I have a question which I am trying to get answers for from multiple people, but I am not sure I have the answer yet.
The average US technology startup raises a seed round of about $150K which lasts them 12-18 months. Most Indian startups look to raise a seed round of $250K which lasts them 12 months or less. Why is that?
Let me give you more clarity on both numbers.
The average YC company gets $25K from YC and a no cap convertible for another $125K. Most (>39% in the latest batch apparently) raise money before 18 months of graduating from YC, but many still have the money last 18 months. The average company has 2-3 people in 12-18 months until they have product-market-fit in the US.
The average Indian company gets by further along by bootstrapping and is not much further along (in terms of product-market fit) than the US counterpart. They raise
$250K (per pocha below)
The money that’s spent is primarily on acquiring customers and payroll.
Even though we have more people in the Indian product startup, we have more-or-less the same payroll costs.
But most startup plans (business plan or execution plan) I see keep aside 40% of their raised capital for “marketing” costs. For customer acquisition – SEO, events, or “viral campaigns”, etc.
So here’s my hypothesis:
1. We need more money because paying customers are *much* harder to get in India than US. Most US startups spend ZERO in marketing (out of pocket costs) for the first 18-36 months from my personal experience.
2. We need more people because most of our startup founders are “generalists” not “specialist and generalists” who cant really code or run a digital marketing campaign or close a sale. They have to “hire” a CTO, CMO and Sales head to do that.
3. We need more money because cost of doing business in India is a lot more than US.
I dont know the answers, but I am very curious what entrepreneurs in India think is the reason product startups need almost twice as much money which lasts 2/3 as less than US counterparts.