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Startups: Legal, Pricing, and Marketing Issues

This post is a recap of what I have learned in the Global Founders’ Skills Accelerator I am participating in with my startup, NarwhalEDU ( over the last week. I am writing this up in the hopes that it will be useful to other new startup founders as a reference point. Some things are only relevant if you are open sourcing, if you have more than one founder, and other caveats of being the experience of a single person in a single company at this accelerator.

Founder’s Agreement and Equity Split:
Determined by factors such as replaceability of founder (e.g. technical knowhow), how much a founder is investing in the company monetarily, basically a really fluid of trying to determine how much a founder contributes to the company over time.
Vesting schedule — so that the equity / shares are earned over time, in case one founder decides to leave. Recommend 3 years, although investors will push for 4 years
1 year cliff — in case a founder leaves early on, their shares do not vest

C Corp vs LLC
C Corp in Delaware — recommended because that is what investors expect
vs. LLC — for tax purposes, can offset business losses against personal income for tax gains, but investors will not accept it if you ever take outside investment (so more suitable for lifestyle businesses, e.g. never plan on taking outside investment, not really aiming for exponential growth, longer-term are all used as criteria but I think the main one is not planning on taking outside investment.)
It is much easier to go from LLC to C Corp (about 5k costs) than the other way around

We’ve gotten quotes ranging from $2000 to $5000 for the standard incorporation and founder’s agreement and a set of template documents. There is an additional 250-500 in filing fees. e.g. if you do a Delaware C Corp every year there is $500 in fees to have a registered agent there.

Some firms offer this, some offer “flexibility” and haven’t started using the term package yet. But basically, firms will offer anywhere from full deferment of fees until you are “successful” (e.g. have raised a major round, are making over a million in sales, etc.) to 50/50 split (so pay 50% upfront, keeping you honest about controlling your spending) to a flat fee. So in a sense you are pitching to the law firms that offer packages.

How it works
What tends to happen is you will interview with the super expensive lawyer (ranging from $250 – $800+), then depending on your company you will get a team of 2 to 3 people: a junior associate (in the $500 range) and paralegals / secretaries (in the ~$100-300 range). These people charge less per hour and so the law firm tends to pitch this as being cost efficient.

Why a lawyer when there is
We asked one lawyer this question. She said that lawyers can provide business and legal advice, especially after working with startups for over a decade. When there is more than one founder, make sure that everything is agreed to properly. In general, it seems to be the thing to do at the accelerator so we are running with it, although I suspect there is a bias towards “startup” and not “lifestyle business” that a legalzoom LLC might be appropriate for.

Why incorporate so soon?
Put your IP into a company instead of into individual hands, and then can decide to open source it or license it however you want. Prevents one founder from forming their own competing company. (?? still a bit confused as to how this applies to open source hardware).

Open Sourcing and EdTech The end conclusion is to NOT use a creative commons noncommercial use only license.

After incorporating, have to put some money into business to make it an actual business. Within 30 days, need to fill out 83B form.

Often engineers go for cost-based pricing. Not the best idea. Consider instead the amount of value provided to the customer and getting an appropriate fraction of that. In particular, I have heard that in software the most money comes from subscription-based models. This is because the customer does not know the full value of the software initially and actually gains a lot of value over time, and the subscription model captures more of this value than an upfront pricing model.

Pricing! Okay, let’s go into how to do pricing surveys. In an ideal world, you do randomized questions with at least 30 responses each.
DO NOT ask the customer “how much would you pay for this product: $100, $150, $200?” because that is not how we make decisions in real-life — this feels like bartering, so the customer’s answers will be influenced by their bartering. Instead, randomly present them with one choice and ask them a simple yes/no.

To do this, I used qualtrics software, a trial version.

Then, to get survey responses, I used facebook.

The going rate seems to be about $1 per survey answer.
I put the max bid at 50c per click.
Click through rate: ~1%, e.g. if 1000 people see your ad, ten people will click through. Of that, maybe 2 people will actually answer the survey (that would be pretty ideal).

I had this 1 dollar/answer my first and second days but on the current day (day 3) it seems to have shot up to almost 3 dollars per answer ;__; hopefully the next few days will even this out, or perhaps weekends are just better for people clicking through and deciding to actually answer the survey.

