Buddy up with someone from HN? I'm now curious as to the logistics of having someone in the US setting up an LLC (only takes a couple weeks at most) for overseas operations.
Yes, and there is substantial risk for the American involved too. If listed as an owner, you're the one who gets served if the corporation gets sued in the US. So it's never as easy as "find an American and get paid", unfortunately.
I am looking forward to apply for startupchile, a little research on payment gateways has pointed me to dineromail.com, have you evaluated that option?.
I'm arriving end of this month for the Nov 3 batch, what I know so far of local options is that webpay.cl is the local PayPal which a lot of companies use.
Yep, you don't need to be a citizen or resident to do that. I have a Brazilian friend (Diego Gomes, founder at EverWrite) who went through the whole foreigner-incorporating-in-the-US-without-living-here thing and is posting details about it on their blog (the next post is exactly about ITIN and merchant accounts): http://myeverwrite.com/blog/.
He can find a us lawyer on elance to set him up and advise him on all this. Get a us tax record etc. He will want to talk to a us tax specialist too. I know both if he wants referrals
It really depends on your investment strategy. That's the real problem with actually moving the company to the US. At the time this post was written we didn't have any investment, so it probably wouldn't have killed us to set up a Delaware C corp. But when you're pre-revenue (which we were), that's a big challenge in itself.
Being a European company, just looked at Chargify, and Quickpay is the gateway that looks like it supports all of EU. Going there, it looks like I need an acquirer for my gateway. So you're telling me that I need an acquirer to get the payments, a payment gateway for the credit cards, and Chargify to manage recurring billing?
Kill me now, please.
If anyone has an article on EU credit cards basics, please let me know.
In case it helps, although it's not on Chargify: I'm going to launch a SAAS product (https://www.wisecashhq.com) and will use Recurly. They advised to join WireCard, which we did.
Basically, WireCard does the acquisition, payment gateway and provide a merchant account as well, as part of a single pack; which means I "only" subscribe to Recurly + WireCard.
I can acquire money in $ (we will only use $ first) despite being a french company, and my merchant account there will be in €.
Be sure to check out the way Recurly handles VAT too: blog.recurly.com/2010/09/recurly-now-features-vat-support/
Have you tried a non-local bank with Aussie branches, or just the Big Four? HSBC is pretty big, and has a fair few Aussie branches. Though maybe it's a subsidiary, not a branch. There's also Barclays Capital - I've heard of them so they must be big. If you go to http://en.wikipedia.org/wiki/List_of_banks_in_Australia, there's quite a few subsidiaries and branches of foreign banks.
Banks like HSBC may seem and claim to help you between countries, but this is rarely the case. The problem is regulations, they really do operate in regional silos except perhaps on advice (and where the profits go). For example my HSBC account in the UK doesn't help me in opening an account in the US, even if I just moved to the US. It also doesn't speed things up when I want to transfer money to an HSBC account in Hong Kong.
HSBC has a somewhat-premium Advance service that specifically claims to help opening accounts when you move countries and move money and banking history. Was that what you were using in the UK? (That being said, apparently HSBC in the USA isn't all that great in general.) Perhaps their commercial/merchant banking can do similar things?
Citibank branches around the world really go out of their way to help you when you appear on their doorstep with a Citibank account from another country.
My Citibank UK account absolutely helped in opening a Citibank US account. I also seem to recall it was quicker and/or cheaper to transfer money internationally between Citibank accounts.
To get a US merchant account, you need a US Tax ID/Bank account (acquirable with Delaware company) AND a US Social Security number for someone who has ownership in the company. Unfortunately that is the minimum that underwriters will accept... AFAIK you need the same stuff with Stripe, Samurai, and Braintree.
One thing to realize is that for us startups serving startups, we would love to do the rest of the world but there are a bunch of complications that come with doing so (timezones, currencies, partners, taxes).
How is a foreign corporation, setting up a US corporation, going to have a social security number for an owner of the corporation, if none of the owners are US citizens?
Is this really a requirement of the underwriters, or the IRS? I remember looking at an EIN form once and seeing that it required a SSN in order to get an EIN. But of course, someone whose never lived in the USA would not have an SSN.
This would seem to imply that the USA is only open for business to US Citizens. You need an EIN to do anything that might be taxable in america, but you can't get one unless you have an SSN.
Try being in Brazil then... All of these hurdles, plus the craziest tax laws in the world. It's almost like a Kafka story trying to run a business here.
we're in the process of getting a merchant account going but it's a long drawn out pain. We're using eWay for the gateway as I've used them in the past and they've been fantastic. The bank, however, is having a hell of a job getting it's head around the idea that we want to sell a service over the internet (we're building a saas product).
last call from the bank was yesterday when they decided they wanted full login and usage rights to our app (so they could verify it?) - kind of hard when it's not built yet. We seem to be in a bit of a chicken/egg situation where we have to actually launch before they'll let us receive payments... Prior to that they wanted revenue history for the last few years! agh!
Luckily we anticipated this taking so long which is why we started the ball rolling months ago.
