Archivio dell'autore: Alberto

The Edgeryders guide to starting a company based on Estonia’s e-residency scheme

In early 2017 my partners and I founded a new company in Estonia, Edgeryders Osaühing. This has become much easier since the launch of Estonia’s e-residency scheme in 2014. We explained our reasons in a separate post. It took quite a lot of research to figure out how to do it: it makes sense to share it, in the hope that it will help those of you considering the same move.

Preparation

  1. Budget time and effort. In theory, starting a company through the Estonian e-residency scheme is fast and low-effort. In practice, it takes time and effort. You are, after all, dealing with a completely new (to you) legal system.  Estonian professionals are still getting up to speed with e-residency: expect glitches and misunderstandings. For us, doing it was one of those important-not-urgent things. We chose to do it on the side, with low- to no disruption of our day-by-day.  It took us about 8 months to go from decision to foundation, and another two months to get the bank account up. We spent about 1,500 EUR, including one year of assistance but excluding the e-residency charges themselves and one trip to Tallinn.
  2. Take some time to understand the e-residency scheme. It’s a novel concept, and many people misunderstand it. The main things you need to know:
    • e-residency is a government-guaranteed digital identity scheme. Through it, e-residents can access Estonian online services such as company foundation, banking, taxation. They can also sign documents and contracts.
    • e-residency does not give you the right to enter Estonia, or live in it.
    • e-residents do not pay personal income tax in Estonia, but in their country of physical residence.
    • e-residency is quite well documented (starting a company through it, not so much). The official website is a good place to start.
  3. Seek help.  Establishing a legal entity is useless unless you can use it to do actual business. As a foreigner, Estonia’s rules and regulation will look alien to you. Also, any company needs a physical legal address in Estonia, and PO boxes are not allowed.  Here is a list of business service providers you can hire to assist you and provide you with an address. If you are starting a one-man business, our Estonian friends recommend Leapin. Anything else will need an accountant: we are small and simple, but Leapin turned us down saying our needs are too sophisticated for their offer. Our accountant is Witismann and Partners, in Tallinn. They have been very patient and helpful. If you contact them, please mention us.
  4. Beware KYC. The Estonian government is committed to fast, frictionless online services. But Estonia still has international obligations to watch out for money laundering operations. In practice, banks and accountants need you to prove your identity and residency before they can take you on as a customer. This process is called Know Your Customer (KYC). Consequences for you: paperwork, with literal paper implied. This was the single most frustrating part of our experience of incorporating in Estonia.
    • At the time of writing, banks in Estonia insist on a visit to one of their branches in person. This should change, so check back on it. Every person who wants to be a user of online banking needs to visit. Our provisional solution: one of us flew to Tallinn, opened the account and got login credentials for the online banking. This makes us operational. We will add other users later.
    • All partners had to go through KYC with the accountant, but here you can do it in remote. We tried several solutions – all bad, because this is bureaucracy at its most dreadful. The least bad we found is this:
    • Authenticate a (paper) photocopy of your passport at an Estonian embassy (see below).
    • Get a utility bill in English (or Russian or Estonian – good luck with that). If this is not possible, ask your bank to write you a letter in English certifying that you have a personal account there. Make sure it shows your physical address.
    • Send your accountant the authenticated copy of the passport and the original of the bill/bank letter.

