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What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

I was reading Danielle Morrill’s blog post today on whether one’s “ Startup Burn Rate is Normal. Danielle goes through some commentary from Bill Gurley, Fred Wilson and Marc Andreessen about burn rate and then goes on to discuss her own burn rate and others publicly weigh in. Valuation.

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?”

High Burn Rates Result in Short Startup Runways

Startup Professionals Musings

Your burn rate is the rate at which that money is being spent, and allows an estimate of how long you can go before refueling (runway).

What is the Appropriate Time Horizon of a Financial Model for VC’s

Ask The VC

Early and pre-revenue:  Investors are going to be most interested in your near term burn rate and how long their money is going to last. Recognize that your revenue is totally speculative so the “base case” is going to be zero revenue. In early cases, they are going to focus on cash / monthly-burn-rate.

Investors Measure Entrepreneurs By Cashflow Mileage

Startup Professionals Musings

Investors check your burn rate to assess your efficiency, and project your remaining runway before you run out of money and into a brick wall.

Market Type and Revenue. 2 Minutes to Find Out Why

Steve Blank

This video describes how “Market Type” affects your revenue and your burn rate. Minute Lessons Market Types

Rami Korhonen From PlayMySong On Optimizing Your Startup's Burn Rate

ArcticStartup

Your startup's cashflow is obviously crucial to keep your eye on so we spoke to Rami Korhonen, the CEO of PlayMySong, about how he optimizes their burn rate. Month to month their burn rate stays pretty consistent. Now it's pretty much the other way around. Hear it from startups.

Burn Rate Norms

Thinking About Thinking

When investors and entrepreneurs talk about “burn rate”, they’re generally referring to the amount of cash a company consumes through its normal operations every month. For many venture-backed companies, they have a negative burn rate meaning that they are expending more cash than they are collecting.

Burn Rate

charliecrystle.com

Fred posted on Burn Rate today. Instead, we raise cash here and there, hoping to get enough to run things smoothly, and maybe combine it with revenue. It's pretty simple: you have your known ongoing expenses, known revenue (or not), and known investment (or not). It's a good read--definitely go read it after this post.

Unicorpse

Feld Thoughts

Venture capitalist Marc Andreessen warned in a tweetstorm that startups with high burn rates would “vaporize.” That word is unicorpse.

The Resetting of the Startup Industry

Both Sides of the Table

The last few funding corrections saw many great companies disappear due to bad capital planning / high burn rates. Why does this matter?

Numbers Can Ruin A Good Story

A VC : Venture Capital and Technology

But at some point, you will have numbers; users, user growth, revenues, and revenue growth. You will also have a burn rate. As I was reading Josh Kopelman ‘s excellent post on the seed boom and Series A bust , I got thinking of some words of wisdom Mike Arrington once shared with me. Now this is not always true.

What Is The Appropriate Time Horizon Of A Financial Model for VC’s?

Ask The VC

Early and pre-revenue:  Investors are going to be most interested in your near term burn rate and how long their money is going to last. Recognize that your revenue is totally speculative so the “base case” is going to be zero revenue. In early cases, they are going to focus on cash / monthly-burn-rate.

Don’t Get Burned By Your Startup Burn Rate

Startup Professionals Musings

Your burn rate is the rate at which that money is being spent, and allows an estimate of how long you can go before refueling.

What Everyone Should Take Away from Twitter’s 8% Staff Reductions

Both Sides of the Table

” It goes like this: What is your net burn rate? But I’m certainly willing to say RIP Excess Burn. Does this suck?

Driving Corporate Innovation: Design Thinking vs. Customer Development

Steve Blank

Startups operate quickly – at a speed driven by the urgency of a proverbial gun-to-their-head called “burn rate.” Here’s why.

Why You Need to Ring the Freaking Cash Register

Both Sides of the Table

The company with no revenue and a $150k burn rate that raised $2.5 I work with a lot of startups. have said so for years. million.

8 Good CFO Attributes That Every Entrepreneur Needs

Startup Professionals Musings

Investors love to see a former CFO running a new business. In the case of GrubHub’s Adam DeWitt, he ended up with a salary exceeding that of the CEO.

