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In the beginning, people costs are where most of your money goes, by far. Whether you have employees or contractors, human capital will cost you the most. For
by inmygarage 15y ago
In the beginning, people costs are where most of your money goes, by far. Whether you have employees or contractors, human capital will cost you the most.
For a typical $500K seed round, here is my breakdown for 12 months of expenses. Feedback welcome.
2 founders + health insurance + taxes = $10k/month
2 engineers + health insurance + taxes = $20k/month
1 p/t designer = $5k/month
...and you've burned through $420,000 of your $500,000 in 12 months.
As for the other $80K?
Legal Fees: $10K (or $800/month);
Space: $30K (depending on where...around $2500/month);
Accounting/Finance: $10K ($800/month);
Server Costs + Hardware: $12k ($1k/month);
Miscellaneous Expenses including random contractors here and there, marketing expenses, SWAG, a party if you want, some travel to a few conferences, food, etc.: $18k ($1500/month)
Hope this helps.
- DanI-S 15y agoIs ~50k/yr a typical founder salary? How much does it vary from this kind of number?
- inmygarage 15y agoFounder salaries vary wildly depending on amount raised, whether the company is profitable or even generating revenue and the stage of the company. Some people pay themselves $1k/month and some pay themselves $15k/month. I figured $4k/month was a good benchmark based on a pre-series-A seed-financed tech startup that is generating minimal revenue and is not profitable.
- nicholasreed 15y agoWhile mocking up salaries with an adviser, he said that we should earmark $60k for founders "so people think you're stable."
- jwatte 15y agoIf you're in silicon valley, and want senior/lead engineers who can make a difference, expect to pay >>$10k per month per head for salary, benefits and payroll taxes. Plus give away a chunk of equity. Competition for good people is always fierce at all times.
- michaelochurch 15y agoOnce there is a valuation and there has been investment, founders should be collecting close to full salary (maybe 75-85%) because to take less means they are effectively putting money into the business and should be getting more equity, but that can dicey because it dilutes investors. $500k can't support 4 people for 12 months (in NY or CA) unless the founders have personal savings to use. You have to include travel expenses, a "cushion" in event of unexpected growth, and expenses incurred in getting the next round of funding.