This is called the “taxi meter” effect, something you have to beware of in pricing, that the customer is not constantly focused on whether they are getting the value they paid for out of your product (e.g. if you priced weekly or monthly instead of yearly).

Pick up the phone and call!
Have the whole company focused on the same metric — something everyone can work towards. e.g. number of sales
Always be helpful, e.g. even if you are not immediately knowledgeable on a topic, you can answer forum posts / emails with a bit of google searching.
Should be more time than money initially, as you do labor-intensive one-on-one direct sales.
Personalization of emails is important (e.g. with their name) (for mailing lists, use mailchimp)
Other recommended software: HARO, grasshoper, Highrise CRM, google analytics, mailchimp
Testimonials are important! If they are above the fold, can lead to 10-15% increase in conversions.
Start a blog right away! Short posts just to get over the hurdle of getting started. Basically free marketing by establishing yourself as an expert right away.

There’s lots more, but I think that’s a good amount of information for one post. Please feel free to contact me or leave a comment if you have any questions.

Oh! One thing — if you’re affiliated with MIT, sign up for the MIT Venturing Mentoring Service. They will offer free legal advice sessions (make sure to sign up for the mailing list) and a whole host of other benefits (e.g. matching you up with mentors and you set the schedule as to when you meet).

trip to nyc / adafruit industries / founder of hackaday!

trip to nyc / visit adafruit industries / meet founder of hackaday and talk to ladyada herself!
with charles guan and cynthia lu and hanna lin

10 am: depart
2 pm: arrive

left to right: charles, cynthia, and hanna
arrive in CHINA wait sorry flushing district of New York City

look what we found in chinatown! an AVR manual IN CHINESE. @___@
and a MasterCAM X book. This was at the WJ bookstore
we ate at Taste of Shanghai on prince street. delicciousss
Cynthia sketches ladyada chibi! Ladyada was super happy about this when she got it.
this picture from Charles! Not mine!
We arrive!
The magical workings of adafruit heavy metal industries. Err. Adafruit industries.
$150k+ pick and place machine! IT IS SO SHINY. Apparently it is or is a relative of the ones Samsung uses to manufacture phones, and that this is something Foxconn / Apple would never do, sell you the machines that make machines at a conference
Assembly station! At adafruit industries they do it by product and not as a procedural task with multiple people per product. The guy is Philip Torrone, founder of hackaday and editor at large at MAKE magazine while he works with adafruit on everything awesome.
The ladyada shrine πŸ™‚
Hydraulic wooden arm spotted! d’aww
And finally, on the air on ask-an-engineer! We are sitting in the background, as Charles is the main guest (we sort of surprise showed up). Left: Phil; Middle: Ladyada; Right: Charles
The episode is archived at and

Phil and Ladyada were amazingly open about everything we could ever possibly want to know. I learned that:

  • adafruit industries took on no outside investment and was entirely bootstrapped
  • it started in just one apartment, then two apartments, and finally they moved to a warehouse
  • their first pick ‘n place was picked because it was the only one that fit through their apartment door, and was $35k. they are now donating this to nycresistor with the condition that no questions come their way about how to use it or anything
  • after 8 years, they are at 50 employees, 1/3 in shipping, and at 10-15 million dollars in revenue and they are tripling every year. 
  • They wrote their barcode/shipping software in python and ship ~1000 packages a day. The software notifies the buyer and charges their credit card when items ship 
  • In fact, they are the largest shipper in lower Manhattan.
  • they grew specifically so that ladyada could do all the engineering, and it sounds like they have a few consultants from around the world that help with the engineering but ladyada essentially solo beasts all the products (it sounded like)
  • they chose to keep all manufacturing in house instead of outsourced
  • they used a black and decker IR oven, equipped with arduino, for reflow for a long time. In the new space, with the real reflow oven and new pick ‘n place, they are finally able to keep up with demand
  • Their latest video show has 3 year-olds making lemon batteries o____O Each 2-3 minute video takes over 80 hours to produce. Phil is the one manipulating the giant plushie LEDs / figures under the table
  • they are thinking about adding translations to, hopefully crowdsourced, as there is a lot of demand from germany, japan, china, and italy
  • gets about 11 million visits (either daily or monthly) after 8 years of relentless quality documentation
  • the new move from docuwiki to their own system has cut down documentation time by about a third
  • but each tutorial still takes anywhere from 6 hours to 2 days
  • Their PCB stencils are done by hand. They found that people can do it better when trained and get over 99% yield, such that they almost think they don’t need an optical checker
  • Testing rigs for circuitboards! Ladyada actually designs products with testing in mind
  • They worked with companies like Eagle to make girl scout/boy scout-esque badges, and Eagle was very happy about it
  • They helped Jay Silver with MakeyMakey, who really just needed encouragement that a market exists
  • Ladyada did not market ressearch nor business plan. She believed in the product strongly enough that she created a market / demand for it. Execute.
  • ladyada reminisced about her time at MITERS and how it used to very much by Tim Anderson’s shop, and also about her Bridgeport mill which is still in active use at MITERS

