I think your expectations of a seed round might be a bit optimistic. It's realistic to take funding so you can quit your day job --- especially if you're growing reliably month-over-month. It's a little less reasonable to think that you'll be able to hire multiple people with a small seed round and execute on your business so well that you'll be off the funding treadmill after that seed round.
Unless you have pretty exceptional circumstances, I think you're also pretty optimistic in assuming that a few hundred thousand dollars will only cost you a few % of your company.
Well what kind of seed rounds have you seen for companies that are small but have some traction? I have been involved in a few ( not as owner though), and for example a company with 0 market fit or customers or tech got 250k convertible debt for about 10% of the company (obviously depending how the next funding round went). Using that as my mark with a fairly conservative growth rate, 250k should fund me + 1 full time dev (+ current support staff) until we get to profitability.
What's "traction"? What's your month-over-month growth and how long have you had it?
One word of caution would be that a lot of the numbers we see for seed financing apply to companies that have gone through high-profile accelerators like YC, or that have founders who have previously made money for investors.
The bigger concern is that if you hire, the profitability number you need to hit can change radically. Raising to hire is a very easy way to put your company on a funding treadmill.
Growth is in the OP. 3 months, but have a good sales pipeline (i.e. Dec will be month 4 and no slowing down, if anything it is speeding up).
The funding example I gave was for a non-incubated startup. But it is my n=1, so not totally sure that is out there.
100% agree on the hire and funding treadmill. I would only take funding if it is reasonably sustainable. If I would end up hiring 2 people and in 6 months we have had less than projected growth, I would lay them off to keep the company alive. Sucks for the hires, but part of the risk of startups I think. I would not hire 14 people that I need funding to employ.
That is not part of the risk of startups. If you can't pay someone indefinitely, don't hire them. The word for people who risk a reasonably assured salary to participate in a startup is "cofounder".
This sounds very good in theory, but if I got to the point I have 3 months runway at current staffing level with no funding in site, or 6-12 months at staffing level N - X, I would lay people off to improve the success of launching the company. My job is to get the company to take off. I think it would be absurd to say "Whelp guys that depend on me for a job.. I don't want to lay off 2 people to save the rest of your jobs because you are employees and not founders, so we are gonna likely go under in 2 months"
This is totally a valid thing you should bring up in an interview though. I would pass over you, but I can totally see many others agreeing with you.
I think his point is that anyone applying for and accepting regular, full-time employment does it with the assumption that the job will continue to exist into the foreseeable future. That's kinda the definition of "employee" in our society.
And he's saying the alternative in this scenario is "cofounder", in which the would-be employee takes on a job that may disappear and is compensated for that fact by getting significant equity in the company.
I mean, I understand what he is saying... but if you join a startup (even as an employee), you should be aware that your risk of your job going away is higher.
If you want a really safe job for 20 years you would join the government or a fortune 100 type company. Does the 2nd and 3rd employee ever think his job is as secure as working for a fortune 100?
Good startup managers don't hire people they're not sure they can pay indefinitely. It's not the case that people applying to startups for jobs are aware of the risks that they're taking, and if your risk set includes "entirely possible this job is gone in 3 months", the word for the person who takes that job really is "cofounder".
Either way, I think you're going to find that outside funding on the scale you're contemplating is much less magical than you think it is. It's going to be harder to close than you think, and it's going to do less for your business --- at least, if you really do mean to do all the things you need to do to stay off the funding treadmill!
There's no reason you can't get on the funding treadmill and sell enough of your company to get a "runway" to the next round of funding. Lots of successful businesses are built that way. It's harder, however, to think of bootstrapped businesses that have leveraged small seed rounds tactically the way you're thinking of.
You may also find that it's difficult to raise funding when one of your "use of proceeds" bullets is "enables me to quit full time job". People who invest in startups are largely driven by signals, and a pretty important one is "founder believes in the business enough to have dedicated themselves to it full time for some time".
Unless you have pretty exceptional circumstances, I think you're also pretty optimistic in assuming that a few hundred thousand dollars will only cost you a few % of your company.