Unless you want your startup to remain a side project for the rest of your life, consider injecting the proper amount of cash into the venture. No, sweat equity doesn't count; you need actual greenbacks to pay for things that "more time" can't, like Facebook ads and bills. But how much capital should a founder start with, especially, if it's their own cash?
Here are seven examples that suggest $10,000 - $15,000 is the right amount for founders to invest if they are serious about growing their venture into a successful, lasting business.
1. VICE Media started with $10,000 and $5,000 worth of computer equipment
Living off of government welfare, co-founders Suroosh Alvi, Shane Smith, and Gavin McInnes split from a local magazine operation in Montreal and started their own print magazine, dropping the "o" from "Voice" and calling it "Vice," which eventually evolved into the $5.7 billion media empire it is today. "We got a new loft...," Alvi told Guy Raz in an interview on NPR's How I Built This. "I borrowed five grand from my parents, Gavin borrowed five grand from his parents, and Shane got $5,000 worth of computers from his dad. His dad worked in IT or something. And so it was with the ten thousand dollars Canadian that we started Vice."
2. Reddit began with $12,000
Two former college roommates, Alexis Ohanian and Steve Huffman, pitched Paul Graham, founder of Y Combinator, the idea for a way to order a sub sandwich while pumping gas at a gas station, and Graham rejected it. But he liked the two partners. Instead, Graham followed up and challenged them to make the "front page of the Internet." He gave them $12,000 and three months to do it. Exchanging emails with brainstorms from Graham every day, Ohanian and Huffman launched the first prototype for what we now know as Reddit in three weeks.
3. Dharmesh Shah, Hubspot's co-founder, launched his first startup with $10,000
Dharmesh Shah, who is also an angel investor, author, and prolific blogger at OnStartups.com, said that prior to founding Hubspot, he bootstrapped Pyramid Digital Solutions, an enterprise software startup in the financial services sector, with $10,000 of his own money when he was in his twenties. Pyramid was later acquired by SunGard Business Systems, an $11 billion technology company, giving Shah the capital to begin Hubspot.
4. Google founders Larry Page and Sergey Brin maxed out AmEx cards for $15,000
Today's $742 billion search engine monolith started as a side project in the co-founder's dorm rooms at Stanford University. When "Backrub," as it was then called, started receiving over 10,000 daily searches, the creators decided to pursue it full time, renaming it Google. After writing a business plan, they used credit cards to buy a terabyte of disk space, computers, and open source software for $15,000, before raising their first institutional investment of $100,000.
5. The colorful athletic tape startup, Rock Tape, cost the founder $10,000 to order the first pallet of product
Greg van den Dries is the founder of Rocktape, the brand of colorful kinesiology tape seen on the limbs of Olympic athletes. The genesis of the startup began when he dialed in the right "stickiness" formula for his tape and took the leap to drop $10,000 to order the first batch of product. He remembers the day in 2010 when the pallet from South Korea arrived in his driveway. Today, seven years later, the brand is still privately held and rakes in an annual revenue of $20-$40 million.
6. Cards Against Humanity raised a mere $15,000 from Kickstarter
The line-skirting game Cards Against Humanity posted a funding goal of $4,000. After realizing the game had traction, the founder posted a stretch goal of $10,000 and then a final challenge of $15,000, which it reached successfully. Cards Against Humanity went on to gross upwards of $12 million in its first year.
7. Paul Graham's former startup Viaweb started with an injection of a rich friend's $10,000
Paul Graham launched one of his companies, Viaweb, an e-commerce site builder platform, with $10,000 of seed money from a rich lawyer friend. In 1998, Yahoo acquired Viaweb for $49 million worth of stock and renamed it Yahoo Store.
Ten to fifteen grand is a nominal fee for an established investor but can be a significant blow to the bank account of a first-time founder who's likely in the middle of or fresh out of college. It's a substantial risk for someone in their twenties.
But imagine if the startups mentioned above began with a smaller "founder, friends, and family" round. They may have taken too long to develop and their passion, momentum, and opportunities may have petered out. They needed enough money to focus, work, and eat. But not too much to sit back and hire a hundred employees prematurely.
There's a delicate balance to this first amount: too little and the startup may remain a steady side project forever, too much and the startup may get comfortable, lose focus, bloat, and fray.
Every startup genesis story is different, but there seems to be a pattern that $10,000 - $15,000 is a proven amount of first funds to build a merited startup and grow it into a multi-million dollar company.
One final thought to fine-tune the purpose of this article:
For many startups, $10,000 - $15,000 may be impossibly too meager. For example, Nick Woodman needed $250,000 to develop the first GoPro prototype. And Elon Musk isn't going to build a Mars-destined rocket prototype with a dozen grand. The takeaway from this article is for first-time founders who are sitting on a startup project and afraid to adequately test it by allocating or asking for an effective amount of capital to do so. Are you really serious if you're only willing to put in a couple hundred dollars?
The hallmark of entrepreneurship is risk. If you don't want to bet with your own (or your friends and family's) chips, your potential future investors might not want to either. If you're overly risk-averse, you might not want to be in the game at all. This is worth taking the time to learn about yourself. Many people want to start a business, have ideas and passion, but when it comes to shelling out the right amount of money to actually start one, they don't. Smart poker players save themselves a lot of heartache, time, and money if they fold before the ante.