[vinceguidry]

Generally you double an engineer's salary to arrive at the total cost to the firm of retaining their services. So that's 5 engineers for a year. This article puts a final estimate at 2.7x:

http://web.mit.edu/e-club/hadzima/how-much-does-an-employee-...

You also need to realize just how new and unproven Lean Startup ideas are in the larger context of business. In that world, a million is just getting started. Most software products in the world took much much more than a million dollars to make. You have to pay the project managers, creative team, etc etc.

[gearoidoc]

> Generally you double an engineer's salary to arrive at the total cost to the firm of retaining their services.

It's a fair point thought I do think 1-3 engineers is still plenty for "most" startup products to get to MVP (not universal but general rule of thumb).

> You also need to realize just how new and unproven Lean Startup ideas are in the larger context of business. In that world, a million is just getting started. Most software products in the world took much much more than a million dollars to make. You have to pay the project managers, creative team, etc etc.

Established (and assumedly) revenue generating software is not the topic of the discussion. The comment I was referring to was that $1m is needed to make a marketable product. Its a bogus claim.

[vinceguidry]

OK, we need to qualify what is meant by 'product'. I'm not talking about a palette swapped iteration on an existing product. I'm talking about something new that the market hasn't yet quite seen before. The sort of product Silicon Valley funds.

Even the palette-swaps generally cost anywhere from a quarter to half a million dollars to do properly, unless it really is cookie-cutter. I don't know the exact figures, but the company I worked for spent a sum in that neighborhood on an e-commerce site, and laughed at me when I told them I'd build them a new site in house for a modest pay raise. Software is really expensive, programmers have this blind spot around it I think because it's psychologically easier to undervalue software than it is to face the reality of economic exploitation.

It seems you have experience in this area and I don't want to belittle it, I won't contest your claim that you've done it for less, but I want to be clear that the expertise that allows you to do that is worth a lot of money, even if you didn't get paid for it. How much? Take $1 million and subtract what the firm actually paid to bring the new product to market, and there you go.

If it's your company, then you get to enjoy the competitive advantage that the cost savings affords you. If not, the people owning the company are arbitraging your expertise and they're getting the competitive advantage.

But it's not just your expertise. Your team has to be a cut above in order to build software products for less than the general market rate. Again, they are either getting compensated for it or they're not, in which case they form part of the competitive advantage of the firm. The entire Silicon Valley startup industry is organized around creating and exploiting this advantage, which is really why it seems to you that a million bucks is an outlandishly huge number.

[gearoidoc]

> OK, we need to qualify what is meant by 'product'. I'm not talking about a palette swapped iteration on an existing product. I'm talking about something new that the market hasn't yet quite seen before. The sort of product Silicon Valley funds.

Something never seen before like Snapchat? Or something never seen before like Hyperloop? If its the latter then clearly you're correct in your assessment but most startups ambitions fall much closer to the former.

Your post here has got some valid points but you've moved away from the very specific "minimum $1m for a marketable product" to some very vague generalities.

> Even the palette-swaps generally cost anywhere from a quarter to half a million dollars to do properly

"Properly" is subjective. I could have a Snapchat clone developed easily for $100k - probably considerably less - lets just say iOS App and corresponding web app & server architecture. With the exception that it clearly wouldn't be able to handle the load Snapchat handles - but certainly enough to be marketable.

> which is really why it seems to you that a million bucks is an outlandishly huge number.

I never said a million dollars is a large number. I know how easy it is to blow through such an amount.

My argument was you don't need that amount to create a marketable product - whether you're a developer or not.

Perhaps In SV, you may be correct but most people do not live in SV.

The reason I feel so strongly about this is that your sentiment is a very dangerous one to propagate to new or would-be startup founders. Based on the number of downvotes I've received for disagreeing with your comment, it would seem that people believe you need $1m in the bank before you can go to market.

That's a very good way of making sure some entrepreneurs never bother trying.

[vinceguidry]

Now you're backpedaling while accusing me of doing so.

> I could have a Snapchat clone developed easily for $100k - probably considerably less

Bearing in mind that a Snapchat clone by itself wouldn't be marketable, you'd need a lot of marketing to differentiate it, so could I. But you and I have expertise, and expertise is valuable and needs to be factored into the price. That's the point I'm trying to make. My old CEO knows nothing about software, he paid half a million for an e-commerce site. For a real software product built by someone who doesn't know what he's doing, a million dollars is the minimum. Anyone who comes to the table with less than that is going to get really badly burned.

If you come to the table with half a million worth of expertise, and zero dollars of capital, you will probably fail unless you focus hard on getting funded. I'd rate the skill of getting funded as worth around $150-200K. If you don't already have it, you're going to have to pour in more of your blood, sweat and tears.

> it would seem that people believe you need $1m in the bank before you can go to market.

No, they understand the meaning of "a million dollars of your own blood, sweat and tears".

It does absolutely no good to would-be founders if they try their hand at doing a startup thinking it's going to be easy. When I see these kinds of post-mortems, I see that clearly, a million bucks worth of effort wasn't put in. They worked too hard, and not smart enough. They didn't have the expertise to enter the market that they wanted to be in. They may not have literally thought that all of their competitors and potential partners were stupid and / or naive, but their business model implicitly assumed it. They failed to de-risk the business and the risk killed them.