Execution

  1. Get e-residency. All partners in the company need to become e-residents. For practical reasons, it’s best to also have anyone you want on the management board to do so. Application is online and very simple, and costs 100 EUR. Once it comes through, every e-resident needs to collect her physical e-residency card in person.  Cards are not mailed, and you are not allowed to send someone else in your place. You can do this either in Tallinn or at Estonian diplomatic representations. This can be an inconvenience, because Estonia is a small country with relatively few embassies around the world (list of Estonian diplomatic missions). If you do not have one of them near, get your KYC obligations out of the way on the same day as you pick up your card.  We recommend you make 2-3 copies of your passport and get them authenticated by them while you are there. In Brussels this service is by appointment, and it costs 30 EUR per copy. Also ask the accountant if they insist on other authenticated documents, then get all the authentications done in one visit.
  2. Install, test and debug the software and the hardware. E-residency cards communicate with your computer via a card reader and some software. You should not expect this to Just Work. Take time to install, test and debug. For all its pathfinding ambitions, the Estonian government is still a government, and so it runs mostly on Windows. Mac users should restart their computers before attempting to do anything with e-residency cards. Linux users should do the same, and also look at these improved installation instructions that @Matthias wrote. The cards come with cheap card readers. In general, these work, but I already had to replace mine. Pro tip: the e-residency help desk is really great and very responsive, via email or phone.
  3. Incorporate. You can do this through the Company registration portal. The way we did it: we set up a Skype meeting with the accountant, and they guided us step-by-step. There are three steps.
    • One person fills a form called a “petition”. This is a request to the government to authorise the establishment of the new company.
    • Each shareholder needs to digitally sign the petition. You can save the process at any time in case one of the partners struggles with the tech. The last partner to sign sends the petition to the relevant authority by pressing a button on the site.
    • Pay a tax (at the moment 190 EUR). If you are working with an Estonian accountant (as you should), they take care of this for you. A few days later the government informs you that your company is now live, and you receive a registry number.
  4. Get a bank account. At the moment, three banks support the e-residency scheme, but more should be added. Before you apply to one of the three, make sure you have a business plan ready. They will ask you questions: how much money do you think you will receive? From which countries? What are your estimates based on? Where is your money going to come from? Your accountant can help you smooth things out. In our case, I think it helped a lot that I sent them a recent profit-and-loss statement downloaded from our cloud accounting platform. We bank with LHV Pank. Our Estonian friends recommend it, because it is the only Estonian bank currently in this game, so it is the fastest to adopt government innovations as they come through. But it seems all banks in Estonia offer very competitive conditions and good service.
  5. Register for VAT. Estonia has very low ceilings for operating without a VAT registration, so you will need to do this soon. Beware: whatever your turnover, you are not allowed to file quarterly returns for VAT. VAT is always monthly. To register:
    • Go to this page of the Tax and Customs Board’s website. Download the PDF form called “Application for registration as a person liable to VAT”.
    • Enter the relevant information, sign the file digitally and e-mail it to the to the TCB (kmkr@emta.ee). Processing takes about a week.
  6. (Optional) change your articles of association. When you incorporate,  the E-Registry portal generates standard articles of association for you. You have no way to customise them. But you can do it later. The procedure is this:
    • Download your own articles of association from the e-Business register. To do that, access your company’s record (for example by searching for it). Then select “Documents in the business file” from the “Choose information” drop-down menu. Then add to cart and pay (2 EUR) to download the files. Two of them are the articles of association, in Estonian (pohikiri) and English.
    • Make the changes you need on the English version.
    • Get the changes translated into Estonian. Articles of association have to be in Estonian, sorry. Save this into a PDF.
    • Log into the Company Registration portal. Choose “Submission of application”. Click on “Changing the data of an enterprise ” and choose the name of your company.
    • In the page that opens, click on the button “Start the petition for an entry regarding alteration”. You are taken to a page where you can later any data of the company. Click on “Alter the articles of association”, then  “Add the articles of association as a file”. Select the PDF you saved from you computer and click on “+Add the articles of association as a file”.
    • At this point you have created a petition, like the one you created for incorporation. Next, shareholder need to digitally sign the petition and send it to the authorities for approval.

Why we are e-moving our company to Estonia: Introducing Edgeryders Osaühing

“We know, the pitch looks better than reality” – says Marten Kaevats. “But we’re working on it.” I look around. They are working on it, all right.

Marten, Henri Laupmaa and I are sharing a meal in Telliskivi Loomelinnak (“Creative City”). It’s a huge Soviet-era former electronics factory in Northern Tallinn. During the boom of the early 2000s, real estate tycoons had planned luxury condos here. When the crisis hit, they rolled out a plan B of making it into a hip-and-cheap creative business hub. Now it’s home to 200 businesses and NGOs: design studios, tech startups, co-working spaces, clubs. It’s airy, colourful in the slanted light of the Nordic spring. It looks hopeful.

Marten is the Estonian government’s Chief Innovation Officer. Henri is one of the country’s foremost fintech entrepreneurs. They both used to be grassroots communities organisers. They showed up to welcome me, and point me in the right directions. I am grateful for their advice and their company. I need it: I have come to Estonia to relocate my company, Edgeryders.

Edgeryders is small, high-tech and global, a typical child of the Internet. We were born as the project of a supranational institution, the Council of Europe. We developed as an online community, with members living in 50 countries. When we built a company on top of that community, the six members of the board were citizens of six different countries. Our first clients were global too: the United Nations Development Programme, UNESCO, the World Bank.

Our loyalties are to Planet Earth, and to each other. From a legal point of view this does not fly: a company has to incorporate in one country (and almost all countries design for traditional companies, and make no provision for businesses like us). In 2013, we chose the United Kingdom. It seemed, and was, a natural choice. It has a great ecosystem of services to business. Government services are well thought through, well documented and online, from HMSC to the Information Commissioner’s Office. The main black spot is banking: expensive, dysfunctional service, ethically dubious banks. But the advantages outweighed the disadvantages.

