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He brings-up a good point that most start-ups don't raise enough capital: “If you raise [$500,000 to $700,000], you can pay the two founders decent salaries, y

He brings-up a good point that most start-ups don't raise enough capital: “If you raise [$500,000 to $700,000], you can pay the two founders decent salaries, you’re able to hire one or two other people, and that gets you maybe eight months, almost a year, except you have to start fundraising again three or four months beforehand."

pedalpete 16y ago
But isn't it true that most start-ups can't raise more than $1 million without a proven track record or traction? Doesn't the angel round buy the company time to get either a higher fidelity prototype or actually launch the business and get some traction before going for the bigger Series A?
- joshu 16y ago
  The context is more generally that a lot of companies are doing the 500-750 now and will all be raising again at the same time mid next-year. Which means many of them are going to fail to raise simply because of the timing.
  - pedalpete 16y ago
    can you elaborate on the 'fail because of timing'?? Do you mean a VC funding cycle where most funds are distributed in one quarter over another (or time of year)? Maybe I continue to miss something. Thanks
    - joshu 16y ago
      I mean more the fact that other startups will be raising at the same time, and you will be competing for attention and money. Consider: Does an angel want take some dollars and a) invest in a new hot startup that he just got introduced to or b) double down in a startup that hasn't seen traction yet and is going back for another year's worth of runway? Using story-based reasoning, the investor is able to convince himself that A is a much better opportunity.
      - pedalpete 16y ago
        Thanks for clarifying your thoughts on that. Though I would have thought most start-ups are not returning to Angels for a follow-on round, but rather progressing to VCs for a seed round. I see your logic as the business is probably relying on the initial angel to lead a Series A.
        joshu 16y ago
        If you have raised 500k, and have been working for a year and have not shown any traction, you are going to get punished if you try for a series A. You'll do better going back to your angels -- but the current crop of angels may react differently than you expect/hope. That's my overall point.
Andrewski 16y ago
I think a smart "founder" saves his Porsche buying until after the company is actually profitable. A $50k salary for a founder is about the limit until the company is actually raking in some dough, unless the goal is to feel important and drive that sucker into the ground.
- joshu 16y ago
  50k is often not survivable. Especially in SV, where everything is expensive. I agree that if it is possible you should do that. I'm drawing zero salary right now myself. But more importantly - strong talent is expensive.
  - btmorex 16y ago
    50k is easily survivable in SV as long as you don't have a spouse and kids to support. I'm really having trouble understanding how you need more. Are you doing all your shopping at Whole Foods or something? Eating out 2 times a day? Where does all that money go?
    - klbarry 16y ago
      My girlfriend and I are surviving easily in NY on about 24,000 a month total, and the valley probably isn't too much more expensive. I also eat delivery fairly often and am not particularly careful with money.
      - tptacek 16y ago
        Presumably, you meant $2,400/month. The average studio apartment in Manhattan is $1900, leaving you with $500 at the end of each month to cover every conceivable expense. MTA to-from work alone ate $180 of that between the two of you.
        joshu 16y ago
        When I lived in NYC you could have a nice, inexpensive apartment in Astoria or Williamsburg for much less than that. When I did delicious, one of my employees could get to our office in manhattan from wburg faster than I could from the Upper West Side, too...

pedalpete 16y ago

But isn't it true that most start-ups can't raise more than $1 million without a proven track record or traction? Doesn't the angel round buy the company time to get either a higher fidelity prototype or actually launch the business and get some traction before going for the bigger Series A?

joshu 16y ago
The context is more generally that a lot of companies are doing the 500-750 now and will all be raising again at the same time mid next-year. Which means many of them are going to fail to raise simply because of the timing.
- pedalpete 16y ago
  can you elaborate on the 'fail because of timing'?? Do you mean a VC funding cycle where most funds are distributed in one quarter over another (or time of year)? Maybe I continue to miss something. Thanks
  - joshu 16y ago
    I mean more the fact that other startups will be raising at the same time, and you will be competing for attention and money. Consider: Does an angel want take some dollars and a) invest in a new hot startup that he just got introduced to or b) double down in a startup that hasn't seen traction yet and is going back for another year's worth of runway? Using story-based reasoning, the investor is able to convince himself that A is a much better opportunity.
    - pedalpete 16y ago
      Thanks for clarifying your thoughts on that. Though I would have thought most start-ups are not returning to Angels for a follow-on round, but rather progressing to VCs for a seed round. I see your logic as the business is probably relying on the initial angel to lead a Series A.
      - joshu 16y ago
        If you have raised 500k, and have been working for a year and have not shown any traction, you are going to get punished if you try for a series A. You'll do better going back to your angels -- but the current crop of angels may react differently than you expect/hope. That's my overall point.

Andrewski 16y ago

I think a smart "founder" saves his Porsche buying until after the company is actually profitable. A $50k salary for a founder is about the limit until the company is actually raking in some dough, unless the goal is to feel important and drive that sucker into the ground.

joshu 16y ago
50k is often not survivable. Especially in SV, where everything is expensive. I agree that if it is possible you should do that. I'm drawing zero salary right now myself. But more importantly - strong talent is expensive.
- btmorex 16y ago
  50k is easily survivable in SV as long as you don't have a spouse and kids to support. I'm really having trouble understanding how you need more. Are you doing all your shopping at Whole Foods or something? Eating out 2 times a day? Where does all that money go?
  - klbarry 16y ago
    My girlfriend and I are surviving easily in NY on about 24,000 a month total, and the valley probably isn't too much more expensive. I also eat delivery fairly often and am not particularly careful with money.
    - tptacek 16y ago
      Presumably, you meant $2,400/month. The average studio apartment in Manhattan is $1900, leaving you with $500 at the end of each month to cover every conceivable expense. MTA to-from work alone ate $180 of that between the two of you.
      - joshu 16y ago
        When I lived in NYC you could have a nice, inexpensive apartment in Astoria or Williamsburg for much less than that. When I did delicious, one of my employees could get to our office in manhattan from wburg faster than I could from the Upper West Side, too...