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Welcome back to the Career Hacking Village.

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Many of us think, do I really want to go work for somebody else?

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Do I want to, you know, report into an employer?

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Maybe I really want to start off on my own.

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So we're very happy that one of our own, who has done a phenomenal job starting his own company, wanted to share with us sort of the back end of what it's all about.

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So Bryson, share with us what it is about starting your own company.

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Welcome to Entrepreneurial Adventures, Starting Your Own Company.

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Kathleen, I'm going to correct you on one thing you said, done a phenomenal job.

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All I can say is I've been doing this for eight years, and I've started three different companies.

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I gave a keynote at a college a few years ago, and we were talking about entrepreneurialism.

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And somebody asked me, well, what's the metric of success?

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Like, how do you know you're successful?

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And I was like, I have no idea how to measure that.

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Every day that we get to continue to make payroll, and the company stays alive, is how I see success.

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So I don't know if it's been phenomenal, but I do appreciate the opportunity to continue to pursue the ideas and the passion with all of the great folks that I work with, and the fact that our companies have done so much for the community.

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All right, so I got a tweet that I wanted to include from Mark, and it was a great quote.

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An entrepreneur is someone who will jump off of a cliff and assemble an airplane on the way down.

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I guess the definition of success here is you don't crash.

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So who am I?

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I'm the guy who dresses up like a unicorn.

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So I founded Grimm eight years ago.

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While serving a large client, they gave the initial spark for the idea that became Scythe, and that's now my full-time job.

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I co-founded the non-profit, the ICS Village, and I'm a senior fellow at the R Street Institute, as well as the National Security Institute for National Security and Cybersecurity.

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So I have experience with a non-profit, a services company, and a product company.

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All right, this is me.

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I am not a lawyer.

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This is not legal advice.

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I'm not even one of the best entrepreneurs out there.

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I just want to really highlight this one.

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So besides my two dogs, that golden couch there is where I sat on day one, eight years ago, when I started Grimm and went, okay, so I've done the big adventure.

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Now what?

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That's where it all began.

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So starting with, why do you want to do this to yourself?

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Asterix, the reason we have so many people here on the screen is that it takes more than you to start a company.

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Your friends, your family, all of them are going to be a part of this journey for better or worse.

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And so when you're thinking about that question of why do I want to start this company, you need to think through why do we want to start this?

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The startup curve.

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When you actually finally take that leap, it's the honeymoon period.

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It's jumping into the great unknown.

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And it is so great.

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And it is wonderful for as long as it lasts.

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In my experience, it took about three to six months before that reality sets in.

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And then you're down in the, okay, what have I really gotten myself into?

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For the first two to three years of a company, you will find yourself every single month being confronted with some insurmountable challenge, some existential threat to your ability to continue to go.

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And you'll make your way through it.

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And at some point, you'll hit that point where things start to click.

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Things start to work.

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Those crises don't keep happening.

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And at some point, then people start to know who you are.

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And they start to come to you for that solution.

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And it takes off.

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So to be an entrepreneur, I believe requires only two primary skills.

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Passion, intolerance for bullshit.

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You don't need to be the smartest.

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Look at me.

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What you do need is a passion for an idea that each day that you're not doing that idea, it hurts you.

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There's an itch that this idea needs to get out there into the world.

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And when you're in charge, you are in charge.

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You are the CEO and you're the janitor.

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Nobody else is going to clean up.

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Nobody else is going to pick up everything.

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The buck literally stops with you.

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And so that tolerance for bullshit is you need that patience and the wherewithal that each day you're getting up, you're going at it and you're doing whatever needs to be done, which are going to be some really glamorous things on the high points and some not so glamorous administrative,

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HR, state registration, all of the litany of things that need to be done because nobody else is there to do them.

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That's your job.

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So you don't need to be the smartest.

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You do need to have some that you believe in.

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Do not do this for the money because that's one of the big jokes is starting your own company is one of the fastest ways to lose money.

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So what is the idea?

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The ideation phase.

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All right.

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First of all, if you've got an idea, talk to people.

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Then talk to some more people.

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Have them introduce you to even more people and talk to those people.

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And by talking, I mean, listen.

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So a lot of folks get so afraid to share their idea.

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They're like, hey, I don't want somebody else to steal my idea.

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Personally, if somebody else can do what I'm doing better than me, I am happy for them to do it because I shouldn't be doing it.

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But people are afraid.

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People are scared that if I give somebody something, they're going to take it away from me.

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You have to kind of get out of that because you're going to find that if your idea is really that good, most people can't execute it.

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There's a great phrase, and I think it's usually attributed to Ben Franklin, even though he probably didn't say it, which is that genius is 99% perspiration and 1% inspiration.

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Great ideas are a dime a dozen.

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The execution, the follow through, the day in, the day out of doing that makes the difference.

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And then, again, you, the entrepreneur, it's your network.

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It's who you talk to.

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It's them being willing to help you.

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And I can speak from personal experience.

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When I first started my own company, I came out of a very small closeted world in the intelligence community.

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I didn't have really a lot of contacts in the civilian world.

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And it took me a while to figure out how important that was.

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And as I started building those relationships, by asking and asking for help, people want to help you.

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Let them.

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The best technology doesn't win.

