Today’s article is another guest post from Patrick Lockton, who recently showed you how to raise seed capital when you don’t know any investors. Some of you will naturally be concerned with tax and legal issues as you work, live, and play in different countries, which is where his expertise comes in. Everything that follows is from Patrick–

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“The first thing we do, let’s kill all the lawyers.”

– King Henry VI, William Shakespeare

Let’s face it, lawyers are the butt of a lot of jokes and the truth is that it’s probably not all undeserved. Many true things are said in jest – there are serious truths and concerns for mobile entrepreneurs at the root of many of these jokes.  Lawyers are an expensive necessity and they’re not getting any cheaper.  Even in these tough times, law firm’s profits are soaring and hourly-billing rates are still going up even while the economy is going down.

The key issue is how can a mobile entrepreneur avoid extortionate legal costs when lawyers are so important your mobile business? Here are a list of ways you can minimize your legal expenses responsibly.

1.  Don’t try to avoid lawyers completely. Law is a highly complex minefield and your business should be protected by having the right agreements, contracts and structure.  Ignore lawyers at your own peril; it will cost you a lot more in the long run.

2.  Pick your battles. Avoid disputes with customers and clients from getting out of hand. If there isn’t a huge amount of money at stake and all you have to do is swallow some pride to avoid a costly legal battle, then swallow your pride.  It’s much more palatable than being dragged in to a legal fight just because there is a principle at stake – it is just too expensive and stressful.

3.  Always Negotiate Legal Fees. Here are a few tips that can make negotiating legal fees easier for mobile entrepreneurs – knowledge is power.

• Get a fixed fee quote. Lawyers bill per hour which encourages them to take as long as possible over the work you give them.  Always negotiate this fixed fee quote and promise them further business.
• Ask for the hourly billing rates of the lawyers working for you. There is no transparent pricing in the legal industry and there is therefore less competition for hourly rates so make sure you know everyone’s hourly rates before making a decision.
• Shop around. It sounds obvious but many people don’t.  I met one mobile entrepreneur who never used the same law firm more than once.  He promised each firm he used repeat business, got a discounted rate then used the same technique with another firm next time.
• Ask the law firm you are dealing with whether their lawyers have billing targets and what they are. Every lawyer at a law firm has to reach massive personal billing targets which can be as high as 2,000 hours per year. This encourages lawyers to make up or exaggerate their time recording in order to keep their bosses happy.  If you are feeling brave, ask them how they ensure these targets don’t encourage dishonest time recording.  It might focus their minds a bit.
• Get a lawyer you know to negotiate your legal fees with law firms. Your lawyer friend could save you hundreds by just picking up the phone and negotiating on your behalf.  Knowledge and experience is power.
• Use small niche law firms – bigger is not always better. The bigger the law firm, the bigger the amounts of money that are wasted on pay, expenses and plush offices and then passed onto you, the client. Go for smaller firms with modest offices and lower overheads.

Although amounts and proportions vary, my years working at big law firms have taught me that, as a general rule of thumb, if your lawyer is billing you $400 US dollars per hour:

a) $100 of it is going to the partners’ huge salaries;

b) $100 goes towards paying the junior lawyers working on your matter and the often lazy and inefficient staff who take sick days like it’s going out of fashion;

c) $200 pays for the plush offices, Christmas and the other parties, taking out other clients to expensive lunches, buying masses and masses of paper (think a small forest), expensive IT, professional indemnity insurance and other expenses.

A colleague of mine once told me that a lawyer they used to work with used to expense his haircuts, daily Starbucks coffees and his client lunches at some of the ritziest restaurants in the city. His expenses ran to at least $4,500 a month and he wasn’t even a partner.  Why should anyone, let alone an entrepreneur just starting out, have to pick up the bill for that? You don’t. Go for a small niche legal practice over a bigger firm.

4.  Use alternatives to lawyers, such as accountants, that are cheaper but provide the same quality of service. For instance, you are living abroad and earning income in the US – where and how do you file your taxes? When it comes to completing your taxes, use an accountant instead of a tax lawyer.  They are a lot cheaper and do the same job.  There are also alternatives to law firms, like my company, that have cut away all their overheads and provide high quality lawyers to entrepreneurs for a fraction of the cost.

5.  Try local and new law firms that need your business. There are an increasing number of lawyers opening up small practices because of the dire job market.  A new local firm is more likely to want your repeat business than a big law firm with established large corporate clients.  You can find new firms by calling and asking the Bar Association or Law Society of the jurisdiction you need advice in.