ALSO. I GOT A 555 PLUSHIE. d’awwwww it is an octopod ^__^ heart cousin of hexapods

And a final note on fail.

I wanted to draw ladyada’s face with our robot arm but sadly we were not at a stage to make a recognizable drawing and I think ladyada was just like, WTF. ;__; SORRY LADYADA one day we will draw better faces with our el cheapo 9g miniservos and then give you a portrait. we probably should have stuck to the adafruit logo or something.

edge detected from the WIRED magazine cover
draw out… yea… it does not resemble ladyada at all x___x

Ah well. So it goes, so it goes.

That’s all for tonight folks! Getting ready to teach Intro to Robot Arms, class #2, in a few hours (for MIT HSSP. Let me know if you all have any questions.

Oh, an easy one — I don’t know how this came about. I think Charles emailed Ladyada saying he would be in NYC and wanted to visit, and he was then invited as a guest onto the show. He was going to by in NYC for a mikuvan trip including us, so we tagged along to visit adafruit industries. All quite strange and befuddling.

Hunt for cheap steppers cont’d: VID teardown, datasheets

Steppers I mentioned in previous post came within a few days! They’re not as small as I’d thought, but they are very flat. I bought them off of amazon by searching for “stepper motor gauge”:
6 Stepper Motor Chevy AVALANCHE V8 5.3 8.1 2003-2006 Gauge Cluster Speedo Speedometer x6
$16.5 for 6, or $2.75 each.

The inscription says VID29-02P.

Well, I decided to take one apart.

They’re geared steppers and you can see the end stop (top right) that prevents the gear from rotating and this stepper from being continuous. It has 315deg of travel according to the datasheet.

If you take it apart, you see that the four leads of the stepper go to the four poles of two coils of wire, switching the electromagnet on and off.
That’s all there is to it!

Time to find a datasheet.
Here is one for a similar one, the MR series:
which is where I get my guess of VID’s “Angle of rotation of motor with internal stop” as equal to 315 degrees from.

Here’s a note of the rather obscure manufacturers:
For instance, in our case:

Hong Kong based VID also manufacture a range of similar motors. Their motors are black, and have a black model number starting with β€œvid”.

Well, anyway.
I also decided to buy (off of ebay) some less strangely shaped and hopefully easier to couple to stepper motors. They turn out to be cheaper too!

[x] img src, ebay iawoo
28BYJ-48 – 5V Stepper Motor Datasheet
“New 1pc 5V 4-phase 5-wire Stepper Motor Gear Motor 28BYJ-48”
$8.72 for 4, or $2.18 each.

Those should get here in two weeks. It’s nice to just order fun things ahead of time and feel like I am getting good deals.

That’s all for now.

References “Quick Start for Beginners to Drive a Stepper Motor”

MIT summer housing research

$160/week for a single (one person, one room)
$140/week for a walk-though single (one person, one room)*
$120/week per person for a double (two people, one room)

 * A walk-through single is a room that is accessed by walking through someone else’s room, or that someone must walk through to get to her room.

