Budgeting for Tech-Startups

[canone]

Hey guys, I am reading and hearing a lot of stories where the founders can't get by with the money they have, make 6-7 figure in sales per year and still have debt or don't break even. Miscalculating is a big reason for startups to fail, even if the idea was great.

So what are the key aspects when it comes to dealing with your budget to succeed? How do you bootstrap correctly even if your customer aquisition cost is a bit high / in the normal range? What things need the most money in such a business (servers, coding, marketing,...)?

Please feel free to tell us everything else that you think may be important, even if it's not specifically asked here. OGs are very welcome to share their experiences as well. Thank you and have a nice day y'all.

 

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[Victory!]

Are you thinking about venture capital backed startups or bootstrapped startups?

The idea behind venture capital backed startups is to snowball growth at any cost. You basically throw a ton of money at a problem in order to acquire a huge market share and outdo your competition. A lot can go wrong here. Then you exit and unload the problems onto somebody else, wether that be another company via an acquisition or retail shareholders via an IPO. At this point, the company starts trying to improve profit, the cost cutting starts and the quality of the product tends to go downhill.

With bootstrapped startups, the reality is that building good software is time consuming and expensive, especially if founders have to hire engineers. A common problem I've seen with companies I've worked with is that founders rush to build a solution and waste a ton of money building before validating if people are actually willing to pay for what they've built. Sure they get some sales, but it's not enough to sustain the business. They realize they've spent a ton of time and money and not enough people are willing buy. If you build something great and solve a real problem, people start lining up.

 

[Andy Black]

Hey guys, I am reading and hearing a lot of stories where the founders can't get by with the money they have, make 6-7 figure in sales per year and still have debt or don't break even. Miscalculating is a big reason for startups to fail, even if the idea was great.

So what are the key aspects when it comes to dealing with your budget to succeed? How do you bootstrap correctly even if your customer aquisition cost is a bit high / in the normal range? What things need the most money in such a business (servers, coding, marketing,...)?

Please feel free to tell us everything else that you think may be important, even if it's not specifically asked here. OGs are very welcome to share their experiences as well. Thank you and have a nice day y'all.

I only worked for two businesses since 2000.

One was profitable from day one and scaled to spending €120k/day - with no real product I might add.

The other was a sexy "tech startup" that focused on building a social network, burned through €40m in funding, and was sold off for a pittance because it never made any revenue.

Which type of startup are you referring to?

 

[aminsafiq]

I have no advice regarding budgeting for tech startups, for now. However, you've brought up a good topic and this is something I've been thinking about recently as I'm working on my first SaaS business/product.

Nevertheless, I'd recommend reading the book The Lean Startup by Eric Ries. This book teaches how to minimize waste (of money, time, energy and resources) and avoid building products/features that have zero demand/need. You do this by building bare minimum feature-rich products to test out their need/demand and learn whether your customers want it or not--this is AKA a Minimum Viable Product (MVP) in lean startup lingo. A successful entrepreneur that I admired back in my country suggested me to read this book when I told him that I wanted to start my tech business.

For me personally, I like to keep my costs (of time, money, energy and resources) at their bare minimum because I'm funding myself. I'm a programmer myself and also love business, so I'll do everything--from business to marketing to sales to coding--probably later I need to hire someone or some ppl for customer support when I have a larger customer base. (I'm NOT affiliated with any of the products/services I've mentioned here) I've bought a cheap dot-com domain yesterday from PorkBun, then set up a free (zero-dollar) business email with Zoho Mail. Then, to test out the initial interest/demand for my SaaS product, I've used Google Sites and connected that with my domain (yes, GSites does allow custom domains for free, so does ConvertKit). I've used GSites (instead of coding) to save my time and energy basically because, for now, I mainly need a landing page to capture emails from interested potential customers. So, my first MVP is essentially a little description of my SaaS product and an email sign-up form. This also builds a mailing list for my potential customers and users to test out my BETA products. I've saved my time, money, energy and resources.

I hope this helps. Cheers!

 

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[aminsafiq]

A common problem I've seen with companies I've worked with is that founders rush to build a solution and waste a ton of money building before validating if people are actually willing to pay for what they've built. Sure they get some sales, but it's not enough to sustain the business. They realize they've spent a ton of time and money and not enough people are willing buy. If you build something great and solve a real problem, people start lining up.

Good advice. Figure out a problem/need/demand first, then solution/product. Not the other way around.

 

[canone]

I only worked for two businesses since 2000.

One was profitable from day one and scaled to spending €120k/day - with no real product I might add.

The other was a sexy "tech startup" that focused on building a social network, burned through €40m in funding, and was sold off for a pittance because it never made any revenue.

Which type of startup are you referring to?

Hi Andy, I don't know if it's a "sexy" startup but I'd go with that in that matter How did the company burn 40m Euros? Was it all due to the staff/ rent? I am just trying to understand how a tech company burns money.

I would think it's mostly common sense, but maybe these startups don't focus on the consumer too much and only do what the investors tell them to do.