And then Brexit happened.

This is not the place to discuss the political hows and the whys, nor am I particularly qualified to do it. I want to look at Brexit and post-Brexit from a risk management perspective. There are two kinds of risk here, and both were obvious even before the vote.

Risk number one: becoming a bargaining chip. Over 3 million EU citizens living in the UK were not allowed to vote, or even consulted. They were, in the political jargon of the time, “a bargaining chip”. The UK only cared about nationals. We are not nationals. What if the government decided to play hard and fast with the assets of companies owned by foreign nationals? Freeze our bank accounts, for example? Could we be the next bargaining chip to throw on the negotiation table?

Risk number two: taking collateral damage because of the government’s incompetence. No one knows for sure what the consequences of a hard Brexit will be. What happens to the treaties on double taxation, within Europe or outside? What to VAT on cross-border transactions? What are the consequences of the UK not being a member of WTO anymore (its WTO membership went through the EU’s collective one)? These would be hard questions for anybody. But the British establishment keeps going through “oh, shit” moments. Wait, what about the Irish border? What about Gibraltar? What about funding to research? What happens to trucks queuing up at Calais and Dover in the case of hard Brexit? All this handwaving has not done much to reassure us.

So far, I have given you the rational argument for not being comfortable as a business owned by EU nationals but incorporated in a post-Brexit UK. We also have reasons of the heart: we are not big on nationalism. Nationalisms killed a hundred million people in Europe during World War 2 alone. We believe, instead, in peace, peace and prosperity through trade. Trade is communication: to sell something, you have to put yourself in the shoes of your client, to empathise. This vision is clearest in the project of a united Europe, the more united the better. We feel united in Edgeryders: we hail from every nation in Europe, and many outside it. We enjoy our unity in diversity, and will allow no one to put us against each other.

Our minds and hearts, this time, were in agreement. We have become Brexit refugees. And we need to do what refugees do: move.

We applied to Estonia’s e-residency programme before the vote even happened. We chose Estonia because:

  1. It is in the EU and runs the Euro. We don’t risk losing access to our major market. We are protected against currency turbulence.
  2. It makes explicit provision for location-independent businesses, like us. E-residents are meant to be foreign nationals, or Estonians abroad.
  3. The game theory checks out. Look: Estonia is a tiny country, with only 1.3 million citizens. They aim to have 10 million e-residents by 2025. And that’s the entire country’s business plan right there, because 10 million e-residents translate into 100,000 good jobs in finance, insurance, accounting, real estate. If the e-residents are unhappy, they will go somewhere else, and Estonia can’t afford that. The equilibrium of this game is: they give us good services, and we keep using it, and keep their business plan humming along.

The system is far from perfect. For example, the Republic’s banks and accounting firms are subject to international anti-money laundering regulation, aka “Know Your Customer”. So, the government allows e-residents to incorporate a company from a web page… but then your accountant will ask you for a utility bill as proof of residency. Banks are even firmer: either you show up in person, or no account (regulation is in the pipeline that should solve this). Also, Estonian professionals are still new at this game, and it can be difficult to get information.

But Marten is right: it will get better. Estonia wants to be a “pathfinding” country. Given how small it is, this makes sense in a way that it would not in Germany or the UK. They have plenty of vision (“country as a service”, “zero-legacy policies”, “accounting 3.0”). They have a young, energetic ruling élite. They can do this. We look forward to be part of it.

So, say hi to Edgeryders Osaühing. It is an Estonian private limited company, incorporated as of March 30th 2017. We will be phasing out Edgeryders Limited By Guarantee in the course of the next year.

Reposted from Edgeryders. Photo: Troy David Johnson on flickr.com

Spawning The Reef: re-inventing communal working and living (again)

Reposted from Edgeryders

A few years ago we started paying close attention to care. Ready-to-go, affordable health and social care was – and still is – unavailable. Not for some unknown person in some distant land, either. For friends and family members, people in our communities, right here. Something had to be done.

We see people coming together, stepping into the breach. Communities are taking up the role of care providers, making it work where neither the state nor private business could. They are doing amazing things. Hackers make open sourced, internet-enabled glucose monitors for children with diabetes. Belgian trauma therapists set up mobile studios and drive them to refugee camps in Greece, to help bereaved refugees. Bipolar 1 patients find and help each other fight back suicidal tendencies. Biologists and biohackers are trying to invent a cheap, open source process to make insulin. Activists in America encourage each other to eat healthy food and exercise by doing it together.

