Startup

Developing as a Contractor in Belgium

My experience

As a software developer, I have been freelancing since 2010. Before that I was an employee for a consulting firm for 5 years. And one of the things that pushed me over the edge was when I found the invoice my employer had sent to the company I was consulting for at the time in the office printer. It said they “sold” me for 650€ per day, 13000€ or more per month. Given the fact that my net salary was 2500€ per month, and even if you factor in all the taxes and social charges and all the other benefits, that was still quite a huge gap. And in addition to that, I was not free to buy the car I wanted or the laptop I needed. When I needed vacation, I needed to factor in the “loss” for my employer. And when I wanted to attend a conference somewhere, I had to ask for permission. And I’m not even mentioning all the things I had to agree with (company pension plan, eco-cheques, etc.) that had simply no value whatsoever to me, but I was forced to take them because they were fiscally interesting for my employer.

For all those reasons, after talking with other freelancers to carefully evaluate the risks and constraints of having my own management company, it appeared obvious that it was the smart move given my experience. And the thing is I’m not the only one to make the same calculation. I know plenty of senior developers who have quit the rat race, stopped being an employee and taken matters into their own hands. Sure it’s a lot of administrative pain, with the accounting and all. Sure every letter you receive from the SPF Finance (tax services) makes a shiver run down your spine. Sure it’s stressful to have to find your own customers, deal with contracts, plan ahead for your periods of inactivity, negotiate your rate for each contract… but that is nothing compared to the incredible freedom you get. Being able to choose your customers and projects depending on how much you need to work. Being able to choose how you pay yourself, how you train yourself, the tools you work with. All of that is really satisfying.

The ecosystem

That being said, when you are a freelance developer, there are 3 big kinds of customers in Belgium (and I guess in a lot of other areas):

  • The big corporations, banks and public institutions (European Parliament and Commission) usually have framework contracts and Preferred Supplier Lists with big consulting consortiums and firms that force you to go through intermediaries who take a 15 to 30% cut on all your invoices, no matter how long the contract is, and often for very little added value other than access to those customers.
  • The small companies are the most flexible and you can usually work with them directly, but they are the hardest ones to find and you have to negotiate a lot with them.
  • And then there are the startups. When you are in the ecosystem, they are quite easy to find, you can also work without intermediaries, the projects are by far the most interesting ones, and you get to work in really cool teams. But that’s where the funding is often the most fragile (“no I can’t pay my bills with shares in your non-funded startup”)

The fears

Recently though, I noticed a really disturbing trend with startups refusing to work with freelancers, mainly for a few reasons:

  • Most are afraid that a freelance developer will be less “involved” in the success of the company
  • Some even fear that a freelance developer will combine several customers in parallel and thus will devote less energy to them than an employee, as if freelance meant part-time
  • I recently heard companies being afraid that freelancers would have a harder time integrating into their team
  • And I’m sure some really look at the cost and think a freelancer costs more than an employee

The reality

It’s hard to know where these fears come from, but let me bring some counter-arguments to those.

First of all, when you are a freelancer, your very ability to find work and the best work depends solely on your reputation. You can’t hide behind the reputation of a consulting company or the manipulation skills of your business manager. It’s just you and your awesome work. If you leave a customer on wrong terms, if your work is not impeccable, and if your involvement is not up to par with your customer’s expectation, no employment code, no firing cost, no prior notice is there to protect you. If you don’t show dedication, you will get fired, fast, and your reputation will suffer, making it harder for you to find a new mission in the future, especially in the startup world where everybody talks with everybody.

Second of all, most freelance developers I know hate switching between projects at the same time. It’s very inefficient and frustrating, so most of us prefer working for months or even years for one customer at a time.

As for integration time, it is of course completely the opposite: when you have to change project on a regular basis, you have to get comfortable finding your place very quickly in a new team. Practice makes perfect.

Last but not least, about the cost issue, most companies, especially the smallest ones for which economies of scale are really small, only consider the salary cost. They don’t factor in the management cost of dealing with social secretariat, car leasing companies, medical insurance companies, training companies, buying and maintaining your own hardware inventory and so on. In my experience, unless you are a big company and you can make big economies of scale on these management costs because you have a lot of employees, there is little to no difference in terms of cost between an employee and a freelancer. In addition to that, you also have to factor in the cost of firing an employee with a lot of seniority, or keeping him around despite your non-satisfaction with his work because of this cost.

