Yes, all nice data, but $400,000 is, sorry 'bout that, no matter what it's called, is not appropriately called a seed round. Let me guess: The usual criteria are all the first technical work done, traction significant, and traction growing rapidly. That's not planting or watering seeds ; instead, that's a sapling or small tree. Indeed, for a Web site, costs can be so low that by the time there is significant traction…
Ad revenue is probably the worst way to try and fund a startup. The economics of ads are horrible unless you can get many millions of visitors reliably, which only works for a small sliver of startups. The rest pin their hopes on ad revenue without doing the math, look at the revenue numbers with horror, wreck their product with more and more ads, then quietly fold. Now, if you mean that the actual costs to keeping u…
Nearly every effort at powered human flight failed until the Wright brothers did some good engineering.
Actually, in practice, the probability of success means next to nothing, even if it is tiny. Instead, what does matter is the conditional probability of success given additional information. A great example is the probability of an airplane surviving after flying over Baghdad early in Gulf War I. The probability was low. But the conditional probability given the engineering of the Lockheed F-117 stealth bomber was quite high, and, indeed, the F-117s did nearly all the early bombing of Baghdad and never got even a scratch.
I've carefully planned my startup.
On ad revenue, the Mary Meeker reports from Silicon Valley venture capital firm KPCB have long claimed that for ads on Web sites (not merely for mobile devices), can expect revenue of about $2 per 1000 ads displayed. Sure, may get paid by the click, but can still get an average of $2 per 1000 displayed.
Each of my Web pages is just 800 pixels wide with everything positioned to the last pixel with tables. The pages are all just dirt simple; the fonts are large; the contrast is high. There are no icons, rollovers, pull-downs, pop-ups, or overlays. The HTML and CSS are dirt simple and need only a standard Web browser up to date as of about 10, maybe 15, years ago. There is nearly no use of JavaScript, and the pages load nearly instantly and never jump around.
There are both horizontal and vertical scroll bars, and the pages are still usable in a window as narrow as 300 pixels. So, the pages should be fine on any client device from a high end workstation to the cheapest smartphone.
The UI/UX is simple and intuitive, and a child in, say, rural Thailand who knows no English should be able to figure out how to use the English language version of the site from about 15 minutes of experimentation or about 3 minutes of instruction. The Internet data rate a user needs is usually meager.
For the ads, there is a banner at the top of the page in the standard size of 728 pixels wide and 90 pixels high. Down the right side of the page are some ads, at least four, sometimes more, say, an average of five, in the standard size of 300 pixels wide and 250 pixels high.
The site is intended to be of high interest to everyone on the Internet -- children, adults, in the US, and around the world. The results are all not just safe for work but just squeaky clean, proper, uplifting, educational, informative, artistic, engaging, entertaining, especially entertaining, etc.
The site should be especially popular with relatively good user demographics. E.g., the NYC MOMA crowd will love it! But so will the girlfriend of Joe Sixpack.
So, let's see, assume:
Get, on average 24 by 7, one user a second and a peak of about twice that.
Due to the UI/UX, each user sees on average 10 Web pages (it's an interactive UI/UX, fun, awash in variety, something like an adventure, for some users addictive).
Uh, there's no login and no use of cookies, and the site still works fine with JavaScript disabled in the user's browser. The site is one of the best on user privacy: After a user's session state times out, nothing is kept on the user. No background data is used on a user. Still from the UI/UX, there is some good data for ad targeting; I have the math worked out but have not written the code yet; I don't intend that ad targeting yet.
People will want to come back for more and also tell their friends and send results to their friends -- right, virality.
Each page contains one banner ad and on average five of the other ads for an average of six ads per page (the banner ads may yield more revenue per 1000, but I am neglecting that).
So, for assumptions, we're talking on average one user a second; each user sees 10 Web pages; each Web page has six ads; and the revenue is $2 per 1000 ads displayed.
So, in one month the revenue would be
1 * 3600 * 24 * 30 * 10 * 6 *
2 / 1000 = 311,040
With my software timings, one good server computer for $1000 (I just did some careful shopping) say, AMD FX-8350 with eight cores at 4.0 GHz and 32 GB of ECC main memory, on average half busy 24 by 7, could send the average of 10 Web pages a second.
For the Internet upload data rate, each Web page sends for about 400,000 bits (the ad networks send the ads; my server merely sends the URLs of the ads at the ad servers). So, for a peak of, say, twice the average, that would be a peak data rate of 8 Mbps, now trivial for an Internet connection, say, just from next to my left knee, over coaxial cable, where the big deal is just a little extra for a static IP address, which my ISP is happy with -- they do encourage their customers to run Web servers.
So, maybe I'm off by a factor or 2, 4, 5 or so in places. E.g., maybe I'll need more than one server: So, as the usage and, thus, revenue from one server starts to grow to put too much load on my first server, then, quickly, in, say, a week, there will be enough revenue for a second server, then 10 servers, etc. However fast the usage grows, if the usage does grow, it will throw off plenty of revenue for more servers.
Sure, the main issue is just, will the users come. I'm betting they will.
For supporting me and my kitty cat, say, food, clothing, shelter, etc., I should be able to get that out of the $311,040 a month or early on the $200,000, $100,000, $50,000, $20,000 a month.
And with traction enough to interest equity investors, I will be nicely profitable in every sense with plenty of retained earnings for capacity growth, a new Corvette, etc. So, net, I see no possibility of equity funding -- by the time the equity guys are ready to write me a check will be too late for me to accept it.