Hello we have an investor that is willing to invest in an extensive prototype. The problem is that he said that he is willing to invest only what sounds like a 'reasonalbe budget'. This is a high tech startup and we've reached a 300,000$ budget for half a year of development including employees and taxes and equipment rental and an accountant/lawyer/insurence agent ect. The problem is how do we estimate what's reasonable to the investor? For me it sounds like a very high budget but the prototype he is asking is much more complex then what we had in mind. How do we cut down the 'unneccesary' (and everything is neccesary) clauses in the budget?
+1
A:
Reasonable means that you can justify each item in the budget, not that he has any particular figure in mind. That doesn't sound like all that much to me for a half year of work (my own company burns around $1.5m/year), so you might find your investor thinks that to be a reasonable figure. Make sure you have a contingency amount in there in case your estimation is off.
Andrew McGregor
2010-02-05 11:41:05
+2
A:
It sounds like you are trying to tailor your estimate to his likely budget. That's a bad move. It's going to cost what it's going to cost. If you give a lower figure to get him on board, what are you going to do when the money runs out?
Tell him what it will actually cost. If he doesn't like it, let him walk away... otherwise what's the point? It's bad business to accept investment at any cost.
John
2010-02-05 12:01:39
+2
A:
I would split the prototype development into various milestones comprising user stories / sets of requirements. Give him a budget estimate for each milestone and see how far along the road they are willing to pay for.
Joe
2010-02-05 12:11:32