

How much money should my company raise? - teej
http://jessicamah.com/how-much-money-should-my-company-raise

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ctide
_Budget 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?

~~~
axiom
I 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
_"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.

~~~
temphn
> fairy farts and equity dreams.

If your attitude towards the startup is that cynical, then you shouldn't be
working for a startup. Go to bigco where they will pay you lots for doing
nothing.

Startups are difficult and need people who want to work hard and sacrifice in
exchange for greenfield technical development, high responsibility, and high
upside. By all means ask for more equity. But a startup is about the future,
not about huge comfy salaries in the present day.

This is especially true given that the economy is now headed back into the
toilet. Tide is going out and many startups will die. Those that survive will
be those in which neither founders nor employees are unduly greedy.

~~~
thomasgerbe
'If your attitude towards the startup is that cynical, then you shouldn't be
working for a startup. Go to bigco where they will pay you lots for doing
nothing.'

That's just as cynical. There are bigcos that have fantastic projects AND pay
you, as well as startups that offer poor pay and little equity in exchange for
lots of hot air.

Unless it's Google or Facebook (or any other mature startup), I'd better be
getting more than 2% if I'm being paid less than 50% of standard market rate.
Otherwise, the equity is more of a nice bonus than the main selling point.

You're right, many startups will die. All the more reason why people have to
be careful about exchanging salary for equity.

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emrosenf
Bravo 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.

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Joakal
Why is it 'crazy' to try to raise as much possible?

~~~
donw
When 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.

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rudiger
How much capital do you wish to raise?

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rorrr
Whenever 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.

~~~
culturestate
I 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.

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axiom
One 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
Not on the seed or A round they aren't.

~~~
axiom
I'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.

~~~
fraserharris
You 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...](http://techcrunch.com/2011/03/29/ted-livingston-kik-velocity-
donation/)

~~~
axiom
So 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
Expectations 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.