Why being an aussie start-up doesn't suck - two words - health insurance. The public health system provides for much, and as a private citizen for a few hundred dollars a month I can get coverage for elective things. I'm not faced with a decision like 'shit, if I quit my job at bigco and go and do this startup thing and then get sick will I be putting my life at risk?'
Yet many young people in no way require the amount of health coverage older people do. Why should they be forced to buy into something they don't need? Each year we go through our health care presentations we have numerous people asking to opt out but they aren't allowed.
Yes it weighs on the minds of many, but not all. I am all the more willing to pay as you go on my health care but I would prefer to see reasonable coverage for catastrophic care which is what really becomes expensive.
The whole point of health insurance - nay, insurance in general - is the idea that the well fund the sick in part, because being sick costs so much money.
If all the young healthy people opted out, you'd have pools full of old sick people, and rates would be so bad, there wound't be much of a point.
With insurance, you need a large element of people that are essentially paying into the service for no benefit in order to insure the risk. That's the whole idea.
> The whole point of health insurance - nay, insurance in general - is the idea that the well fund the sick in part, because being sick costs so much money.
Actually, no. The idea of insurance is that you pay a slight premium over your expected costs in order to avoid getting hit by variance. (The slight premium is to pay transaction costs.)
Healthy people paying for sick people is subsidy, even if you hide the subsidy behind the label "insurance".
Being "older", I'm all for today's young people subsidizing older people. I wonder if the next group of young people will feel like subsidizing the current group when the current group gets old, but that's not my problem.
That might be the RNC's talking points of how insurance works, but given that I'm in the industry, I can tell you that insurance exists to offset risk by spreading costs over a pool of people.
The concept of "risk" by default means that certain people will never utilize the service. Premium is a factor of the risk analysis, not a transaction fee.
This works very well for concepts like auto or home insurance: most people will - in a given year - never actually crash their cars or destroy their homes. The premium they pay is based on the risk profile of one of these things happening to them, and overall to the pool.
Health insurance is a little different, but the concepts remain the same. The only real difference between a nationally run program and several private programs - assuming a level of administrative competency - is the size of the pool. The larger the pool, the less the risk, the cheaper the average premium.
You can call it dirty words and all, but if you are against the concept of national insurance programs as a principle, you should really evaluate your view of insurance in general, since you're "subsidizing" people who crash their cars, have house fires, pick the wrong banks etc, etc.
As an aside: I'm in Canada. As such you might find it interesting that while I believe the US system isn't using the full potential of the available pool, I believe our system has forgotten a lot of the concepts that sustain the insurance industry by just declaring medical care a "right" despite the costs. Both of our countries would be better served by abandoning ideologies here.
> That might be the RNC's talking points of how insurance works, but given that I'm in the industry, I can tell you that insurance exists to offset risk by spreading costs over a pool of people.
Both insurance and subsidies (as I described them) spread risks over a pool. The difference is in how we charge folks in the pool.
If we charge them by their expected cost, it's insurance. If we charge some people significantly more than their expected cost so we can charge others less, the first group is subsidizing the second.
And no, the fact that I don't have a claim doesn't imply that I'm subsidizing anyone any more than the fact that someone hits the lottery implies that lotteries are a good bet. The relevant question is how my cost of "insurance" compares to my expected claims.
There is value in reducing variance - I'd rather pay $600/year for 10 years instead of paying $5800 one year and nothing for 9 years. And, I'm willing to take the chance that I'd never pay anything to avoid the hit of paying $5800 twice and nothing 8 times. (In this example, I'm paying $200 so I'm not subject to variance.)
However, I'm a lot less willing to pay $600/year if I think that my expected costs are $1k once every 10 years. That's the problem with subsidies disguised as "insurance". The rational response is to try to get out of the pool.
> Premium is a factor of the risk analysis, not a transaction fee.
I didn't refer to insurance premiums, I referred to the fact that maintaining a pool has costs which the payments must cover in addition to the losses.
> The larger the pool, the less the risk, the cheaper the average premium.
That's simply not true. My risk of having a car accident does not depend on how many people are in "the pool". There can be economies of scale in the costs of maintaining the pool, but they have nothing to do with risk.
> if you are against the concept of national insurance programs as a principle, you should really evaluate your view of insurance in general, since you're "subsidizing" people who crash their cars, have house fires, pick the wrong banks etc, etc.
I'm not against insurance. However, subsidies have issues and it is dishonest to claim otherwise and confuse the two.
I don't think you have any idea how insurance works.
>If we charge them by their expected cost, it's insurance.
Um, no. Insurance premiums are determined by total cost of claims plus expected inflation plus administration costs. There is no "expected cost". You are making this term up. There is only risk and the premium mathematically calculated to cover said risk. Making these calculations is the entire purpose of a whole profession: http://www.soa.org/about/about-what-is-an-actuary.aspx
>I referred to the fact that maintaining a pool has costs which the payments must cover in addition to the losses.
...which is always significantly less than the losses, since administration fees are usually a percentage of claims.
