

Ask HN: How much savings did you have when you started? - Azuldolphin

As I've detailed in a previous post, I'm planning on quitting my job in a few months and moving to SF to join the start-up scene with my friend / prospective co-founder. However, I've only got about $18k saved up. How does this compare to other people who have taken the leap?
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ardit33
$18k - is not that much at all, and it will disappear fast. If you don't have
any family to back you up with some reserve/emergency cash when you ran out, i
would be really careful.

You will use it within 5 - 7 months. Keep in mind, that just even for renting,
you will have to give a first, deposit, (and sometimes last month). Assuming
you are going to have roommates, if your rent is 1k (can be more, can be a bit
less in crappy area), + moving costs, you could see easy 4k gone, just when
you land there.

The chances to get funding, or any revenue within that time are pretty much 0,
unless you have a solid prototype already build, do you?

My advice, is move to SF, find a job (hopefully one that will pay relocating
costs), or maybe even a contracting one, and then develop your product on the
side. When it is at least 60% done, and you have a bit more savings, go full
swing into it.

The rule of thumb, you should have at least 1.5 years of savings. If you have
parents that lend 20k extra when things go sour, then 9-1yr would be good
enough.

In SF that would be at least 30k. add about 10k you will need for the business
(servers and such, depends on what you are doing, then 40k is minimum.

If you are working as an engineer, and are smart with money, you should be
able to save at least 20k-30k a year.

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lsc
>My advice, is move to SF, find a job (hopefully one that will pay relocating
costs), or maybe even a contracting one, and then develop your product on the
side. When it is at least 60% done, and you have a bit more savings, go full
swing into it.

overall, sound advice, I think.

Note: if you move to silicon valley rather than SF, you can get a room in the
lower-end but perfectly safe areas of Santa Clara or Sunnyvale for $600/month
or so. $800-$1000 will get you a nice room that's near to the y combinator
offices. If you are renting a room, you often can get away with first and
deposit, especially for lower end stuff. Look around.

As for savings, well, that depends on your risk tolerance. A year and a half
seems pretty excessive to me, but then I personally co-sign business loans and
leases, so if the company craters, any personal money I had is gone anyhow.

If you are in a capital intensive space (e.g. you have to buy lots of servers
like I do) contracting while you are starting up (if you can talk people into
going corp to corp) can have some tax advantages, too.

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jacquesm
I did it with exactly 0, but I did have a lot of luck and plenty of people
that wanted to see me succeed so they threw me jobs, contacts and so on. That
helped tremendously.

Conservatively, I'd say you need about 6 to 9 months living expenses in the
bank and if that ever goes below 2 months remaining it might be time to see if
you can land a job somewhere again.

The safe way to do this is to try out your consulting next to your regular
employment.

That might take longer but the chances of failure are dramatically less.

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xal
About 100k when I started Shopify, that meant I didn't have to take a salary
until we had enough revenue 2 1/2 years later. Urg, don't do it like that.

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keeptrying
You mean that you shouldnt use your own money?