The benefits

But more importantly, I see plenty of companies neglecting the benefits of working with freelance developers.

  1. By definition, they have to manage their own company, find their own customers, negotiate their own contracts, so entrepreneurship is at the heart of everything they do. They understand what it means to manage a business, and they don’t expect to be told what to do: they take initiatives and think creatively.
  2. They come with an all-inclusive package: no need to worry about company cars, vacations, insurances, gear renewal costs or training. All of that is taken care of by the freelancer himself.
  3. If you are not happy with their work, or your budget constraints change, or simply your needs evolve, you can stop the contract very easily. Agreed, it’s the same on the freelancer’s side, so you’d better offer him the best working conditions possible to keep him around, but that shouldn’t be an issue, should it? ;-)
  4. Given the importance of their reputation and the desirability of their profile, most freelancers train on all the latest trends can bring some really cutting-edge tech to your company.
  5. A key asset for any freelancer is his professional network. So he knows a lot of developers, which can be incredibly powerful when you raise a new round of funding and need to grow your team quickly.

In addition to all those reasons, considering the fact that most experienced developers have already made the switch, if you don’t want to work with freelancers, you cut yourself from an important crowd of some of the best developers around. And don’t expect to bring freelancers back into an employee status: given how much it costs to kill a company in Belgium, and all the freedoms he would have to give up, I know very few freelancers who would come back to being an employee. It’s simply not worth it.

The future

As a futurologist, I also feel the need to mention the fact that in my opinion, the employee status as a norm and default situation is fading away. More and more people are realizing that they need to adapt to a changing work environment at an ever accelerating rate. You need to train for new skills, acquire new knowledge. The very notion of career is being questioned and revisited more and more regularly. And in some industries, software development included, it’s not uncommon to work for companies anywhere in the world, from anywhere in the world. This trend is pushing more and more people to be independent workers, and even though governments and administrations are once again incredibly late in adapting to it, it doesn’t prevent us (even though it makes it incredibly painful sometimes) from doing it. It’ simply the sense of history, and it’s always frustrating to see so many awesome companies resist it, especially when they are supposed to be at the forefront of innovation.

Let’s talk about it

Given all that, I would love to hear more about the reasons why employers, and especially startup founders and managers don’t want to work with freelancers. I’m sure there are plenty of myths to be busted in there, and I’d be really happy to help. Also, if you are a freelance developer, and would like to share some interesting experience to share, let’s get the debate started in the comments of this post.

By Sébastien, ago

You Have the Right to Buy some Shares… Soon!

calculatorIn my latest article, I mentioned stock options as one of the interesting perks in working for a startup. But the truth is that it is not really easy to understand as an investment instrument, and you can easily find a lot of resources how stock options work from the employer standpoint, and not that much from the beneficiary’s point of view. In addition, there are different mechanisms in different countries, with different tax systems, and it’s very difficult to understand. So let me try to explain stock options in Belgium. First of all, let’s talk about shares. When you create a company, it must have a starting capital, a certain sum of money in the bank to let you invest to start your activity. Typically, this starting capital is the only value in the company, so it also corresponds to its valuation. In Belgium, the legal amount to start a limited liability company (SPRL) is 18600€. This so-called social capital is represented by a certain number of shares, that are attributed to the founders, usually proportionally to their contribution to the initial capital. So let’s say John and Marc create the SuperCorp company with an initial social capital of 20000 euros, represented by 100000 shares. Each of them, brings 10000 euros to the table, so each of them gets 50000 shares. The value of each share is set to 20000/100000=0,2€. As the company grows, works and develops its business, its valuation increases. There is value created in knowledge, intellectual property, various assets that it may develop or acquire, and more importantly all the perspectives that it offers for the future thanks to the work that John, Marc and their employees do for SuperCorp. This created value is not financial yet. But if John or Marc decides to sell some of their shares to someone else, they will take into account the estimated current valuation of their company. Let’s say John and Marc estimate that all the work they put in is worth 80000 euros after a year, so that means the company’s estimated valuation is 20000+80000=100000 euros. So each share is now valued at 1 euro. It is all virtual until someone is willing to buy some shares for that price. Let’s say Simon comes in and proposes to buy 20% of the company at the current estimated value. One way to do this transaction is to transfer some of the shares of the founders to the new buyer. So for example, Marc and John could sell 20% of their shares to Simon, and we would end up with the following capitalization table:

