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I'm finally at the stage where it's time to stop coding for 12 hours a day and it's time to raise capital - I've been approached by an angel investor who asked for a 6 month budget.

The project is a niche dating site in a moderately competitive space. I spend about $1k/month on advertising, and another $1k per month hiring freelancers to do misc tasks. I have a target # of users and features to implement in the 6-month time frame.

I've crunched it all together, added a salary for myself, 2 full time software developers, 1 part-time marketing person, $3k/month advertising, $30k marketing/branding agency costs and came up with around $200k. This sounds somewhat low to me, but I do not have anything to compare against.

Anybody been/in a similar situation or anybody can advise ?

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You are spending too much in advertising/marketing - IMO. Are you using any free tools such as MailChimp, Unbounce, Twitter, Facebook, Email, etc... to help with advertising and marketing? Also, word of mouth is free and usually very effective. – Ricardo Oct 16 '10 at 23:36
"too much" is a relative term :) I know people who spend my monthly advertising budget in a day.... yes we're using all the above...they are free to use but not free to use efficiently...word of mouth will only get you so far, especially when you have no brand recognition and you're in a competitive space. – Sherif Buzz Oct 16 '10 at 23:47
the dating space is an industry that tends to spend a lot on advertising and SEM, from what I have heard.. – Jeff Epstein Oct 17 '10 at 1:22
I would increase marketing costs. Part time is not enought. 3k per month for advertising seems too low to too. – user3997 Oct 17 '10 at 9:14

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Now this does seem to be on the low-side. Hopefully, you can measure you ROI so anything spent on SEM or Paid Search will be worthwhile.

I have heard from experienced entrepreneurs to "take your budget and double it" to come up with a number when speaking with investors. The reasons are: 1) things never work out as planned; and 2) leave yourself with enough runway...

That being said, it was much easier to say it was too high (before the edits) now it does seem that you could easily add 50-100k..

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thanks. I've made all resources full time and added to marketing budget – Sherif Buzz Oct 17 '10 at 19:33
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This budget sounds ok to me, comparing to the budgets of startup-s that I worked in. In my country salaries are probably comparable to the Egypt. You business seams to require big marketing budgets. Just make sure to include in the calculation every expense that you will have expected or unexpected. We actually survived much more time with $200K and 10 developers but without spending for marketing.

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Your biggest expense is your developers. I am assuming you are in the USA. Use offshore developers such as those in Belarus or Ukraine. You can find a great programmer offshore.

With software, planning is the majority of the work. Plan everything in advance, including user interface. The more you tell your designers and programmers about your vision, the less they have to think / charge you.

As for marketing... I think the bulk of your money should be spent on marketing, with this caveat, if you spend $$ on something it should deliver immediate results. Many advertising firms tell you that you have to build a brand before making $$ that is not true. A good ad campaign pays for itself, the time to manage it, and builds profits.

If you are going with us developers you may be able to offset your expenses by using interns or junior level developers. It may take them an extra month or two, but the savings will be worth it, and you can always make changes as you become more successful.

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I'm in Egypt, where development costs are comparable to Ukraine. I did budget for a branding exercise with a marketing agency, but I keep on hearing from people that it's a waste of time and money, so may scrap that. Thanks for your input – Sherif Buzz Oct 19 '10 at 14:35
What are they considering a waste of money? The project or the time and expense in the spent with the marketing agency? Can you develop the software yourself and market it in beta mode to see how it might do? – Frank Oct 19 '10 at 15:02
It's already out there and doing pretty well - but the name and branding aren't too great, that's why I'd consider using an agency. – Sherif Buzz Oct 20 '10 at 14:40
You can always pay 10,000 usd for kim kardashian to TWEET about your company! That is a joke to bring up the point of smart marketing. Share more details about yoru company, and perhaps the URL, I am sure the members here would be more than happy to help you align your Marketing Plan. Its important to know who your customer base will be, and your goals... . – Frank Oct 21 '10 at 23:05

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