6.  Put an ad up and hire a temp lawyer for a few days to work directly for you. There are a lot of very good out-of-work, part time or retired lawyers who are looking for part time work out there.  If you take them on as a temp for a few days, they can probably do most of what you need done for as little as $50 an hour.

7.  Do some of the work yourself. Don’t bother taking legal advice on the various business entities you can use for your business. Just ask your accountant about the most tax efficient way of running your business. Most businesses start off as a sole trader and then transfer the business into a company when it becomes appropriate and tax effective to do so.

• Use incorporation agents. If you need to set up a company, use incorporation agents because they are quick, reliable and affordable. They will make all the necessary checks, complete the required forms you need to incorporate your company and advice you on your responsibilities and filings.
• Don’t worry about trademark issues at an early stage, just focus on running your business. Unless there is a significant amount of goodwill attached to your brand, it can wait till you are more established. Some well established law firms I have worked with have not registered their trademarks. Goodwill is usually vested in the entrepreneur, not the brand or trademark.
• Take responsibility for your corporate secretary duties and buy a good corporate secretary handbook for future reference. If you are going to manage corporate secretarial issues, you should be aware of your duties so you don’t miss filing deadlines etc. It is not a cheap book, but it will save you a lot in legal fees and answer all your questions. Law firms themselves use them and they are very easy to understand.

8.  Find a lawyer you like, let them get to know your business and if you like them, stick to them. The better they know you and your business, the more likely it is they will be able to help you quickly, effectively and affordably.

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Patrick Lockton is a lawyer for digital nomads and entrepreneurs whose Matrix Law Group practices what they call Law 2.0—a flexible, on-demand, virtual legal practice—an alternative to big law firms that’s rooted in notions of mobility, technology and efficiency.

Read the original article on Thrilling Heroics here: How Mobile Entrepreneurs Can Avoid the Monopoly of Waste in the Legal Industry

Patrick Lockton is a lawyer for digital nomads and entrepreneurs whose Matrix Law Group practices what they call Law 2.0—a flexible, on-demand, virtual legal practice—an alternative to big law firms that’s rooted in notions of mobility, technology and efficiency. One of the questions clients have for him most frequently is ‘How do I raise seed capital if I don’t know any investors?’

I know there are several of you who will one day seek funding for your own big business venture, so I thought it would be of great value to get some of his expert knowledge about the early-stage and legal aspects of forming a business here (hopefully with more to come soon). Everything that follows is from Patrick–

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Long gone are the days of pitching investors with hot new ideas and having money thrown at you. Entrepreneurs are now much more likely to dive into their own pockets and battle hard to start up and stay alive. But if you don’t have the cash and need money to pay for the development of, for instance, costly new software and a complex website, what do you do?

Luckily, there are still options for funding, but finding and securing the cash will take time, research, good negotiating skills, and, above all, a strong commitment to your new business.

There is no easy, one-size-fits-all formula, but I have developed a short checklist that I use when meeting digital nomads and entrepreneurs.  It has taken me years to put together, but it seems to work every time.  It is designed to spark ideas and inspire confidence.  Some of the items may seem obvious and some obscure, but if you start at the beginning and work your way through, you will stumble upon something that can make all the difference.

1. Do you need as much as you think?

This seems obvious but you can build a small business without a huge amount of funding these days.  Sometimes entrepreneurs think they need more money than they actually do.  You can structure the development of a business so that you start small and build it up with the income your business earns.  This is a good way of ensuring you don’t waste money and develop strong foundations before you invest more money.

Angel Investor Howard Greenstein, a Social Media Strategist and President of the Harbrooke Group, remarked in a recent interview:

“Build something (anything), put it in the hands of customers and get some traction before raising money. Any hardware/software/whatever startup can do this thanks to lean startup and customer development techniques and the decreasing costs of doing everything.”

One of my clients was starting up his own brokerage firm.  He wanted to spend money on an expensive office, logos and branding, PR and sophisticated IT system when all he needed was a website, an online trading account, an internet connection, a laptop and his client’s confidence.  His overheads were so low that he had more money and time to invest in getting clients and the long-term development of the business.  His business has become a huge success.

2. Borrow from people, not banks, credit cards or yourself

Don’t cash in your investments or pension, don’t use credit cards and avoid banks at all costs.

