

Ask YC: how much of 120k was left at demo day? - ac2u

Given the recent talk of being extra careful about burn rates I would like to get an idea of the average burn rate of a YC investment in the run up to demo day so that I can plan for my own YC app. Did you have 50% left, 20%, more investment or broke? Thanks in advance.
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Patrick_Devine
I think it's a reasonable question. The answer is almost entirely dependent on
how many founders/employees you have and if you're drawing salaries or not.
Salaries are by a country mile your most expensive cost.

It should be roughly enough for around 4 people to be pulling $90K/year
salaries for 3 months with a bit left over for other stuff. So not a ton, but
enough to do something interesting. The expectation is you'll be raising
another round right after YC.

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ac2u
Thanks for your answer. I find the more figures I have in general about how
money moves in and out of the company over time, the more I feel I understand.
It's really more of a question to get my head around the burn rate for early
stage valley companies that are living and working together and your answer
helped.

It was a little annoying to see some folk answer back with an invalidation of
the question.

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Patrick_Devine
One caveat is that I haven't gone through YC, however I am running my own
startup right now in Los Altos/Palo Alto.

Our next biggest expenses after salaries are legal bills and IT stuff. I
believe YC really helps keeping the legal bills down (we're not so lucky), and
many cloud services companies will offer you free cloud servers (including my
own; do you need any instances?). Oh, also, office space costs an arm and a
leg here, but presumably you can just work out of someone's house in the true
start-up spirit.

Other than that there's not much to worry about at first unless you need a
foosball table. You're not going to have much time to play it though.

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paulmatthijs
Knowing how much money you'll have left after Demo Day doesn't say anything
about the state of your business, or if you did it right or wrong.

What you can do is estimate your runway length based on ramen profitability.
That should give you a rough estimate of your best possible scenario (i.e. no
other expenses). At least you'll know how much an unforeseen cost will shorten
that period. That's the only thing you and your co-founders can relate to, and
have to know.

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minimaxir
> _I would like to get an idea of the average burn rate of a YC investment in
> the run up to demo day so that I can plan for my own YC app_

How would that be helpful your YC application?

The talk about burn rates is for startups that have raised $millions.
$hundred-thousands are barely anything when determining burn rates. ($120k is
the cost for _one_ engineer)

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ac2u
I'm aware the recent talk is geared more towards seriously funded companies,
but I would like to get a feel of the figures in general from the first few
months of YC.

When talking to potential co founders (a lot of which have never heard of YC),
I'd like to be able to give them a picture of how the investment typically
gets spent during their time at YC.

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angersock
Your business needs should be dictating your burn rate. What's it matter what
other people are doing?

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ac2u
It doesn't matter what specific companies are doing, but it's always helpful
to know how the experience goes on average.

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brudgers
The average experience for startups is failure.

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angersock
Exactly. There's no such thing as an "average experience" in creating a
startup--our industry is not that commoditized yet, thank God.

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7Figures2Commas
You should plan to have somewhere between $153.23 and $724.78 left by demo
day. Your burn rate is a proxy for your company's growth. If you have too much
money left, investors will think you're not growing fast enough.

~~~
byoung2
Additional funding after demo day could take weeks or months. You would want
some money to run your company in the meantime.

~~~
7Figures2Commas
$153.23 to $724.78 is more than enough to keep a couple of t2.micro AWS
instances going and ramen in the cupboard for a few months.

Remember: the period after demo day and your second seed round separates the
winners from the losers. This is when you have the greatest opportunity to
show investors that you can hack life and hustle. Pull it off and your
investors might even agree to an uncapped convertible note.

~~~
byoung2
_$153.23 to $724.78 is more than enough to keep a couple of t2.micro AWS
instances going and ramen in the cupboard for a few months._

And how about rent for said cupboards? At least a few grand?

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7Figures2Commas
Like I said, you need to hack life and hustle. If you're paying rent, you're
doing it wrong and any reputable Silicon Valley investor will tell you you're
not hacking and hustling hard enough.

It's bad enough Y Combinator upped its funding to $120,000. Entrepreneurs did
a lot better with $5,000/head.

~~~
byoung2
You're contradicting yourself. You're saying you should spend the whole $120k
before demo day, but you're also saying you should hack and hustle like you
only have $5k per head.

~~~
thisGuysAccount
you're feeding the troll.