> My risk of having a car accident does not depend on how many people are in "the pool".
You're failing again to understand the math. The risk of you having a car accident is only part of the equation, the other part is the number of people that are able to absorb said costs. Any artificial group will vary from the mean overall risk, either being better or worse. The larger the pool, the less this variance. This is why you can't get insurance if you get sick: The pool's overall risk is artificially lowered to maintain competitive premiums.
>However, subsidies have issues and it is dishonest to claim otherwise and confuse the two.
There is no real distinction here except for the doublespeak you're introducing in an attempt to somehow differentiate health insurance from any number of insurance services. Actuaries do not define the term subsidy. It's a political creation to confuse and obscure.
> Insurance premiums are determined by total cost of claims plus expected inflation plus administration costs. There is no "expected cost". You are making this term up.
I'm not using jargon, but the meaning is both clear and correct.
>There is only risk
and the cost of that risk is the meaning of "expected cost".
However, you did make an error. Premiums don't depend on the total cost of claims, but on the EXPECTED total cost of claims. That's where actuaries come in - they predict claims costs (and try to reduce them) - you don't need actuaries to compute the total cost of claims. See if you can figure out why it is the expected and not actual costs.
However, that's just how you get the total payments required to create and maintain a shared-risk pool - you have choices wrt the price paid by different members of the pool. (Actually, it's a shared-cost pool because it's not the incidence odds but the product of the incidence odds and their cost, but I digress.)
Subsidy refers to a class of pricing decisions, namely those that ignore (to some extent) relative costs, so it's neither surprising nor relevant to say that actuaries don't define subsidy. Moreover, actuaries don't determine pricing systems - they merely provide cost-predictions when and where necessary.
For example, you could charge each member their individual predicted claims plus a share of the other costs. This would be risk-based, or rather, expected-cost-based, pricing and is what is traditionally known as "insurance". In this case, actuaries are involved in determining pool-member pricing.
Or, you could charge every member the same amount, namely the total divided by the number of members, even though your actuaries tell you that some members of the pool have higher predicted claims than others. If you do this, the high-expected-cost members of the pool are being subsidized by the low-expected-cost members. This is a subsidy, even though there's still a shared-cost pool. In this case, actuaries have no role in determining a given member's price - they're just needed to determine the expected cost of the whole pool.
Note that high-expected-cost members can save money by leaving a pool that has cost-based pricing for a pool where they'll receive subsidies. However, low-expected-cost members can save money by leaving a pool that requires them to pay subsidies for pool that has cost-based pricing.
In the (artificial) case where all high cost members are identical as are low-cost members, the end result is that everyone ends up paying cost-based prices but they end up in different pools (assuming each pool pays its costs).
>> My risk of having a car accident does not depend on how many people
>> are in "the pool".
>You're failing again to understand the math.
Not at all. You claimed that my risks depended on pool size - they don't. The fact that the variance in total pool claims does depend on pool size doesn't change that fact.
> This is why you can't get insurance if you get sick
Actually, you can. A pool with expected-cost-based pricing makes money on all possible pool members, regardless of expected cost.
However, a pool with subsidies does benefit from avoiding high-expected-cost members.
>There is no real distinction here except for the doublespeak you're introducing in an attempt to somehow differentiate health insurance from any number of insurance services.
I've never tried to differentiate health insurance from other insurance. I'm differentiating different pricing policies for shared-risk pools. Some are insurance while others have internal subsidies.
It's like opting out of vaccinations for fatal/life-threatening diseases. As long as you don't contract that disease, you'll be fine and patting yourself on the back regarding your prudence at avoiding unnecessary vaccinations/mercury/whatever. But you have no way of knowing when and if you will be exposed to the infectious agents of that disease and, in many cases, have little to no control over whether that happens.
Young people generally have fewer health issues than older people. That's great until you discover that you happen to be one of those young people who do have a serious health issue.
Also, you gradually get a little less young with each passing moment and the wake-up call that you need health coverage may end up being a preexisting condition that then won't be covered by many insurers in a private, profit-driven system.
> Yet many young people in no way require the amount of health coverage older people do. Why should they be forced to buy into something they don't need?
Young people in no way require the amount of health coverage older people do, until they do. And the time at which they do is largely unknown---there are probabilities, but it's still a big gamble. And because in practice when they lose the gamble they get caught in a safety net (i.e. the emergency room at the hospital), people that aren't paying in are really just freeloading.
So to answer your question, they aren't. They're being forced to buy into something they do need, but don't admit they need.
(...and maybe can't easily afford, which is also a problem, but a separate discussion.)
I'm Australian, age 29, in excellent health, and living in the US. I currently have quite good health insurance.
However, if I found myself in a situation in the US where I did not have health insurance, I would try to move back home as soon as I could.
To me, it seems laughably risky that anyone would voluntarily not have health insurance. (I realize there are many reasons why people might involuntarily not have insurance.) Illness can happen at any time to otherwise healthy people with no warning, and if that happens you are royally screwed if you don't have insurance.
