Ask HN: What do these startups need so much money for?

$100k/mo salary for 20 people is a fully loaded $60k/yr; that's less than half of what your mean FTE headcount cost will be in the Bay area.

Your first two points I can agree with, but it's the 3rd that troubles me.

Shouldn't a company that means to stay in business want to have slow but steady growth, a gradual climb, giving the them time to adapt.

Doesn't a company want to put its money making plan in action before it goes big time?

I know justin.tv has major bandwidth requirements, and from what I can see there is no revenue model apart from adverts in place, which probably can't cover the cost of the bandwidth alone let alone everything else.

Please take no offence but if a company has a cash gap it's usually a bad sign, and throwing money at the problem will only work for so long.

15 people for 100k/month would mean you are paying an average of 74k/year. Who would willingly work for a startup for that, without lots and lots of equity (answer: the exact people that you would never actually want to hire)? And you can't give lots of equity to 15 people, and even if you give them 8% each you would be left with nothing yourself.

$12k per month on rent? You would have to be retarded to pay that as a startup. Rent an old house and get lots of card tables.

Servers/bandwidth at 20k/month? What kind of site is this? That's $240k per year of bandwidth. If you are serving up that much content and aren't making a profit already, you are either going to get bought out in a few months or go under in a few months after that.

My hypothetical startup budget:

Salary: Pay myself enough to pay bills and live on, as well as 2 or 3 talented confederates (if I happen to have 2 or 3 talented people, with skills I need, on tap. Otherwise, wait until some are located before hiring anyone. Nobody is getting my equity unless they totally rock.) Estimate: 6k-25k per month.

Rent: $0, I happen to have an office large enough for 4 people to comfortably work in at my home. If I didn't, I would charge a one time expense of $2000 to put some carpet in the garage, install an AC out there, and run some wiring and so on.

Furniture, equipment, etc: $500. Find your nearest very large public university. They probably have a depot that just sells old furniture and equipment. You can drive up with a truck and get enough furniture to outfit a small army for under $500 (one time fee). http://www.purchase.umd.edu/ttrader/items/showroom/index.htm....

Servers/bandwidth: This obviously depends on what site you are making. A Youtube needs way way more bandwidth/servers/rackspace than a yelp for the same size audience. Using EC2 as a guide, a small instance is $70 per month if used constantly. If you used say 100 instances constantly, and transfered 1TB a day, you would be paying around $12000 per month. That is a metric assload of servers and bandwidth, so the $20k number is probably retarded also.

PR/Advertising: I'm not sure. 10k per month buys a fuckload of adwords. At a CPC of .40, you are talking 40k * 2.5 = 100k impressions a month with that advertising budget. In reality you can get clicks for .20, and lately even less, unless you are selling asbestos litigation.

So my point is you can get a hell of a site out there for like $300k per year or way way way less, unless you are an idiot.

When marginal cost is greater than marginal revenue a startup can either a) find more vc funding to raise marginal revenue, or b) cut expenses to lower marginal cost.

Startups will press a) until the button breaks leaving b) the only option.