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So, the idea here is that we're looking for this concept of a value proposition.

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By talking to lots of folks, we figure out how to explain our idea, how to shape the idea, and more importantly, why would someone buy this idea?

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That's the value proposition.

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It's a very short, this is what we do that makes us money.

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And then, the expression of that idea that comes into code, into practice, that is the minimum level of features that somebody would buy it, is the minimum viable product.

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So, products versus services.

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This is important because we need to understand the economic model of what's underpinning our idea.

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If we're a services organization, we're going to grow organically.

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We're going to have people, one hour of a person's effort equals one hour of pay.

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Products have the allure of one hour of effort is worth whatever somebody's willing to pay for that.

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That multiple is why you see those kinds of acquisitions that seem very exciting, where people pay a lot of money for a product.

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You don't get those same multiples on services because people don't scale.

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When I started Grimm, I had folks in the private equity and VC community coming to me and they would be like, well, what's your business model?

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And I would explain, well, we hire the best team of hackers.

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And I emphasize that the team because hacking really is a team sport these days.

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You can't just have the single prima donna who can make everything happen.

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It needs to be the best team.

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And they're like, all right, well, that sounds great.

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How are you going to grow that?

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I was like, well, as much as we can continue to find the best team that we can fit that with.

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They're like, well, that doesn't scale.

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No, it doesn't.

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Unless you're going to give up on that idea and try to figure out some other way of commodity people, which is really the pyramid of I have some expensive people and then I just hire lots of cheap labor.

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And even then, you're still scaling by person and the money that they're making is still one hour of work for one hour of pay.

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So you want to do this.

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First thing, incorporate.

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You need to establish a legal structure.

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So the different kinds of structures are limited liability corporation and S corporation or C corporation.

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To start with, the simplest one is a limited liability corporation, which is just providing you the legal protections so that you as an individual have legal protection and coverage for doing work.

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Check the name availability.

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The IRS and states have the ability for you to look up the names that already exist.

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There are also ways that you can use names that don't necessarily have collision.

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Like I used an acronym to start Grimm, SMFS, to keep this PG rated.

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I will not share what that stands for, but use your imagination.

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And then we use Grimm as the doing business ad.

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So that's the trade name that actually ties to our logo and what we're doing, just like Scythe.

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With the IRS then, you need to go and register for an employee identification number.

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So you go to the IRS website, you request an employee identification number, they come back to you.

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That's basically the social security number for you.

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Why does the IRS want it?

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Because they want their taxes.

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They want you to pay them money.

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When you make money, they want it.

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Then at the state level, you need to create a local registration for each state that you're doing business in.

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If you have an employee in that state, you have to register in that state.

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If you sell in that state, you'll have to register in that state.

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I'm not going to go into a lot of the details, but the clever states to register in are one of the most well known, which is Delaware, and they are the the paragon for the ease of use and simple business friendly laws.

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A couple of others that are variations of that that are also well known are Nevada and Wyoming.

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As always, I'm not a lawyer.

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So make your own choice.

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And then a lot of places, you also need to register down at the county government.

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While you're doing this, I also recommend that you register with the U.S.

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government for procurement purposes.

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So this is not the U.S.

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government.

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This is not the side of the U.S.

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government that wants to take money.

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This is the side of the U.S.

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government that helps you get money.

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And so the two ways to do that are with the SAM system.

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I believe that's just sam.gov.

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Register for a CAGE code, and then Dun & Bradstreet will give you the same thing.

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Register and you'll get a DUNS number.

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They're free.

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It doesn't cost anything.

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It's actually fairly easy to do.

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And that just sets you up in place that if you ever need to do any kind of that stuff, and there are a lot of commercial companies that also will sometimes request a CAGE or a DUNS number, you're already set up and you don't have to worry about it again.

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So starting with your best friend forever.

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This is, of course, a common challenge.

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Business never goes as planned.

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And you can destroy a lot of relationships and friendships by doing that.

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So starting with, be clear on what are the roles, what are the expectations.

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One common mistake that a lot of people make is they immediately set the percentages of equity at the start.

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You don't necessarily have to do that.

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So, for example, you might decide, hey, we're going to start this business.

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And after the end of the year, we're going to look and see what's happened.

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And then maybe that's when we'll assign what the equity percentages should be.

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And the advantage for doing that is that you can actually make it fair.

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Maybe somebody started off and then, for whatever reason, decided to go do something else.

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You're not now still tied to that person with them owning a percentage of the company because it's not even a financial question.

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It can also be a question of control.

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Equity decides who gets to make the decisions in the company.

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So what if things change?

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What does success look like?

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That's something where that question where I got asked at the college keynote, what does your success look like?

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And I was just like, well, I keep going.

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I don't have some measure of success for what I'm doing for any of these companies other than particularly with Scythe.

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I just have a particular idea that I think really can help the industry.

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And I want to see that get out there.

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Now, that's not to say that money is not important.

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Money is the lifeblood of a company, especially if you have employees.

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You don't put food on the plate with ideas.

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You put food on the plate with money.

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And so making sure that with your friend, you both have those ideas of expectations.

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Who does what?

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What's the compensation going to be?

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And then what are you trying to accomplish?

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And what does that success look like?

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To raise or not to raise?

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That is the question.