Someone I know was diagnosed a month or so ago with stage 4 cancer. They had no symptoms, and it was only found by a diagnostic test administered by a cautious doctor. They now need hundreds of thousands of dollars worth of treatment, although fortunately they are insured. You simply have no way of knowing when your luck will turn.
If your startup has 5-6 people, then you will have no problem getting a group health insurance plan in the US. Health insurance is really only a problem for very small pre-funding startups. In practice, it doesn't seem to be that big of a deal. So far, the center of the tech startup universe seems firmly rooted in Silicon Valley and in no danger of moving to France, Canada, Australia, or Cuba, despite universal public health care in each of those countries.
This is a point that gets a lot of rhetorical attention with little substantial evidence to back it up. In practice, if you're not resourceful enough to figure out a way to bridge the 6-12 months or so you need to build your startup to a point where it can provide insurance, then you just plain aren't resourceful enough to be an entrepreneur.
Actuarially speaking, young people just don't get that sick or need that much healthcare. Also, people doing startups tend to be risk-takers and are usually already risking their life savings. So this is really not a barrier.
Perhaps Envato my can help, that's the company behind themeforest, audiojungle and the whole tuts network of sites.
They may be able to provide suggestions, there are an Aussie based startup who are profitable, have experience (been in business for 5 years) and they only sell digital based products and subscriptions.
My co-founder and I were just bitching about that this morning. It's unreasonably difficult to send money to people in the land of capitalism...
Even worse is most of the 'innovation' in the banking sector seems to be pointed at making old systems less painful (e.g. cashing checks via MMS etc.). Why not just eliminate them altogether? Major opportunity for disruption if you can overcome some pretty deep and wide moats.
I'm an Australian but I currently work in New York. From my perspective, a startup in Australia has many hurdles:
1. The cost of living. Seriously, Australia is an incredibly expensive place to live now. I'm from Perth and I'd say that overall it's cheaper for me to live in _Manhattan_ than Perth now. MANHATTAN. Actually, same for same rent-wise, Perth is still cheaper but Manhattan has options Perth doesn't (like saving money by living in a walk-up);
2. Virtually no VC and startup community; and
3. Depending on your industry, you will find very consumer-friendly legislation that is actually a problem for small companies to comply with, particularly in the finance space (and within that space, particularly dispensing anything that could be construed as "financial advice"). The US has gotten worse about this in the last decade with SOX and other reactionary legislation but it's still better.
Put it this way: I don't think something like Mint could ever be done in Australia.
Now Australia's fortunes rise and fall with China's so the boom industries are mining and construction. If you can think of something to sell to these industries, you could make a lot of money. But why do it in Australia? The strong Australian dollar makes it more attractive to do it elsewhere.
Sure health insurance is an issue but you can buy that in the US and even if it's hundreds of dollars a month (IMHO) you're better off overall.
Perth is not Australia - it's not the East Coast.
Perth and WA is comparatively moribund for start-ups, and years behind when it comes to adoption. They still have thick sections of classified advertisements there in the newspapers, and the dominant marketplace is a weekly classifieds newspaper - Quokka.
Meanwhile, as you say, the economy market is overheated with the mining boom.
But there is some great stuff happening in Sydney and Melbourne, and some awesome things happening across in New Zealand. Auckland and Wellington are closer to Sydney than Perth - and a lot more advanced.
I was in Melbourne for 3 months this year and enjoyed it, but it was shockingly expensive. Groceries are 2x the cost of NYC, clothing is 3x. If you drive, fuel is 6x. Housing is about the same. From what I know, Sydney is even more expensive.
If this list is to be believed, all major cities in Australia are more expensive than NYC, which is about the most expensive place in the USA.
As to your first point, I traveled extensively in Australia. To an outsider, Perth is more culturally similar to the rest of the country than Sydney is. :P
This may seem a bit naive, but given how many people complain about banking services in non-US countries, specifically as it related to merchant accounts and SaaS offerings, isn't there a business to be made solving that problem for those people?
Couple issues I can see:
1. Maybe it's that the market is too small, but if you made it easier, I'd bet you'd have more customers.
2. Working within the legal/financial systems in those countries may be too difficult???
It could be an interesting venture, but I think very capital intensive, and extremely risky. Not only do you have widely varying government bureaucracies to navigate in each country, but you also have the credit card companies and banks trying to kill you at every turn. You could build a very promising business and then by killed by legislation at the stroke of a pen because you were out-lobbied by the powers that be.
That's not to say it couldn't be done, but I think you'd want to start with deep connections in at least one country and build a viable business there first before attempting to move to multiple countries.
I was, perhaps, a bit unclear. I was meaning specifically different ventures to operate specifically in one country and offer deep expertise and service in that one country only. The OP was about Australia. I suspect there's some legislation which makes is hard for viable competition to get established, but I can't imagine it's totally impossible. Once a more customer-oriented cc gateway/merchant vendor was operable, it would provide some competition to the established players.
Australia has low self esteem and a 'you'll never make it' attitude which is pervasive. There is little consciousness within employees of the concept of 'equity' which can often be replied with 'I don't work for 'free'' - or even for for 'less'.