-> 12 weeks = $2160 to $1680
Single 2171
Double 1910

It will cost $722 or $622 per month, depending on the room. You do not need to rent for all three months.
$1866 to $2166 for 3 months


These approximate prices are for the entire summer and include food. πŸ™‚
Quad: $1050 
x2 = 2100, except pika has a waiting list and probably only I can get in, not my friend (not from MIT)…?
Triple: $1200
Double: $1450
x2 = $2900, again kind of risky
Single: $1800

rough it out: free
TAing @ $16/hr, 20hr/wk, Jun10-Aug10 = 61 days not including end date (9 weeks) = $2880. Eek. Haha. Time to start selling things on etsy or something…
Possibly factors: novelty (not stay in same place again)
I’ve been spending this week mostly on applications and looking for funding. In one way, mathematically, this is a good idea — spend a bit of time to get thousands of dollars versus work all summer to get the same amount of money. However, I am wary that I’m spending too much time on this — time is money too.
Alternative ways to make money: finish persistence of vision yoyo and sell some. This would happen at the end of May. Con: takes up precious time, again.

Update 4/18/13: Got on the pika waitlist, so… time to look for other options
EC undergrad housing, 2171/summer, May 28 – August 11 (75 days).
~870/month (30 days)

MIT Guest housing, $38.50 per night,
$1154/30 days

x12 weeks, 120/wk, $1440 (480/month)
x2 people, $2880

Frat housing
Looks like about $1700 each for the summer for a double. $1350 ea. if we are okay living in a quadruple.

braindump, 3D Printing Research (from a year ago)

Last summer (while I was an intern at fitbit) I did a bit of research on 3d printers while considering getting a solidoodle, so this is about year-old information


Hi all,
(following is a long post, I decided to finally educate myself about 3d printers)

The 2 nozzle machines do not allow for support structure for complex parts.

In case anyone is interested, I consulted my awesome friend (who recently sourced 3d printers for a new shop space) about the resolution issue.

It turns out that resolution in the Z direction is less than in the XY directions so that can be used to differentiate printers. However, it seems that to some extent the limit nowadays on hobby machines is in software, not hardware, for z-axis resolution. In fact, usually (all?) professional 3d printers have to use steppers in the end, so they get similar resolution to hobby machines. Solidoodle and Makerbot Replicator can go down to 0.1mm (3.94 mils). I am uncertain but since this is comparable to listed professional layer heights, the main difference may be speed and lack of support material for overhangs and such.

The main difference between commercial (usu. 10k to 200k) and hobbyist machines(<$10k): one is designing for reals and 3d printing it, the other is design for the 3d printed cools and 3d print it. Partly resolution, partly speed, mainly “the problem with low-cost hobby printers for really professional apps is that they do not do support material.”

=======Technical Discussion (see below for background info)===============
From my friend Charles Guan on support materials:

Not even the [Makerbot] replicator right now does built-in support material, nor Ultimaker

or Solidoodle. If they really want something that they don’t have to think

about designing specifically around the shortcomings for, and especially for

protyping consumer product enclosures or internal assemblies, I think a

commercial machine is worth it [versus hobbyist printer]. Ultimately even $40,000 Stratasys printers are

stepper-driven and get the “same” resolutions.

On the topic of different professional printers,

If they want *sheer resolution* you still can’t beat classic stereolithography
(SLA) processes. Zcorp has the advantage of infinity colors, however. Depends
on if they want prototypes to be structural or not – zcorp prints won’t be able
to act as enclosures or test cases, etc. but SLA plastic generally can. Modern
SLA machines all use DLP to do a whole layer at a time so they can be very
fast. Downside of SLA is the open bucket of light-sensitive goo they use (which
tends to be really expensive, except for this new place which seems to be producing low-cost
variants, though not sure if a commercial printer would like that)

Otherwise, a hybrid of the two is Objet which we have on our
list of stuff to get. They essentially do UV-cured resin, similar to SLA, but
in a dry form (depositing only what’s needed). Both have much, much better rez
than FDM/extrusion. Can’t think of the numbers off the top of my head though.

On the topic of resolution (what resolution do you need for professional products?):

Depends on what you want… hair is usually 3 mil (.003). 0.01 is a tad rough,
you would see it very clearly. The makerbot Replicator is 0.27mm (0.0068) by
default. For professional product proto’ing I would try to find at least 5 mil
or greater. SLA (stereolithography) and Objets can hit this easily, I think. I have a “beast mode”
setting on the replicator which is 0.5mm (about 19 mil) layers if i am building
something square that just needs fast.

