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). Investors look at your burn rate to see how efficient and effective you are at running the business.

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. It doesn’t take a financial genius to recognize that you need to keep your burn rate low.

Trending Sources

Startup Runway Length Depends on Your 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 (runway). Investors also look at your burn rate to see how efficient and effective you are at running the business.

When Burn Rate Outweighs Enthusiasm

Anything's Possible

Despite that nearly all venture-backed startups burn capital unsustainably, Uber’s level of spending is viewed as particularly problematic among its naysayers. It will be able to sustain its burn rate based on that excitement unless something surprising happens to its business, or it goes public. It doesn’t matter whether a company’s burn rate is $10K per month or $10 million per month, companies die when their burn rates are greater than investor enthusiasm.

8 Questions Investors Use to Bypass Startup Hype

Startup Professionals Musings

My advice to founders out there is to not volunteer too much, but be open and honest in the face of direct questions like the following: What is your burn rate and runway today? They should be asking to speak to you if you are a potential investor or a superstar hire.

ProfessorVC: Burn Rate

Professor VC

Burn Rate. The burn rates of my portfolio companies is certainly top of mind right now, but thats not what this post is about. Since Im not a fan of any of those genres, I have been looking forward to the release of his latest work, Burn Rate. Unable to conceive, they hire Annie Day as a surrogate to bear their fertilized egg to term. Burn Rate. ProfessorVC. The last blogger in Silicon Valley. Wednesday, July 22, 2009.

Startup Sales – Why Hiring Seasoned Reps May Not Work

Both Sides of the Table

Even if you don’t have “direct&# sales I would tell you that “everything is a sale&# including fund raising, hiring, getting press and doing business development. Don’t confuse that with hiring “consultants&# who make terrible sales people.

5 Steps To Maximizing Your Startup Cash Flow Runway

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. It doesn’t take a financial genius to recognize that you need to keep your burn rate low.

After Funding, Watch Burn Rates And Beware The Tyranny Of Incrementalism

Anything's Possible

At first the team is small and the initial burn rate barely moves the dial on the capital raised. No one wants to feel underpaid, and how big a deal is an extra $10K a month to the company’s burn rate when one or two million dollars just hit the bank account. Then the hiring begins. They start articulating key capabilities that are needed, and they put together job specifications of who to hire to solve those problems. Not hire any people?

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

Both Sides of the Table

But like many companies over the past five years it hired aggressively and probably had some degree of straying off of a core strategy and some amount of excess jobs relative to its current revenue forecasts and opportunities. ” It goes like this: What is your net burn rate?

GBP | Dirk Paessler | How to Grow & Stay Agile. Part 1: Top 6 Business Decisions

Business of Software Blog

We never had a “burn rate”: At every point in time we were profitable and would have been able to continue the business forever—without being under pressure to reach a certain goal at a specific time. Decision 3: The Team Hires the Team.

Agile 20

10 Indications That Your Startup Role Is Killing You

Startup Professionals Musings

Too often they are also hesitant, inexperienced, and fearful of hiring people or a mentor to be the partner they need. They let the burn rate go up too fast, and the business burns down before it really starts.

10 Clues That It May Be Time To Seek Outside Help

Startup Professionals Musings

Too often they are also hesitant, inexperienced, and fearful of hiring people or finding a mentor to be the partner they need. They let the burn rate go up too fast, and the business burns down before it really starts.

8 Good CFO Attributes That Every Entrepreneur Needs

Startup Professionals Musings

While the CFO usually takes the lead in finding professional investors, everyone needs to look for ways to reduce the burn rate and maximize alternative funding sources, including bartering for services, finding partners willing to accept deferred payments and talking to friends and family.

8 Questions Before You Join Or Invest In A Startup

Startup Professionals Musings

From my perspective as an investor, I recommend that every founder needs to know the answers to these questions, be open and honest in answering them thoughtfully, and without making excuses: What is the current runway and burn rate?

3 Ways To Ensure Your Startup Has A Top-Notch Team

YoungUpstarts

While you absolutely need to keep an eye on earnings and burn rate, human capital is ultimately the fuel that makes the machine run. Depending on your startup’s needs, it can be a toss-up on whether to hire for attitude or skill.

9 Metrics Every Entrepreneur Should Know About Their Business Offhand

Up and Running

Renewal Rates. If you’re selling anything, understanding renewal rates is absolutely critical. This impacts every decision related to your business, from hiring more staff to expanding product offerings to investing in marketing. – Ben Rubenstein , Yodle. Burn Rate.

10 Clues That An Entrepreneur Is In Over His Head

Startup Professionals Musings

Too often they are also hesitant, inexperienced, and fearful of hiring people or a mentor to be the partner they need. They let the burn rate go up too fast, and the business burns down before it really starts.

8 Key Questions To Expect In Investor Due Diligence

Gust

My advice to founders out there is to not volunteer too much, but be open and honest in the face of direct questions like the following: What is your burn rate and runway today? They should be asking to speak to you if you are a potential investor or a superstar hire.

An Alternative to Board Decks Some Seed VCs Actually Prefer

View from Seed

Examples of housekeeping include the following list, though not every item will appear every time: Finance: Cash out date, burn rate, 409A valuation, cap table, common/preferred stock dashboard. An example using our fake mobile startup: Section 7: Burn, Budget, and Runway.

3 Ways Structure Can Take Your Tech Startup To New Heights

YoungUpstarts

Use burn rate as an example. If you don’t understand how much money your company is burning through each month, how can you expect to intelligently talk about your fiscal health? by Gadiel Morantes , chief revenue officer at Early Growth Financial Services.