It took us 3 months to set our our facility using chargify which was fuct - whatever. But now it works and it is awesome.
I moved to the bay area from Australia for the knowledge hub and to find hackers who are also environmentalists (who seem to be as rare as hens teeth). The amount I have learned technically in a short period of time has been profound.
I can never go back to Australia. It feels like a ball chain has been removed now I am in an environment that cultivates, even reveres nerdy freaks and dreamers.
Nice article, I guess, but overly complex; it really is a very simple set of reasons. Here goes:
1. There is a large startup community in the US
2. Many people interested in startups already went to
the US because of (1)
3. The barrier to moving to the US because of (1) is far
lower than trying to recreate the environment locally
4. This is a strongly self-reinforcing phenomenon
Wash, rinse, repeat. You can say the exact same thing for films and music.
Spoken as an Australian who is likely moving to NYC in the coming months. The startup environment just does not exist in AU. I have the petri dish, I have the bacteria, what I need now is agar, and there is precious little to be found down under.
I'm also an Aussie living in the US and agree wholeheartedly with the title. The article focuses on "tyranny of distance" issues which I agree are a serious pain.
Another problem in Australia is that the entire investment community is focused on sucking on the government teat* and tax minimization. I was involved in meetings with Australian "VCs" that were far more concerned with how they'd write off the loss from their investment than actually delivering a successful product.
* The Australian government has a terrible habit of trying to "pick winners" and invest in projects directly. A classic example of this was a huge fund created in the early 90s to fund "multimedia" development. This probably did more to kill the Australian "multimedia" industry than any other single act.
Also in the mid-80s the government at the time came up with a well-intentioned but retarded idea of encouraging research by offering >100% tax write-offs for R&D expenditure. This is a classic example of paying peanuts and getting monkeys -- most companies simply figured out tricks to reclassify stuff they already did, like photocopying, as R&D.
Suggest all Aussie startups check out http://www.startmate.com.au/ they're doing heaps to build the startup community back in Oz as well as forming strong ties to the US. They've just opened their 2011 intake.
Startmate was a massive help to us at Chorus (http://www.getchorus.com). With their help we launched our product and successfully flipped our company up to the US. Today we're operating out of Mountain View, CA.
Recently I discovered that there is a US work visa specifically for Australians (the E-3). Unlike the H1-B, the E-3 cap of 10,000 per year has never run out. Also, E-3 applications go under less scrutiny and are more likely to be approved and are generally approved quicker. It's worth thinking about if you are an Australian programmer interested in working for a US startup.
From a funding point of view you have more and more angel / super-angel sized investment $$$ coming online all the time. There's also an ever increasing amount of large scale investment into top Aussie startups from leading Valley firms.
This has led to a good number of successful startups and more that continue to be started everyday.
I could keep going on but I won't... :)
The point is, let's not get confused. The post is about a specific issue with being a non-US based startup not about the Aussie startup community as a whole.
Being an Australian startup early on is great because there's a number of programs to get easy cash, including AusIndustry CommercialReady which can get you a CPI-indexed loan for $1-2m.
65 comments
[ 4.3 ms ] story [ 117 ms ] threadWhat's the minimum requirements of setting up a shell Delaware LLC? Surely citizenship wouldn't be one of them.
What stopped me was the need for an American social security number.
To be clear: This is what the Stripe signup required, I can only assume they need it for all the merchant account magic they do.
Thanks for the tip.
http://www.irs.gov/businesses/small/international/article/0,...
Being a European company, just looked at Chargify, and Quickpay is the gateway that looks like it supports all of EU. Going there, it looks like I need an acquirer for my gateway. So you're telling me that I need an acquirer to get the payments, a payment gateway for the credit cards, and Chargify to manage recurring billing?
Kill me now, please. If anyone has an article on EU credit cards basics, please let me know.
Basically, WireCard does the acquisition, payment gateway and provide a merchant account as well, as part of a single pack; which means I "only" subscribe to Recurly + WireCard.
I can acquire money in $ (we will only use $ first) despite being a french company, and my merchant account there will be in €.
Be sure to check out the way Recurly handles VAT too: blog.recurly.com/2010/09/recurly-now-features-vat-support/
Hope this helps!
My Citibank UK account absolutely helped in opening a Citibank US account. I also seem to recall it was quicker and/or cheaper to transfer money internationally between Citibank accounts.
Here's an ebook that might help folks understand the gateway/processor dynamic: http://feefighters.com/ebooks/what-is-credit-card-processing... (written with US audience in mind, but most of it holds true worldwide)
To get a US merchant account, you need a US Tax ID/Bank account (acquirable with Delaware company) AND a US Social Security number for someone who has ownership in the company. Unfortunately that is the minimum that underwriters will accept... AFAIK you need the same stuff with Stripe, Samurai, and Braintree.
One thing to realize is that for us startups serving startups, we would love to do the rest of the world but there are a bunch of complications that come with doing so (timezones, currencies, partners, taxes).
