Always have 18 months of cash in the bank

<i>Almost all VCs I know care primarily about the success of their companies and not about extracting every last point of equity.</i><p>You would be surprised, I have seen some things in my career that are insane and done for the simplest reasons, like ego, megalomania and most of all money.<p>I once was with a start up in which the CFO and the COO got into a fist fight in front of the entire company, over equity.<p>Another time I saw a VP who was running one division give everyone the day off, called in three of his trusted developers, and they all said that the development team was on strike and would not return unless the board appointed him the CEO. He then proceeded to run the company in the ground, while paying himself and his three developers handsomely.<p>And I have seen investors use all manners of leverage against the operations team to dilute their ownership. The stories about being diluted out of ownership are common because it happens all the time. I personally, was diluted out of my ownership in a start up. A 90 million dollar exit and I walked out with less than $100k as the CTO, a tough lesson in finance for me, but it happens all the time.<p>I have come to believe that for people that act like this, it is a game, and the game is not won if they cannot get every penny. It probably bothered them that I walked away from the table with less than 100k, because some how they did not play the game hard enough to get that from me. Somehow they are less of a person, if they don't win and they judge their self-worth based on it.<p>I am not saying that this is all, or even most, VC's, but they are out there, and you only need to cross one of them for it to make an indelible mark.

I initially thought this was referring to <i>personal</i> finances, and thought that 18 months seems a little extreme. I have heard people suggest to keep anywhere from 3 to 6 months of living expenses in the bank.

<i>1) as a rule of thumb it takes 3 months to raise money</i><p>If you're already connected with multiple VCs that might be true. If you're starting out cold, I wouldn't count on getting funded in 90 days even if you have the greatest thing going on planet Earth.

I would think having the ability to raise 18mo of funds to deposit in a bank already puts one in a small (and quite fortunate) group. True, this ability can come from diligence and careful financial planning, but there will always be external factors that could preclude this ability to save up in the first place.<p>Besides that, the more reckless half of myself is reminded of this Oscar Wilde quip: "Anyone who lives within their means suffers from a lack of imagination."

That's 18 months worth of expected expenses or 18 months worth of reasonably expected losses? I am confused.<p>If a company has any dependable revenue, I would expect that to count against the money you have to have in the bank. What do others say?<p>I am a big fan of cutting expenses to a min, and funding from operations to the extent one can but have noticed that VC types don't like this (relatively low-risk) strategy. Not entirely sure why.

I'm wondering if Chris is talking about Series A+ with this.<p>If you raise anything less than $500k angel it's going to be very tight to make that last 18 months by the time you've hired a few developers, covered expenses, etc - esp in SF/SV

It depends.<p>If you plan to build a profitable startup, meanings, you are willing to sell the service (for $$) as early as possible, then perhaps, "18 months" is a period of time which within you get to the break-even point.<p>If you are planning to build a cool-and-free-iPhone/android-app and all you care is to get as many users as possible, then perhaps, this is a great advice for you.<p>In the first case, however, it means, you only need raise enough for about 12-18 months.

18 months of cash. That would take me about 180 months to save up.<p>Are you guys all really that disciplined when it comes to saving up? Or simply earning way too much?

s/in the bank/under your bed/g.

Hello Hacker News.<p>I would LOVE to have 18 months in the bank. In fact, I would love to have 30 days in the bank. And I think I have a really terrific idea and I know for a fact that I can make it a reality, since I have implemented aspects of this before, and have about 27 years of programming experience (started when I was 7). The thing is, it seems quite far-fetched to think that someone would give me 18 months worth of cash to make my vision a reality. Anyway, here is the idea: <a href="http://cure.willsave.me/vision" rel="nofollow">http://cure.willsave.me/vision</a> . Basically the goal is to replace WordPress with a platform that has a number of advantages, starting with a CoffeeScript codebase running on Node.js.<p>"The Cure Platform is a component- and plugin- based content and data management framework.<p>The main goal for this platform is increased developer and user productivity. To achieve that the platform will have these features:<p>* WYSIWYG drag-and-drop designer. No source code templates (no mixed markup/source) and limited CSS.<p>* Component (GUI control) -based architecture to enable easier code reuse and faster configuration and integration of modules.<p>* Comprehensive data framework enabling drag-and-drop form creation with corresponding updates to hierarchical models. Transparent data handling. "<p>So my plan is, while I am finishing up my current project, to work on this new platform. I have already started with some of the implementation. I would very much like to avoid getting another "regular job" or gig when my main project is complete, and so I was hoping against hope that somehow I could crank out a simplified version of this new platform and miraculously turn that into my day job immediately. Or perhaps get a few thousand dollars from kickstarter.com or some such.. but most likely not try to raise much money at all, and probably not do any fundifying until I had a prototype of some sort.<p>Anyway, supposing I can live on just $3,000 per month, and I need exactly 1 person to help me who also only needs $3,000 per month. Suppose that includes all of our expenses for servers etc. and we are working out of our homes. 3000 * 18 = 54000 * 2 = $108,000.<p>I'm sure people will tell me I am wrongheaded, doing something wrong, or misinterpreting, but I think that this article is quite clearly saying I should try to get $108,000. This seems completely unrealistic to start going around trying to get $108,000. And actually, once I have a prototype, I still doubt I will even want that much money -- I will probably be happy to try to sell the system for 2 or 3 months, so maybe 3 months would be nice, but after that, I can't see going 5 or 6 months spending someone else's money without significant money coming in, so the $108,000 doesn't even seem prudent.<p>Anyway, if someone reading this wants to give me $108,000, I am sure I can build the system I described.. just not sure if people would be smart enough to adopt it. You can PayPal the money to node@willsave.me (lol)