
Ask HN: How much money should I save up before quitting my job? - trynabootstrap
My cofounder and I have done data science &#x2F; engineering work for various large companies. We have a startup idea in this space that we&#x27;ve fleshed out over the past six months while working at our jobs.<p>I have roughly $50,000 of our money that I can commit to our startup while we build the prototype in preparation for raising money. We can live with family members -- so rent will be free -- so we estimate our cost of living to be $1,000 &#x2F; month &#x2F; person.<p>At $2,000 per month total -- this gives us 20 months to finish the prototype. We think we can do it in 3-6 months, but we recognize that our time estimates could be completely wrong.<p>Are these numbers reasonable? Should we save up a much larger amount of money, like $100k or $250k? How complete should a prototype be before raising money?<p>Here are some additional considerations:
 - My cofounder has $20,000 in student loans to pay. Should he pay them all off before quitting his job?
 - We have another $50,000 of money in 401(k)s and Roth IRAs. We&#x27;re young enough to lose all this money and make it back without concern. Should we convert some of our retirement money into capital for our startup[1]? This would give us a total of $100k in funding.<p>[1]: http:&#x2F;&#x2F;guides.wsj.com&#x2F;small-business&#x2F;funding&#x2F;how-to-tap-an-ira-or-401k-to-help-fund-a-start-up&#x2F;
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dalerus
Having bootstrapped a couple of times:

1) I would double your estimated time to build. Worst case, think it would
take 9-12 months.

2) Personally, I wouldn't get too into the finances of my co-founder. I'd just
want to know that what are bringing (financially, sweat equity, and/or key
industry knowledge) are equal. If I'm bringing 50K, my partner should too.

But to answer your question, if I was that co-founder, I would. I would look
at paying off the debt and lowering the overall amount we needed to get to
MVP.

3) Numbers look more than reasonable. Actually, I know a lot of people that
would never have that much to bring to their own startup.

4) Don't touch the 401(k) or Roth.

Are you sure you need all this money and time to get your MVP ready? If you're
bootstrapping, why not stay at your current roles and code in the mornings,
evenings, or weekends?

Get your MVP done, get it into the hands of customers, and see if you find a
fit. I'm not sure you need all that time and money...

~~~
trynabootstrap
> I'd just want to know that what are bringing (financially, sweat equity,
> and/or key industry knowledge) are equal.

My cofounder has several more years of work experience, and more closely
focused on mathematics and machine learning. I have some experience in these
fields, but am more of a general software engineer. Because I am bringing the
money to the table, we intend to make the equity split 51/49 in my favor.

> Are you sure you need all this money and time to get your MVP ready? If
> you're bootstrapping, why not stay at your current roles and code in the
> mornings, evenings, or weekends?

We are currently working nights and weekends and making good progress. We both
work very fast-paced, demanding jobs in Silicon Valley, which makes it hard to
sustain our current pace without burning out.

> Don't touch the 401(k) or Roth.

Would you suggest that instead of cannibalizing our existing funds, that we
just stop contributing to our 401(k)s and save more cash for our startup? Or
should we continue to save for retirement at our previous pace?

> Get your MVP done, get it into the hands of customers, and see if you find a
> fit. I'm not sure you need all that time and money...

I am definitely in favor of doing this, but like you pointed out, the MVP
could take twice as long even when working full time.

~~~
dalerus
> My cofounder has several more years of work experience, and more closely
> focused on mathematics and machine learning. I have some experience in these
> fields, but am more of a general software engineer. Because I am bringing
> the money to the table, we intend to make the equity split 51/49 in my
> favor.

Cool, as long as you both feel the even contribution. The 51/49 will also only
work if you're both clear that the 51% has the deciding vote on disagreements.
Otherwise, just a 50/50 split.

> We are currently working nights and weekends and making good progress. We
> both work very fast-paced, demanding jobs in Silicon Valley, which makes it
> hard to sustain our current pace without burning out.

Sure, I get that. Just make sure you're setting up times to talk to investors
now. Showing your progress and trying to get customers.

> Would you suggest that instead of cannibalizing our existing funds, that we
> just stop contributing to our 401(k)s and save more cash for our startup? Or
> should we continue to save for retirement at our previous pace?

I'm never a fan of holding off on saving for retirement. Keep putting it in if
you can afford it.

> I am definitely in favor of doing this, but like you pointed out, the MVP
> could take twice as long even when working full time.

True and you will know best of the time frames here. I have no idea what you
are building. ;)

------
kiraken
Well, i've helped hundreds of startups launch their product, and you guys are
more prepared than 90% of my clients. You have enough money to survive for a
long time, the technical knowledge to create your product ( I assume ) So you
wont have to hire external help and a low burn rate. As for your friend's
debt, it can wait for now, and you'll always have the 401(k) as a fallback If
push comes to shove. Though its worth mentioning that you guys shouldn't
probably quit your jobs until you pitch your idea for some random people, and
see its viability in the market. All our ideas seem great to us, even if
they're not.

As for when you should start raising money, i think that you should start
pitching investors while you're working on the MVP to not lose time. And
schedule meetings right when the MVP is ready.

There are a lot of other things that you should consider too! Feel free to
reach out to me on Quora. I usually answer questions there and help new
founders in my spare time. For free of course.
[https://www.quora.com/profile/Aladin-
Bensassi](https://www.quora.com/profile/Aladin-Bensassi)

------
brudgers
My random advice from the internet:

\+ Tap financial resources as you go. You will [hopefully] be iterating.
Limiting the amount of cash in the company will reduce the chance of
overspending on dead ends. Manage cash flow: 20% of $20k is a lot less than
20% of $100k.

