
Always have 18 months of cash in the bank - bjonathan
http://cdixon.org/2011/12/06/always-have-18-months-of-cash-in-the-bank/
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kls
_Almost all VCs I know care primarily about the success of their companies and
not about extracting every last point of equity._

You would be surprised, I have seen some things in my career that are insane
and done for the simplest reasons, like ego, megalomania and most of all
money.

I once was with a start up in which the CFO and the COO got into a fist fight
in front of the entire company, over equity.

Another time I saw a VP who was running one division give everyone the day
off, called in three of his trusted developers, and they all said that the
development team was on strike and would not return unless the board appointed
him the CEO. He then proceeded to run the company in the ground, while paying
himself and his three developers handsomely.

And I have seen investors use all manners of leverage against the operations
team to dilute their ownership. The stories about being diluted out of
ownership are common because it happens all the time. I personally, was
diluted out of my ownership in a start up. A 90 million dollar exit and I
walked out with less than $100k as the CTO, a tough lesson in finance for me,
but it happens all the time.

I have come to believe that for people that act like this, it is a game, and
the game is not won if they cannot get every penny. It probably bothered them
that I walked away from the table with less than 100k, because some how they
did not play the game hard enough to get that from me. Somehow they are less
of a person, if they don't win and they judge their self-worth based on it.

I am not saying that this is all, or even most, VC's, but they are out there,
and you only need to cross one of them for it to make an indelible mark.

~~~
jpdoctor
> _Almost all VCs I know care primarily about the success of their companies
> and not about extracting every last point of equity._

This quote is from someone who has not been around the block.

~~~
kls
The author did preface it with "i know" which does condition it as their
experience. But yes they may have a experience that is the minority to the
odds of running across a bad VC and generally once you are in a VC group you
tend to use those connections in the future. For example I just had a really
good idea the other day, called a good VC that I know and we are working out
the details now to start working on it. If I had met her as one of my first
contacts, I probably would have not went through the learning process that I
did.

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baddox
I initially thought this was referring to _personal_ finances, and thought
that 18 months seems a little extreme. I have heard people suggest to keep
anywhere from 3 to 6 months of living expenses in the bank.

~~~
jessriedel
Depends on your income. Apparently, it takes on average 30 weeks to find a
$100k job.

[http://www.ehow.com/facts_5858845_average-length-job-
hunt.ht...](http://www.ehow.com/facts_5858845_average-length-job-hunt.html)

~~~
tbrownaw
30 weeks for $100k and 25 weeks for $40-$75k... but also 30 weeks if you're
over 55 years old, and 21 weeks if you're not. And I'm guessing that industry
and education level would have even bigger effects.

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vannevar
_1) as a rule of thumb it takes 3 months to raise money_

