January 20, 2007

Creating companies on the cheap, basics for round one startup and an event on bootstrapping

Category: Entrepreneur,Technology,Work — by Amit Chaudhary @ 4:05 pm

Creating companies on the cheap

It started by reading in John Cook’s Venture Blog: A $50,000 burn rate which talks about Newsvine which claims to have a $50,000 burn rate with 6 employees.
The above blog entry was in turn triggered by the article: WallStreet Journal: Tech Start-Ups Have Money to Burn, But Choose Thrift which talks about Silicon valley companies having a typical burnrate of US $150-200k per month, it does compare unfairly with Paypal which used to give money away for opening accounts or referring another user.

Interestingly, most of the startups mentioned in the WSJ online article was in nice locations: Membo, Riya and Sharpcast.

Two interesting view points

O, sure, you can build some Web startups around two founders with a good idea and $50k in seed capital for the first year if the founders forgo their normal salaries, but, assuming the founders normally make ~$150k/year in salary + benefits, the real cost of that startup in the first year will be closer to $350k.

Capital efficiency, in and of itself, isn’t an achievement. The achievement is building a great team and great product on a shoestring budget.

My thoughts

Some basics should be there once you have outgrown the founders only (proof of concept) phase and are in round one funding. These might vary for each, I would include:

1. Good location (Reduce commute, Have atleast one conference room, etc)

2. Furniture which is Ergonomic (No Herman and Miller chairs, but no making tables from doors like amazon.com either) as one sits for many more hours and Fast computers.

3. Small break room (Coffee, Tea, Microwave, Refrigerator)

4. Competitive salaries to be able to hire good staff, Decent benefits.

Finally, it comes down to thinking what scale are you going for: Thinking in context of a startup, Do you want to start a MyBlogLog or Facebook. Sometimes you can choose, sometimes your idea and product space will decide it for you.

An event on bootstrapping

On the same topic, consider there is a TIE Seattle event on 24th Jan 2007 Wed in Bellevue, WA

Bootstrapping: The secret to entrepreneurial success


A different point of view in Fractals of Change: Web 2.0 – Greater Initial Investments Required and Changing Ingredients for Web 2.0 Success – Continued with Reader Help.

A indeed.com salary comparision for startups v/s venture backed (Idea from Fred of A VC Blog)

On an average, venture backed startups openings seem to have 10% more salary.

View Larger Startup Salary Graph

View Larger Venture Backed Salary Graph

Update 2:

You might also be interested in Brad Feld’s article: Bootstrapping Top 10 List

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