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jacquesm
I think he meant don't take 2 1/2 year to build up your revenues to the point
where you can take a salary.

~~~
jyothi
Does it also mean you might get too comfortable sitting on a large saving. So,
do it with just enough cash to put up some pressure for early delivery. .

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RealGeek
I started my first startup with $600 in credit card debt.

I had a product idea that I wanted to work on. So, I started doing consultancy
to make some cash and bootstrap my way. Then I found a biz co-founder, hired a
designer and two programmers to take care of the consultancy business. Our
team size quickly grew to 20 programmers and designers, and we had several
paying clients.

Most programmers we hired were average, but not great. This team could make
websites, but not products. We hired this team to do work clients projects, so
I can focus on building our product.

Since our team and clients were in different time zones, I had to deal with
clients in night and development team during day. This setup kept me engaged
and busy with client's projects. Therefore, we were unable to work on our
product and we missed the boat.

Recently, I decided to quit the company and move on to work on my new product
startup.

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iamelgringo
It's completely feasible if you move to SF with a job in hand.

Spend a year working, networking and getting the lay of the land, and then
jump off and do your own thing. There's tons of companies that are hiring
right now.

Aside from that, $18k really isn't much at all in SF or SV. Spend part of the
$18k in coming out here for a visit for a month or so, do some networking land
a job and then move out. Think of doing startups as a more long term plan
rather than a short term leap to SF to see how far you can get by living on
ramen noodles.

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biznickman
Technically I started before I quit ... something that I highly recommend any
other entrepreneur to do. However you could definitely pull it off with 6
months money although 12 months would be better :) A few months after going on
my own I also landed a contract dev job that helped me make it an additional 6
- 8 months and attend some events I wanted to. I did the dev work at night and
then just worked on my project during the day.

If you are all-in on your new project though, you should be able to make it
though. Just make sure you already have that new computer or whatever tools
you'll need to get started. I've found a nice computer always boosted my
productivity and made me feel better :)

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kls
I really think you would be better to get the bare minimum product out the
door, so you are not burning money while you are in product development. It
takes dedication and a lot of nights and weekends, but it really is the best
course of action to give yourself the best chances of success, with the funds
that you have available.

This way you can dedicate the 18k to marketing once the product is completed.
Contrary to the dream stories of everything going just right, not many
products go grass roots or viral or whatever we are calling it these days.
Many of them require good old fashion marketing to get the word out.

18k still does not give you a whole lot of runway especially if you have rent,
electricity, food and the other life necessities. Postpone spending cash as
long as possible and when you do make sure that that cash is going into
something that will convert back into revenue.

If you don't understand marketing, start learning about it now. Buy some books
read some blogs of industry leaders. You will have to become an effective
marketer if you want your product to succeed. Contrary to popular belief even
some great products don't sell themselves and require good marketing.

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daveambrose
From friends in SF, the rent is similar to that of NYC where I live so I'm
happy to share my experiences to see if it's similar to yours.

When both my co-founder (formerly in Investment Banking) and me (previously in
Public Relations) left our jobs, we split our savings of $70k where the
majority went to rent, food and other necessities living in a big city like
New York. We also began to set up the necessities of the business, i.e. legal
entity, website development, etc. and then went into product mode. We managed
to start the company and live off our savings for thirteen months before we
took outside funding.

The biggest thing to think through regarding savings, like cpercviva
mentioned, is figuring out where the largest amount of your money needs to go.
For us, and any other person thinking about taking the leap in New York, is
usually rent.

I'd map every single expense you've had in the last year in a Google
Spreadsheet so you can trim any "financial fat".

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hasenj
Depends on your expenses. How long do you anticipate that amount would last?
And, would you be totally doomed if after X months, your startup isn't making
any money and you run out of savings?

I think $18k is plenty fine, (but that's just me). I'm planning to do a
similar thing and my savings are less than that.

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dotBen
_I think $18k is plenty fine, (but that's just me)._

Not for San Francisco.

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limedaring
I had 20k, but I also had no rent (very advantageous). SF is going to be
really expensive — what about moving to cheaper Mountain View which still
right in the middle of the startup scene (location of YC), and a train ride to
SF?

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cperciva
How much money you need depends on how much time you need. I had more savings
than you when I started working on Tarsnap, but a secure backup system isn't
something you can throw out in a few months, so I needed a longer runway.

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lsc
When I started my current company, I had a full time job. I've had a job on
and off for most of the time I had the company. This (5 years in on this
company) is the first year I've been full-time for the whole year, actually
working on the company (rather than consulting, etc...)

If you've got eighteen grand, well, you are going to have to start making
money quick. Living around here is pretty expensive. Be prepared to get a
contract gig, because for most product businesses, ramping up as fast as you
will have to ramp up with that runway will be quite difficult.

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abalashov
$400. Had over $3500 in living expenses to meet the month I got fired (at
beginning of month). Been finding novel and intriguing ways to do so for 35
months now, though the expenses are bigger these days.

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dirtyaura
It fully depends what are you going to do and how much are you spending.

To get a baseline of what you need, calculate your living expensed plus do the
worst-case calculations for a year.

Expect that your currently fully-working laptop and mobile phone are both
going to break and you have to buy new ones. (sudden hw costs can be easily a
couple of grands). Ditto for cars etc.

If you have a spouse, don't expect that working from home for a year is such a
great idea, thus plan some money for renting a space.

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ido
I'm guessing you're moving to get investors?

If you are planning on self funding wouldn't it be much better to bootstrap in
a lower-cost location?

