We are looking to start an Adwords campaign for our startup. We are keen to know what levels of spend people started at and what responses they found to be typical. for reference this is a service related to Kindle web clipping so it would not be taking on expensive words like 'insurance'
I'm sure you mean Adwords (where you spend money) rather than adsense (where you earn money). =)
As far as spend goes, simply go with whatever you can afford at a rate that converts into customers where you can afford. So if you can spend $1 per customer at your conversion rate, then go ahead and spend it.
As far as typical responses goes, I've been told by my adwords rep that 1% is the industry standard CTR for search ads, and for display ads it varies wildly to the point where there really isn't a standard. I see roughly 1.3% CTR on my search ads and roughly 1.1% CTR (depending on the site) for my display ads.
Conversion rates also wildly vary depending on your target market and website design. I've seen 1.5% conversion on getting email leads to 20%+ conversion rate for software downloads on a personal project I have.
My advice is that as long as your money is paying off, then spend as much as you can in adwords.
There's no hard rules or amount. I've started a campaign for one client with a budget of £10 per week, 5 years ago, that client spent over £4,000 on Adwords last week and made over 1,600 sales.
You should start with a small budget, as the first few weeks are about test and adjustment and increase spend once your campaign is more efficient. On the other hand, you don't want a budget so low that you can't get a measurable result. If financial constraints mean you don't have much budget then don't spread it too thin over too many products/services/keywords.
DIY here is often false economy. Adwords is very simple to set up and equally simple to do badly and waste budget. We offer very competitive rates for set up and management of Adwords. Have a chat to us before you dive in yourself.