Popular culture has created the myth that start-ups are cheap—cheaper than regular businesses anyway. This can be true for designers and developers who band together and use their own labour in the form of sweat equity. However if you don’t have the necessary skills and connections yourself, you have to hire in talent and that isn’t going to be cheap. Good products take time and effort after all.
A competent freelancer will typically cost you around £8k per month—a good agency staffer doubly so. With these rates in mind, an early prototype taking two people a couple of months could cost in the region of £30-60k. For a fully fleshed out beta version, you’d probably want a team of three or four people working on it over a four to six month period. Plugging those figures in you’re looking at anything from £100-350k before you’ve even launched. Suddenly this starts to feel less like a cottage industry and more like a real business.
Having spoken to several successful investors, these figures seem to stack up. It would seem that most investors expect it to cost around £50k to get your proof of concept and around £250k to get that product to market.
