What finally pushed us to incorporate abroad

Hi everyone.

What's up?

I'm good, don't even ask.

We're wearing the same hoodies again. If we do two takes we could change them, make it look like it was filmed on different days. That would be nice.

You wear it in the first one, I'll wear it in the next. Or if we wear the same hoodies every episode, no one will ever be able to tell when each one was filmed.

...Actually that makes sense too. But at the end of the day, well, yeah.

Yeah, but then I'd have to keep your beard and my hair at the same length all the time. That might be a bit hard.

Yeah, yeah, but it's manageable, I think we can sort it out with AI or whatever, once all this stuff is over.

Or you could wear a green screen t-shirt and turn it into something different every episode.

We're really setting up quite a production in here, like a Pixar studio, just because we're filming a webinar, filming a podcast. Anyway, let's get into it. How are you doing, by the way, are you good, how's it going? Busy agenda.

Honestly good, we've been working well these last few days. So I'm in good spirits. Looks like it's going to be a good April and May. How about you, how are you feeling?

Honestly, I'm pretty good too. Quite good actually, when you look past current events. But those events inevitably affect everyone, the company, our potential customers, our existing customers, everyone around us. But we're saying it'll sort itself out, God willing.

Sure. Individuals too.

This week's topic is maybe a little connected to current events, or maybe not, but it's something people generally ask us. Hardal, of course, is a tool, a product, but it's also a company. Why did we set this company up in America? Why did the American company we opened have to acquire our Turkey-based company? And how do stock option processes work, what didn't work in Turkey that made us open in America instead? It's actually a pretty broad topic. That's this week's subject, folks. What do you think? Let's start here: why did we feel the need to open a company in America?

...Right. Let me actually take a step back and start with this: why did we take investment? Because that's really one of the points that kicked off this whole process. Once we're taking investment, we figured we should think long term, and that's what led to setting up in America. So I want to touch on that briefly first, if that works for you. Normally, as you'll remember, our goal for a long time after we first launched was to bootstrap. Meaning, to keep going without taking any outside money in any form. Maybe we'll talk about the investment process at length in a separate episode. But afterwards we realised that to reach the point we wanted, we needed to grow our cash pool a bit more. Too much cash going back and forth, were payments made or not, which will tie back into the America topic in a bit. So we said, we need to take at least a minimal amount of investment into this company. Then we went through an investment process and took the investment. But after taking the investment, this issue came up: okay, what are we going to give the people who invested? Are we going to give stock, equity? Something else? How is this deal going to work? And one of the firms we took money from, being foreign, said they had some reservations about investing in a company based in Turkey. But they were at a point of 'it could work'. And the other one, an investor we like, said 'whatever you do, I'll put my money into it.' Then we went into that process. Okay, there's a company in Turkey. And we can open in certain places abroad. We could open in America. We could open in the UK. We could open in Estonia. Or we could keep it in Turkey. Then certain other problems specific to Turkey actually came into play, right? For example, take Stripe.

What were those problems? For example, we hadn't even been able to open a Stripe account. We said we'd start as a SaaS, but we couldn't turn it into something people could actually buy with a credit card. We were issuing invoices. There were refunds, wrong amounts invoiced. Do we charge in dollars? Will they pay in dollars? Will they pay in lira? They ask for an IBAN. And for enterprise companies we simply couldn't do a straightforward buy-now-pay-by-card.

Exactly. Yeah.

That's why having Stripe is basically a must.

Yeah, and we were kind of like, just pay us, however you want to pay. If you want we'll issue an invoice, or you know, just leave the money at Berkay's doorstep at night or whatever. Honestly all of that was fine by us. But...

They'd leave it in a white envelope, right? Coming in by Tofaş, all secretive... a hundred dollars.

Exactly. But then they just drop it and run. So once that happened, we tried a few different systems in Turkey. If I remember right, we tried integrating with a couple of local providers. They were hard to work with, the commission rates were high, and the systems weren't flexible at all, not a simple plug-and-play. It was, no, you'll need to discuss this, do that, and so on. And we started losing a lot of time on it. Because that's really where this comes down to: it turns into that whole SaaS-ification process. You're selling a hundred-dollar product. A product that costs a hundred dollars a month. On one side you've got an endlessly long purchasing process, on top of that an endlessly long legal process, on top of that an endlessly long payment process. For a hundred dollars. A process that could take thirty seconds ends up dragging on, purely because we didn't have products like Stripe available to us, and because, as I said, just linking your card and buying isn't common in Turkey, we found ourselves stuck. And when you multiply that across forty brands, on one side we agree with a brand, and it takes a month and a half just to start working together. Why? Because a hundred-and-ninety-nine-dollar product ends up needing the legal department's contract agreements and whatnot. Related to the payment process, filling out this vendor form, did you fill it out, now enter it into the system, and so on. That was one of the biggest headaches.

