What average cost/head should be used for forecasting the cost or burn of an early startup team? (ie. $1mm covers a team of 5 for two years)


Depends on where your team resides. In SF, you could use an average of $135k for all-in costs for each employee. In Toronto, you could probably drop that by 20-30k per person.

But there are so many other factors related to burn beyond headcount that just using a headcount cost + overheard to estimate burn would be pretty inaccurate to reality of calculating a cash-out date.

Happy to talk through the details of your situation in a call.

Answered 9 years ago

$10K / mo is a good proxy in most major cities if you run a reasonably lean operation. I've seen much leaner of course, mostly depending on location, but more than this at an early stage (pre A round) is pretty suspect outside of SF from this investor's POV.

Answered 9 years ago

You need to do a more detailed forecast, I don't think there is any particular "rule of thumb". This will vary depending on the industry and type of people you need to get you started. it will also depend on the type of equity packages you can get your people to agree on.

Initially you just need a basic forecast that covers headcount and any other major expense, but at time goes on you will need to get more and more detailed.

Answered 9 years ago

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