We (http://samurai.feefighters.com) hope to be in Australia in the near future. If interested in Samurai for Europe or Australia, give us your email address here: https://docs.google.com/a/transfs.com/spreadsheet/embeddedfo...
If interested in Canada, use this form: https://docs.google.com/a/transfs.com/spreadsheet/embeddedfo...
As for the beaches, I hope to find out soon :)
Is this really a requirement of the underwriters, or the IRS? I remember looking at an EIN form once and seeing that it required a SSN in order to get an EIN. But of course, someone whose never lived in the USA would not have an SSN.
This would seem to imply that the USA is only open for business to US Citizens. You need an EIN to do anything that might be taxable in america, but you can't get one unless you have an SSN.
we're in the process of getting a merchant account going but it's a long drawn out pain. We're using eWay for the gateway as I've used them in the past and they've been fantastic. The bank, however, is having a hell of a job getting it's head around the idea that we want to sell a service over the internet (we're building a saas product).
last call from the bank was yesterday when they decided they wanted full login and usage rights to our app (so they could verify it?) - kind of hard when it's not built yet. We seem to be in a bit of a chicken/egg situation where we have to actually launch before they'll let us receive payments... Prior to that they wanted revenue history for the last few years! agh!
Luckily we anticipated this taking so long which is why we started the ball rolling months ago.
tl;dr: use eWay
Yes it weighs on the minds of many, but not all. I am all the more willing to pay as you go on my health care but I would prefer to see reasonable coverage for catastrophic care which is what really becomes expensive.
If all the young healthy people opted out, you'd have pools full of old sick people, and rates would be so bad, there wound't be much of a point.
With insurance, you need a large element of people that are essentially paying into the service for no benefit in order to insure the risk. That's the whole idea.
Actually, no. The idea of insurance is that you pay a slight premium over your expected costs in order to avoid getting hit by variance. (The slight premium is to pay transaction costs.)
Healthy people paying for sick people is subsidy, even if you hide the subsidy behind the label "insurance".
Being "older", I'm all for today's young people subsidizing older people. I wonder if the next group of young people will feel like subsidizing the current group when the current group gets old, but that's not my problem.
The concept of "risk" by default means that certain people will never utilize the service. Premium is a factor of the risk analysis, not a transaction fee.
This works very well for concepts like auto or home insurance: most people will - in a given year - never actually crash their cars or destroy their homes. The premium they pay is based on the risk profile of one of these things happening to them, and overall to the pool.
Health insurance is a little different, but the concepts remain the same. The only real difference between a nationally run program and several private programs - assuming a level of administrative competency - is the size of the pool. The larger the pool, the less the risk, the cheaper the average premium.
You can call it dirty words and all, but if you are against the concept of national insurance programs as a principle, you should really evaluate your view of insurance in general, since you're "subsidizing" people who crash their cars, have house fires, pick the wrong banks etc, etc.
As an aside: I'm in Canada. As such you might find it interesting that while I believe the US system isn't using the full potential of the available pool, I believe our system has forgotten a lot of the concepts that sustain the insurance industry by just declaring medical care a "right" despite the costs. Both of our countries would be better served by abandoning ideologies here.
Both insurance and subsidies (as I described them) spread risks over a pool. The difference is in how we charge folks in the pool.
If we charge them by their expected cost, it's insurance. If we charge some people significantly more than their expected cost so we can charge others less, the first group is subsidizing the second.
And no, the fact that I don't have a claim doesn't imply that I'm subsidizing anyone any more than the fact that someone hits the lottery implies that lotteries are a good bet. The relevant question is how my cost of "insurance" compares to my expected claims.
There is value in reducing variance - I'd rather pay $600/year for 10 years instead of paying $5800 one year and nothing for 9 years. And, I'm willing to take the chance that I'd never pay anything to avoid the hit of paying $5800 twice and nothing 8 times. (In this example, I'm paying $200 so I'm not subject to variance.)
However, I'm a lot less willing to pay $600/year if I think that my expected costs are $1k once every 10 years. That's the problem with subsidies disguised as "insurance". The rational response is to try to get out of the pool.
> Premium is a factor of the risk analysis, not a transaction fee.
I didn't refer to insurance premiums, I referred to the fact that maintaining a pool has costs which the payments must cover in addition to the losses.
> The larger the pool, the less the risk, the cheaper the average premium.
That's simply not true. My risk of having a car accident does not depend on how many people are in "the pool". There can be economies of scale in the costs of maintaining the pool, but they have nothing to do with risk.
> if you are against the concept of national insurance programs as a principle, you should really evaluate your view of insurance in general, since you're "subsidizing" people who crash their cars, have house fires, pick the wrong banks etc, etc.
I'm not against insurance. However, subsidies have issues and it is dishonest to claim otherwise and confuse the two.
>If we charge them by their expected cost, it's insurance.
Um, no. Insurance premiums are determined by total cost of claims plus expected inflation plus administration costs. There is no "expected cost". You are making this term up. There is only risk and the premium mathematically calculated to cover said risk. Making these calculations is the entire purpose of a whole profession: http://www.soa.org/about/about-what-is-an-actuary.aspx
>I referred to the fact that maintaining a pool has costs which the payments must cover in addition to the losses.