  • John: 40000 shares, 40% of the company, worth 40000 euros
  • Marc: 40000 shares, 40% of the company, worth 40000 euros
  • Simon: 20000 shares, 20% of the company, worth 20000 euros

Here, the total number of shares doesn’t change, John and Marc each have less shares in the company, but each share is now valued at 5 times its initial value. The problem with that mechanism is that the company doesn’t get any money in that operation. John and Marc personally sold 10000 shares each and they received 10000€ each in the process. So basically Simon just bought a right to ownership of a part of SuperCorp, but won’t participate in its investment. Let’s say Simon is an investor, and his goal is to buy some shares of the company in exchange for some financial capital for the company, in the hopes that SuperCorp will use this new financial capital to increase its valuation even further and allow Simon to sell his shares with a premium sometime down the road. One way to do this is to create new shares of the company instead of selling existing ones. If John and Marc create 25000 new shares and sell those to Simon, he will own 20% of the social capital, which is estimated at a value of 20000 euros. So we will end up with the following capital table:

  • John: 50000 shares, 40% of the company, worth 40000 euros
  • Marc: 50000 shares, 40% of the company, worth 40000 euros
  • Simon: 25000 shares, 20% of the company, worth 20000 euros

The results of this operation are the following:

  • the company has 20000 euros more on the bank account to invest.
  • the value of the company before the investment was 100000€ (pre-money valuation)
  • the value of the company after the capital increase is now 125000€ (post-money valuation)
  • each of the 125000 shares is worth 125000/125000=1€.
  • each original founder now owns 50/125=40% of the company. This process is also called dilution.

Note that all of these figures are entirely fictional and chosen merely to ease calculations. Now that we understand these systems of shares, let’s talk about stock options, or more specifically warrants (we’ll use them interchangeably here even though they are slightly different). Warrants are a financial instrument used to incentivize employees to stay with the company as long as possible and do their job to their best. Simply put, a warrant is the right to buy a share of the company later at the price it has today, which is called exercising the warrant. And since the value of the shares is supposed to go up, the goal is to make it possible for the employee to make a profit when he buys the shares associated with his warrants, and then resells the shares at the value they are worth then. That is for the motivation to participate in the success of the company. The motivation to stay is created by what is called a vesting schedule. Basically, the vesting schedule says that the employee who subscribes to warrants has the right to vest (or exercise) these warrants only in a certain timeframe. Typically, 25% of the warrants can be exercised at the end of the first year in the company (that is called the cliff), and then 1/36th of the warrants can be exercised at the end of every month for the following 36 months (3 years). So if an employee is given 2500 warrants, that means he will be able to exercise 625 warrants (and get 625 shares) in one year, and then about 52 more warrants every month. If he leaves the company during the first year, he will lose all of his warrants. If he leaves during his 13th month of the company, he will be able to buy 625 shares of the company at the price they were at when he got the warrant, whatever the increase in their value. He is not forced to exercise the warrants: if he doesn’t have enough cash to buy the shares or if their value has gone down, he can simply give up on his warrants. So in our example, let’s say that when Simon comes in as an investor, John and Marc also hire Steve as a developer and they want to incentivize him to go the extra mile and stay longer. So they agree with Simon on the following:

  • John keeps 50000 shares, 40% of the company, worth 40000 euros
  • Marc keeps 50000 shares, 40% of the company, worth 40000 euros
  • Simon gets 22500 shares, 18% of the company, worth 18000 euros
  • 2500 shares are set aside in the warrant plan for Steve, representing 2% of the company, worth 2000 euros

