I’d be interested in comments here as some conversation around the office was regarding how much it takes to start a product-based software startup. This is interesting to me because I’ve hired three software developers during my time in Mac-Sys and Infurious had at least one software developer in-house.
Our estimate was a development team of 3-4 people for a minimum of two years would mean probably half a million pounds when you add travel, marketing, overheads.
This assumption was based on 4 people (presumably 3 developers, 1 designer), earning mid-range to low-end salaries (£25,000 per annum) probably because they have some sort of equity stake.
This is assuming you’re not a service company – you’re not paying salaries by doing development for other people.
And then there’s the assumption that it’ll take you a year to build it and the second year you’re building product #2 and supporting product #1 with bug fixes and updates.
There’s needs to be a burn rates for marketing and sales before revenue appears. If you can get a sales guy who’ll knock on the doors for commission only then all the better.
I’ve shifted my opinions over the last year from product has to be right to just get it sold first with a roadmap of what’s coming. The runway looks a lot better when there’s revenue coming in and it keeps investors from worrying too much as well.
As you can tell from the maths, 4 people at 25K per head is going to be about £250K for two years. I said it would need half a million because of the rest – for travel, marketing and other overheads.