\+ Paying off student debt is foolish. $20k is 10 months living expenses. Over
that 10 months loan payments are probably about a quarter of that. That's an
extra six months of life.

\+ Divide the company 50/50\. If there's success, the 2% difference in equity
isn't worth fighting over, the 100% difference in control is. If there's a
disparity in initial investment, make it a loan with moderate interest if you
must. Otherwise, one founder taking control of the company from the other is
within the rules of the game.

\+ Working toward product market fit is more important than building a proto-
type. It's also harder because it requires talking to people and changing
direction and dealing with rejection rather than going head down building a
prototype using familiar skills.

\+ Tap into your 401k when there is a clear business case for doing so. You
can't blow it on Aeron Chairs and Macbook Pros and Google Adwords until you've
got it to blow. Wait until you really know what you're doing.

\+ How much money you should save depends on the business model. A SAAS can go
up on Heroku for ten bucks a month. The first quantum smartphone is another
matter.

\+ The worst course of action is to spend six months building something, uveil
it, and discover nobody wants it. What you're building is a company.

Good luck.

------
AnimalMuppet
It's possible that you are building something that nobody wants. How long is
it going to take you to decide that you have failed (if you do)? Do you have
enough money to get that far _and still recover_ (find a new job before you
are bankrupt)?

------
sharemywin
I didn't see any kind of marketing, sales plan. Your story would sound much
more interesting with 10 customers lined up to give you $500/mo when your mvp
is ready to go.

------
new_hackers
"We can live with family members -- so rent will be free"

Boy how generous and mature of you to take advantage of your family while
building your empire. Also does that $1000 include paying for your own
insurance? What are you going to do if your dream fails? Continue to live at
home?

It sounds like your plan is only accounting for if everything goes exactly
right.

Personnally, my recommendation is to do this:

\- continue working. If you really want this, you should be able to build a
MVP on the weekends (it didn't sound like you were married or had children)

\- live on $1000 per month including savings and tithe. So for $1000 of
"income" you should be able to live on $650. if you can't really do this, then
adjust your required income numbers

\- figure out how much you would need to live on your own. Add that to your
income requirements. Then if you still want to live at home, then pay your
parents. That food, laundry, property tax etc isn't free. They have to pay it
and they have much less earning time than you.

\- do not touch your retirement, you will need it later

\- pay your debts, if you do the plan above, your friend should still have
enough real income from their job to pay off the loan

------
meric
I have not started a startup:

1\. $1,000 / month / person sounds sufficient, living with family.

2\. I think paying off the loans are good idea, since the loans carry
interest.

3\. Your username is "trynabootstrap". What would it take to know your product
either falls flat or bringing in regular revenue? Do you need to raise money
for that? Before you raise money, you will continue to have the option to go
back into full time work to "recharge" and work on this part time, and then
quit the job a year later and work on it again. Once you've raised money, this
option won't be on the table anymore.

4\. No, I don't think tapping into 401(k)s and Roth IRAs is a good idea.
That's the kind of thing I rely on in case my own money making schemes fail.

~~~
trynabootstrap
> What would it take to know your product either falls flat or bringing in
> regular revenue? Do you need to raise money for that?

We will likely need to raise money. My cofounder and I have a wide variety of
experience, covering machine learning, data science, and site reliability
engineering. We would like to hire a data scientist with deeper and narrower
experience to handle some of the most difficult mathematics.

We can build the first version of the product by ourselves, but our product
(enterprise SaaS) is not likely to gain traction until someone much better can
performance-tune our algorithms. We would also need a strong UI / UX engineer,
a designer, and a corporate salesperson -- but we can probably hobble along
for longer without those roles.

~~~
sharemywin
Until you have at least one but probably both of these people identified and
"recruited" it sounds like your dead in the water to me. Unless, you have
someone that's willing to give you money to find and recruit the missing
pieces. I'm not trying to be negative just suggesting what you need to focus
on.

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ramtatatam
If your product is creating new market then consider how long will it take to
close a deal. If you plan to have a MVP in 6 to 12 months and closing the sale
can take up to 6 months (in our industry it can take that much) then you need
~18 months (you can start selling your idea, pitching, seeing your potential
customers - in such case this time can go down). Also your money pot should
pay somebody to do sales, marketing and operations for you (unless of course
you do it yourself).

~~~
trynabootstrap
You bring up a good point -- our customers will definitely take a significant
time to make a sale. Ideally we will raise enough money to wait out the long
sales cycle and use that time to make our product more attractive.

We definitely need a strong sales lead, but we hope to pay for that role
through outside investment.

If our estimate (20 months of runway in the bank) is correct, then we should
have enough time to raise capital after 12 months of MVP-building.

------
jf22
Are you sure you can live with family members for over a year?

------
eulji
i wonder if you guys have considered moving to much cheaper country like
Thailand or Malaysia. Or is being in the US part of the success ?

~~~
trynabootstrap
We have considered spending some time in Thailand, but we are concerned that
the fixed costs of moving (plane tickets, visa, etc.) would outstrip the
month-to-month savings unless we chose to stay there for over a year.

While our project estimate could be wrong, we intend to spend much less than a
year working on our prototype before we can raise.

Our potential customers are almost all in SF, NY, LA, DC, and Boston. If we
stayed in America, we would not be living in any of those cities, but could
travel to some of them by car.

