

Ask HN: Where they/you spend $1m for a startup? - jimmmylost

Hello HN,<p>That was always a question for me, where do startups spend $100k or $1M of their funding? 
How much money does a web-startup need to be determined it's successful or not?
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mpr3
The word "startup" means you're looking at a company that hasn't found its
business model (which can scale) yet - at least that's how I interpret it.
Important to clarify this first.

As a startup, money should only be spent on making sure that the product and
vision are geared towards solving a problem that a lot of people have. If your
product isn't solving a problem, then you can spend more of your cash on
trying to figure that out in iterations. If a company is iterating in this
customer discovery phase then their burn rate should be fairly low.

Once you're convinced that your product resonates with your intended customers
(i.e. people have paid you, signed up, or some other KPI has sufficient
momentum) then you can start to spend to accelerate marketing and sales in
order to "fill the sales funnel". This spending is usually through hires, paid
clicks, other advertising and PR.

Spending to accelerate marketing and sales prior to ensuring that your product
solves an important problem for a lot of people is a great way to blow through
your $1m or more.

In summary, great founders spend their seed money making sure that they have
their product aligned with a bit/important problem, then once that is found
they spend to accelerate marketing and sales.

~~~
jimmmylost
[Repeat] We assume that your are a web developer, you have an idea and have it
implemented. you sell or are not! do you really need hundreds of thousands of
dollars?

~~~
mpr3
What this usually gets used for is hiring sales staff in advance of having the
revenue that allows it. Acceleration is really the key thing that this capital
is looking to accomplish (in theory).

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merinid
If you're looking for a short answer, startups spend most of their money on
people. And rightfully so. At such an early stage, the only assets that really
count are human.

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samstave
On the execution of an idea that provides something that people want and are
willing to pay for.

So, you're question is really "How do you define 'Execution of an idea, and
how do you fund that":

You'll need an idea with capable skill behind it. The skills you need will
evolve with the idea and the % of execution performed.

At times you will need development, infrastructure, sales and administration.

Development is the team to execute on the feeatures your idea needs to keep
users engaged/paying.

Infrastructure is needed initially/at scale in different forms, factors and
frequencies.

Sales is getting people to know about use and pay for your idea.

Administration (I am using generically) to include all the activities that
support the above. Rent, HR, Marketing (though this can also go into Sales)

So, you need to have a somewhat solid understanding of the above as it relates
to your idea and where you are in the process of building a company.

A very very early startup is going to spend most on, intially development and
infrastructure, then on sales, then on admin, then cycling back to the other
areas as needed.

Hopefully you do NOT wind up with a resource sink such as legal battles, poor
investments on non-contributors etc...

~~~
jimmmylost
We assume that your are a web developer, you have an idea and have it
implemented. you sell or are not! I really need hundreds of thousands of
dollars?

~~~
27182818284
It makes life easier for sure. For example, you're just a sole developer with
limited time. If you add others to your team and pay them a salary, that could
be money. Or you simply aren't a web startup, but a startup in hardware or
something else that requires more money.

Etc.

