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For most software companies, the overwhelmingly highest expense is going to be employee salaries and direct costs of employment. At many companies that is 80%
by patio11 13y ago
For most software companies, the overwhelmingly highest expense is going to be employee salaries and direct costs of employment. At many companies that is 80% of all expenses. (Exceptions: companies with large advertising costs, and platform companies with exceptionally large costs that scale with the success of the core business, like you might imagine Twilio, Heroku, or Stripe having.)
Consider a 3 man company which raises $5 million in investment and expands to 10. They'll chew through a million every six months just in payroll costs.
Ten is a fairly small company. There are many VC-backed companies which are in the 100~200 employees range. Payroll scales pretty much linearly, so...
- ig1 13y agoCompanies with large advertising costs is probably a larger group than you think. Many businesses with high customer lifetime value spread over a prolonged period (SaaS, Gaming, etc) have the problem that they need to spend the money on customer acquisition upfront but may need 12+ of revenue from that customer before they make that acquisition cost back. Hence it makes sense to use external money to for marketing.
- timmm 13y agoStartup devs really get paid 200k/yr? The VC backed company I worked for was a fraction of that.
- tptacek 13y agoHe's counting fully loaded cost, which includes taxes and benefits.