The contracts too... the contracts try to get customised, and honestly there's room for that too. It should be a system you can move forward on with a read-and-accept, a project you can kick off with just an 'I've read and agreed to this' rather than it being about money. But then different departments started picking apart every single sentence in the contract. You've said one to ninety days somewhere, what does that mean? To give an example, right down to 'what exactly do you mean by data' and so on.

...Exactly.

People started picking apart a single word like that. I mean, I get it. Even outside enterprise companies, bilateral agreements between companies need this kind of alignment, a mutual understanding, because it's literally called an agreement. But then more effort gets put into it than the product's own added value is worth, because of regulatory issues, because they too might get audited someday and their processes need to be accountable, and so on. And that's actually what gets in the way here.

Come on. I mean... honestly, I think there's also a bit of a side to this. Maybe... it'll end up being a bit of a, well, product too. But some of the law firms these companies work with are, I think, picking those contracts apart just to generate billable work. Let me put it plainly again: what's the actual likelihood of a hundred-dollar product ending up in court? And if it did end up in court, how critical would some clause really be? And then a hundred and fifty more clauses like that come back to us in a contract. My God. Odds are the law firm spent five hours on that contract. Then billed those five hours. Or billed ten hours. It just goes back and forth, back and forth, back and forth. It got so absurd. And this ties into another one of our obstacles in Turkey: e-signatures. One of your favourite topics. Suddenly half of Berkay's Fridays turned into this. Courier deliveries. Exactly. Did you get them, did you send them back? Did your courier arrive? We sent it but where is it? I mean, this...

Couriers and all that. Think about it, you're building a SaaS, and the whole point of SaaS is that it's a concept where people get service self-service, without these kinds of agreements. You set a target, say, I need to reach ten thousand paying users. Great. Now imagine doing that only in Turkey: you're dealing with ten thousand contracts. That means ten thousand signatures, ten thousand courier deliveries. Just organising that alone is a whole separate job. So for this kind of hands-on operational work to be taken out of the picture, the regulation itself would really need to change. But I don't think that's possible right now. Why did PayPal pull out of Turkey, why does the BDDK apply certain limitations to specific banking applications, and so on, both the monetary and regulatory sides of it, I think that's a huge factor, and the legal side too, like you said. So honestly, at the very least, I'm glad these things can be adapted into some kind of automatable format.

Yeah. And there's also this, plainly: say you make a deal with a company in America, are you going to courier two copies of the contract to them and have them send one back? The guy won't even bother. He'll just drop the product.

And shipping paperwork to America is pretty expensive too, I mean, uh...

Three months of our expenses go straight into courier fees, back and forth.

So beyond the cost of it, the document really needs to be in a format you can sign remotely. Say you're not even paying for it, say that's not an issue. It should still be a concept you can sign remotely. But you might have an e-signature and the other side might not. The other side might genuinely want a wet-ink signature. That's a bit...

Sure.

It's an odd situation. It's like there needs to be some kind of hybrid solution, and I think there actually is one. There are hybrid systems, ones that run entirely on e-signatures, and ones where you can print a document that's been e-signed and then put a wet-ink signature on top of it. But, tying back to our topic, none of these systems really have an equivalent in Turkey. If you're a joint-stock company in Turkey, none of this applies to you. It's honestly a bit maddening. Among the reasons for opening the company in America, this is, if not the most critical, then one of the biggest upsides, I think.

Exactly, exactly. So this actually started with that. These were already problems that were bothering me. And once the investment process came on top of it, we went into a search process. Then the whole thing basically turned into: okay, we're definitely setting up a company abroad, where should we set it up? So we talked to someone who'd incorporated in Estonia. We talked to someone who'd incorporated in America. We spoke with various companies and so on. Then, someone we trust, a law firm called Igniters, from there—

That sounded like an ad. Link's in the description, folks. Ten per cent off.

When we spoke to them too, when you compare it, America actually turns out a bit pricier for us. For example, compared to incorporating in Estonia. So incorporating the company, plus acquiring the Turkish company and all the rest of it, ends up costing a bit more. But it seemed like it would be healthier for us, especially in the long run. And that's why we... we actually made that decision.

