

Ask HN: founders, how much you had in the bank when you started your business? - gilbax

I just graduated. I have $5000 on my bank account and want to dive into a project of my own, full time.<p>I wonder if I should earn a bit more by working for a while, how much did you have when you started ?
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patio11
This depends totally on your needs, ability to make money going forward,
comfort with risk, etc. My bare minimum personal burn rate is about 1.5k per
month, 2k at my usual standard of living. I quit the day job with about 5k in
liquid savings, a retirement account rather larger that I haven't touched, and
some consulting work lined up to cover the summer months. It was all but
certain that sales from September on would cover all my expenses.

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SIK
What city do you live in? Can you break down the $1.5k and $2k rates?

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patio11
A small city in central Japan you may not be familiar with.

$450 rent, $300 utilities (power, gas, water, sewage, data data data), $100
gym, $500 health + pension, $250 food + sundries if I live the cheapest I have
ever achieved living. $750 on food and sundries if I live how I actually live
(e.g. eating out, entertaining, going out with friends, what have you).

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DaniFong
I had about $300, plus thousands in student debt, a couple of weeks before I
took a flight up to Cambridge for the YC interview that sparked my first real
entre into starting up. Starting up was a mad, year long scramble of part time
jobs, slum apartments, long train commutes, various trial cofounders and
ideas, writing, and, finally, one idea that stuck.

It's only something I can recommend to a certain kind of person, but the
experience of crawling out of that does give a person a certain kind of
strength.

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ScottWhigham
OP, you have given us only one piece of information (how much you have saved)
out of a necessary 20 data points or so and you expect quality advice?
Impossible. @nolite said "3 months rent + unemployment" but is that really
valid? No, it isn't. His/her advice is predicated on the idea that you will
start making enough money within 3 months to cover your expenses. We have no
clue what your business is, how much you expect to make, what your model is,
etc. There is no way any of us can offer help without knowing that information
as well.

Your question is a fine question to ask but, unless you provide more context,
there is no way that nearly anyone with experience will want to spend the time
working through all the possible data points.

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acabal
When I started development on scribophile.com I was in college and working
part-time. I had maybe $5000 in the bank. My big financial risk was paying a
freelance graphic designer $100 for a few FB-like gift illustrations and
laying down $500 in Adwords spend for the first month after launch. After a
few months it was paying for itself and had returned my small investment, and
it's been growing ever since then. Nowadays I have significantly more in the
bank, but developing and launching the site was practically free (besides sunk
time costs).

If you want to do your own project full-time, make an estimate as to how much
it costs for you to live in your area per month. $1000? $2000? It's hard to
say because it will depend on where you live. Set aside 12 months worth of
cash (6 months for dev time and 6 months to give yourself some time to make
money after launch) and maybe a little extra for emergencies, and get to work!

Of course this is assuming you think you can become ramen-profitable in 6
months. Many people haven't become ramen-profitable in years, or ever. It
depends on what your living expenses are and how you are monetizing your
project.

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paraschopra
It totally depends on where you are living and what your general lifestyle
costs are. I'd have at least a year worth of savings put aside before thinking
to start of a startup. This will act as a security nest, which will help you
survive while you are searching for a job in case your startup doesn't work
out. Oh, and definitely take health insurance first before you dive into
startup world.

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garply
20k USD and living costs of 400 USD per month. Also, very marketable skills:

Teaching English in China can get you that 400 USD rather quickly. Also, if
you can do basic web development, you're pretty marketable (this pays
relatively better than English, but English jobs are possibly easier to find
than software consulting).

Unlike a lot of people starting a business, I had almost no fear of starving
on the streets. When it comes to ensuring that I both have food and own as
much of my time as possible, I try to eradicate risk as thoroughly as
possible. Having a minimal financial footprint and redundant contingency plans
allows me to do that.

Thankfully, these days, I don't need the side-jobs, I mostly just focus on
growing my business's profit. When I want something unusual (new monitor, new
advertising campaign), I just sleep a little less and pull in the extra money
with some software consulting.

