So, you’re about to close on a $300k seed round and investors are asking for a first-year budget. Not having started a company before, the $300k number seemed right since other startups were raising a similar amount. Time to allocate the $300k and come up with a plan.
Here’s an example $300k budget for the first 12 months of a startup:
- Salaries
– Two founders with $40k salaries = $80,000
– Lead engineer @ $70k salary = $70,000
– Employer taxes = $15,000 - Benefits
– High deductible health insurance for the individual only @ $200/month times three people = $7,200 - Legal
– Help with closing, operating agreement, and other standard docs = $5,000 - Domain Name
– Great domain name = $5,000 - Design
– Logo and simple branding = $1,000 - Office Space
– Three team members plus an un-paid intern for a total of four people @ $300/month = $14,400 - Equipment
– Used MacBook Airs for four people @ $1,000/each = $4,000 - Web Hosting
– $1,000/month on Amazon Web Services = $12,000 - Web Apps (CRM, marketing automation, help desk, accounting, etc)
– $1,000/month = $12,000
Adding up each of these items comes to a total of ~$225,000. Thus, the $300k seed round pays for a small team to work 12 months to find product / market fit with a healthy cushion to experiment on more items or stretch the runway out six more months (things always take longer than expected).
What else? What are your thoughts on this $300k budget and how would you change it?
David Cummings on Startups 
One point. If you need business org setup and closing documentation a lot closer to $15k for legal. If there are attorneys on both sides you can almost double that to $30k for legal fees and due diligence. Bill Payne has a couple of good posts on pricing legal fees.
Very interesting topic!
I would say it would be challenging to find a lead developer at $70k. I guess It really depends what part of the country you are in. In Los Angeles a lead developer will be minimum $100k and most likely $125k for a good one.
Agreed, it’s definitely dependent on geographic region and amount of equity.
Nice article. Well thought out. Informative and concise!
How do you define “simple branding” and who is writing website text, marketing materials, press releases, RFPs/RFQs, speeches and managing media relations?
Often the founders are doing that for a seed stage startup.
Excellent budget starting point. One question: web hosting for $1000/month seems extraordinarily high, especially during the building stage. Seems a startup could pay much less than that, either on a godaddy account or by utilizing AWS free tier. The logo & simple branding number is good. I recently used 99designs.com to get a logo & branding colors done for <$500.
A good addition to this post is equity exchanges with the salary which may slide the money equation up and down a bit. $70k for an engineer with 5% of the company, etc…
Agreed, great point
great follow-ups, per usual.
Good to Great domains sell for far more than 5k…. and to settle on a so so domain name only later to bleed out branding a subpar business name isn’t wise.
I’ve purchased a ton of good domain names for less than $5k.
Ya you can find some but the majority of great domains cost far more. http://www.dnjournal.com/domainsales.htm and thats just the reported sales for last week. But if you or anyone else needs a specific domain name for a certain vertical I can find you one best domain names that defines exactly what you do or offer. Drop me line
Me too, but not as many as I’d like 🙂 It’s a fair budget range for generalization purposes, but single word dictionary domain names, like Rigor.com and Rivalry.com for example, don’t usually land in that budget. Good on them if they got them at those prices though. You can stay within that budget and pick your company name from a list at brand bucket or similar services and they even toss in a logo (shaving more off that budget) ! 😉
If you can’t acquire the ‘ideal name’ within your budget, be careful choosing an alternative. Many entrepreneurs pick something similar (playfoursquare.com, thefacebook.com, twttr.com) and end up going after the ‘ideal name’ later. Historically, this has cost entrepreneurs more later. Picking an alternative or a bad name altogether may end up leaking traffic to another site or cause consumer confusion (flickr.com vs flicker.com) As a hedge, see if you can lock up a domain name in some kind of an option or lease arrangement. If you’re a huge success down the road, you don’t want to have to try and buy that ‘perfect’ domain later.
Great post. What about a sales guy. I have found that starting with a great sales / channel guy is essential to rapid growth.