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So What is The Right Level of Burn Rate for a Startup These Days?

Both Sides of the Table

This has led VC & entrepreneur bloggers alike to similar conclusions: start raising capital early and be careful about having too high of a burn rate because that lessens the amount of runway you have until you need more cash. But the hardest question to actually answer is, “What is the right burn rate for your company?”

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Unicorpse

Feld Thoughts

Some will demonstrate strategically justifiable metrics and have fantastic ‘up round’ exits; others may see liquidation preferences kick in which will negatively impact founders and employees; others may fulfill the adage “IPO is the new down round” , which has been the case for more than half of the public companies on our list.

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Investors Beware: Today’s $100M+ Late-stage Private Rounds Are Very Different from an IPO

abovethecrowd.com

As a result, a “late-stage” financing is no longer reserved for high-revenue, pre-profitability companies getting ready for an IPO; it is simply any large round of financing done at a high price. You must subtract it from your top-line revenue. You should not pay a net revenue multiple for a gross revenue disclosure.

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On the Road to Recap:

abovethecrowd.com

The pressures of lofty paper valuations, massive burn rates (and the subsequent need for more cash), and unprecedented low levels of IPOs and M&A, have created a complex and unique circumstance which many Unicorn CEOs and investors are ill-prepared to navigate. So how will you ever get liquid?

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How much equity for investors and employees?

dondodge.typepad.com

My next post will be about the importance of cash flow, keeping burn rates low, and how to avoid excessive equity dilution. from David Dalka - Creating Revenue and Retention - Chicago GSB MBA As discussed in my recent post about a TiE event on Chicago start ups, there are many factors to consider when taking in funding and employees.

Equity 40
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What Most People Don’t Understand About How Startup Companies are Valued

Both Sides of the Table

Huge funding increases lead to massive wage inflation, rent inflation and thus higher burn rates. forward revenue for SaaS businesses when in the years before it had been less than 5x. Or down rounds might favor earlier-stage investors because the liquidation preferences of later stage investors get reduced.

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