Ask HN: How much savings did you have before starting your startup? As a Canadian developer I look on at Silicon Valley software dev salaries with awe. Currently have 60k in savings, with the strong urge to start a company. Some part of me feels like the most logical path would be to secure a larger safety net by working in the USA, before taking on bigger risks. How large of a safety net did you have before beginning your startup journey? |
For all of them, I started with no safety net at all. Sometimes I had a side job (if you're starting a business, your business must be your main job and anything else is your side gig), sometimes I had an investor, and sometimes I white-knuckled it. There are obvious advantages and disadvantages to each approach.
Except for when I had an investor or side gig, I arranged my business so that it would generate some income from day one (that income being from efforts that were not what the business was attempting to do, but could leverage the same assets -- this was usually contract work. This is part of a business rule I believe very strongly in: anything you do should pay you in more than one way.)
That said, I'm currently preparing to start a new venture, and this time I'm building up a bankroll first, as I'm of the age where my risk tolerance is lower than it was when I was younger. My target bankroll is $100,000. That is money I can burn, and doesn't count retirement, personal savings, etc. $100,000 would let me work on the business without any additional income for two years.
I'm choosing to have a largish bankroll this time because, quite frankly, I don't want to have to make the sacrifices that are otherwise likely when you don't have an ongoing income -- and during the initial stages of a business, you won't have a meaningful income personally, it will be going into the business.
I could get by without the bankroll, as I've done before, but this time I want a little bit more comfort.
I should add that this is because of how I prefer to do business -- I am unwilling to take debt, large investments or VC money. Not that there's anything wrong with doing those things -- they just don't mesh well with my personality.
I still freelance 4 days, 1 day/week I'm building up a second venture, hoping it can replace another 2-3 days of freelance per week :-).
My personal burn rate is negative, so I have an infinite runway. Good thing, too, because sometimes it just takes a while for clients to build up trust. I've seen competitors come and go, they lasted 1 or 2 years. Others had to take investment money and have less control of the company now.
A couple of times I've invested full time in the projects for 2-3 months, hoping it would give enough of a boost to let me work on it full time, but the boost was minimal, and I burnt through a big chunk of the savings. It took a year to financially recover.
"Good things, sometimes, take time." - Lou Mannheim in Wall Street (1987)
The upshot is: they will probably take a bigger risk. Targeting enterprise grade hardware, rather than consumer internet. But in no way would I construe that as translating into a higher TAM, or probability of success, or ability to execute.
I feel incredibly blessed by my own position. Being able to bootstrap on little more than allotted cloud credits.
And to be honest you can start with less. There are people sourcing orders without a product first via pre-sales commitments. You can even get by without a landing page if there is already inherent market demand. An email address, a phone number, a side deck on google docs. Very little is required to begin testing your ideas immediately.
Best of Luck ;)
My advice if you are going to start a company and bootstrap it: cashflow is king. Ensure that you always have cashflow. Funded startup is an entirely different beast where the company itself is the product - so you can burn like crazy because you're (supposed to be) creating value in the business/IP itself.
Now, 60K in savings, in my mind is zero. I mean, you do need to live, and also working in your startup - very likely you'll need to spend at least 2-3K/month. You'll end up with no money in 6 months, and with your morals completely down.
If I was living in Canada, I'd keep an at least $200K safety net.
So 60k I would say can stretch to 2 years if you can keep your budget of spending just 2k per month. Once you only have 10k in your bank account and your business is not profitable yet you need a job.
I would say don't just calculate safety net based on savings but also on your employability. Good luck.
I think it depends a bit on the product you're building, how long you think it would take to validate, and your safety net (can you get some quick contract work if needed?).
Since I have started another company but this time I won't quit until it has proper traction.
You do not want personal finance problems on top of startup problems. They are hard enough by themselves.