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So let's start with the easy one.

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Starting a services company, probably not.

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You're growing by people.

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As you make more money, you hire more people and you grow organically.

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Very little reason and very few investors that will invest in a services company.

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As with everything, there are no absolutes, but just as a general rule, probably not a good idea.

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Products, you probably are going to look to raise at some point because there's going to be some element of speed to market to expertise.

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So my own personal example, I had a consultancy, Grimm.

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Grimm generates a good amount of cash.

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We use that money to invest in incubating the idea of Scythe for a couple of years and doing R&D with the Fortune 50 client that we were working with.

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And then I realized, okay, I want to take this software to market.

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I know absolutely nothing about commercial software and how to go to market.

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And so it wasn't the money that was important to me for the investors, but it was finding the right investors who could help provide me that expertise and experience so that I didn't learn some costly lessons that might kill the idea and successfully bring it together.

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So you're not just looking at it from a money perspective.

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You're also looking at it, what do they bring to the table?

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I wanted to call out, Haroon Mir had a great video on bootstrapping ego and really looking at that perspective again, where we talked earlier on the BFF slide about control with equity.

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You're constantly in this balance because as you bring other people in, and of course they bring and buy their money in, what they're buying is part of the company.

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That equity in that company represents control.

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And so there's this balance of how much control do I want to give up for other folks, balancing that with the potential that that capital can be used to really grow us.

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So I highly recommend checking out this video by Haroon to go in more detail.

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So the types of investors, all investors are not created equal.

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So the venture capital types are, there's funds and there's private equity.

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So these are the big institutions.

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And the biggest thing that I would say is if you are looking at raising, it takes some time to start to learn what the different types are.

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And particularly at the seed round, there are not a lot of investors who actually invest small amounts at that level, because it's a different time commitment for them.

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It's a different amount of risk.

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And they typically have very large funds where them writing a $500,000 check is almost a waste of time for them because they need to write really big checks to get the funds that are sitting there out.

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Save yourself the time and ask upfront what they do.

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What kinds of check sizes do they write?

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What rounds do they typically come in?

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Because you're going to find that there are a lot of later stage investors who want to chew up your time early and they're not going to give you money.

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Angels are smaller investors.

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They typically are writing check sizes of 25k to $100,000, sometimes more, sometimes less.

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That's just a range.

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These are typically folks who have been successful.

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Typically they were entrepreneurs.

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They want to continue to keep their hand in supporting other entrepreneurs in the industry.

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They're going to be very friendly and supportive.

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There's always friends and family.

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Friends and family are a good way to get started.

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Then there's this other sort of side concept called incubators, where what they'll do is it's typically a program that provides you office space.

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Pre-COVID, office space used to be a thing.

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Now that it's not a thing anymore, I don't know what incubators do other than perhaps they connect you to online seminars where they'll introduce you to different executives that might be in an industry that's a potential buyer.

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They'll introduce you to other VCs and investors and introduce you to other entrepreneurs.

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And then finally again, the government has a small business innovation fund called SIPR.

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The link is here.

241
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And different elements of government will put out different proposals.

242
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So if your technology or your idea matches one of those potential areas of interest, this is free money.

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They don't take equity with this.

244
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It comes in phases.

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Phase one is typically I think like $150,000 to $150,000.

246
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Excuse me, phase two can be $150,000 to $250,000.

247
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And then phase three, where they're trying to help push and scale into the government as well as commercialization, you're looking at a good half a million, $750,000.

248
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And so again, that's like free money.

249
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So just something worth considering.

250
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All right, so you've decided after all this thinking, you've got this idea, you're passionate, you want to do it, you've fleshed it out, so you're going to raise.

251
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You need a pitch deck.

252
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There are five core elements to the pitch deck.

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One page, what's the problem?

254
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One page, how does your solution help with it?

255
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You could use a few more pages after that, but if you can't condense in one slide how your solution works, you probably don't have it refined yet.

256
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Proof, do you have beta customers?

257
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Do you have examples?

258
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Tell me what you've got other than, that sounds like the greatest thing since sliced bread, that tells me that somebody else thinks about this.

259
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This is how investors are trying to fit.

260
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Is this just a great idea in somebody's, you know, in the proverbial engineer's garage?

261
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Or is this something that other people are going to believe in?

262
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Funding, how much do you want?

263
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This took me a while to get around that.

264
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I'm supposed to actually say how much money I want to actually do this.

265
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I just got so carried up in the selling, I forgot I needed to actually say how much money do I want from you?

266
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And then, what am I going to do with that?

267
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And then your vision, what does that look like?

268
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The schedule, the milestones, when will we get to a minimum viable product?

269
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What does that look like?

270
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Now, a lot of people get caught up on this part because investors might ask for, hey, tell me the potential addressable market, which we'll talk about shortly.

271
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They might say, hey, how am I supposed to know how much money we're making in two years?

272
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They're not looking for you to tell them a correct number.

273
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What they are looking for is your thinking.

274
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How did you get there?

275
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Does that make sense?

276
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Is it logical?

277
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So they're really just trying to get a better understanding of going inside your head.

278
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At the end of this presentation, I have numerous lists of wisdom from different entrepreneurs.

279
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This part includes Rangoola as well, and a link to more details on how to put together your pitch deck.

