Gimme Three Steps

I know a little about startups and have written quite a bit about the various stages of a startup on FoG.  I was pretty darn proud of myself.  Not anymore.

Christine Herron of First Round Capital has a simply brilliant summary based on the wildly successful MINT.

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!

October 7, 2009  |  Comments  |  Tweet  |  Posted in Entrepreneurship, Startups