============Background Info====================
Okay, that was hard for me to digest and summarize because I didn’t have the background knowledge, which I present here.

First person pronouns
Industrial 3D printer manufacturers:
(manfuacturer name – printer name – technology used)

Hobbyist 3d printers manufacturers of note: (all FDM process)

  • reprap-based machines (tend to be finicky to setup and use),
  • Makerbot
    • (gen 1 cupcake, finicky and poor mechanical design,
    • gen 2 replicator, better designed and support for two nozzle head for multicolored prints)
  • Ultimaker – super light moving head for fast printing
  • Solidoodle
  • a whole host of others, including cake printer (candyfab), chocolate, rice krispy printer…

SLA, DLP, FDM — terms I’d heard before but didn’t know in detail:

(abbreviation, full term, summary, base materials, manufacturer)

  • FDM – Fused Deposition Modeling – Poop out lines of heated material that then solidifies (“molten polymer deposition”) – thermoplastics and eutectics – Stratasys
  • SLS – Selective Laser Sintering – Dump layer of powder, use laser to fuse parts to keep, repeat (“granular materials binding”) – thermoplastics, metal powders, ceramic powders – EOS
  • SLA – Stereolithography – photopolymerization to produce a solid part from a liquid – photopolymers – Objet
  • DLP – Digital Light Processing – photopolymers – Object
  • Z-corp – Powder bed and inkjet head 3d printing – deposit lines of liquid glue on powder, deposit layer of powder,  repeat – Plaster, colored plaster – Z-corp (exclusive)

Full[er] Explanations


A plastic filament or metal wire is unwound from a coil and supplies material to an extrusion nozzle which can turn the flow on and off. The nozzle is heated to melt the material and can be moved in both horizontal and vertical directions by a numerically controlled mechanism, directly controlled by a computer-aided manufacturing (CAM) software package. The model or part is produced by extruding small beads of thermoplastic material to form layers as the material hardens immediately after extrusion from the nozzle. Stepper motors or servo motors are typically employed to move the extrusion head. If required, support structures are automatically generated. The machine dispenses two materials – one for the model and one for a disposable support structure. The materials are deposited in layers as fine as 0.04 mm (0.0016″) thick,


Selective laser sintering (SLS) is an additive manufacturing technique that uses a high power laser (for example, a carbon dioxide laser) to fuse small particles of plastic, metal (direct metal laser sintering), ceramic, or glass powders into a mass that has a desired 3-dimensional shape. The laser selectively fuses powdered material by scanning cross-sections generated from a 3-D digital description of the part (for example from a CAD file or scan data) on the surface of a powder bed. After each cross-section is scanned, the powder bed is lowered by one layer thickness, a new layer of material is applied on top, and the process is repeated until the part is completed.  Unlike some other additive manufacturing processes, such as stereolithography (SLA) and fused deposition modeling(FDM), SLS does not require support structures due to the fact that the part being constructed is surrounded by unsintered powder at all times.
According to, one machine, “EOSINT p390. The layer thickness of this machine is0.15mm.” (5.9 mils)


Stereolithography is an additive manufacturing process which employs a vat of liquid ultraviolet curable photopolymer “resin” and an ultraviolet laser to build parts’ layers one at a time. For each layer, the laser beam traces a cross-section of the part pattern on the surface of the liquid resin. Exposure to the ultraviolet laser light cures and solidifies the pattern traced on the resin and joins it to the layer below. After being built, parts are immersed in a chemical bath in order to be cleaned of excess resin and are subsequently cured in an ultraviolet oven. After the pattern has been traced, the SLA’s elevator platform descends by a distance equal to the thickness of a single layer, typically 0.05 mm to 0.15 mm (0.002″ to 0.006″). Then, a resin-filled blade sweeps across the cross section of the part, re-coating it with fresh material
Stereolithography requires the use of supporting structures which serve to attach the part to the elevator platform, prevent deflection due to gravity and hold the cross sections in place so that they resist lateral pressure from the re-coater blade. Supports are generated automatically during the preparation of 3D Computer Aided Design models for use on the stereolithography machine, although they may be manipulated manually. Supports must be removed from the finished product manually, unlike in other, less costly, rapid prototyping technologies.