280
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And again, don't be afraid to share your pitch deck.

281
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I've had numerous folks send me examples of their pitch decks.

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I have shared my pitch deck, which I have spent two years refining through different versions as I've continued to learn what the hell I've built and what the hell our team has built.

283
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And I don't know if that one ever goes away, if you ever figure out exactly what you built in completion.

284
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Maybe once you're Apple, you have figured that out.

285
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And even then, it seems like they're still coming up with new things.

286
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So the process.

287
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All right.

288
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So first, caveat.

289
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Everything Cishet white male founders tell you probably will not work if you're not in that group.

290
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I am a Cishet white male founder.

291
00:22:12,450 --> 00:22:23,330
So the point here, and my good friend Katie provided this quote here, is the raise process is a very insular community.

292
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I can speak to one bias that I personally experienced, which is the West Coast bias.

293
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A lot of VCs, a large portion of the money, are on the West Coast.

294
00:22:32,930 --> 00:22:40,790
Now, that has been shifting, and there have been numerous centers of additional innovation and investment outside of it, but it is the main draw.

295
00:22:41,050 --> 00:22:49,670
And numerous West Coast investors that I talked to, the first question they would ask me, because I'm on the East Coast, is, so when are you moving to the Valley?

296
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I'm like, well, I'm not moving to the Valley.

297
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I'm going to stay on the East Coast.

298
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And that was a non-starter.

299
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Then there's a challenge which we see in InfoSec and IT in general, which is the tech bros.

300
00:23:03,150 --> 00:23:11,810
The, hey, I'm a tech, you know, I'm a guy, and there's an inherent bias about anybody who doesn't fit the certain way that they look.

301
00:23:12,010 --> 00:23:23,010
And then, of course, the challenge here is because the community is so insular with the investments, it is based on relationships, but you're stuck in this chicken and this egg of how do you build those relationships?

302
00:23:23,190 --> 00:23:30,490
And so this is an area where, again, having built that network can help you crack it, but Katie sums it up really well.

303
00:23:30,490 --> 00:23:38,810
This is a very insular community, and you're going to hear a lot of advice from the Ted style talks of like, well, this is how you do it.

304
00:23:38,910 --> 00:23:45,210
And a lot of it won't apply because that privilege doesn't automatically just confer.

305
00:23:46,470 --> 00:23:47,970
So capital.

306
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All right.

307
00:23:48,970 --> 00:23:53,270
Taking capital, getting an investment is like getting married.

308
00:23:53,430 --> 00:23:59,470
You could have the prenuptial, which is a convertible note or straight equity.

309
00:23:59,470 --> 00:24:01,430
So there's really two different ways of doing this.

310
00:24:01,430 --> 00:24:15,270
One, convertible note is almost like a loan under set circumstances that once a round is finalized at some point in the future, the money that they invested converts into that equity in that future.

311
00:24:15,590 --> 00:24:20,030
And then, of course, there's just the straight equity, which is I'm buying this amount.

312
00:24:20,410 --> 00:24:21,390
I'm giving this amount.

313
00:24:21,390 --> 00:24:22,690
I get this amount.

314
00:24:24,110 --> 00:24:28,670
I think it is an apt metaphor to talk about this like marriage.

315
00:24:28,910 --> 00:24:34,790
Whoever you're jumping into bed with as a part of your company, they're going to be there for a long time.

316
00:24:35,090 --> 00:24:39,190
And if it goes poorly, it's going to be very, very messy.

317
00:24:39,190 --> 00:24:40,370
So think very carefully.

318
00:24:40,370 --> 00:24:51,210
Do not get caught up so much in the money assigned to a name and really think through who and why you want to work with the various folks that you're bringing into your idea.

319
00:24:53,210 --> 00:24:59,210
Some of these folks who are the major investors are probably going to want to have formal influence through your board.

320
00:24:59,210 --> 00:25:03,190
And there's really two formal roles there.

321
00:25:03,190 --> 00:25:12,030
One is a director, which means that they get a formal vote as a part of board assigned to the amount of their control, which we've talked about.

322
00:25:12,030 --> 00:25:19,330
And then observers, where they don't have a formal vote, but they are allowed to be and to talk at the board meetings.

323
00:25:19,330 --> 00:25:32,170
And then there could be other kinds of folks on the board, like some people bring in independents, some people bring in folks that represent that are independent, that represent different potential customer types for the industry.

324
00:25:32,370 --> 00:25:41,830
But that board is going to be the captaincy that provides the advice for execution.

325
00:25:41,830 --> 00:25:52,970
So this is probably the biggest thing that I've seen a lot of founders and CEOs struggle with, is in most places, you do not work for the board.

326
00:25:52,970 --> 00:25:55,290
The board works for and with you.

327
00:25:55,290 --> 00:25:57,370
They're there at the end of the day.

328
00:25:57,370 --> 00:25:59,570
They have their meeting, they say their things.

329
00:25:59,570 --> 00:26:05,710
It's the CEO who's responsible for going and executing that and making sure that that actually happens.

330
00:26:06,110 --> 00:26:14,090
And yes, they're accountable to the board, but don't get lost in the fact that the board is there to help you, not just tell you what to do.

