2) “I wonder how many have actually run a startup for a couple of years (and not just developed a prototype from home and abandoned it in a few months .. aka .. failed fast)”

It all depends on your determination. If you mean that people only work hard when they have invested loads of money (just for the sake of it) thats no reason. If you are really interested in doing something you can definitely start with lower amounts. This concept works best for web based businesses.

Lets take an example -
1) http://sarkari-naukri.blogspot.com/ – How much do you think have they spent (they use blogspot) – Alexa India Traffic rank in India is 647.
2) pluugd.in – Alexa India Traffic rank – 489.

Do you think there is much difference?

And I definitely don’t think pluggd.in must have spent 7-8 lacs when they started. It was simply a wordpress blog and its just a matter of Rs 4000 – 6000 do get a blog up and running with hosting and domains etc.

What I understand from this post is that you are talking about some high end web applications that need some really good developers as well as infrastructure.

Even if you don’t take the specific example of Quora, restricting access to your service to lower operation costs sounds very questionable to me. Anyway, everyone is free to work the way they like.

Of all the people who have commented here saying that you don’t need any of the above to run a company, I wonder how many have actually run a startup for a couple of years (and not just developed a prototype from home and abandoned it in a few months .. aka .. failed fast)

Are you very new to web development? (no offence meant). Quora would have 10s of servers atleast.

This perfectly makes sense, especially since you want to keep costs low. India has always been a preferred place to outsource development. And now with the startups booming across India, it’s not very difficult to find young talent anymore. Added to t…

I speak from experience – make the worst estimate possible and then add a 20% to it. That would end up as your realistic cost of running the business. I think Prateek is actually conservative in his estimate.

The bigger problem is when you don’t know how to monetize your concept. If you don’t have a solution that “solves” a real-world need and gets you tangible $$ then you will realize that the burn-rate will add to the anxiety (you will be worried about running out of money at the end of your predetermined period – 6months, 1 year, 2 years). And mostly people call it quits even before you reach 1/2 the way. A better way is to have something that will generate continuos revenue (side consulting, teaching, part-time pizza delivery – whatever it takes) to keep your burn-rate low so you don’t (a) suffer from pangs of calling it quits within a few months (b) fret about smaller stuff in life and focus on the objective of the business.

We started off 18 months ago, moved into a new office, bigger staff – bigger pays (for them) etc etc. clients are increasing and so are the bills, and it’s a rat race all over again … wait a minute !! Is that not why I started off on my own?? )

PS: I was passionate (and still am); it’s not just about being on my own)

Would be great if people who think 2-3 lakhs is a better estimate to reveal their assumptions or some cost saving tips.

Out of personal experience of starting a business while in college, we budgeted our monthly expenses very low and when eventually we came out of campus, we realized very soon that there’s little fun in working on your passion when you have to do an optimization on every meal order. imho value your work, as you’d value your employees and attach a cost to it, that will enable you to live comfortably. (& i dont mean your opportunity cost).

The other thing probably, a little out of context, is if you have an opportunity to raise money, do it, even if you don’t think you need it. it always helps.

However, you are not adding the value of time that you are spending on your start up, so if you work for 6 months and your salary was 5L, you need to add another 2.5L to the overall cost.

Hosting & Backup Costs – I have tried it in India & got much better deals also, service too. Though for some it may be good in US, but there is no harm in evaluating it thru.

Chairs & Desks – Absolutely the more comfortable the better.

Computer & Peripherals – Try a combo of branded & non branded. May turn out to be wee expensive but helps in the long run. Here friends are definitely a great help. And Yes 1 Laptop is a Must. Budget & buy everything for 9-12 months in advance. Do not go by the logic that we shall upgrade when it gets cheaper…Not worth it.

Legal Costs – One which wildly fluctuates, but can really be controlled thru referrals, known people sometimes free except the actual charges.

Running Costs – This is one place where everyone makes a mistake of budgeting very low. Be fair to yourself; treat yourself as an employee owner of the venture & pay yourself decent amount. Remember, India is NOT USA. Trying to save some money, wearing jeans etc. to meet somebody, bounces badly on you. Also remember, in the eventuality of winding up before successful & starting to search for a job, you still need something. AND if partners split, till you get someone, you need funds.

VISION, CONCEPT, IDEAS are great things, BUT SENTIMENTS do not work in BIZ. PRAGMATISM & REALITY RULES

Excellent article. Really helpful.

Btw, can you recommend a good dedicated hosting company.

Thanks
Vinayak

Also s3 + ec2 is not a significantly cheaper option. For a typical startup, the cost comes to about $100 a month. If you can host on google app engine, its a different story.

If the co-founders are really dedicated towards their startup, they will not need anyone else to join in during the ‘Getting off the ground stage..’ it all depends on their confidence.

Hosting – one should go for S3,
Office space – servant quarter, your bedroom or even a corner in your living room.
Legal costs – In case og Muziboo DMCA is necessary but for others its not. From my experience legal costs can be cut down by getting in touch with people who hve their friends doing some legal work. You can cut out a deal very cheaply there.

Startups in the infant stage are mostly about finding inroads doing things which costs less. Never ever draw salary (for that one should have a backup), being an entrepreneur one should always look for alternatives or just roll up your sleeves and get on with the work.
If its a startup the co-founders should hardly sleep to make sure their servers are up and running and their customer queries are always answered.

So I would support the number 2.6 lakhs (approx. $5000) by Prateek.

Good post Ashish.