

Ask HN: Your startup needs money: WHY? - grep

I never quite understood why there's so much money being "given" to so many startups that do pretty much nothing... why do they need so much money? I don't get it..
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shafqat
We got to where we are with 250K, and are pretty close to product/market fit.
We have paying customers, a great product and a repeatable sales model.
However, for us to really step on the accelerator and grow, we need to hire A+
salespeople. We can pay them from cashflow, but that will slow things down.
We'd rather raise a small amount of capital (i.e. < 1M) so we can hire a
couple of great sales guys and really speed up the growth of our business.

Just a tangible example of why our startup needs money!

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instakill
Your start-up doesn't NEED money, but it is definitely helpful. Most of the
start-ups that do receive funding of $1million+ aim to go big, so having that
latent capital is certainly a great security for when the time comes to
expand. They can use this money to hire the necessary people, purchase the
necessary assets (servers, workstations, etc) or secure annual rent.

On the other hand, start-ups that have a more modest outlook or vision don't
need as much and actually shouldn't accept that much. Having $1million VC
money pumped into a start-up that only expects to make $50,000 a month with
steady growth will more than likely buckle. The investors will keep pressuring
the founders and terms like ROI will be thrown around meetings like crazy.

The best thing to do is determine how much you _really_ need (Or create a
range for variables), and work from there. There's a bunch of decent (free)
spreadsheets you can get from here:
<http://www.exinfm.com/free_spreadsheets.html>

That's my 2c.

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oceanician
I guess some projects need more money than can be feasibly obtained from other
projects organic profits, and are too risky for banks to touch, and co-
founders credit cards are already maxed out, so they need investors to 'give'
money.

Maybe they do nothing today, but are in a closed beta with a small circle of
users, and will be more public beta tomorrow...?

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staunch
What is there not to get? Running a business costs money for very obvious
reasons: salaries, office space, computers, servers, marketing. Even for a
very frugal early stage company that is usually hundreds of thousands of
dollars per year. Those costs tend to exist regardless of whether the idea is
simple or not.

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frossie
Did you have a particular example you want to discuss?

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grep
I do not. I'm generalizing, I'm not pointing any names but I'm sure everyone
already had this feeling.

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tlack
To pay the salary of the people working on the site?