331
00:26:15,190 --> 00:26:17,150
So addressable market.

332
00:26:23,270 --> 00:26:29,070
Addressable market is really, really, really, really, really, really, really hard to do.

333
00:26:29,070 --> 00:26:31,770
Like I said, it's more around the thinking.

334
00:26:31,830 --> 00:26:39,690
The best way to do an addressable market buildup is saying, okay, I think there are these kinds of customers.

335
00:26:39,690 --> 00:26:45,810
So I have a blue unicorn or red unicorn and a purple unicorn who represent different kinds of customers.

336
00:26:45,810 --> 00:26:49,310
And they're willing to pay roughly this amount, or this amount and this amount.

337
00:26:49,310 --> 00:26:51,030
And I think there's this many of them.

338
00:26:51,050 --> 00:26:59,010
This is the preferred way to try to build up an addressable market as opposed to vulnerability management.

339
00:26:59,010 --> 00:27:00,290
It's a $4 billion market.

340
00:27:00,290 --> 00:27:02,110
I think I can get 10% of it.

341
00:27:02,110 --> 00:27:04,590
Therefore, my addressable market is $400 million.

342
00:27:06,990 --> 00:27:10,230
And that's not going to cut it.

343
00:27:10,230 --> 00:27:15,110
They want to see you understanding, hey, I think that I can charge this kind of customer this amount.

344
00:27:15,110 --> 00:27:17,990
And I think there are this many of them, this many of them, and this many of them.

345
00:27:17,990 --> 00:27:19,050
And then put that together.

346
00:27:19,050 --> 00:27:21,130
And now you can show all of your thinking.

347
00:27:21,130 --> 00:27:25,810
Like I said, they're not looking for the correct answer because they don't know.

348
00:27:25,810 --> 00:27:26,790
This isn't a test.

349
00:27:26,790 --> 00:27:28,050
You're not being graded.

350
00:27:28,050 --> 00:27:31,310
It's really how believable is it and does it make sense?

351
00:27:31,310 --> 00:27:36,430
Is that something that somebody could see playing out as you execute?

352
00:27:37,330 --> 00:27:39,910
That's how you get your overall addressable market.

353
00:27:39,910 --> 00:27:41,370
So, economics.

354
00:27:41,770 --> 00:27:45,030
A person does not cost a person.

355
00:27:45,030 --> 00:27:48,970
Most people think of what a person costs, or in this case, a unicorn.

356
00:27:48,970 --> 00:27:50,790
I love my unicorn references.

357
00:27:51,410 --> 00:27:55,290
And it's not just the salary that makes up what a person costs.

358
00:27:55,290 --> 00:27:56,310
Whoop, going the wrong way.

359
00:27:56,310 --> 00:27:59,510
So, hourly salary is the base cost.

360
00:27:59,510 --> 00:28:02,950
And then on top of that, you have multiple elements.

361
00:28:02,950 --> 00:28:06,910
Fringe, general administration, and overhead.

362
00:28:07,250 --> 00:28:10,850
So, fringe is benefits.

363
00:28:11,070 --> 00:28:14,610
Health insurance, holidays, paid time off.

364
00:28:14,610 --> 00:28:21,610
What are the different kinds of benefits that are 401k match that are offered to an employee?

365
00:28:21,610 --> 00:28:23,770
Then you have the back office element.

366
00:28:23,770 --> 00:28:25,710
So, there's two elements of back office.

367
00:28:25,710 --> 00:28:29,150
General and administration is like headquarters.

368
00:28:29,190 --> 00:28:31,990
What does it cost to administer the overall company?

369
00:28:32,230 --> 00:28:35,470
Overhead are specific project costs.

370
00:28:35,550 --> 00:28:46,790
So, in a product company, you're probably not going to have specific project costs, but in a consultant company or a services-based consultant company, you might have specific client costs that you need to have.

371
00:28:46,790 --> 00:28:49,730
And those roll up, and that gives you this multiple.

372
00:28:49,850 --> 00:28:58,830
So, on average, you're going to see a multiple of an employee costing anywhere from about 1.3 times their salary up to the low to mid 2.

373
00:28:58,830 --> 00:29:04,170
So, up to about 2.5 for a very high-end expensive company.

374
00:29:06,570 --> 00:29:07,610
Hiring.

375
00:29:07,770 --> 00:29:09,870
Hey, you know people, right?

376
00:29:10,030 --> 00:29:17,790
And that's typically where you start is in the very beginning when you're looking for those first hires, you're probably going to be looking at friends in your network.

377
00:29:17,950 --> 00:29:25,410
One of the challenges that come with hiring and when a company is small is the mistake that folks make around rank.

378
00:29:25,990 --> 00:29:40,650
Chances are the person that you hire to be in charge of sales or engineering or business partnership, they're probably not going to be the same person that's in that role if you do become very successful.

379
00:29:40,650 --> 00:29:51,130
The difference between running a company in sales for a company that's small and 10 people, that job changes when it's 500 people.

380
00:29:51,150 --> 00:29:56,910
Their ability to grow with that becomes challenging and that rank can make it difficult for them to grow into that.

381
00:29:56,910 --> 00:30:01,090
So, that's something where in the very beginning try to punt that as much as possible.

382
00:30:01,330 --> 00:30:04,930
The real big part on this of course is incentive.