You can call it the lazy loading approach to finance.

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enjoy-your-stay
What you have in the bank is irrelevant, it's how far down the development
road that money will take you that counts.

That's a calculation only you can do with your current living costs in
addition to estimated cost of equipment, services, software, office space, and
probably lots of other things you would never imagine (legal costs, accounting
costs, cost of incorporating for example?)

If you're asking the question then I guess you haven't done these calculations
yet - but putting them all down on paper (or spreadsheet more appropriately)
as well as a realistic development timeline will tell you what you need to
know.

Good luck! If you never try you'll never know.

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arethuza
It's going back a bit but when I co-founded a company my wife and I
effectively had no money that wasn't already committed to paying for other
things (she was at law school which we were paying for using our own savings).

However, what we did have was a contract from a client giving my co-founder
and I a years guaranteed work. In that year we found enough additional work to
raise the headcount to four people and be fairly profitable - which we used to
support the work required to eventually get VC investment and switch to
product development. We got our first round about 2 years after we actually
started trading.

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mprovo1
As long as $5000 is enough for you to survive 3-4 months, go for it. As others
pointed out, calculate your burn rate and make sure you won't call it quit
after a month. You need enough time to put a MVP out there!

As a side not you will probably lose the money, but the learning experience
will be invaluable :) From what I understand sounds like your burning rate
should be pretty low. $5k could be enough. The risk seems minimal. You are
just out of school, not leaving any kind of high paying job (anyways, you can
always find one if you fail). The worst case scenario is losing that 5k.

You can do it!

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ashitvora
I would say, If you have money to pay your rent and bills for the time you
need to get first version of your product out, go for it.

Also, have a good cofounder. You might have heard this many times but this is
true. A good cofounder will take away some burden from your shoulders and you
will keep you motivated.

If your idea works out, its good. If it doesn't, not a big deal. You will have
learned alot along the period of time which will help you get better job than
you would have got when you graduated.

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cullenking
$0 in the bank, but enough sidejobs here/there to keep my cheap lifestyle
going. Now, the company is returning enough to pull a tiny $1k a month in
salary, which is getting me by.

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rmah
I've bootstrapped two startups. For both, I and my partners invested a few
$10's of thousand in the business and had enough funds in the bank to cover at
least 6 months of normal living expenses.

Two lessons I learned: we should have invested more money in the company and
had more money in reserve. If I was doing it again, I would not be comfortable
without at least 1 year of living expenses.

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gallerytungsten
A really basic rule of thumb is the following formula: 6 months of living
expenses, startup expenses, and 6 months of business operating expenses. Do a
simple spreadsheet to test if the numbers work. If you have that amount, go
for it.

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aeden
Get a job and continue to earn money while working on your project on the side
at first. You have more energy than money right now, so use that to your
advantage.

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revorad
About £15,000 living in London. More would have been nicer but didn't want to
make things too comfy.

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amorphid
$75 + hopes & dreams.

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maxawaytoolong
$80,000

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nolite
3 months rent + unemployment

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rmah
Strictly speaking, it is against the rules in the US to collect unemployment
if you've started a new business. It does not matter if you have revenues or
not. Be aware that filing for incorporation, LLC or DBA may cause your
unemployment benefits to be suspended.

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pbhjpbhj
In the UK we borrowed money against our property (as house prices had
inflated) in order to set up our business. We had no money of our own (£300 or
so), just overdrafts to live on and were refused unemployment benefit. It was
2 months or so before we were going to be able to open our studio (building
works, planning permissions, etc.) and neither of us was employed by the
company into which the money had been vested (as director's loan).

Hard times!

90% of UK businesses fold in the first year, I can see why.

Basically the message was, sit and do nothing and we'll give you a house and
pay you unemployment (until your payed in years of NIC have run out at least).
Start a business on credit and we'll let you starve.

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togasystems
negative $25 000

