Types of Startup Companies in California

This video discusses the types of startup businesses that Profitwise Accounting has worked with. Watch to learn!

What are the Different Kinds of Startups in California?

Below is the transcript of the video:

What did you call that initial session?

It’s called the initial strategy session. The whole idea is to be proactive and I feel like a mini education sales tax, use tax going through and looking into the business and performing a mini audit. Our clients privy to a lot of things that they need to know. The problem is a lot of people would go to a tax advisor and just get tax return done, so they miss out on all the consulting elements and a lot of CPA related setup for the services, because maybe they are just focused on the tax returns. They’re not really geared toward being an advisor to small business owners. So that’s one of the points that separate us.

The overall majority of our new clients are startups. And we typically define a startup as someone that’s been in business for less than 2 years.

Oh, okay! I was thinking of a startup as they’re not even in business yet but they want to start.

Yeah. We call those pre-startups.

Okay!

So actually they fall on to four different categories. The first example is, let’s just say, it’s one person and they want to start a new business. And they’re selling beer mugs on amazon, for example, as a brand new business. He sells the product called the “man mug”. So it’s a beer mug he sells on amazon, and he targets frat houses, beer connoisseurs. So like this aluminum mug that keeps your beer cold. This is kind of an example. He has a full-time job and he does this on the side. He sells primarily on amazon. The business is called seven-after-nine. Manmug.com is his website. He’s just kind of boot-strapping it just to get everything going. They’ve already been operational for about a year. So now it’s the 2nd year. It’s kind of a slow-go when you’re doing something like that. So that’s one type of startup.

Let’s just characterize that. So that is a part-time person. Solopreneur. He’s been in business for a little while and he’s in a kind of early growth phase.

The next example would be a bencher back startup. So this client, the website is mantelmount.com. They’re primarily e-commerce as well. One of the founders develop this way to kind of hang your flat screen TV above your fireplace, and so you can pull your TV off the wall and twist it around. There’s a lot of people that have their TV mounted on the fireplace, kind of hard to view it right. This kind of has a swing arm that you can take out and they’ve done it very well. This situation of 3 partners coming together in the investor, a couple of investors, and then the inventor hired a CEO to run the company. They hired us to handle the accounting and the taxes. That would be the second type of company and they’re hitting the road faster, because they have some investment behind them. I think their product is a little bit more unique too.

A third example would be a biotech client. They have private funding but they’ve raised 10 million dollars. We have another one that’s a bencher back company and they’ve raised like 20 million.

When you describe a biotech company, can you just characterize what that is a little more?

It’s a company that does cancer research. Manufacturing part. They develop intellectual property and then they make a deal with like a large pharmaceutical company. Pharmaceutical company manufactures that. IPO. They’re kind of rare and a little bit stressful when they’re that big.

When you say big and it’s stressful, what’s big and why would it be stressful?

The size of the company. They’d do 8 million dollars a year in expense and they have some proper revenues here, but they’re C Corp it got stock options plan and there’s just a lot of different complexities in the business. Kind of the nature of what they’re doing. It’s not that bad but still you get into more technical areas. Just making sure they’re doing proper compliance. Stock options is probably a big part of that. Making sure they’re done correctly. They have a cap table updated. When they have big numbers, they provide you with all these information. You know so…

Yeah. So there’s more things going on and they’re a large company for sure.

So when you say more stressful, what that really means is that there’s more money involved and there’s more at stake, and it’s much more complex.

Yeah.

Why did you describe them as a startup?

Basically, they came to us as a startup. We started working with them. They were brand new. They had some investment. We started with them from day 1. So I think they’re near 3 now but they were a startup.

Another one might be somebody I could employ that’s out there working for somebody and they think they can do a better rights to go and turn around.

They all think they can do it better.

Yeah. Exactly.

We had a client who used to work for Stone Brewing and he went off and started his own brewery. He was a marketing guy for Stone. He went and got a million dollars of investment and started his own brewery. Now he’s doing really well.

Interesting.

That’s kind of not a typical thing. Typical might be somebody who’s a salesperson for somebody right. And have some sort of services, and then they go off and do the same thing. And they can kind of have a book of business running quickly. Those are usually use your ones right or somebody who’s already been in the business before and they just start shutting down old company. Maybe it was a partnership gone bad. Maybe they’re starting a new business on around with someone else. Again, it can get up and running quickly right because there’s a track record. Some of the ones that are more tough are the people who start from zero, and maybe they’re brand new in the industry and they don’t have a lot of money. So it’s going to be a slow go.

What would you say in general are the specific challenges that startups have as against other types of companies?

 

 

 

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