So at the end of the 4-year vesting period, Steve will be able to buy 2500 shares of the company for 2000 euros. Normally, within four years the value of the shares will have greatly increased but Steve will still get a preference price thanks to the warrant, and he will be able to sell those shares for a much higher price. Note that those 2500 shares will not represent 2% of the company anymore by then, because other investors will have joined, more shares will have been created, thus diluting the existing shares. But a slightly smaller percentage of a much larger cake is still very interesting. Let’s talk about taxes now. In Belgium there is a very special tax system for these warrants. The general principle is that you have to pay your taxes right when you receive the warrants. So the warrants are basically free, and they don’t have any value yet, but you still have to pay some taxes on them as if you had received a revenue. Typically, these taxes represent 18% of the face value of the warrants. So in our case, the year Steve gets his 2000 euros worth of warrants, he will have to pay taxes on a taxable basis of 2000*18/100=360€. What if Steve decides not to exercise his shares in the end, or can only exercise a portion of them because he leaves the company? Well that will be too late then: the taxes are paid, and there is no refund. But there is an upside: in exchange for this advanced payment, Steve won’t have to pay any additional taxes when he exercises his warrants and sells the corresponding shares with a bonus. So let’s say Steve’s shares are worth 20000 euros when he can exercise the warrants to buy them, he will still pay 2000 euros and sell them for 20000 euros, receiving a 18000 euros bonus in the process, on which he won’t have to pay any additional taxes. That’s a nice deal, isn’t it? Woohoo! There we are… well… almost. Because there is yet another small trick with those taxes. Basically, if Steve exercises his warrants as soon as he can to buy the associated shares, it’s more paperwork and it’s only interesting if Steve intends to keep those shares for a long time instead of reselling them right away. So to incentivize Steve to hold onto his warrants and only exercise them to sell the shares directly, there is a 50% tax discount if he commits to exercise his warrant no sooner than the beginning of the fourth year after he got them. If he takes this commitment, he just has to pay taxes on 9% of the value of the warrants in taxes, which represents a taxable basis 2000*9/100=180 euros. And what happens if he leaves the company before this commitment ends, you might ask? Well in that case he can exercise the warrants he is entitled to according to the vesting schedule, and then pay the tax difference. Last element that really makes these warrants particularly interesting: in case SuperCorp is acquired or goes public (enters the stock market), all of Steve’s warrants are automatically exercised, and the vesting schedule is simply ignored. So if SuperCorp is acquired for 10 euros per share after two years, Steve will still be able to exercise his 2500 shares and make a 22500-euro profit, even though he should be entitled to only half of his shares after those two years. There are still a couple of subtleties I didn’t mention here, but this is the general way warrants work and are taxed in Belgium. And this explanation has been double-checked for correctness by an expert accountant. So I hope it was clear enough. If you still have questions about warrants, or remarks to improve this explanation, please feel free to leave a comment down below. And in any case, don’t forget that we are hiring developers, that we have warrant plans, and that we even offer premiums for referrals. Just sayin…

By Sébastien, ago

Top 7 Reasons Why You Should Work for a Startup (clickbait intended)

It’s been a while since I’ve posted something here but as they say, desperate times… So as you might not know a lot has happened in my professional life since I wrote here. Last time I was getting ready to start a new job for Instaply, a startup based in the US but with an awesome team spread around the world. I worked one year with them, and then I was invited to be a coach for NEST’up Spring 2015. Then last month, I started a new job for another startup, based out of Brussels this time, called Take Eat Easy.

Just to get it out of the way, since the topic of this blog post is going to be about the advantages to join a startup, let me come back to the reasons why I left Instaply after just one year. It has nothing to do with the startup environment itself, and everything to do with the reason why I chose to go freelance in the first place: I love to choose the projects I work for and the people I work with. When one or the other becomes something I have to accomodate instead of something I fully enjoy, AND once I have tried everything in my power to make things go back to where they were at the beginning without success, I start listening for interesting new opportunities. That is exactly what happened here. I would have loved to keep working with those great developers. I didn’t believe enough in the project anymore to fully enjoy working on it. I tried everything I could to steer it back to where I would have believed 100% in it. I was not the only person to decide of course. I was offered a coaching position for a renowned startup accelerator I co-created, I moved on. The funny thing is that the first season of this same accelerator, 3 years ago, saw the birth of another startup: Take Eat Easy, yes, the same where I work now. Small world, right?

