Category Archives: Founding a startup – Wonder How To

Founding a startup – Wonder How To?

A Guide to a Web Startup:

Recently, was to be sold to Intuit in a $170m Cash Deal, CEO and Founder Aaron Patzer shared his step-by-step strategy for Mint’s growth at the Juice Pitcher event.  Aaron breaks down his 3-½ year journey with Mint into three phases of development, and each stage’s goal, expected expenses and runway until next round.

Watch the video at Insightful and very helpful to see behind-the-scene basics of a successful startup in the Valley.

PHASE I: Garage Stage (<$100k)

Goal = Build a Prototype

Pre-Revenue Valuation: How a company is valued prior to revenue.

  • “Rule of thumb around the Valley is to…”
    • Add + $500k / Engineer
    • Subtract – $250k / Business Guy
  • …Reason being, web startups need Engineers to build while there is little to do for the Business Guy at this stage.

Mints Expenses: Calculating Phase One expenses, Burn Rate, and Runway before next round of funding (based on $100k).

  • Founders at $30k Salary for living expenses. (Aaron’s Salary = $30k)
  • Engineer First Hires at $30-50k, + 1-3% of company.  (Mint’s 1st Hires at $36k + 1 ½ to 2% Equity)
  • Legal Fees deferred payment for 0.5 to .075% of company.
  • Example: 2 Founders + 1 Engineer = $150k / Yr Burn
    • Resulting Runway = Must raise Seed Money in 9 months.

PHASE II: Seed Money

Goal = Release Alpha Launch and get it in front of users.

  • Alpha should be usable but not polished.

Headcount should be around 5-6 ppl.

  • 3-4 Engineers
  • 1 Product/Front-End
  • 1 Biz Generalist

Mint had raised around $750k at this point.

Mint’s Expenses:  Calculating Phase Two expenses, Burn Rate, and Runway before next round of funding (based on $750k).

  • Salaries = at $50-90k
  • Overhead = + 20%
  • Legal = $25k General + $2k/mth
  • Total = $600k / Yr Burn
    • Resulting Runway = Must raise Series A within 12 months.
  • Note on Legal Fees: “One thing VC’s won’t tell you is how much the legal fees will be and that you’ll be paying theirs and yours…”
    • Paid around $60k in Legal Fees on $750k, leaving them with $690k.

Revenue Projections:

  • “…they’re going to be total bullshit.” And everyone knows it.
  • What Matters Most is…
    • A Huge Market Opportunity
    • Per use/client revenue
  • How much will you make per user, per year?
  • Calculating Opportunity:
    • #User Base x Rev/User/Yr = Opportunity


-        Goal = Launch a real product and grow a profitable business.

-        Be Aware of Hidden Expenses

  • Patents, Trademarks, Consultants, Legal, etc.

-        Mint’s Expenses:

  • Salaries + Overhead = $200k / Yr / Person
  • Legal = $10-50k / Mth
  • Total = $6m / Yr Burn
    • Resulting Runway = Must be profitable within 2 years.


-        Boost in Self-Confidence

-        Gratification of creating something from nothing.