Re:Oyster is shutting down
by bane on Tuesday September 22, 2015 @09:42AM
(#10258451)
An easy way to guesstimate how long a company's investment will last (given no other revenue) is to just assume each person they have on staff costs between $200-$250k per year.
It's not perfectly accurate, but it's surprisingly good in terms of figuring out runway. Staffing costs are typically the lions share of business costs for software companies. This gets weird if they do lots of advertising, or have enormous hosting costs or something, but it's usually on the order of 70-80% of the total operating costs (by comparison renting physical locations like offices is usually among the cheapest).
So let's assume they had 26 people, that's between $5.2m-6.5m per year...right in line with what the actual math shows ($5.67m).
There's other ways of estimating, like if you think a company is running cheap you can go with the old "10 people for a million dollars a year" guess, but I've found that to be increasingly inaccurate.
The reason the numbers look like this isn't because that's what people get paid, but because of all the other cost burdens on having employees -- most of which are already covered here.
It's also one of those things that makes me scratch my head when startups hire huge staffs too early. In good markets, hiring loads of people isn't a huge deal, but burning millions per year you don't have doesn't make much sense.
It's not perfectly accurate, but it's surprisingly good in terms of figuring out runway. Staffing costs are typically the lions share of business costs for software companies. This gets weird if they do lots of advertising, or have enormous hosting costs or something, but it's usually on the order of 70-80% of the total operating costs (by comparison renting physical locations like offices is usually among the cheapest).
So let's assume they had 26 people, that's between $5.2m-6.5m per year...right in line with what the actual math shows ($5.67m).
There's other ways of estimating, like if you think a company is running cheap you can go with the old "10 people for a million dollars a year" guess, but I've found that to be increasingly inaccurate.
The reason the numbers look like this isn't because that's what people get paid, but because of all the other cost burdens on having employees -- most of which are already covered here.
It's also one of those things that makes me scratch my head when startups hire huge staffs too early. In good markets, hiring loads of people isn't a huge deal, but burning millions per year you don't have doesn't make much sense.