Spending ~$400k Seed Money
Breaking Down Our Spending
This post was inspired by a post on Reddit asking, “When a tech startup raises a very small funding round after building an MVP, what do they spend it on?”
When a startup announces having raised a seed round it might seem like a large sum of money. In most cases, it isn’t all that much, and usually it is just enough for the company to survive for the next year.
What does a startup spend that seed money on? Below is a breakdown of what GamerBet’s spending should reflect.
Marketing & Partnering
~$200k
Our marketing category has always been described as, ‘whatever money is left we’ll put towards this’.
I think GamerBet could operate without a marketing budget, but it would hamper our growth. It’ll also take away from development of the core platform we’re building. Why? If tomorrow we didn’t have a marketing budget what would happen is we’d redistribute development resources to projects that could engage the community.
Assuming we have the budget, how would we spend it? It isn’t difficult when you think through all the different avenues of advertising such as events, streamers, Facebook dark posts, Reddit, etc.
Let this sink in for a moment, to advertize directly with some of the top Twitch streamers it will cost $5–10k/monthly for each one.
Founder Salaries
~$60K
This topic deserves an entire Medium post on its own, and I plan to write one covering this topic in the future. For the time being though…
It is my opinion that it benefits the company for founders to receive a ‘ramen salary’. The goal of this salary is nothing more than to pay rent, food, and fundamental basics.
Gaming License
~$30k
This is the cost to take real money bets. There isn’t many options around this.
It is worth noting that fantasy esports does not require this as outlined in the UIGEA law 2006.
Corporation
~$25k
There are a lot of costs associated with running a startup, maintaining, and making sure the company is compliant. These range from incorporating, state franchise taxes, accounting, and taxes.
If you ever plan to raise an investment in the USA from angel investors or VCs, I strongly urge you to check out Clerky.
Infrastructure
~$20k
It pains me to pay for physical servers and colocation but in the gaming industry you’re required to perform your transactions in the country of your gaming license. Amazon Web Services happens to not be located in every country, which sucks.
Legal
~$10k
Early in establishing our company we saw the benefits of seeking legal advice due to the nature of the business and the industry. Lawyers are expensive. Legal opinion letters are expensive. Enough said.
Team Services
~$1k
This category is mostly here to brag about awesome services that might change your life. The services below are worth every dollar, even if it adds up in the end.
These services include:
Expectations
Investors expect you to spend the seed money, not sit on it. On the other hand, nobody wants to see someone squander it either. It is important to employ the seed capital to fulfill the milestones that the company set out. That is the whole reason to raise funding.
Wrap Up
Raising funding is a full-time job on its own. If you’re planning to raise, raise as much as you can because the market is unpredictable. Don’t raise less than a year of runway.
When a startup raises a seed round nearly all of that money has indirectly already been spent.
Disclaimer: We’re still raising money. This is how we plan to spend it.
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