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How To: Spend your investors’ money (stu.mp)
128 points by jnoller on May 8, 2011 | hide | past | web | favorite | 24 comments

My question is, how do you get $500,000 for a feature you can get by clicking "Show Search Options" in Gmail? I do get the bigger picture but I don't see how to monetize it or prevent Google from mimicking it a 1000% better if it gets popular.

I suspect there's a profitable sized market consisting of "People who don't want Google mining and indexing all their mail".

You could make gmail "the best email reading and management experience on the planet by 2 or 3 orders of magnitude", and they're still not going to end up handling mail for the nsa.gov domain. I'm not sure how far down the paranoia scale from director@nsa.gov you need to go before having Google index your internet-cat-pictures and know your social graph becomes the right choice, but there are certainly people with email management needs that Google are not going to address.

At this point we're not just a tool for searching attachments in Gmail. We support Yahoo Mail, Twitter, and Facebook as well. We also plan to branch into other services, e.g., general IMAP. We let you pull together these various accounts into one simple, visualized, central index.

The philosophy of "why build something, because company x, with infinite money, will just build it better" I think is a flawed one.

>The philosophy of "why build something, because company x, with infinite money, will just build it better" I think is a flawed one.

Fascinating quote, but do you think you can articulate why it is flawed? Was it something your investors asked you?

I think the hardest question to answer for a lot of startups is "what happens if [company X with infinite money] decides to copy you"?

My first instinct might be to say I'm one of the top ten or twenty people in the world who are capable of writing the code for my product (however arrogant that might sound), but even if that's true, that still leaves nine or so others that Infinite Money Company could recruit to compete.

Is truly the only good answer being the very absolute best in the field, or are there other good answers?

I think there is a very real danger of competition eating your lunch, but you can't let it frighten you too much, or let it stop you from executing on a good idea. It has been my experience that large companies sometimes lose their ability to rapidly iterate on a product. Maybe it's not even in their best interests -- if you have a killer product like Gmail, there's not a strong motivation to stray too far from the course. It leaves room for companies to take those risks, and find out where there is room for innovation.

1. You can't search your attachments in Gmail. At least I can't (though these days with split testing you never know).

2. Ben and Jesse are in the top 1% of Toronto talent. Ben did his masters in NLP.

3. Google has a history of buying off companys like this for 20 to 30 million, so if you're an investor that is comforting.

4. Jesse has cofounded a successful company before.

What is the investor expectation on runway for a seed round like attachments.me did? 12-18 months?

Very helpful benchmarks. Anyone know why there should be a premium per employee for a platform as a service company? Why is PaaS any different from any other startup with regards to a per employee burn rate?

The article says:

> The thinking here is that SaaS/PaaS companies require more infrastructure, better/higher quality infrastructure, more bandwidth, and more senior/seasoned engineers.

It's less cool therefore it costs you extra money. That's why engineers in finance cost more than non-finance engineers.

I would imagine part of it is that SaaS and PaaS startups have an easier path to revenue. For most of them, a single user means revenue, which means you have more wiggle room for salary. It's also easier to do long term planning if you have recurring revenue streams and possibly multi-year contracts.

Higher up front infrastructure costs would be my guess.

I love stuff like this. It's like answering a question to which everyone wants to know the answer but is too ashamed or overly confident to ask.

It would be interesting to know the variance in responses. I know this wasn't meant to imply statistical significance, but I'm just curious what these results would be with a larger and more random sample.

We hire overseas, so we get by on around $6,000 per month per employee.

I'm employee #1 at a Canadian startup, and they get by paying me about 3300 per month, before tax. Based on my asking-around, this doesn't seem to be out of the ordinary for the area.

That's only one portion of the costs. Besides the associated taxes and insurance they have to pay rent/utilities, purchase equipment, etc etc. The quoted figure was total expenses / employees, not employee compensation.

Correct - the term used is "fully burdened cost per employee". The general rule of thumb is to multiply salary by 1.25 - 1.5.

The figure I've heard is 1.25-1.5x base salary.

That sounds right for direct staffing costs (health insurance isn't cheap!), but low if you mean counting in all the other stuff. I suppose it depends on the business--someone like Dropbox spends a lot more on servers than say Groupon.

Right, that's for the incremental cost of each employee: taxes, benefits, equipment (for the individuals, not servers), office space. It's useful for calculating how much a new employee will cost you.

I've always used a rule-of-thumb of a 100% overhead rate for employees - it's a spectacularly easy number to work with mentally, and its right to well within acceptable error bounds an awful lot of the time.

If I'm paying you $90k, I'll expect to incur an additional $90k in costs resulting from employing you.

Server costs will continue to decrease, whereas salespeople will continue to demand more (we aren't going to lower the minimum-wage).

Not sure where you are in Canada but I know thats pretty damn low for big cities like Toronto, Ottawa or Montreal.

Depends on what you're doing there. But yes, cost per head is not 100% compensation. If you've got multiple employees @ a start-up making $180,000 per year there's an issue.

//Now, if they've re-mortgaged their house and are eating $180k per annum in equity / stock instead of salary, then it could be an almost-fair-number.

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