...which is always significantly less than the losses, since administration fees are usually a percentage of claims.
> My risk of having a car accident does not depend on how many people are in "the pool".
You're failing again to understand the math. The risk of you having a car accident is only part of the equation, the other part is the number of people that are able to absorb said costs. Any artificial group will vary from the mean overall risk, either being better or worse. The larger the pool, the less this variance. This is why you can't get insurance if you get sick: The pool's overall risk is artificially lowered to maintain competitive premiums.
>However, subsidies have issues and it is dishonest to claim otherwise and confuse the two.
There is no real distinction here except for the doublespeak you're introducing in an attempt to somehow differentiate health insurance from any number of insurance services. Actuaries do not define the term subsidy. It's a political creation to confuse and obscure.
I'm not using jargon, but the meaning is both clear and correct.
>There is only risk
and the cost of that risk is the meaning of "expected cost".
However, you did make an error. Premiums don't depend on the total cost of claims, but on the EXPECTED total cost of claims. That's where actuaries come in - they predict claims costs (and try to reduce them) - you don't need actuaries to compute the total cost of claims. See if you can figure out why it is the expected and not actual costs.
However, that's just how you get the total payments required to create and maintain a shared-risk pool - you have choices wrt the price paid by different members of the pool. (Actually, it's a shared-cost pool because it's not the incidence odds but the product of the incidence odds and their cost, but I digress.)
Subsidy refers to a class of pricing decisions, namely those that ignore (to some extent) relative costs, so it's neither surprising nor relevant to say that actuaries don't define subsidy. Moreover, actuaries don't determine pricing systems - they merely provide cost-predictions when and where necessary.
For example, you could charge each member their individual predicted claims plus a share of the other costs. This would be risk-based, or rather, expected-cost-based, pricing and is what is traditionally known as "insurance". In this case, actuaries are involved in determining pool-member pricing.
Or, you could charge every member the same amount, namely the total divided by the number of members, even though your actuaries tell you that some members of the pool have higher predicted claims than others. If you do this, the high-expected-cost members of the pool are being subsidized by the low-expected-cost members. This is a subsidy, even though there's still a shared-cost pool. In this case, actuaries have no role in determining a given member's price - they're just needed to determine the expected cost of the whole pool.
Note that high-expected-cost members can save money by leaving a pool that has cost-based pricing for a pool where they'll receive subsidies. However, low-expected-cost members can save money by leaving a pool that requires them to pay subsidies for pool that has cost-based pricing.
In the (artificial) case where all high cost members are identical as are low-cost members, the end result is that everyone ends up paying cost-based prices but they end up in different pools (assuming each pool pays its costs).
>> My risk of having a car accident does not depend on how many people >> are in "the pool".
>You're failing again to understand the math.
Not at all. You claimed that my risks depended on pool size - they don't. The fact that the variance in total pool claims does depend on pool size doesn't change that fact.
> This is why you can't get insurance if you get sick
Actually, you can. A pool with expected-cost-based pricing makes money on all possible pool members, regardless of expected cost.
However, a pool with subsidies does benefit from avoiding high-expected-cost members.
>There is no real distinction here except for the doublespeak you're introducing in an attempt to somehow differentiate health insurance from any number of insurance services.
I've never tried to differentiate health insurance from other insurance. I'm differentiating different pricing policies for shared-risk pools. Some are insurance while others have internal subsidies.
Young people generally have fewer health issues than older people. That's great until you discover that you happen to be one of those young people who do have a serious health issue.
Also, you gradually get a little less young with each passing moment and the wake-up call that you need health coverage may end up being a preexisting condition that then won't be covered by many insurers in a private, profit-driven system.
Young people in no way require the amount of health coverage older people do, until they do. And the time at which they do is largely unknown---there are probabilities, but it's still a big gamble. And because in practice when they lose the gamble they get caught in a safety net (i.e. the emergency room at the hospital), people that aren't paying in are really just freeloading.
So to answer your question, they aren't. They're being forced to buy into something they do need, but don't admit they need.
(...and maybe can't easily afford, which is also a problem, but a separate discussion.)
To me, it seems laughably risky that anyone would voluntarily not have health insurance. (I realize there are many reasons why people might involuntarily not have insurance.) Illness can happen at any time to otherwise healthy people with no warning, and if that happens you are royally screwed if you don't have insurance.
Someone I know was diagnosed a month or so ago with stage 4 cancer. They had no symptoms, and it was only found by a diagnostic test administered by a cautious doctor. They now need hundreds of thousands of dollars worth of treatment, although fortunately they are insured. You simply have no way of knowing when your luck will turn.
This is a point that gets a lot of rhetorical attention with little substantial evidence to back it up. In practice, if you're not resourceful enough to figure out a way to bridge the 6-12 months or so you need to build your startup to a point where it can provide insurance, then you just plain aren't resourceful enough to be an entrepreneur.
