you'll be, you'll be ready to go.

Yeah, yeah. A lot of those other things you were mentioning were optional products and things like that, right, where you guys are trying to help them, uh, make it, make it a lot easier to, to maintain. So I, I would definitely just, just being in this business now for a very long time, guys, it's one of those things as a founder myself going through that is just mind-numbing to have to deal with this kind of stuff. So I, I do, uh, I do suggest check out Firstbase. They've been a great partner to Founder Institute, got nothing but great feedback from founders that have used Firstbase. Check it out. I know we've thrown some of the, the links into the chat here, and we'll be cutting up this video as well. So anybody in attendance, you will be getting a copy of this video and some other links that can be helpful other resources. Thank you so much, Mark. I mean, I think we've been getting a lot of thank yous, and honestly, I could have— we probably could have gone another hour here, but I don't want to bore people with that. Probably get sick looking at my face. But thank you so much, Mark. Thank you everybody for joining. Have a great day. Check out Mark. We put the link in there, put the link to First Base. And yeah, if anyone else has any other questions, feel free to to reply to any of the emails that you get from Founder Institute. A lot of them are automated, as you probably noticed, but, uh, when you reply, it does go to a real inbox and you'll get in touch with a member of our team.