The extra money in angel investment

The term angel investment is getting skewed everyday. I was talking to a person the other day who was raising $500K (~2.2C INR) as an “angel investment”, seriously? I think the word angel is dying slowly and currently refers to super angel. However, I believe there are still companies that would want to raise somewhere around 30-40L to move to the next stage (after bootstrapping). We were (are?) at this position and generally startups write a plan on how to proceed with the money. We too did it and here are some of the things we missed out in the calculation.

• CTC vs cash-in-hand
  When you want your engineer to take home 30K, you put up this value in the plan. However there are a bunch of things like HRA, DA, Gross salary, etc. (referred to as CTC). If you would need the guy to take home 30K, the CTC would be anywhere between 36-42K, that’s an extra 10K value you need to fill up.
• Auditor fee + filing taxes, etc.
  Someone to manage your accounts / file taxes, maintain your bills, and an auditor to look through it at the end of the financial year – this is going to cost somewhere around 30-40K / year.
• Legal fee
  This is a killer! Generally, lawyers charge on an hourly basis and back & forth of the termsheet, etc would mean more hours spent. Budget around 60-70K for the legal fee, I would say this is an average amount.
• Office space
  Add a buffer – even if the rent you’re paying is going to be xK per month, something is going to crop up – new chairs / table, etc.
• US Trip
  What if you get an invite for Techstars ? or need to go to US on a business trip ? If you would need to stay there for a month it would easily cost 1L for stay / month + tickets.
• Extra force
  You’re definitely going to need 1 more engineer / sales person sooner than you actually plan. Accommodate for his/her salary.

I’m writing this blog post specially targeted to the guys who raise somewhere around 30-35L as a Series-A. Include these expenses beforehand so that you’re well prepared for the small amount you’re raising.