We started a research projects to take a good look inside these and many other stories. We wanted to learn what these initiatives have in common, and how we could make more. That project is called OpenCare; it is now in its second year. Results are still coming through, but one thing is already clear:

It’s all about humans.

Community provision of care services needs humans:  more, better prepared, volunteers. People prepared to teach each other skills.  Therapists to help volunteers in need of trauma support. So, the highest-impact technologies are those that help bring people together. Share knowledge. Distribute human resources across different care contexts. These technologies are connectors: they help string together and coordinate human efforts.

This intuition is fundamental. It goes even beyond care. And it makes sense: we are, after all, the 99%. We have little money and power. We have no large companies, fancy foundations, prestigious universities. But we do have each other. We will thrive, if we can collaborate. Collaboration is expensive, and hard to monetise. Any technology that makes it more efficient is going to make a difference.

At Edgeryders, we have resolved to put this lesson into practice. We are doing it by hacking the most fundamental connecting technology of all: the home.

We dream of a new kind of space, that can be the hearth for our families but still be open to the broader world. Where the door is not a gate to keep the wolves out, but a bridge to a global network. Where we can live, and work, and sometimes work with the people we live with, and live with our co-workers. Where people are welcome to stay for one day, or a lifetime. Where spending even just an hour in good heart ensures you will never be a stranger again. Where we can develop our talent, learn new skills, get better at what we do. Where we can create for each other a healthy, friendly, cosmopolitan environment and, yes, take care of each other.

We have dreamt this dream before. In its previous iteration, we called it the unMonastery. We prototyped in 2014, in the Italian city of Matera. That experience taught us much. The most important lesson was this: a life/work space can not be too close to the needs of a single client. Neither can it be dependent on the grant cycle. It needs to be financially self-sustaining, and benefit several projects and lines of business. We also learnt how important it is to be diverse, open and outward-looking for fresh air and fresh ideas to circulate at all times.

But the unMonastery also got many things right. The one I am proudest of is this: we went ahead and tried it. Planning and due diligence are necessary, but trying things out makes for richer learning.

So, we are not going to keep dreaming about a new space. We are trying a second iteration. Right now.

We are calling it The Reef. Coral reefs are structures built by tiny animals, corals. They serve as the home, anchoring point, hiding place, hunting ground to thousands of species. Algae, seaweeds, fish, molluscs all cooperate with, compete with, eat, feed each other. As they do so, they benefit the corals, who gain access to nutrients (reefs exist in nutrient-poor tropical waters).

Like coral reefs, our new space will draw strength in diversity and symbiosis. Different people will bring in different skills, access to different networks, different personalities. And Edgeryders (a social enterprise, so a creature of a different species) will live in symbiosis with the space and the individuals that live in it. It will pay rent, subsidising those who live there; in return, it will be able to use the space for its own purposes: office, coworking space, venue for small events.

And like coral reefs, our new space is going to be an ecology – a network. There are many ways to take part in it. Some people will want to live there full time, others will show up once or twice a month, or a year. Some will use it on building projects with us, and with each other. Others will work on shared learning and professional development. Of course, we already have a network: the Edgeryders online community itself. This will not go away, in fact it will become ever more important. But now The Reef will give it a permanent offline presence. Reef members will be the kernel of the Edgeryders community. Everyone is free to join the kernel or not; everyone is free to play the role she feels most at home with.

We ran the numbers and we are sure we can make it work. We are going to start with a small-scale prototype: a Brussels loft, with four bedrooms, common living area, office, courtyard. Noemi , Nadia and I are going to be full-time residents; one more room will host temporary residents. We are going live on May 1st 2017, and try it out for one year. We are already looking for a (much) larger space to move into in spring 2018 if the experiment goes well.

Are you considering being part of the experiment, or just curious about it? There are three things you can do.

  1. We are planning a side event to OpenVillage Festival dedicated to The Reef. There, we will design the physical space, its financing model, and the activities therein – from business to physical fitness and personal development. It is restricted to members, because this is our future home we are talking about. It’s up to people with skin in the game to make decisions about it. Info here.
  2. We are running our first personal development event in The Reef itself on 26-27 May. We will learn to be better public speakers in the Power Pitch weekend. Info here.
  3. Get in touch! Write, or join our community calls, or come over for coffee.

So: a place-based symbiosis of some inhabitants of the edge, a mutant company, and no book to do it by. It’s not going to be easy. But it has the vibe I was looking for: the excitement of building, and the pleasure of doing it with good, solid people. It is in the sweet spot between ambition and achievability. And I, for one, am going to give it all I’ve got.