What It Feels Like to Launch a Startup With Two Weeks of Runway
3gt6bsdf8tv.s3-website-us-east-1.amazonaws.com
3gt6bsdf8tv.s3-website-us-east-1.amazonaws.com
I have 12 months worth of all of my personal expenses sitting in a bank account. I never touch it. I can't imagine being above the age of about 25 and not having this. I wouldn't start a new pre-revenue company unless that buffer was at 14 or 18 months or above.
The only reason that starting something seems so scary to you is that you haven't planned properly.
I get paid 33k (EUR) a year. After taxes that is about 1500 a month. After bills and food, I have about 400. If I save every penny, in 2-3 years I have 1 year of living expenses.
Yay for me, except I'm in the top 10% earners in my country and earn about 3 times the national average (and 5 times pre tax minimum wage). Even in software development salaries are usually in the 20-25k range pre tax.
(Portugal if anyone is interested, but even when I was in the UK or Netherlands, there wasn't that much of a difference)
Do you look for remote on careers 2.0?
I have no idea how people manage to spend so much money. I have never owned a car in my life. I never go to coffee shops, and I make my lunch from home. We do mainly cheap stuff, and go on cheap holidays.
But I admire the money you saved (I saved slightly less at the time)
Doing this was my absolute number one priority from the moment I landed my first job after university. As it should be for everybody.
Once you have that stack in place, you can think about moving off of "college student scrounge mode" and into a world where you might consider owning a new-ish car, television, moving to non-shared housing or an area without crazy hobos camping on your doorstep, etc.
Just make sure you pick a significant other with similar priorities to yourself (which also is never bad advice).
There's definitely a social pressure that once you get a real job you should have grown out of eating ramen and taking public transport.
And if you put a kid on the mix, it is event worse.
Don't date people that don't have prudent attitudes toward personal finances. God forbid you end up sharing a bank account one day...
My girl is extremely frugal compared to most of her friends, but we still argue about money a lot.
Two years ago I was a Research Technician working for a neuroscience lab in Boston. I was paid 32k a year (USD), paid 700/month in rent (with three roommates), 150/month heating during the winter (each roomate!), various utilities etc etc.
In Boston, the "Living Wage" is considered around $12/hour [1]. I made $15/hr, technically less because I worked longer than 40 hour weeks.
Despite that, I still managed to hit my employer's 401k yearly match ($1600), a good chunk of my personal IRA (around $3000) and saved $7000 to an emergency account. I had calculated that 7k gave me around 5-8 month runway should things go pear-shaped, or if I wanted to start something on my own. If you add that up, I saved or invested nearly 36% of my yearly salary.
To be fair, I was single and young. Kids, mortgages, etc add a lot to your burden. But still, you'd be surprised how much money you can save when you just sit down and eliminate silly things sucking down your money.
The thing I wanted to mention, is I'm actually doing well for myself (well, somewhat) but if you are earning 20k EUR a year, after taxes, you don't have that much to save after everything is payed.
But since you mentioned the 32k, care to share how much you would take home a month after taxes? Just curious...
(and yes, I have a wife and a kid, and I am atm the only provider)
Totally understand your point about needing a certain minimum threshold to start saving. If you are living paycheck to paycheck, you don't really stand a chance.
I just looked up my paystubs and it appears my monthly take home was just about $2000, after taxes. Perk of being poor in Massachusetts is that I was in the lowest tax bracket at least :)
Just to compare, 33k EUR gives about shy of 1500 EUR a month after taxes.
25K GBP = 1500 GBP per month after tax. minus
600 for shared flat in bad area of London
240 for bills (gas, electricity, internet, phone)
80 for council tax
200 for train to work
180 for food
= 200
I'm yet to finish the month with more than 50 pounds, so there is 40 a week unaccounted for. For indication beer is 4 pounds.
I'm very happy at my job - the work is really interesting, but there is a week at the end of each month where I wonder what I've done wrong with my career.
Just a quick question, what area do you work with? 25k for London is quite low.
I ask cause I keep getting some offers from London and may be able to refer you to some.