Even a very well run startup involves risk.  You always hear success stories about entrepreneurs who max out credit cards, take out second mortgages and borrow from their retirement funds and then go on to become millionaires. The truth is that a lot of people who take great risks lose everything. You can start with a simple loan.

Try the obvious and easiest options first—approach family and friends with an investment opportunity

This doesn’t mean asking mom and dad.  This means tapping into personal ties to raise cash for a business that’s either too new or too small to get financing elsewhere.

Your personal network is a lot wider than you think.  A few emails and calls, using Facebook and LinkedIn can elicit a startling amount of interest.  A few tips on how to do this based on clients’ experience:

• Approach the issue with calm confidence, don’t appear desperate. You have to inspire confidence in your business’s biggest asset—you.
• Offer an investment opportunity, don’t ask for a loan.
• You should still follow professional standards in structuring and documenting loans or equity arrangements. Get a good affordable lawyer who specializes in working for entrepreneurs to do this for you quickly and cheaply.
• Give investors letters acknowledging their investments.
• Pay out attractive interest—say, 1% a month on a $10,000 investment. In setting an interest rate, consider how much money you are saving by borrowing from friends rather than a financial institution.
• Include a clause that allows investors to get their money back at any time. All they have to do is let you know and you will pay them instantly.

Try P2P Lending

Try the following P2P (Peer-to-Peer) online lending communities that are mostly made up of open-minded entrepreneurs.

• Zopa (UK only): where you can borrow between £1 and £15,000 from people.
• Prosper: USA’s largest peer-to-peer lending marketplace.
• The Lending Club:  offers some of the most competitive rates.
• First Funding: allows you to choose a lender from an online community of business angels.

Tips on getting a line of credit for your start-up ASAP:

• Get a good accountant to help you tell your story in numbers.
• Avoid conducting meetings with lenders at their offices. Try somewhere neutral.
• Do a team presentation, involving people you know  who will excel at them.
• Maintain, or clean up, your credit rating.
• Offer some collateral.
• Cut or eliminate your salary (i.e., don’t look for a loan to pay yourself).

3. Apply to Angel Investors, Mentorship and Seed Capital Programs

Angel Investors

Angel investors will want to have a lot of input into the way your business is run but they will share their money and knowledge. Think about this carefully; it is not free money.  If you raise money, it’s difficult  or impossible to take a small exit from your business, or run it as a cash business. This can be a godsend for many entrepreneurs, but I don’t often recommend this to mobile entrepreneurs because their lifestyles aren’t negotiable and can often rub Angel Investors the wrong way.

To find an Angel Investor, try:

• Angel List or
• Record yourself and upload your pitch to the investment community on My Pitch. Be precise, professional, use reliable accounting to tell the story as much as possible and focus on the figures.

Mentorship and Seed Capital programs

These typically include teaching, coaching, seed capital and introductions to investors.  So, if you’re a first-time entrepreneur and have little experience, money or contacts, these programs offer a good opportunity.  My top picks include:

Y Combinator: The Rolls Royce of mentorship programs.  They pay your expenses while you’re getting started and make small investments (rarely more than $20,000) in return for small stakes in your company (usually 2-10%). Entrepreneurs must move to the Silicon Valley area to participate in a three month program. These guys have funded over 200 startups, including Loopt, Reddit, Wufoo, Scribd, Disqus, Dropbox, Justin.tv and Posterous.

TechStars: TechStars is a similar three-month program offered once per year in four different cities: Boulder, Boston, New York and Seattle.  Startups receive up to $18,000 in seed funding for a 6% equity stake, intensive mentorship and the chance to pitch to investors at the end of the program.

Other Programs.  Below are some of the other good mentorship programs:

• Founder Institute – all over the US, Singapore, Paris, Brussels and Berlin.
• Capital Factory – Austin, TX
• LaunchBox Digital – Durham, NC
• SeedCamp – London (and mini-events throughout Europe)
• Launchpad LA – Los Angeles, CA
• DreamIt Ventures – Philadelphia, PA

4. Look into Government and Microfinance Programs

• Contact the National Institute of Standards and Technology, a government agency that awards millions of dollars annually through its Advanced Technology Program.
• Kiva, the Opportunity Fund and Grameen Bank now support US businesses and have always lent money to entrepreneurs around the world.
• In addition, last year’s economic stimulus bill granted $54 million to the Small Business Administration for lending and technical assistance to microlenders.

