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How much money should my company raise?
- Joakal 15y agoWhy is it 'crazy' to try to raise as much possible?
- pbreit 15y agoBecause 1) it can easily lead to sloppiness and 2) it can significantly decrease your exit options.
- donw 15y agoWhen you've first started out, you haven't generated a lot of value, even if you've got a plan, a great team, and an MVP. Your company just isn't worth very much at this point, which is why early-stage (angel) investors get large amounts of equity for very small amounts of money. By raising a large amount of money at a low valuation, you limit your options for future financing, as you can only offer a smaller slice of the pie to future investors, and have to do it at a higher valuation in order to keep your initial investment team happy.
- ctide 15y agoBudget at least $80k/employee in payroll, benefits, insurance, and misc costs. (you'll have to budget more if you plan on hiring more experienced talent) Competent engineers are willing to get hired for what amounts to ~35k / year? .... What?
- kapitti 15y agoCame to post the exact same thing. With 20-30% going to insurance/benefits, taxes, misc costs - that's an amazingly low number....even more so considering they're in SF.
- brandall10 15y agoShe did say employee, not engineer. Still low but I'd gather the equity share is good.
- pagekalisedown 15y agoMaybe she staffs up exclusively with H1Bs?
- axiom 15y agoI think their salaries are 60-65k. Insurance/benefits for 20 something developers at a startup consists of ramen and free pizza on Mondays. That's actually a very reasonable salary and keeps out the guys who are looking to collect fat paychecks working 35 hours/week. You want work/life balance and 100k+ per year? fine, go work at Google. If you want the upside that comes with working at a startup you need to be willing to take on some of the risk.
- timr 15y ago"That's actually a very reasonable salary and keeps out the guys who are looking to collect fat paychecks working 35 hours/week. You want work/life balance and 100k+ per year? fine, go work at Google. If you want the upside that comes with working at a startup you need to be willing to take on some of the risk." That's just a steaming pile of horseshit. I'm sorry to be so blunt, but I've been in this world for a while now, and nothing infuriates me more than when entrepreneurs try to delude employees (particularly younger employees) into working for far below market in exchange for promises of fairy farts and equity dreams. In a city where a one-bedroom apartment costs >$2,000 a month, $100k isn't a "fat" paycheck. It's right about average. And even if you choose to work below market, the <1% equity stake that most funded startups are going to offer you won't make it worth the opportunity cost in anything less than the most exceptional outcome. You say you're working for $60k a year in San Francisco? Yeah, I hope you're getting a founder-level equity, because you're living with roommates and eating ramen. I suppose the only plus side to this kind of nonsense is that any developer worth her salt will be poached within months by any one of the dozens of local startups that are looking for engineers and willing to pay market wages. Don't fall for it, kids: you deserve to be fairly paid, and get some equity.
- alnayyir 15y ago>Don't fall for it, kids: you deserve to be fairly paid, and get some equity. I did, thanks for spreading the messages.
- axiom 15y agoFunny how virtually zero successful startups have followed your model of paying people 100k+ at the beginning (first 1-2 years, pre-series A, or pre-profitability.) Probably just a coincidence though.
- Aloisius 15y agoI wish I could pay people that. I'm probably above $100k/employee in SF.
- sudonim 15y agoI found this statement pretty surprising. Maybe in the next step when it gets doubled, that's a more realistic number. $160k/employee? Either that or the only employee is an office admin?
- rdl 15y ago80k per developer is quite reasonable, exclusive of actual salary.
- rdl 15y ago(To clarify) 80k/yr total overhead for 18mo per employee, counting facilities, health care, direct and indirect costs, etc. You don't necessarily have to spend it, but I think it would be irresponsible to hire someone on a non-founder basis without having that kind of money available to back it up. If someone's willing to take a subsistence or below market salary, fine, but it should be explicit. I'd also be reluctant to hire any permanent employee without having at least 12mo of salary in the bank to pay him; 6mo might be ok if you disclose this to someone and let him make his own choice. It would suck to have a choice between startup and facebook, take the startup, then get laid off in six months. That is the kind of risk a founder should take, but not regular employees. If you can't cover salary, then contractor status makes more sense I think.
- deleted 15y ago[deleted]
- rorrr 15y agoWhenever I see news about some startup raising $400K or something like that, I just can't think of what to do with this amount of money (in USA at least). It's so little. Good developers are expensive. Great developers are very very expensive. $400K can get you maybe 2 good developers + an accountant + crappy office space for a year + all kinds of expenses.
- angryasian 15y agoif a team consists of technical talent, and hiring a junior developer or two, makes sense.
- culturestate 15y agoI agree. We're lucky to be building in a desirable but relatively cheap part of Florida (Gainesville, home to the University of Florida and Grooveshark, and in a state with no income tax) and $400k doesn't stretch very far. I can't imagine what it would be like building in the valley or NYC on that.
- robryan 15y agoIt depends really, if you don't expand and just work as cofounders willing the take just what they need to get by then that kind of money is going to last a long time. You are right if you are looking to hire full time employees though.
- axiom 15y agoOne of the major reasons some of the funding rounds are so big is that a large chunk of the money is going to buy equity directly from the founders rather than going into the company.
- joshu 15y agoNot on the seed or A round they aren't.
- axiom 15y agoI've seen a couple of cases locally where founders took a bunch of money in the A round (specifically I'm thinking of Kik.) I guess I don't have much more than anecdotal evidence though.
- chunkbot 15y agoSorry, but no.
- fraserharris 15y agoYou have no idea what you are talking about. VCs wanted a larger % cut, team didn't want the dilution. Founders still drive the same crappy cars. http://techcrunch.com/2011/03/29/ted-livingston-kik-velocity-donation/ http://techcrunch.com/2011/03/29/ted-livingston-kik-velocity...
- axiom 15y agoSo the 7M raised was ok for dilution, but that last 1M was just too much to bare? Just because it's in a press release doesn't make it true.
- fraserharris 15y agoExpectations are a bitch. Once you set them, its hard to undo. I sold personal shares because my co-founders didn't want to be diluted by another 1%. And Ted's a friend, the press release was for your benefit.
- rudiger 15y agoHow much capital do you wish to raise?
- emrosenf 15y agoBravo Jessica! I think people here may be missing the crux of the article: building a real business -- rather than an initial product -- is quite expensive.