1. Very high salary
2. Peer / parental culture
3. Living so rural it is hard to spend money
4. Other
The generally accepted order is (not my formula, and this is for US-centric retirement, not necessarily starting a business):
1) Max out employer 401K match 2) 3-6 month emergency fund (I've seen this and #1 switched before, personal preference) 3) Max out Roth IRA ($5,500 for 2013) 4) Max out 401K contribution 5) Start investing
Obviously if your focus is on creating an 18-24 month runway you'll want your emergency fund totally liquid (cash in a bank you can withdraw on demand) and the remainder will be focused more on semi-liquid, marginally higher-interest assets than on retirement accounts.
The first two are valid reasons, I should think.
If I said 5 years, sure. But 12 months is not extreme. It's 12 normal months, or three really bad ones.
The OP already said they are all programmers and can easily get consulting gigs. If the runway is two weeks, what expenses could they possibly have? Obviously they didn't sign a 5-year lease. Two weeks isn't probably enough time to get a payroll system and bank accounts all set up, so I don't see that happening. A runway implies that the business has to shut down when they run out of funds. What could there be in two weeks - an AWS bill for fifty bucks..?
Cash flow projection: first useful skill for any entrepreneur.
Good luck!
You can get anything from days to weeks to months of easy work this way. Many people will even pay you by the hour day by day to just sit with them and pair program and train them how to write apps themselves. Sounds like you are a web developer, I don't really know how that goes. Asking friends if they or any of their contacts need some work done is good too.
Then of course there's eLance, oDesk, and the rest. If you don't have good reviews there and clients asking for you then you pretty much have to underprice the already cut rate prices to get work. I've hired there and gotten work for others there, but the wages are too low for me to be willing to do it myself.
You shouldn't really count on any one contract coming through, though. Always keep at least two in progress at once and be OK if one client balks at paying no matter how good a job you did, etc.. It shouldn't have been a big deal if one client clearly wasn't going to get back to you.
It's like a guy with no training, no climbing experience, NO prep-work, standing at the base of Everest, telling everyone "Come and watch me climb to the top."
You ain't climbing shit buddy.
Bah! Two weeks or bust? This is a very short-sited viewpoint: think long term! Slow down and think about what another 3 or 6 months of runway would do for your company and product.
You have skills people want. Do some consulting and give yourself a longer runway. If you truly believe you've got a good product and business on your hands, then find a way to keep it going even if it's on the side while you do a consulting gig. (I know split-focus for a few months is not ideal, but "two weeks or bust" seems like a poor alternative.)
If the OP provided more details about the company I might be looking to invest 5k-10k, and/or offer development help.
Always looking to support local startups being that I work at one also, and I know how hard it is to build a great product that consumers want, and raise funding.
For some it's ego, for others there's a lot more on the line.
Obviously it's not as if we're risking our lives, but you don't have to put your life on the line for something to be incredibly difficult.
It read to me like they realized it's much harder then they anticipated (common) but have an attitude of doing what it takes.
Perhaps the OP can clarify :)
If it's too difficult, don't do it. If you choose to do it, don't complain. Being an entrepreneur is a privilege, not a prison sentence.
Now I'm genuinely curious.
That implies an overly simplistic and (IMO) incorrect view of the human condition.
Quick simple example: complaining allows one to blow off steam which frees up the mind to focus on success.
Put another way: just because you're (perhaps temporarily) scared/unhappy/confused about what you're doing, it doesn't mean you shouldn't do it, or aren't well-suited to doing it.
You don't have to be an entrepreneur. If you don't like the game, don't play. If you play, don't expect sympathy.
I myself understand the emotion that is being conveyed through the writing. Being in that place is difficult and one often loses perspective. Pointing out that his world will not end if the business goes under may help him gain perspective. On the other hand, this comment also belittles the risk and effort that the OP is taking. He has many liabilities: a mortgage, children, and bills that he is almost ignoring to not die.
I applaud his effort and wish him the best. There have been many others who have gone through tough times financially with their startups. Airbnb is one famous example who stopped developing their product in order to raise money via the cereal campaign. Risk is okay, but too much risk is likely to end poorly. Again, best of luck.