Ask YC: how much of 120k was left at demo day? | Hacker News Reader

Ask YC: how much of 120k was left at demo day?

13 pointsac2u18 comments

Given the recent talk of being extra careful about burn rates I would like to get an idea of the average burn rate of a YC investment in the run up to demo day so that I can plan for my own YC app. Did you have 50% left, 20%, more investment or broke? Thanks in advance.

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I think it's a reasonable question. The answer is almost entirely dependent on how many founders/employees you have and if you're drawing salaries or not. Salaries are by a country mile your most expensive cost.

It should be roughly enough for around 4 people to be pulling $90K/year salaries for 3 months with a bit left over for other stuff. So not a ton, but enough to do something interesting. The expectation is you'll be raising another round right after YC.

Thanks for your answer. I find the more figures I have in general about how money moves in and out of the company over time, the more I feel I understand. It's really more of a question to get my head around the burn rate for early stage valley companies that are living and working together and your answer helped.

It was a little annoying to see some folk answer back with an invalidation of the question.

One caveat is that I haven't gone through YC, however I am running my own startup right now in Los Altos/Palo Alto.

Our next biggest expenses after salaries are legal bills and IT stuff. I believe YC really helps keeping the legal bills down (we're not so lucky), and many cloud services companies will offer you free cloud servers (including my own; do you need any instances?). Oh, also, office space costs an arm and a leg here, but presumably you can just work out of someone's house in the true start-up spirit.

Other than that there's not much to worry about at first unless you need a foosball table. You're not going to have much time to play it though.

Knowing how much money you'll have left after Demo Day doesn't say anything about the state of your business, or if you did it right or wrong.

What you can do is estimate your runway length based on ramen profitability. That should give you a rough estimate of your best possible scenario (i.e. no other expenses). At least you'll know how much an unforeseen cost will shorten that period. That's the only thing you and your co-founders can relate to, and have to know.

> I would like to get an idea of the average burn rate of a YC investment in the run up to demo day so that I can plan for my own YC app

How would that be helpful your YC application?

The talk about burn rates is for startups that have raised $millions. $hundred-thousands are barely anything when determining burn rates. ($120k is the cost for one engineer)

I'm aware the recent talk is geared more towards seriously funded companies, but I would like to get a feel of the figures in general from the first few months of YC.

When talking to potential co founders (a lot of which have never heard of YC), I'd like to be able to give them a picture of how the investment typically gets spent during their time at YC.

Your business needs should be dictating your burn rate. What's it matter what other people are doing?

It doesn't matter what specific companies are doing, but it's always helpful to know how the experience goes on average.

The average experience for startups is failure.

Exactly. There's no such thing as an "average experience" in creating a startup--our industry is not that commoditized yet, thank God.

You should plan to have somewhere between $153.23 and $724.78 left by demo day. Your burn rate is a proxy for your company's growth. If you have too much money left, investors will think you're not growing fast enough.

Build a snapchat clone in a month. Oh crap there's $100k left! Show up to demo day in a Tesla Model S.

Additional funding after demo day could take weeks or months. You would want some money to run your company in the meantime.

$153.23 to $724.78 is more than enough to keep a couple of t2.micro AWS instances going and ramen in the cupboard for a few months.

Remember: the period after demo day and your second seed round separates the winners from the losers. This is when you have the greatest opportunity to show investors that you can hack life and hustle. Pull it off and your investors might even agree to an uncapped convertible note.

$153.23 to $724.78 is more than enough to keep a couple of t2.micro AWS instances going and ramen in the cupboard for a few months.

And how about rent for said cupboards? At least a few grand?

Like I said, you need to hack life and hustle. If you're paying rent, you're doing it wrong and any reputable Silicon Valley investor will tell you you're not hacking and hustling hard enough.

It's bad enough Y Combinator upped its funding to $120,000. Entrepreneurs did a lot better with $5,000/head.

You're contradicting yourself. You're saying you should spend the whole $120k before demo day, but you're also saying you should hack and hustle like you only have $5k per head.

you're feeding the troll.

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