[1] http://www.westpac.com.au/business-banking/international-tra...
Even worse is most of the 'innovation' in the banking sector seems to be pointed at making old systems less painful (e.g. cashing checks via MMS etc.). Why not just eliminate them altogether? Major opportunity for disruption if you can overcome some pretty deep and wide moats.
Conversely I was thinking that Australia needs some sort of integrated Merchant Account/Payment Gateway system company, much like Stripe.
1. The cost of living. Seriously, Australia is an incredibly expensive place to live now. I'm from Perth and I'd say that overall it's cheaper for me to live in _Manhattan_ than Perth now. MANHATTAN. Actually, same for same rent-wise, Perth is still cheaper but Manhattan has options Perth doesn't (like saving money by living in a walk-up);
2. Virtually no VC and startup community; and
3. Depending on your industry, you will find very consumer-friendly legislation that is actually a problem for small companies to comply with, particularly in the finance space (and within that space, particularly dispensing anything that could be construed as "financial advice"). The US has gotten worse about this in the last decade with SOX and other reactionary legislation but it's still better.
Put it this way: I don't think something like Mint could ever be done in Australia.
Now Australia's fortunes rise and fall with China's so the boom industries are mining and construction. If you can think of something to sell to these industries, you could make a lot of money. But why do it in Australia? The strong Australian dollar makes it more attractive to do it elsewhere.
Sure health insurance is an issue but you can buy that in the US and even if it's hundreds of dollars a month (IMHO) you're better off overall.
If this list is to be believed, all major cities in Australia are more expensive than NYC, which is about the most expensive place in the USA.
http://www.citymayors.com/features/cost_survey.html
As to your first point, I traveled extensively in Australia. To an outsider, Perth is more culturally similar to the rest of the country than Sydney is. :P
Couple issues I can see:
1. Maybe it's that the market is too small, but if you made it easier, I'd bet you'd have more customers.
2. Working within the legal/financial systems in those countries may be too difficult???
That's not to say it couldn't be done, but I think you'd want to start with deep connections in at least one country and build a viable business there first before attempting to move to multiple countries.
It took us 3 months to set our our facility using chargify which was fuct - whatever. But now it works and it is awesome.
I moved to the bay area from Australia for the knowledge hub and to find hackers who are also environmentalists (who seem to be as rare as hens teeth). The amount I have learned technically in a short period of time has been profound.
I can never go back to Australia. It feels like a ball chain has been removed now I am in an environment that cultivates, even reveres nerdy freaks and dreamers.
Spoken as an Australian who is likely moving to NYC in the coming months. The startup environment just does not exist in AU. I have the petri dish, I have the bacteria, what I need now is agar, and there is precious little to be found down under.
Another problem in Australia is that the entire investment community is focused on sucking on the government teat* and tax minimization. I was involved in meetings with Australian "VCs" that were far more concerned with how they'd write off the loss from their investment than actually delivering a successful product.
* The Australian government has a terrible habit of trying to "pick winners" and invest in projects directly. A classic example of this was a huge fund created in the early 90s to fund "multimedia" development. This probably did more to kill the Australian "multimedia" industry than any other single act.
Also in the mid-80s the government at the time came up with a well-intentioned but retarded idea of encouraging research by offering >100% tax write-offs for R&D expenditure. This is a classic example of paying peanuts and getting monkeys -- most companies simply figured out tricks to reclassify stuff they already did, like photocopying, as R&D.
Startmate was a massive help to us at Chorus (http://www.getchorus.com). With their help we launched our product and successfully flipped our company up to the US. Today we're operating out of Mountain View, CA.
In the US we build companies to change the world, and we scoff at small ideas.
(from an Aussie who recently made the move to Silicon Valley)
- There is no startup community in Australia - INCORRECT
------
There is a massive amount of community activity for those who care to look for it.
Here are just a few examples
- PushStart - http://www.pushstart.com.au
- StartMate - http://www.startmate.com.au (NB: Alan, the OP, is cofounder of http://www.bugherd.com which went through StartMate's first Sydney program and is doing incredibly well)
- Fishburners - http://www.fishburners.org/
- AngelCube - http://www.angelcube.com
- Startup Weekends (here's the next Melbourne one) - http://melbourne.startupweekend.org/
- Silicon Beach Google Group - http://groups.google.com/group/silicon-beach-australia/
- Sydney Tech Startup Meetup (Open Coffee) - http://www.meetup.com/open-coffee-sydney/
...or just sign up to The Fetch (http://thefetch.org/) or Sydney Startup Digest (http://startupdigest.com/2011/05/24/sydney-startup-events-2/)
From a funding point of view you have more and more angel / super-angel sized investment $$$ coming online all the time. There's also an ever increasing amount of large scale investment into top Aussie startups from leading Valley firms.
This has led to a good number of successful startups and more that continue to be started everyday.
I could keep going on but I won't... :)
The point is, let's not get confused. The post is about a specific issue with being a non-US based startup not about the Aussie startup community as a whole.
When you get big you can use someone like GlobalCollect or Cybersource.