8 Questions Before You Join Or Invest In A Startup

Startup Professionals Musings

Early stage burn rates over $50K per month, or a runway of less than six months may indicate an inefficient or desperate startup.

Validate The Pedigree Of A Startup Before You Jump

Startup Professionals Musings

Early stage burn rates over $50K per month, or a runway of less than six months may indicate an inefficient or desperate startup.

10 Incentives For Entrepreneurs To Bootstrap Their Startup

Gust

Count on several months of effort and costly assistance to court investors, with less than a 10% success rate. Invested Interests

Guest Post: Beware The Post Money Trap

A VC : Venture Capital and Technology

Users or revenues or whatever the most relevant metric for your business wind up not growing as fast as you think or worse yet hitting a temporary plateau, possibly even a small setback just as you need to raise more money. Your burn rate is pretty much the same thing. My partner Albert wrote this a few weeks ago.

3 Ways Structure Can Take Your Tech Startup To New Heights

YoungUpstarts

by  Gadiel Morantes , chief revenue officer at  Early Growth Financial Services. Use burn rate as an example. Build It Right.

IP 34

An Inside Scoop on the Funding Environment and What it Might Mean for You

Both Sides of the Table

Invoca was raising at the tail end of  this market phenomenon at this time doing tens of millions in SaaS recurring revenue and growing at a nice clip.

8 Ways An Investor Pitch Differs From A Product Pitch

Startup Professionals Musings

Every customer understands that your solution has to generate more revenue than cost, but you should not put that data in a customer pitch.

Strategy Roundtable For Entrepreneurs: Non-dilutive Financing Through Revenue Sharing

ReadWriteStart

Jeff has managed to keep his burn rate very low thus far, and a slow and steady crafting of the business is working nicely. Sponsor.

Entrepreneur Business Forecasts Are Not Black Magic

Startup Professionals Musings

Yet every business requires revenue and volumes, as certainly as it requires a product to sell. Doubling revenue each year is a good target.

10 Incentives For Entrepreneurs To Bootstrap Their Startup

Startup Professionals Musings

Count on several months of effort and costly assistance to court investors, with less than a 10% success rate. Marty Zwilling.

Every Entrepreneur Dreams Of A Startup Without Risk

Startup Professionals Musings

Then you walk the delicate balance between burn rates, revenue flows versus expenses, investment in marketing, and employees.

The growth imperative (but beware)

Seth Levine's VC Adventure

It’s important to note that there weren’t material differences in revenue size, geography, target market, etc. profitability).

What Is a Break-Even Analysis?

Up and Running

The break-even analysis table calculates a break-even point based on fixed costs, variable costs per unit of sales, and revenue per unit of sales.

8 Ways To Prepare Your Startup For Obstacles Ahead

Startup Professionals Musings

Common financial metrics include burn rate, gross margin, revenue growth and net profit. For others, it’s all about making money.

Your financial health snapshot: the key metrics you need

Up and Running

Keep an eye on both your monthly burn rate and any major payables to make sure you’re financially viable in the immediate future.

Your startup is loved locally, but how do you expand it globally?

The Next Web

Take Airbnb’s expansion into Europe as an example, a market that now generates over half of the company’s revenue. Thinking Locally.

Entrepreneurs Today Don’t Need A Big Budget To Start

Startup Professionals Musings

With a little help from a friend, you can handle expenses, revenue, and payroll, with QuickBooks or a similar package. Martin Zwilling.

An Alternative to Board Decks Some Seed VCs Actually Prefer

View from Seed

An example using our fake mobile startup: Section 7: Burn, Budget, and Runway. Obviously, this is NextView’s opinion. Header.

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

abovethecrowd.com

You must subtract it from your top-line revenue. You should not pay a net revenue multiple for a gross revenue disclosure.

IPO 62

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

Both Sides of the Table

If I’m right my only hope is that more companies actually get funded and more companies reduce burn and survive. All of these are false.

Business Plan Financial Forecasts Test Your Savvy

Startup Professionals Musings

Your “burn rate” or net cash flow out is usually the single most important survival parameter to a startup. Margin is everything.

Vision versus Hallucination – Founders and Pivots

Steve Blank

Other weeks Yuri would be buffeted by the realities of his burn rate, declining bank account and depressing comments from customers.