383
00:30:04,930 --> 00:30:08,310
What are the different kinds of incentives that I can offer for this?

384
00:30:09,150 --> 00:30:18,850
I remember when I first started Grimm and we were three people and I was looking to hire engineers and one of them was just like, well, how much of the company I'm getting?

385
00:30:18,850 --> 00:30:27,390
I was like, I mean, we've been in business now for a year and a half or a year, whatever it was, and you're not bringing anything to the table.

386
00:30:27,390 --> 00:30:34,750
You have a salary and all of the benefits, you put no blood, sweat, and tears in this, and fundamentally you're not going to help grow the company.

387
00:30:35,410 --> 00:30:39,070
Equity really wants to be tied to like serious growth.

388
00:30:39,750 --> 00:30:54,930
Now, what I've done is, so I want everybody to feel like they're a part of it, is hey, maybe you're not getting like significant equity, but we are going to align everybody by giving out, all employees are going to have options in the company, which ties to equity.

389
00:30:54,930 --> 00:30:59,990
So what an option is, is a way to be a non -taxable event.

390
00:30:59,990 --> 00:31:10,350
Again, not an accountant, not a lawyer, but the phrasing here is important because if I give you direct equity, which is worth something of value, that's a taxable event immediately .

391
00:31:10,370 --> 00:31:24,250
If I give you options, which are essentially saying, hey, today's price for what we're valuing this at, the company's going to grow, you get to benefit off of that delta, that's what an option does for you.

392
00:31:24,250 --> 00:31:29,890
So that as the company grows in value, you have an option to take advantage of that growth.

393
00:31:29,890 --> 00:31:33,710
And then finally, of course, is the bonus, which you want to make sure is clear on that.

394
00:31:33,710 --> 00:31:41,870
Keeping in mind, particularly as a young company, bonuses can be very challenging because you need that cash in the beginning to grow because cash is king.

395
00:31:43,190 --> 00:31:44,810
Cash is king or queen.

396
00:31:44,810 --> 00:31:46,130
Cash is royalty.

397
00:31:46,490 --> 00:31:48,110
We're going to be correct.

398
00:31:48,110 --> 00:31:50,410
So we talked about benefits.

399
00:31:51,270 --> 00:32:00,430
One thing that I'll throw out there to help make your life easier, I'm not necessarily advocating for it, I've never used them, is the PEO, the Professional Employer Organization.

400
00:32:00,430 --> 00:32:07,950
So there are companies out there that what they do is effectively you and your employees become an employee of their company.

401
00:32:07,970 --> 00:32:16,350
And you benefit from the scale of all of those employees to provide savings back that you're paying for.

402
00:32:16,350 --> 00:32:30,670
So they provide all of the benefits and the health insurance and the 401k, they'll do the HR stuff, and you pay for that, but it costs you less than it would to go and get it on your own, is the theory.

403
00:32:31,630 --> 00:32:42,430
So just another option on how to do otherwise, like we talked about earlier with tolerance for bullshit, you will have to go and learn all of this yourself.

404
00:32:42,630 --> 00:32:47,630
I personally went and I learned more about health insurance than I ever thought I would know in my entire life.

405
00:32:47,970 --> 00:32:51,230
And that's the way it goes if that's what you want to do.

406
00:32:51,710 --> 00:32:57,950
Back office, other considerations for back office, support for contracts.

407
00:32:58,010 --> 00:33:01,470
Most folks are not experts in reading through terms and conditions.

408
00:33:01,470 --> 00:33:09,810
You are going to get lots of terms and conditions because any customer is going to have a formal element there.

409
00:33:10,170 --> 00:33:12,610
Legal, you need to get counsel.

410
00:33:12,610 --> 00:33:15,210
We talked before, I'm not a lawyer.

411
00:33:15,210 --> 00:33:17,010
This is not legal advice.

412
00:33:17,010 --> 00:33:19,790
You will want counsel to help with some of these elements.

413
00:33:19,970 --> 00:33:25,130
As you grow, human resources will become more important because in the very beginning, everything's very simple.

414
00:33:25,130 --> 00:33:27,470
You don't really even need policies probably.

415
00:33:27,530 --> 00:33:31,270
At some point, I promise you, somebody will do something dumb.

416
00:33:31,270 --> 00:33:32,530
You will get to that scale.

417
00:33:32,570 --> 00:33:38,850
That's where you really need to preempt those with having human resources and policy to get ahead of that.

418
00:33:38,970 --> 00:33:41,470
Payroll, people need to be paid regularly.

419
00:33:41,670 --> 00:33:43,310
You cannot screw that up.

420
00:33:43,410 --> 00:33:45,150
Somebody should be doing your payroll.

421
00:33:46,210 --> 00:33:50,090
Accounting, accounting is critical because this is the system of record.

422
00:33:50,090 --> 00:34:00,210
If money is the lifeblood of the company, accounting is what tracks where all that money is going and keeps you out of hot water when the IRS comes knocking and saying, hey, we think you paid this amount.

423
00:34:00,210 --> 00:34:01,610
You owe us this much.

424
00:34:01,830 --> 00:34:03,710
And then finally, business insurance.