If you're already connected with multiple VCs that might be true. If you're
starting out cold, I wouldn't count on getting funded in 90 days even if you
have the greatest thing going on planet Earth.

~~~
mchusma
Agreed. Closing itself takes around 60 days. So 90 days is really tight if you
are talking about from "hey let's go get money" to "cash in bank"

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westbywest
I would think having the ability to raise 18mo of funds to deposit in a bank
already puts one in a small (and quite fortunate) group. True, this ability
can come from diligence and careful financial planning, but there will always
be external factors that could preclude this ability to save up in the first
place.

Besides that, the more reckless half of myself is reminded of this Oscar Wilde
quip: "Anyone who lives within their means suffers from a lack of
imagination."

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einhverfr
That's 18 months worth of expected expenses or 18 months worth of reasonably
expected losses? I am confused.

If a company has any dependable revenue, I would expect that to count against
the money you have to have in the bank. What do others say?

I am a big fan of cutting expenses to a min, and funding from operations to
the extent one can but have noticed that VC types don't like this (relatively
low-risk) strategy. Not entirely sure why.

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dotBen
I'm wondering if Chris is talking about Series A+ with this.

If you raise anything less than $500k angel it's going to be very tight to
make that last 18 months by the time you've hired a few developers, covered
expenses, etc - esp in SF/SV

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tzury
It depends.

If you plan to build a profitable startup, meanings, you are willing to sell
the service (for $$) as early as possible, then perhaps, "18 months" is a
period of time which within you get to the break-even point.

If you are planning to build a cool-and-free-iPhone/android-app and all you
care is to get as many users as possible, then perhaps, this is a great advice
for you.

In the first case, however, it means, you only need raise enough for about
12-18 months.

------
skrebbel
18 months of cash. That would take me about 180 months to save up.

Are you guys all really that disciplined when it comes to saving up? Or simply
earning way too much?

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ColdAsIce
s/in the bank/under your bed/g.

------
ilaksh
Hello Hacker News.

I would LOVE to have 18 months in the bank. In fact, I would love to have 30
days in the bank. And I think I have a really terrific idea and I know for a
fact that I can make it a reality, since I have implemented aspects of this
before, and have about 27 years of programming experience (started when I was
7). The thing is, it seems quite far-fetched to think that someone would give
me 18 months worth of cash to make my vision a reality. Anyway, here is the
idea: <http://cure.willsave.me/vision> . Basically the goal is to replace
WordPress with a platform that has a number of advantages, starting with a
CoffeeScript codebase running on Node.js.

"The Cure Platform is a component- and plugin- based content and data
management framework.

The main goal for this platform is increased developer and user productivity.
To achieve that the platform will have these features:

* WYSIWYG drag-and-drop designer. No source code templates (no mixed markup/source) and limited CSS.

* Component (GUI control) -based architecture to enable easier code reuse and faster configuration and integration of modules.

* Comprehensive data framework enabling drag-and-drop form creation with corresponding updates to hierarchical models. Transparent data handling. "

So my plan is, while I am finishing up my current project, to work on this new
platform. I have already started with some of the implementation. I would very
much like to avoid getting another "regular job" or gig when my main project
is complete, and so I was hoping against hope that somehow I could crank out a
simplified version of this new platform and miraculously turn that into my day
job immediately. Or perhaps get a few thousand dollars from kickstarter.com or
some such.. but most likely not try to raise much money at all, and probably
not do any fundifying until I had a prototype of some sort.

Anyway, supposing I can live on just $3,000 per month, and I need exactly 1
person to help me who also only needs $3,000 per month. Suppose that includes
all of our expenses for servers etc. and we are working out of our homes. 3000
* 18 = 54000 * 2 = $108,000.

I'm sure people will tell me I am wrongheaded, doing something wrong, or
misinterpreting, but I think that this article is quite clearly saying I
should try to get $108,000. This seems completely unrealistic to start going
around trying to get $108,000. And actually, once I have a prototype, I still
doubt I will even want that much money -- I will probably be happy to try to
sell the system for 2 or 3 months, so maybe 3 months would be nice, but after
that, I can't see going 5 or 6 months spending someone else's money without
significant money coming in, so the $108,000 doesn't even seem prudent.

Anyway, if someone reading this wants to give me $108,000, I am sure I can
build the system I described.. just not sure if people would be smart enough
to adopt it. You can PayPal the money to node@willsave.me (lol)

~~~
ilaksh
Wow -- minus 2 points? Don't understand why this is downvoted so hard? I think
I asked a good question by relating the article to my specific situation.

~~~
Jach
My guess for the downvoting is some mixture of these reasons or others:

* This posting isn't the place for your comment--try an "Ask HN: evaluate my idea" or something.

* Your point "I need $100k for my idea, I can't see why this is necessary nor why anyone would give it to me nor what I'd do with it all anyway" took too long to get to and you probably would have gotten some responses if that was all you had.

* Perceived money-grubbing. "Are you a sociopath?"

* Perceived reasons why your idea Won't Work

* Complaining about being downvoted

* Your comment is structurally similar to some spam comments I've seen--greetings, link(s), bullet points, ALL CAPS at places, already downvoted. Instinctive downvoting.

* "lol"

