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How To Start A Software Company Without Money (Part 2 of 2)

"An investment in knowledge pays the best interest" ~ Benjamin Franklin

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This is part 2 of the series on "To To Start A Software Company Without Money."

To see part 1, click here:

Starting A Software Company

In part 1, we went through:

1) The Idea

2) The Name

3) Registering the Business

4) Securing an EIN

5) Getting a D&B Number

6) Opening a Bank Account

7) Creating a Logo

8) Social Media

9) Business Plan

10) Pro Forma

11) Investor Deck

12) Business Cards

13) Recruiting

In this article we will go through:

14) Contracts

15) Planning

16) User Interface

17) Content

18) Bringing Designs to Life

19) Intellectual Property

20) Raising Capital

CONTRACTS

GOOGLE again is your friend, as you don’t have money for an attorney and your new partners will want their roles clearly spelled out and their stock in writing.

If there is a chance...even a small chance you can raise money GO PAY AN ATTORNEY. Contract work is highly specialized, and you will want to protect yourself. Paying $1000 now for a contract attorney can save you millions later if you have a great idea.

I. Articles of Incorporation- investors will want to see this, expect this to come from your state (try not to lose it).

II. ByLaws- lays out the rules of the company. Only you need to sign.

III. Common Equity Term Sheet- this will lay out the stock you are offering your select partners.

Three points:

1) Make the stock vested/contingent upon at least 1 year after the launch of the completed product. Define the "completed product" to include mobile. The reason you need this is to protect yourself, as your programmers are your lifeblood.

2) Set a very low per share stock price and make the partners buy in for under $15. This will keep the taxable consequences minimized (please GOOGLE this and discuss with an attorney/accountant- each case is different)

3) It is possible you have selected the wrong partners, make sure you keep a voting majority and can make all decisions yourself.

Keep in mind you may have to switch in and out partners more than once to find the right people who are as hungry as you are. Make sure you are protected.

Again, I would HIGHLY recommend hiring an attorney, but this can be done for free. Marry an attorney if you have to (like I did), but do not do this yourself. Cost: $1000

If you're in Florida, we used and highly recommend:

Florida Business Contract Attorney

PLANNING

You have your team, now it’s time to get to work! The first step is to lay out the requirements. Step two is two map out those requirements for UI and design.

This should be extensive, and researching other sites for ideas is a must. It is in this stage where any lack of planning can delay or sink the project.

Mapping your UI is an outline to show what fields and functionality will be included in your website/app.

If the UI person you chose is the right one, he will be able to lay out an outline of what functionality is needed that you can go through together.

Certain functionality may need to be outsourced for the final product. Identify efficiencies that can be gained by outsourcing. For example, we utilize a customer service and support company called “Groove” that is reasonably priced on a monthly basis.

If we were to make our own backend customer service piece of software, it could take a year (or more) of planning, design and development.

It is OK if you are not an “IT Person.” You do not know how to code to start a software company. You do need common sense and the ability to make good decisions, especially when money is not there.

Planning takes a lot of time, but no money.

USER INTERFACE

At this juncture, your choice as a user interface specialist is your most important person. Once you have mapped out all the requirements, it will be time to push some pixels. Creating web pages is easy. Creating good web pages that have high conversion rates is a science and a skill.

Once you have your designs back give careful thought to each and every aspect. Is it too wordy? Is it easy to navigate? Are the “call to actions” clear and effective?

Tip for your UI person- tell he/she to do a modular design, so the HTML/CSS/JavaScript work is easier and faster.

The user has a relationship with any website…make sure their relationship is a good one.

If you found one as your partner, there is no cost.

CONTENT

Writing web content is different from any kind of writing that has ever been taught to you. If you are writing the web content, study on what resonates and converts with users.

There are great resources out there, but here is one of them.

http://www.enchantingmarketing.com/writing-for-the-web-vs-print/

Do NOT attempt to work in every SEO keyword.

Google is on to those tricks, and so are customers. No one wants to read Personalized Group Messaging or Scheduled Group Text in every header on our site, and they won’t want to see that on yours either.