425
00:34:03,710 --> 00:34:17,750
You are going to need to have various kinds of business insurance, anything from general liability to errors and omissions if you're doing professional consulting, different kinds of property insurance.

426
00:34:17,930 --> 00:34:27,910
What I would recommend is that first contract that you get from a customer is going to stipulate exactly what amounts of insurance you need to have.

427
00:34:28,210 --> 00:34:36,950
You will have enough time between getting that first copy and having to sign it and execute it to go and get insurance from somebody specifically to those amounts.

428
00:34:37,090 --> 00:34:41,590
So just me providing like a little cheat there.

429
00:34:41,610 --> 00:34:42,710
They'll tell you what to get.

430
00:34:42,710 --> 00:34:44,230
Go get it when you need to get it.

431
00:34:46,890 --> 00:34:49,270
You actual office itself.

432
00:34:50,270 --> 00:35:02,210
So now that COVID completely is a thing and nobody knows what an office is anymore, the remote work from home element is much more common.

433
00:35:02,490 --> 00:35:06,210
Really pay attention to the culture and the scale to do that.

434
00:35:07,010 --> 00:35:11,590
In the old days, getting space was something a lot of people rushed out to go do.

435
00:35:11,590 --> 00:35:15,550
Like I need a place to hang my shingle because I don't feel like a real business until I do that.

436
00:35:16,390 --> 00:35:22,190
I think that the pandemic has helped make that easier where folks don't feel obligated to do that anymore.

437
00:35:22,190 --> 00:35:24,730
But it is a consideration if you want.

438
00:35:25,390 --> 00:35:33,370
And of course, we talked about incubators as an option, but there's also dedicated, of course, now shared workspaces depending on what you want to do.

439
00:35:33,590 --> 00:35:37,030
And then on top of that, of course, is where do you want to put your equipment?

440
00:35:37,030 --> 00:35:38,470
What are you doing for storage?

441
00:35:39,030 --> 00:35:41,250
And tracking different assets.

442
00:35:42,150 --> 00:35:43,530
Intellectual property.

443
00:35:43,530 --> 00:35:50,430
So intellectual property is how you formalize what's valuable inside your company.

444
00:35:50,430 --> 00:35:53,670
Most obvious that everybody knows about are patents.

445
00:35:53,670 --> 00:36:04,030
A patent is where you go and with a lawyer file for disclosing what the idea is.

446
00:36:04,030 --> 00:36:05,630
And there's different kinds of patents.

447
00:36:05,630 --> 00:36:07,670
I won't go into the details there.

448
00:36:08,450 --> 00:36:14,310
And then there's this concept of trade secrets, which are, hey, I'm doing something that's proprietary to me.

449
00:36:14,310 --> 00:36:18,170
And by not disclosing it, it's essentially my own IP.

450
00:36:18,170 --> 00:36:22,050
Not as well protected, though, as a patent where you formally identify that.

451
00:36:22,050 --> 00:36:26,350
And then two other elements, which are trademarks and copyright.

452
00:36:26,530 --> 00:36:32,810
Trademarks are I have a particular image, like the Scythe logo is trademarked.

453
00:36:32,830 --> 00:36:37,850
So that somebody can't come and work off of that.

454
00:36:37,850 --> 00:36:43,510
And then a copyright is anything, any written work that you publish is yours.

455
00:36:43,510 --> 00:36:48,690
Somebody can't take it and just do whatever with it, claim it as their own.

456
00:36:50,610 --> 00:36:51,870
Talk to a lawyer.

457
00:36:51,870 --> 00:36:53,650
They're usually not this good looking.

458
00:36:55,930 --> 00:36:57,570
How to get clients.

459
00:36:58,150 --> 00:36:59,930
So, we are running out of time.

460
00:36:59,930 --> 00:37:01,590
So, I'm going to try to speed through these.

461
00:37:04,750 --> 00:37:12,470
Go to market is this concept of once I've built an idea, how do I take it and scale that across being able to sell it?

462
00:37:12,990 --> 00:37:16,170
Acquisition, though, is where we're just looking at, like, how do we go and get those clients?

463
00:37:16,970 --> 00:37:19,590
And again, this is where your network comes in handy.

464
00:37:19,850 --> 00:37:22,030
They will introduce you to potential clients.

465
00:37:22,030 --> 00:37:25,930
They will introduce you to prospects who are like, hey, yeah, I'm willing to try that out.

466
00:37:25,930 --> 00:37:32,790
One of the most interesting things I didn't really understand until I became a software vendor, because everybody picks on the vendors, right?

467
00:37:32,790 --> 00:37:35,450
Oh, vendors are like this and vendors are like that.

468
00:37:35,450 --> 00:37:36,850
At least they have good swag.

469
00:37:37,010 --> 00:37:38,850
And I love the free booze at the parties.

470
00:37:38,850 --> 00:37:40,650
Like , that's all vendors good for.

471
00:37:40,650 --> 00:37:49,550
Is there a lot of folks who understand, particularly in the InfoSec community, we in InfoSec don't really solve problems, right?

472
00:37:49,550 --> 00:37:55,130
We solve pieces of it, which clients then build out to a defense in depth measure.

473
00:37:55,130 --> 00:38:07,650
And there are a lot of clients who understand that they need to invest or they want to invest in being early adopters on what's the next technology, because they believe that can help make everything better for everybody else.