Now that we’ve got that out of the way, let’s get back to the present time now. When I joined Take Eat Easy, I made it clear that I didn’t just want to code, I wanted to have a greater impact on shaping the future of a business I really believed in: helping people eat better from the comfort of their home. So I joined as a VP of Engineering. If you want to know the difference with the role of CTO, you should read this article. So now I have the opportunity to keep building some software, but also to build a team with the best possible methodology and structure for the years to come. As a team builder, one of my main responsibilities is to grow the team, to recruit great developers. And that’s what brings me back to my blog.

Right now, we are looking for 3 key persons:

  • one or two Java backend developers to keep building our core system and make it stronger as we release our platform in multiple countries
  • one or two web frontend developers, familiar with Java (JSP, Spring MVC, etc.) but also very strong with HTML5, CSS and Javascript, to make our customer website and our internal tools completely ergonomic
  • one or two Android developers to bootstrap the development of our brand new mobile app, and help us with the development of our apps for restaurant managers and bike couriers, among other things

And I’m not gonna lie: I was expecting to get more applications. The fact is that we are looking for senior developers because we don’t have time to train newbies for now (sorry guys), and we need strong developers with enough autonomy and creativity to take matters into their own hands and really build the backbone of a great team. But still, I can’t help but wonder why we don’t get more applications.

First hypothesis: people just don’t know we’re hiring. Well at least now, you know (and your best developer friends will soon know, right?). I also published a few messages on targeted LinkedIn groups, there was a lot of press surrounding our recent funding round, and we do have our recruitment website where you can see our awesome industrial office space. But maybe it’s not enough.

Second hypothesis: the technologies we are working with are so commonplace in big corporations and institutions like the European Commission, that offer good paychecks and a comfortable 9-to-5 job, that developers are just too comfortable there to get interested in anything else. But I’ve been there, I’ve done that, and I know that working for those big institutions can look like a golden jail and eat your soul from the inside out.

Third hypothesis: startups are so rare in Belgium, that few developers actually know what it’s like to work for one, they don’t see all the benefits, and it sometimes looks too good to be true. So let me set the record straight and give you my top reasons why developing for a startup is so awesome (and of course, even more so for Take Eat Easy :oP )

Have an impact

More often than not, when I’ve worked for big companies, I never met the end users of the apps I worked on. Sometimes, the software I wrote never got to a real end user because the project was just dropped before the end (which tends to happen when a full waterfall development cycle takes a few years to complete before you realize your software is already out-of-phase with your market).

In a startup, not only can you see your final users, but you can meet them, touch them, feel their pain, and more importantly feel the joy and happiness that your software brings to their lives. When was the last time you could say that from the invoice checking ERP/SOA system your worked on (real world example)?

Learn some startup skills

I know so many developers who stay in their 9-to-5 job in a big company and save money for the big day when they will finally take the plunge and turn one of their million-dollar side project idea into a real business. I used to be one of those.

What if you actually learned some useful things while saving for your big coming out? What if you actually witnessed first hand what it takes to be in a startup rollercoaster before you build your own? What if you used this experience to see if you are actually CEO material, and in the process, put your full power to good use by helping a business you actually believe in? There actually is a middle ground between a boring dull job for a pharma company and creating your own startup: it’s called an exciting job for an existing and thriving startup.

Bonus: where are you more likely to meet your potential future cofounders, team mates and investors, at the European Commission or at the heart of the startup ecosystem?

NB: if you are already further down the line and you are planning to launch your own startup within a year, this doesn’t apply. Working for a startup is a long-term commitment and you will only benefit fully from it (and let’s face it, the startup will only benefit from your expertise) if you stay long enough.

Zero-bullshit

9-to-5 jobs are called that for a reason: so long as you clock in at 9 and clock out at 5, you’re good, no matter what you have really done in-between. If you do less than that, you can already feel the warm breath of your manager in your neck (and probably smell his bad armpits with this weather). And those companies are so much about appearance, that you have to disguise as a serious person, with suits and everything. And you have to attend meetings, watch boring Powerpoint presentations, play political games, and the list goes on forever.