5. Ask your lawyer, accountant and clients

If you don’t have any personal investor connections, ask your lawyer, accountant or one of your actual or potential clients if they do. If you don’t have a lawyer or accountant or client, contact me and I will see if I can put you in touch with someone.

6. Look for a business partner

Rather than borrowing, perhaps you can get a partner who can inject some cash, new ideas and contacts into the business.  You may not have much money, but if it is your idea and hard work driving the business forward they might be happy to stump up the cash.

7. Last, but certainly not least—learn to be a schmoozer

If you’re looking for seed capital, but don’t know any investors, you need to learn how to schmooze and build relationships.

Learning to schmooze means getting out there and starting to meet the right people, and knowing how to get their trust and attention.  It is not going to be easy but this is not necessarily a bad thing. One of the reasons so many companies went bust during the dot com bubble was that financing was too easy to get. Getting seed capital is a good testing ground for your business idea.

The goal is to get introductions to investors, i.e. an introductory phone call or email from a middleman whom the investor trusts and respects.

It takes time and patience to build relationships and trust, this does not happen over night, so don’t get impatient.

Jeff Bezos, founder and CEO of Amazon.com, met with about 60 private investors over a six-month period in early 1995:

“I talked to all the people I knew who I thought could afford to invest $50,000 …. Ultimately that $1 million was raised, $50,000 at a time.”

A year later, venture capitalists began to line up outside Bezos’ door.

Read the original article on Thrilling Heroics here: How to Raise Seed Capital When You Don’t Know Any Investors

This is a guest post by Colin Wright. Colin is a designer and blogger currently based in Buenos Aires, Argentina. You can find him on Twitter at @colinismyname and at Exile Lifestyle, where he blogs about lifestyle design and his travels.

I’m a rebel. Be afraid.

I tagged buildings in college. I ran off a handful of Sunday School teachers back in my middle school days. I wrote controversial columns for my high school newspaper that almost got me expelled and I’ve pirated more than a few MP3s in my day.

To most people who know me, though, I’m a straight-laced kind of guy. Definitely not a rabble-rouser. I may have different ideas about things, but I’m no in-your-face revolutionary. And that’s exactly the kind of reputation to I want to have.

Because you know what? I have done things (and intend to continue doing things) that make people uncomfortable, yet still I insist upon keeping a clean image and a sterling reputation.

I make it a point to obey the law most of the time.

Why? Because if I ever find myself on the wrong side of a situation, it’s much more likely that I’ll get out of it without too much trouble. Not only that, but in general society does a pretty good job at keeping things oiled and running smoothly. There are problems, sure, but the vast majority of everyday people, places and things don’t need my help to do their job because they’re doing just fine on their own; if it’s not broke, don’t fix it.

Many people I know who have revolutionary ideas don’t abide by this rule, unfortunately. They find something to rebel about and then keep on screaming at the top of their lungs (sometimes metaphorically, sometimes literally) for things to change. Once you’ve demanded one change, it’s easy to find little problems with anything, which leads to more demands, more yelling, more—let’s be honest—really annoying revolutionaries.

This is a serious problem for people with good ideas everywhere, because in all honesty, most people couldn’t care less about someone else’s ideas or complaints. To them, someone else screaming ‘Viva revolution!’ is the same as the neighbor’s dog barking or a baby crying or a garbage truck driving by at 6am…just more noise pollution to be tolerated until it can be ignored.

By exercising restraint, however, you are able to make it clear that when you speak up, what you are speaking up about is important.

If you, the clean-cut, helpful, friendly, cheerful boy/girl next door are taking action and instigating change, well, then something must really be wrong! Just make sure that something really is wrong, though, because you can only cry wolf once or twice before people start treating you as if you’ve been screaming your head off all along.

Then, of course, there are all the benefits of actually being a respectable part of society in general. Just be a good person and surround yourself with good people and you’ll have a good life. Help old ladies cross the street and hold doors for people. Be polite. Be honest. There’s no need for an ‘us versus them’ mentality for most things in life. Compete with yourself and not others and work on your confidence level. Obey the damn law.

Do these things, and your ability to influence change by drastic action will not be watered down by years of complaining and acting out. You’ll be more than ready to unleash the beast, should you really need to, and make tsunami-sized waves any time you speak up.

Read the original article on Thrilling Heroics here: Obey the Law Most of the Time