All I can do is write about it. Some excerpts.
Why should you raise money, and how much?
- Step 1: When you’re ready with an Idea: Raise $100K from friends and family, and use it to build a prototype.
- Step 2: Once the prototype is done: Raise < $1M in seed capital, and get into market with an alpha launch.
- Step 3: After that initial launch has traction: Raise $5-10M, and use it to prove/scale the model.
How the $100k was spent:
- Founders: $30K/year living expenses
- Engineering 1st hires: $30-50K/year
- Office: $400/cube/month
- Tech: $10K
- Legal: Deferred payments for 0.50 – 0.75% of company
Roughly, 2 founders + 1 engineer/contractor = $150K/year burn.
The $750k seed round:
- Salaries: $50 – 90K/year ($450K/year for 5 people)
- Overhead: +20% ($100K/year)
- Legal: $25K + $2K/month ($50K/year)
Which gave them 12 months to get to their first venture round. Which looked like this:
- Salaries + Overhead: $200K/year/person
- COGS: Varies, but even one-time expenses magically add up to $150K/month
- Legal: $10-50K/month
Total burn for a 30-person team: $6M/year.
Go read Christine’s entire article Great stuff!