IP 38

Failure and Redemption

Steve Blank

90 days later, I found out our games are terrible, no one is buying them, our best engineers started leaving, and with 120 people and a huge burn rate, we’re running out of money and about to crash. We hired everyone according to our plan.

Validate The Pedigree Of A Startup Before You Jump

Startup Professionals Musings

From my perspective as an investor, I recommend that every founder needs to know the answers to these questions, be open and honest in answering them thoughtfully, and without making excuses: What is the current runway and burn rate?

Why Founders Should Know How to Code

Steve Blank

Speed keeps cash burn rate down while allowing you to converge on a repeatable and scalable business model. And that he could identify the resources needed, (outsourced contract developers who could build it for him) and he would hire a partner to do so.

Startup Revenue Milestones

K9 Ventures

And in order to do that they need to either raise capital to be able to hire a team by paying them real dollars or recruit co-founders who are willing to share the journey based on the equity stake and bootstrap the company.

8 Big-Company Habits That Don’t Work In A New Venture

Startup Professionals Musings

The longer you wait to start your own business, the higher the default burn rate, and the less happy you will be to take a financial step down.

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

The Next Web

Airbnb’s experience shows how local engagement strategies such as these do not have to increase a startup’s burn rate considerably. One of the most important parts of taking on an expansion process is hiring the right local talent, a time consuming and challenging factor.

Founders – Use Your Down Round To Clean Up Your Cap Table

Feld Thoughts

” Many companies have hired ahead of their growth rate because they had the cash to do so. In our portfolio, we generally don’t have this problem because we aren’t big fans of either (a) overfunding companies or (b) escalating burn rates based on headcount. But, occasionally we find ourselves in the position on the board of a company where, as you look forward, you realize you are burning more than you should be for the stage you are at.

The Importance of Benevolent Dictators

Both Sides of the Table

Should you increase your burn rate by adding 2 senior hires who will help you ship faster or sell more but then have less time for fund raising? I believe that groups coming together to make tough decisions driven by consensus tend to make poor decisions.

8 Key Questions To Expect In Investor Due Diligence

Startup Professionals Musings

My advice to founders out there is to not volunteer too much, but be open and honest in the face of direct questions like the following: What is your burn rate and runway today? They should be asking to speak to you if you are a potential investor or a superstar hire.

8 Pieces of Advice For CEOs That Need To Scale Their Startups

YoungUpstarts

Burn rate: Seeing company grow fast is both exciting and overwhelming experience. Even though the growth is rapidly increasing, the burn rate can equally increase too so its essential to plan advance and evaluate the options based on that. Hire Talent.

Begin With a Job at a Startup, Then Start Your Own

Startup Professionals Musings

People hire people they know, so nurture your relationship with friends already active in startups. What's the monthly burn rate? Personalities are strong, and the hiring process for good ones is tougher than big corporations.

10 Startup Shortcuts That Will Be Back To Haunt You

Gust

Be quick to hire and slow to fire. Hiring after one interview is like hopping a red-eye to Vegas to get married after one date. On the other end of the process, don’t hesitate to pull the trigger fast when a new hire isn’t working, but don’t forget to be human and follow all the steps.

5 Shark Tank Lessons Every Startup Should Understand

Up and Running

Investors like valuation to relate to actual business numbers, such as sales, gross margin (price less direct costs), and burn rate or fixed costs. I can take the money you want, hire some people, and become your competitor.”

Create Structure out of the Gate and You’ll Thank Yourself Later

Feld Thoughts

They close on the $750k, hire a buddy or two, buy some Macs, and get to work. Things start to get a little fuzzy in terms of priorities, but not to fret, the new office is coming along really well with all of the hiring! Three months in, the burn is now at $70k/month. At month six, one of the early hires leaves, a developer who turns out wasn’t a good fit. The burn is now at $90k/month as they had to hire a “customer delight” person to handle the beta process.

Should Startups Care About Profitability?

Both Sides of the Table

If you hire 6 senior sales reps in January at $120,000 / year salary then you’ve taken on an extra $60,000 per month in costs yet these sales people might not close new business 6 months. They don’t want high burn rates but they will never fund slow growth.

“Venture Assistance”: A Philosophical View Of What Boards Should And Should Not Do

techcrunch.com

He knows how to advise entrepreneurs on hiring/firing, running teams, managing funding, when/how to control burn rate, and making other tough management decisions in the real environment of startups. Good advisors have also done a lot of hiring and know what to look for.

Blue Collar VC

Mucker Lab

How can we tell founders to stay lean, keep focused on their customers, and keep burn rates low if we cannot walk the talk and eat our own dog food? The ones who would rather hire a sales guy than spend money on flavored morning lattes. Four years after founding and bootstrapping Mucker Capital , we are pleased to announce the close of a new $45 million fund, Mucker III. This is our third fund, which might make us seem like grumpy, rich, old VCs.

The Co-Founder Mythology

Both Sides of the Table

Hire your co-founder. Involve them in fund raising, hiring, strategy, etc. like how much burn rate), whether to sell the company, etc. Startups have high failure rates. So trust me when I tell you that you can hire incredibly talented people for 30% of your company. I spoke at Stanford last year about starting a tech company. They really cleverly chopped the video up into small bite-sized segments.

How Great, Operationally-Focused CFO’s Can Transform Your Business

Both Sides of the Table

For a well-funded seed company I have controversially recommended hiring a great office manager that doubles as an administrative assistant. This happens because many CEOs are passionate, market-driven people who are constantly trying to launch new products, win contracts, get press, hire staff and woo VCs. They can show the projections on what this does to burn rate. Every hire you make takes time to negotiate their contract – even when you have standards.