In digital light processing (DLP), a vat of liquid polymer is exposed to light from a DLP projector under safelight conditions. The exposed liquid polymer hardens. The build plate then moves down in small increments and the liquid polymer is again exposed to light. The process repeats until the model is built. The liquid polymer is then drained from the vat, leaving the solid model. The Objet PolyJet system uses an inkjet printer to spray photopolymer materials in ultra-thin layers (16 micron) layer by layer onto a build tray until the part is completed. Each photopolymer layer is cured by UV light immediately after it is jetted, producing fully cured models that can be handled and used immediately, without post-curing. The gel-like support material, which is designed to support complicated geometries, is removed by hand and water jetting. Also suitable for elastomers.

Powder bed and inkjet head 3d printing  

An inkjet-like printing head moves across a bed of powder, selectively depositing a liquid binding material in the shape of the section. A fresh layer of powder is spread across the top of the model, and the process is repeated. When the model is complete, unbound powder is automatically removed. [For some definition of automatic.. usual requires manual post-processing aka making a giant mess]

Random dump from class notes:
typical feature size — 10 mils. state of art — 1 mils. (lowe resolution than can machine parts). Slow! — hours to print small objects. complex — days.   
real point of 3d printers: nested parts and overhang — cannot do in mold [molding and casting procdess]. but need supporting material.
stratasys — water soluble primer
inkjet acrylic droplets — print with wax
dimension 3d printers — has two heads. raster structural and then support material and then next layer. temperatuer of chamber — below fusion temp and much higher than plastic flow so plastic sticks to itself.
have crypto on material cartridges — drm on plastic (can use cheap plastic otherwise). 10k mac shop [yea I don’t remember what this means] — fine but materials are appallingly expensive. Applies to any vendor.
tektronix phaser — inkjet photocurable acrylic. melt wax away to get part and then play with solvents to get wax completely out. fairly fast process b/c heads running in parallel and global uv flash. very nice finish / resolution for same reason.
dimesnion — little fdms — 10 to 40k. big ones, 100k.
InVision — 100k, and $100 for tiny part due to mats.

color 3d printers —
zcorp — everyone dislikes, because? they have powder bed (plaster), spreads layer of powder. straight inkjey heads from hp spreads binder. then powder, then binder. don’t need support material (use unused powder), and add color just in binder.
but disliked because binder does not bind very well. when done printing, try to separate bound from unbound, and sort of bound powder, and everywhere covered. post process to convince to really stick (infuse / dip in wax) together. color but no structure / surface finish. in theory just as fine as invision with droplet size, but due to messiness does not come close.

laser sintering — instead of binder, use laser to print. works with metal powder. issues: machines are alarmingly expensive (few hundred thousand dollars) and metal compacting is not very good.
metal 3d printing — force in metal (injection mold) and squish it. cost does not justify quality.  

Hobbyist FDM resolution

Best of all Sam Cervantes, the founder of Solidoodleβ€”who clarified some of the technical points on their website following our postβ€”helpfully contacted us to illuminate some of the murkier points of 3D printing resolution. As Sam explains:
… Typically the Solidoodleβ€”and the MakerBot, from my understandingβ€”print layers every 0.3mm (11.8 mils). At Solidoodle we’ve printed as low as 0.1mm (3.94 mils),

Now let’s talk about the resolution in the horizontal (X-Y) plane. The Solidoodle is capable of repeatedly positioning its printhead to within 0.011mm (0.433 mils) … but I did see that they [Makerbot] use 1/16th (62.5 mils) microstepping on their motors.

However, you can see how it’s a little superfluous to say that the resolution in the vertical (Z) direction is 0.3mm and the resolution in the X-Y (horizontal) direction is 0.011mm

… it’s important to remember that the printhead is extruding plastic through a 0.35mm (13.8 mils) nozzle. It’s important to remember that ABS plastic oozes and expands a bit when it comes out of the nozzle . Even though the motor on the automatic sprinkler may be capable of positioning the water nozzle to within millimeters, in the end the water is going to going to spray out of the big nozzle over a wide area in a somewhat random manner.