Nothing like that in a startup, really. It’s pretty much like McDonald’s. Come as you are. Geeky t-shirts, flip flops, 3-day beard, whatever. So long as you do your job, you get results and produce awesome software, we don’t care how you look or when you come to the office. As a matter of fact, we know you are going to stay late, because you will love your job and your team mates so much that we will have to send you home! And no bullshit meetings or layers and layers of management. We are not here to justify our paycheck, we are here to get some shit done, and make the world a better place, one distributed database at a time (Silicon Valley pun intended). Anyway, you get my point.

It’s an investment

Whatever you do for a big company, where is the incentive to do your job better today than yesterday? But who am I kidding, if you are reading this your are probably such a perfectionist professional that you don’t need any incentive. But what about your colleagues?

In a funded startup, not only is the paycheck completely comparable to your current corporate one and probably even better, but you get one thing the big guys will never be able to offer you: stock options baby! I know, this is not a salary, and I am the first one to say it should not be bargained as one. It is merely a bonus. Some would even say it’s a gamble, and in some sense it is. But what do you call a bet in which you can influence the odds of successful outcome with your hard work, sweat and creative ideas? I call that a pretty good bet, one that won’t make you rich for sure, but might go a long way in setting you up for your own startup some day… or anything else for that matter. How about that?

Awesome colleagues

How many times have you complained about all those guys around you, who are not all bad, but have become so infatuated by such comfortable working conditions, that they have completely stopped questioning the status quo and the misery of their conditions. But you are stronger than that, right? You are still too young for that shit, huh?

Then how about working for a company that doesn’t settle for the average Joe Does-the-Job, but strives to only work with the most creative, no-bullshit software builders it can find? How about being part of a great team, and even participating in building it with all the great developers you have met throughout the years, and thus influence your stock options value even more?

Cool perks

Do you remember the last time you yelled at your computer because you still don’t understand why you get to build complex user interfaces and innovative backend systems on the same gear as Julie from accounting? And that chair, boy that annoying old chair that was probably already used by card punchers if you know what I mean, and has likely squeaked though Y2K bug times. And don’t get me started on those unbearable cubicles and that awful stuff they call food at the Sodexo joint downstairs (confess to me: when people ask you how it is, you still answer “it’s fine!” with an awkward smile). I’m barely exaggerating, admit it.

Of course, a startup is so much better on all those fronts. I needed a big 27-inch screen to do my iOS storyboarding wizardry properly, I got the green light for one in a couple of days, and now it’s proudly sitting on my desk. Inspiring creative work environment? CHECK! Awesome food delivered straight from the most trendy restaurants in Brussels? What else? (ok, the Take Eat Easy factor might help there). All those little thing that make you smile your way to work, along with Magic Assembly breaks, no-nonsense days-off policies, do you really need me to go on?

The (real) Agile way

I’m not talking about post-it fakery here. No “of course we do Agile! RUP is agile, right?”. Ever heard of ScrumFall? Remember those post-it notes that you ordered to migrate your project to Kanban, and that ended up arming your post-it war with your cellmates across the road, out of despair?

In a startup, Agile is not something you do to shake up your manager’s certainty, or to make your life as a developer less miserable in an Excel-driven management world. It’s a necessity. It’s the norm. It is what you do because it’s just the most efficient way to get shit done and to ship actual software out the freaking door and into the hands of your feedback-blowing users. Real Kanban with regular retrospectives with which you can customize the process to fit your team’s way of working in full collaboration (not against) a business that actually craves for your every line of juicy code.

 

That’s what a startup really looks like. And of course that’s what OUR startup really looks like, and will do even more so if you loved every advantage listed above and want to make them even more real by joining us.

Of course, I can already hear some of you in the back whisper: “oh, but that’s not all rosy, you will probably do crazy hours, and you will have a lot of responsibilities, and it might not work out in the end, it’s not safe out there, it’s a cutthroat jungle, and investors will make a lot more money than you, and your kids will see your sorry face a lot less, and yes, you will learn, but you will fail a lot to get there, and…”

I won’t deny. That’s all I have to say: I won’t deny any of that. I’ll just let you read it back out loud and leave you with that and my direct email address: sebastien.arbogast@takeeateasy.be

By Sébastien, ago