If you are a writer, this is also FREE. You are getting closer to your product being ready and you might still under $1650 total ($1000 on contracts).

BRING DESIGNS TO LIFE

It’s time for the HTML/CSS/JavaScript of the main pages of your work. Assuming you have negotiated an ownership share with a talented front-end programmer, this should cost you nothing but time.

If this resource is not part of your management team, you should be able to get this done for anywhere from $2-300/page. Keep in mind some pages are far more complicated than others, so this is an estimate.

INTELLECTUAL PROPERTY

No matter what you are developing, you will have IP. A large portion of the value of your company is determined by the IP.

There are three types of IP:

1) Copyright: (Straight from the copyright office) A form of protection provided by the laws of the United States for "original works of authorship", including literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual creations. "Copyright" literally means the right to copy but has come to mean that body of exclusive rights granted by law to copyright owners for protection of their work. Copyright protection does not extend to any idea, procedure, process, system, title, principle, or discovery. Similarly, names, titles, short phrases, slogans, familiar symbols, mere variations of typographic ornamentation, lettering, coloring, and listings of contents or ingredients are not subject to copyright. Copyright Information

For software this is not as important as the next two.

2) Trademark: A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others.

Your logo and company "phrase" (if you have one) can be Trademarked. This protects your brand.

COST: ~$795

3) Patent: A patent is a limited duration property right relating to an invention, granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention.

If you have an algorithm or process you have created, you definitely want to talk with a patent attorney. You CANNOT patent your idea once it is launched. When you patent something, you are telling other people how to do what it is you are doing in exchange for protection.

You cannot do this on your own or by "googling" it.

We used "Daniel Law Firm" for our work, and highly recommend his services. Jason is outstanding. Not every software product has a patent...in fact, most don't.

Patent Attorney

COST: ~$12,000

RAISING CAPITAL

So now you have an idea, a name, a company, a Pro Forma, a Federal Tax ID #, a logo, a pitch book, a business plan and a visual demo to show what the product will look like (without functionality).

It’s also possible have also spent under $3000 but have spent a LOT of time.

Now it’s time to polish everything up and bring it up to speed and start presenting.

Raising capital is an adventure, and to a large extent it will extend to your personal contacts first. Sometimes it’s very easy (if the right people know you and you have a great idea) and sometimes it’s a journey that never ends (wrong idea…you have no connections).

It is fairly common for software companies at this stage to command a 1M valuation despite being “pre-development” and “pre-revenue.” 250K for 25% is a fairly normal offer in the venture capital world. That said, the person with the money might feel differently, so you should be prepared to work something out. Sometimes a personal guarantee may be necessary, and sometimes it may be a loan. Please see our blog post on “VALUATE YOUR SOFTWARE COMPANY FOR A PRE-LAUNCH CAPITAL RAISE” for more information: How to valuate a software company

You will need to determine the real amount of money you will need to build the product and have that pitch book in tip-top shape. Knocking on any and all doors is a good exercise in any case.

Assuming you had the right idea and the right people in place, you may now have a valuable company. The most important piece is never the idea, it’s always the execution of the idea. If you raise the capital you need to fund this idea, you may be on the way to a multi-million dollar company.

If you followed these instructions and had the resources, luck and skill to have all the puzzle pieces fall in place it is possible you may have gotten here for under $3,000 out of pocket. If that does happen that would be amazing and I would love to hear about it.

I was not that lucky but had my share of luck on the way!

Please feel free to reach out if you have any questions, I am happy to help.

ABOUT THE AUTHOR:

Eric Beans

Eric Beans is CEO of Texting Base, Inc., out of Orlando, Florida. Texting Base is a cloud-based software that adds efficiency and power to business texting communications. Combining the efficiency of a “mass text” and the effectiveness of a personal text message, Texting Base uses patent pending software to allow businesses to build relationships with their customers like never before. Prior to Texting Base, Eric Beans owned Premier Mortgage Capital, Inc., a nationwide state charted mortgage company and helped to start TechSpan, a global IT consulting company.

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