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.

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. Investors look at your burn rate to see how efficient and effective you are at running the business. Cash is the fuel of every startup.

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.

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 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.

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.

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. But back then the plan was to get lots of funding, hire a lot of people, and then figure out what you're doing. Month to month their burn rate stays pretty consistent. That's going to increase their burn rate, but at the same time it's tied to selling their product. "If

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.

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.

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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.

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.

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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?

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?

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.

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?

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 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.

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Crisis Management by Firing Executives – There’s A Better Way

Steve Blank

Surprisingly we have never explicitly articulated or understood that what’s really happening when we hire a new VP or CEO in a startup is that the newly hired executive is implicitly pivoting (radically changing) some portion of the business model.

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.

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.

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.

It Must Be A Marketing Problem

Steve Blank

Six is a Proxy for Burn Rate. Later I realized six salespeople without revenue to match was a proxy for an out of control burn rate that now had the boards serious attention. With that initial sales “success” they began to hire and staff the sales department per the ”plan.” Cash was flowing out of the company and the VP of Sales was still hiring.

Corporate Perks Will Doom Your Entrepreneur Dreams

Gust

The result is a startup with an exorbitant burn rate, and a very unhappy entrepreneur. In a big company, you get used to having an IT team around configure your computer, a personnel specialist for hiring and firing, and a marketing team for strategy. Image via ExecutiveSky.ch.

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.

Raise What You Need, and Then Some

Mark Birch

Continuing from that discussion, you need to consider five key factors; major expenditures, average monthly burn rate, breakeven point, contingency and funding capacity. Generally the largest costs will be for hiring, office space, customer acquisition and legal.

Keep Asking Questions

ithacaVC

Unfortunately I have been burned a few times when asking more questions could have avoided the burn. Ask: why is your burn rate so high and is it sustainable? Did you hire too quickly? I have encountered a few situations lately where I found myself asking a lot of questions. This is mostly because I sit on many portfolio company boards for which I simply do not understand at a fundamental level the technologies. But sometimes it results from lousy answers.

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.

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.

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.

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 60

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.

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.

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.

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.

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.

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.

Death By Revenue Plan

Steve Blank

raised their voices in a annoyed investor tone) that the headcount and its attendant burn rate combined with the lack of revenue meant the company would run out of money much sooner than anyone planned.

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.

Dear elizy: How much should I pay myself at my startup?

Hippoland

Raised $500k-$1.5M : In this range, you probably have a slightly bigger team – say 4-8 people, and some of these later hires are going to be commanding closer to market-rate salaries. 4) Burn rate is a signal to investors Your overall burn rate is a signal to investors. If your burn is “too high” per your stage of the business, this could hurt your ability to raise money. Dear elizy : What’s reasonable for a founder salary?