We can also compare opening in Estonia, or in the UK, or another country, versus America, versus Turkey and other countries. Actually, compared to Turkey, we can even say it comes out much cheaper, because the pricier part isn't just the accounting processes, or the effort spent incorporating, or the fees paid there.

Sure.

It actually ends up cheaper to be a company abroad because of the opportunities you miss out on by being stuck in Turkey. Because here, we haven't been able to benefit from anything up to now, because as a concept, people just don't get it.

Sure. And also... ha, I was going to say that too. I mean... there's also this. To be honest, I don't think we managed this side very well ourselves. You know, get into a Technopark, be in an incubator, KOSGEB, TÜBİTAK, whatever it is... the company I founded, whatever it was... there are actually a lot of these things, the exporters' association and so on. Yeah, I don't know.

There's being in an incubator. Incentive premiums, social security discounts, and so on. We realised way too late. That's exactly what I meant. That's what I meant by people not understanding it.

Yeah. And there's also the effort involved, you know, maybe that's a whole separate episode on its own. We applied to TÜBİTAK, did presentations and everything. These are all topics that take a separate effort of their own. And honestly it doesn't feel very feasible to me. On top of daily operational work, on top of company growth and planning, to also make time for that, even working with consultants, which we did, it takes a serious amount of effort, I think. And at the end of the day we sort of decided: the effort we'd spend to benefit from those advantages wasn't going to take us to the next level, wasn't going to get us where we wanted to go. So the other option made more sense again, when we weighed it up. Because, if you remember, at the end we basically said, let's just drop it, stop all of those processes. Because we can't do it. We said we can't make the time. And then after that, well...

Mm-hmm. It's a separate job, by the way. At other companies there are people whose whole job is chasing exactly these things. Chasing incentive premiums, applying to the exporters' association, saying there's an event on, look, if we can show attendance at these events abroad, this association or that ministry will support it, give an incentive premium. And so on and so on. There's really a lot of it. Look at Turkey... on paper, Turkey offers some really nice opportunities for the startup ecosystem or tech companies. But to actually benefit from those, you'd have to drop everything you're doing, or drop the opportunities outside, and think of yourself as fully focused on Turkey to make use of it here. Which is a bit of an odd position to be in. Why odd? Because the system itself doesn't actually support it. When you offer these services, these benefits, in an environment that's closed off to innovation, none of it pays off. And likewise, PayPal being banned in Turkey, us not being able to open the account we want, there not even being a legal framework to give our employees stock options, things like that. Once I can't do any of that, why would I bother fighting for a whole year to benefit from some service in Turkey, just to get an office in a Technopark for two thousand lira a month?

Yeah,

It ends up being, you'd genuinely have to drop everything and go wander around, you know, Technopark, Technopark.

So, yeah. And honestly we have to be fair about something else too. Even companies aiming to dominate the Turkish market, their very next step, even before they get there, is to expand abroad first. Why? Because it's more stable. I mean, stability in the world right now is debatable, but... okay, even if you want to focus on the Turkish market, if you can't reach the point you want, then it's genuinely worth understanding and learning this ecosystem. No lie, there are plenty of opportunities too. But it ends up like this: every yes you say there pushes you into saying no in a lot of other places, so it's simpler, it's... even the accounting processes in Turkey are a real struggle. We realised that once we moved to America.

By the way, the moment you said accounting, an accounting meeting reminder popped up, I heard the notification sound too, just now. Honestly, it did. So, I mean...

Take that in. Think about it, for example, compare American banking processes with Turkish banking processes. For instance, in Turkey, even though we're not using them, we're paying a printed-statement fee for every single card. And we couldn't get it cancelled.

We're not even part of the process, really. Like, worst case, we didn't get it cancelled, but in America, even though we didn't ask for a limit, because there was investment money coming into the account, a big limit was assigned automatically. The card took about three days to arrive from America, and honestly you're getting a genuinely good experience from that bank. You don't have to worry about it. Whereas here we have all these issues, in mobile banking or wherever, that part you just don't have to worry about there. So which ones do we use? There's Brex, there's Mercury, there's Ziraat Bankası. And I think there's one more, but that's about it. Those are in Turkey, and the ones in America are two.

Exactly. And appearances too. Yeah. Although, isn't it kind of ridiculous, when you compare our credit card limits at Mercury with our limits at Turkish banks, given that a big part of our cash flow, salary payments, money coming in and going out and so on, used to be in Turkey. We're gradually moving it now. I actually did a quick calculation between our Turkish credit card limits and our American ones.

Mm-hmm. Mm-hmm.

Turns out it's seven times as much.

