[Discuss] Startup?

[blu at nedharvey.com (Edward Ned Harvey (blu))]

> From: John Hall [mailto:johnhall2.0 at gmail.com]
> 
> What about all the expenses for
> administration and legal services ? Isn't this part of why you'd seek an "angel
> investor"?

You'd *better* be able to swing that much yourself.  A few grand of expense here or there, and a year of working without pay...  Or enough taken via friends & family to be able to swing it.

No - your angel or VC investment (or ycombinator/masschallenge/etc) is at *minimum* $50k-$200k, but more typically $500k to $3MM.  These funds are mainly dedicated to hiring developers, licensing tools, marketing people and marketing expenses, manufacturing if applicable.  Things that are much larger than an individual would be able to take on themselves.

They're generally expecting you have some way of dealing with legal and administrative costs, sometimes even patenting, out of pocket yourself, and depending on a lot of stuff, might expect you to already have a working product and paying customers before taking on the investment.

I have been *extremely* pleased to see how much mileage we got out of asking people simply, "Would you be willing to work on credit - we'll pay you later if we can - or work for some vague promise of options - I promise a non-specific number of shares and a non-specific percentage of the company, when and if we create an option pool later?"  When people trust you to be honest, and they acknowledge the risk of the business potentially failing, and they understand they *might* get nothing, or *might* be able to get something much bigger than their normal hourly rate if the business is successful, and they're just simply helping somebody that they like, or contributing to a cause they want to support - A lot of people are willing to contribute this way.

The small investors - $50k to $200k are generally more inclined to take on early stage seed investments, where you might not have all that much developed yet, you at least have proof of concept but need more development and patent work done etc.  You better be prepared to work unpaid, and *really* stretch those dollars, to deliver a lot of bang for buck.  And then go for something larger, when you've got something successful and outward facing, with a proven business model and just need to expand development and marketing and sales.