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Burn Rates: How Much?

Burn Rates: How Much?
In the comments to last week's Burn Rate post, I was asked to share some burn rates from our portfolio. I can't do that. But an alternative suggestion was to write a post suggesting some reasonable burn rates at different stages. I can do that and so that's the topic of today's post. The following applies to software based businesses, and most particularly web and mobile software businesses. It does not apply to hardware, life sciences, and energy startups. Building Product Stage – I would strongly recommend keeping the monthly burn below $50k per month at this stage. Building Usage Stage – I would recommend keeping the monthly burn below $100k per month at this stage. Building The Business Stage – This is when you've determined that your product market fit has been obtained and you now want to build a business around the product or service. A good rule of thumb is multiply the number of people on the team by $10k to get the monthly burn. One final caveat – there are outliers.

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On startups burn rates Bill Gurley gave an interview a few weeks ago in the WSJ where he sounded alarm on the very high cash burn rates of big startups these days. It triggered an immense debate as he was immediately echoed by Fred Wilson, this “Winter is coming” post from Techcrunch post along with deeper commentary from Mark Suster or Danielle Morill. The trade-offs between profitability and growth is one of the most fundamental and (generally) misunderstood business topic in the startup ecosystem. Here I’ll explain why there is no “right” amount of burn for a company, and I’ll try to give you some frameworks you can use for thinking about this problem. Frameworks

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