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Comment by baby | Hacker News Reader

Maybe a stupid question but.. Where does the money go when a little startup or this kind of startup raise fundings ? in advertisement ?

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A start-up is no different than any other company in terms of expenses, and usually their expenses outstrip the earnings, especially in the beginning.

So typically you need to spend money on:

- an office (unless you're really tiny)

- people (freelancers, employees)

- overhead (legal, administrative)

- communications (phones, network connections)

- hardware (computers for your employees)

- office furniture (but second hand is fine)

- marketing

and so on.

Plenty of those are 'one offs', so they at least won't be back next month, but if you grow quickly there is more money in each of those categories in the first months to years.

Starting up can be expensive, depending on how labour intensive your company is.

Three reasons: 1) To hire and pay for costs 2) To have great people involved with building your company. 3) To have leverage for if you ever had to raise more money.

In addition to the usual list of costs in employees/hosting/office space, I presume since this particular product does integration with Banks, you would need funds to setup proper compliance with various security standards that are mandated.

Presumably hiring, mostly. Salaries can burn through $1M pretty quickly.

A million dollars really doesn't buy a whole heck of a lot. A 10 person company (which isn't that big, assume a CEO, three or four developers, a support person, a tester or two and a couple sales guys plus offices, incentives, and other expenses and you're north of a million in expenses per year easily).

Or another way to think of this...it's better to use this money to try and boot strap and hit profitability to grow out slowly and organically than use this as immediate ramp-up money to build out a huge team and hope that lighting strikes.

I love that you used the phrase boot strap in the same sentence as a million dollars...I understand the concept, don't blow the money on a big team, but man, for us people bootstrapping, selling possessions and hoping the $1000 a month salary turns into $2000 before there isn't anything left to sell...

Kudos to anyone bankrolling their own start, I've been part of a couple of those in the past and I hear you. My wife is trying to bootstrap a company in the same sense that you are. Instead of a million dollar investment, we've "invested" what her old salary was (she quit her job a few months ago to explore doing this).

But it's obvious that she's going to need some more money than that to hire a designer, a part-time lawyer, pay for hosting and probably get one more developer for what she wants to do...and we simply don't have the cash for that. So she's seriously thinking about looking for an investor to hire those people. A quarter million would probably cover those expenses for 18 months.

I don't know what to call that, "investor assisted bootstrap"?

It's definitely a different model than "I have an idea, give me money, I'll go hire 20-30 people and we'll make a go at it for a year", which is certainly not bootstrapping.

My own company tried that "instant company model" a few years ago and it didn't work out, so we reconstituted the company with different leaders and different VCs, and now are following this hybrid mixed bootstrapping model...and you know what? We're doing much better.

Well, most of that is solved by conceding equity rather than hiring an employee. Two people can realistically, if pushed really hard, produce something that can succeed. A part time lawyer...Are you doing something involving other peoples money? Designers are cheap on a contract basis, usually available for less than $5k, as long as you are fine with diving in and filling the actual gaps, starting all the CSS yourself, etc. Let the designer do just that, design, and if you are OK with an image of a good design rather than a fully implemented HTML/CSS layout, you can get by with MUCH less than $5k. Finally, our colocated machine is a mere $50 a month. Granted, it's on our own hardware ($2000 split between my other founder and myself), but it would have been less than $70 a month for dedicated leased hardware.

There are many options, depending on the type of business you are starting. I'd argue that some of the best heavily involve the founder(s), rather than farming out to other people, as it gets the founder(s) intimately familiar with the roles they will be hiring out later.

Growth. Skilled engineers don't come cheap, when you're trying to steal people who are good enough to get offers from Google or Facebook.

Engineers, hardware and services (such as bandwidth). Not necessarily in that order.

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