Capex vs opex for a startup comes down to one question: does the money buy something used up now, or something that earns for years? Running costs like rent are opex, while an asset that keeps earning, like this company's content library, can be treated as capex and spread over its useful life.
The company builds AI tools for doctors and pairs them with a library of medical content, such as journal summaries and conference talks. It was raising a seed round and needed a model and a deck, with a valuation behind them.
Two things made this job harder than most. The company had three kinds of customer, and it was spending real money on content that would take years to earn back.
Three customers, three sets of numbers
Individual doctors pay a small monthly fee. Many of them try it and leave. Hospitals and institutions pay much more, sign longer deals and rarely leave. Drug companies sponsor content, which brings in big sums at uneven times and depends on relationships.
Put those together into one average and you get a number that describes nobody. So we kept them apart. Each group has its own price and its own churn. We also split the marketing into two funnels, one for the free version and one for the paid AI tools, because people find them in different ways.
The mix of customers changes over time too. In the first year most users come in through a medical society partnership. Later, more come in as institutions and paying individuals. The model shows that shift year by year.
Capex or opex: the choice that changed the shape of the business
The founders were counting every dollar spent on content as a running cost, like rent or salaries. That made the early years look like a deep loss.
But the content isn't used up in a month. A summary of a journal paper keeps bringing in users for a long time. So we treated the library as an asset the company builds and then uses over time. In the books, that's capital spending, or CapEx, spread over the life of the content.
Different content lasts for different lengths of time. We spread journal content over 18 months and conference content over six, because conference talks go out of date faster. The total spend didn't change. What changed was when it showed up in the profit and loss, and that made the business easier to read.
Testing the options before picking one
The founders weren't sure which way to charge. We built a scenario tab that tested three revenue setups side by side. The founders picked a mix of the three once they could see what each one did to cash and growth. Investors could see that the choice was made on purpose.
What we built
- A 17-tab financial model with separate numbers for each kind of customer
- Two marketing funnels, one free and one paid
- Content treated as an asset, with its cost spread over its useful life
- A scenario tab comparing three ways to charge
- A pitch deck built around clinical trust and the drug company partnerships
- A valuation to anchor the raise
If you spend money now on something that earns for years, ask whether it's a cost or an asset. The answer can change how investors read your whole business.
Questions founders ask
Should a startup capitalize or expense development costs?
It depends on the accounting rules you report under and on what the spending creates. Costs that build something the company will use for years, like software or a content library, can often be capitalized and spread over their useful life. Research, upkeep and anything used up straight away is usually expensed. Your accountant makes the final call, but your model should show which choice you made and why.
Can you capitalize content creation costs?
Sometimes. If the content keeps earning after the month it's made, there's a case for treating it as an asset. Here, journal summaries kept bringing in users, so we spread journal content over 18 months and conference content over six, because talks go out of date faster. The total spend didn't change, only when it showed up in the profit and loss. Check the treatment with your accountant.
What is the difference between capex and opex for a startup?
Opex, or operating expense, is money spent running the business, like rent, salaries and marketing. It hits the profit and loss straight away. Capex, or capital expenditure, buys an asset that earns for years, like equipment, software or a content library. It goes on the balance sheet and its cost is spread over its useful life. The cash goes out either way. What changes is how the profit and loss looks.