474
00:38:07,650 --> 00:38:10,050
We talked about contracts.

475
00:38:10,050 --> 00:38:13,650
The tissue paper of contracts is what's called the non-disclosure agreement.

476
00:38:13,650 --> 00:38:16,110
This should be a very simple document.

477
00:38:16,470 --> 00:38:21,250
The good news is when you're starting out, most of your clients already have all this paperwork for you.

478
00:38:21,250 --> 00:38:23,950
And so you can just follow along with that.

479
00:38:23,950 --> 00:38:33,850
The contract for the work itself, being very explicit with expectations, the period of performance, and then of course, how and when do you get paid?

480
00:38:34,350 --> 00:38:42,590
One of the things that was the hardest part around doing a business is I thought that getting the work was the hard part.

481
00:38:42,590 --> 00:38:46,550
Doing the work was easy because we're an expert, we know what we're doing.

482
00:38:47,210 --> 00:38:50,610
I didn't realize the hardest part is getting paid.

483
00:38:51,130 --> 00:38:53,250
Clients do not pay on time.

484
00:38:53,570 --> 00:38:56,590
Clients, you have to chase them.

485
00:38:56,590 --> 00:38:58,630
You have to focus on getting paid.

486
00:38:58,630 --> 00:39:00,370
A lot harder than it sounds.

487
00:39:02,210 --> 00:39:09,870
In conclusion, every month, you will face a random existential crisis that no amount of planning can prepare you for.

488
00:39:09,870 --> 00:39:11,210
You'll get past it.

489
00:39:11,210 --> 00:39:12,390
You will survive.

490
00:39:12,390 --> 00:39:15,590
And at some point, it's not happening.

491
00:39:15,610 --> 00:39:18,070
And you're not alone in doing it.

492
00:39:18,690 --> 00:39:20,450
I wanted to throw out some resources here.

493
00:39:20,450 --> 00:39:22,050
There's a Security Founders Slack.

494
00:39:22,050 --> 00:39:28,350
There's a Future Founders channel for those who are interested in getting started but aren't quite there.

495
00:39:29,070 --> 00:39:35,820
Some recommendations that I have that for ones that have done well for me, Gusto providing all the payroll and benefits administration.

496
00:39:36,270 --> 00:39:38,790
Pilot is easy and cheap accounting.

497
00:39:38,790 --> 00:39:42,070
The challenge there is it doesn't handle a lot of complexity.

498
00:39:42,250 --> 00:39:43,830
They only show up monthly.

499
00:39:44,050 --> 00:39:49,650
I liked Brex because that was a credit card that I could find that was not tied to my personal credit.

500
00:39:50,390 --> 00:39:56,890
Since then, additional credit cards have come out that also do this.

501
00:39:56,890 --> 00:39:58,350
So, I'll just throw out a handout.

502
00:39:58,350 --> 00:40:01,050
I think Stripe also does that now and I think there's two others.

503
00:40:01,290 --> 00:40:06,090
And then, any entrepreneur that you know will be happy to help as best as possible.

504
00:40:06,090 --> 00:40:14,470
I like to think of being an entrepreneur as like joining an exclusive club where the only requirement is the desire to join because every member will help you.

505
00:40:18,510 --> 00:40:24,290
And then, I have numerous entrepreneurs here who have provided their advice.

506
00:40:24,290 --> 00:40:27,490
So, all of that will be available in the slides.

507
00:40:27,970 --> 00:40:30,550
And I'm ready to take questions, I think.

508
00:40:31,230 --> 00:40:39,050
And questions will be in Discord and other venues when we share them with the community.

509
00:40:39,170 --> 00:40:40,490
Bryson, this is great.

510
00:40:40,490 --> 00:40:41,830
Absolutely wonderful.

511
00:40:42,430 --> 00:40:48,450
We might not be able to get to the remainder slides in the YouTube recordings.

512
00:40:48,450 --> 00:40:49,910
Yeah, I don't expect that.

513
00:40:49,910 --> 00:40:54,090
I'm just going to make sure that the slides are shared so that everybody can go through them on their own.

514
00:40:54,170 --> 00:40:58,110
So, where should people find those slides?

515
00:40:58,830 --> 00:41:02,910
I will post that in Discord when I figure it out next week when this airs.

516
00:41:03,030 --> 00:41:04,390
Sounds great.

517
00:41:04,670 --> 00:41:08,570
I just want to make sure we have a solution provided before we do it.

518
00:41:09,850 --> 00:41:11,070
Well, great.

519
00:41:11,550 --> 00:41:13,710
That was just absolutely wonderful.

520
00:41:13,710 --> 00:41:32,150
I thought that you were very methodical about laying it out because there are so many people, as we know in the community, have a really great idea and they want to charge out and do it and don't understand that infrastructure and passion and your tolerance for bullshit are really key things that need to happen.

521
00:41:32,470 --> 00:41:34,110
Bryson, I know you're really busy.

522
00:41:34,110 --> 00:41:37,590
Thanks for all you do for the community and thanks for being part of DEF CON.

523
00:41:37,590 --> 00:41:39,050
Take care.

524
00:41:39,050 --> 00:41:40,230
Thanks for having me.