And the limits when we first opened were much lower, so I understand the banks' policy side of it, a brand-new company shouldn't get whatever limit it wants, there are limit policies and so on. But in America there's also this concept where they can lower your limit if needed, whereas there's no such thing as lowering a limit with Turkish banks. So it's both rigid, and honestly the issue here isn't just the bank limits themselves. The real issue is that we're able to run every process without ever really dealing with the bank. That's actually what being a company in America gets us. In Turkey, whether you're a joint-stock company or an authorised signatory of the company, it doesn't matter, at every step you run into some legal snag. Getting even the smallest document means, no, you have to get that from a branch, you have to get that from somewhere else, you both have to log into internet banking at the same time, these weird rules and so on. While you're getting an SMS, I have to be doing something else at that exact moment, and so on.

Yeah. Exactly. Think about it at the most basic level, man. Me, Barış, I'm a partner in a company. And I can't access the company's credit cards. Why? Because when the company cards were opened, they were opened in this weird, grouped way. One was assigned to you, one was assigned to me. I...

You had this one small thing, like a burner phone, and only through that could I get the messages.

Yeah, exactly, man. I'm trying to get an SMS on it. I'm calling you saying you're about to get a text and stuff. It was completely insane, ugh.

An ext-... you know... something else happens with other banks by the way. You open your own account individually. You never go to a branch. You just verify your ID and it's done. That exists at Turkish banks too now, but let me get to my point. In terms of the technical processes, whatever we do to actually receive a service from that company or that country, or whatever steps we take to offer a service, not being pulled into any bureaucratic matters is a huge freedom. Whether it's between companies, between a person and a company, or between a company and a country, at no step did we get caught up in any bureaucratic obstacle, or a process that ought to be bureaucratic. Because everything is planned, programmed. Even the minimum price you need to pay for a share is actually clearly defined.

Yeah.

But when you ask how much you need to set up a company in Turkey, there's no official source at all. You look around a bunch of places online, MemurlarNet says one thing, DonanımHaber says another. Someone writes, my accountant opened it for this much back in whatever year. Nothing is clear here at all. That's why it's, you know...

Man, even with... For example, if you remember, we couldn't even be sure about the capital increase for our Turkish company.

Yeah, we went back and forth on whether to do it or not.

Our accountant gives us one piece of guidance. Who said what? To get something done. Our lawyer says something else. We talk to another accountant we know, they say something else. We ask other business owners, they all say something different. Half say we did it, half say we didn't. Half say if you don't do it you'll get fined. The other half say do it in three years, don't bother. Now... even just that creates a mental block. That's honestly what we've been trying to say from the start. Are these hard problems? No. Are they unsolvable? Of course not, they're not that either. Every single one has a solution. If you sat down and listed everything we've talked about so far, you could knock them all out one by one. But all of it takes up space in your head. I think that's what wears a person out the most. Things being a bit more relaxed over there made us happy, honestly. Every topic we've talked about takes a workload off our shoulders, so we kind of feel, yeah man, this was the right call, that's where we're at.

Honestly, I'm quite happy with it too. We'll see. We haven't run into any problems so far, but I don't think whatever problems we do run into will be as exhausting. If you want, we can pause here. Let's say we'll see you in the next episode. Anything you want to add before we close?

Yeah. No, honestly, thank you, I really got into it towards the end, it was a good conversation.

Yeah, it was good. In essence, in terms of the topic, we built a product, we built a SaaS. It grew, it grew fast. We went through investment rounds and at some point we needed to move the company out of Turkey. Actually, we were forced to. As a result of that, we tried to talk about both the benefits and the advantages, and the disadvantages too. There weren't many disadvantages, but... is it the right call or not? We'll see. To be clear, we're not saying everyone should go incorporate abroad. We're not exactly enthusiasts of that. Leaving our homeland and our nation behind... if I put some music on here... I'd die for Turkey with a single blue-bead charm. Let me put that in here, let the sound play in the background.

Yeah. It's not. Or maybe a year from now there's a new episode: why we moved back to Turkey, we shut down the American company, and so on.

Walking alone down the streets of San Francisco, right, we've ended up homeless or whatever. Why did we go bust, and so on. But in short, I think this is genuinely one of the biggest problems people looking to take their first startup step actually run into. Where should we incorporate the company, that question. We sometimes see people incorporating out of Estonia.

Exactly.

Electronically, to take advantage of e-Residency, there are people incorporating out of other countries, things like that. Where we chose to incorporate was America. It has its advantages. There are certain points to it. Let's say we tried to touch on those. See you in another episode then. See you. Take care. Bye bye.

Take care of yourself.