# Burn Rate

MBA Mondays is back after a week off. Today we are going to talk about burn rate, or cash burn rate to be more specific.

Your burn rate is the speed at which your cash balance is going down. If you had \$1mm in cash on January 1st, and now it is October 1st and you have \$250,000 left, your burn rate is \$750,000/9, or \$83,333/month. Just to be perfectly clear the \$750,000 in this calculation is the amount of cash that has gone out the door (\$1mm minus \$250,000 is \$750,000). And the 9 is the number of months that have transpired (January through September is nine months).

So it is October 1st and you have \$250,000 left and your burn rate is \$83,333/month. So how many months of cash do you have left? Well now that you know your burn rate, that's easy. Take the amount of cash you have left (\$250,000) and divide by your burn rate (\$83,333/month) and you get three months. At year end, you will be out of money.

That's the whole point of knowing what your burn rate. If you had unlimited funds, burn rate would be an irrelevant number. But I've never seen a company wtih unlimited cash. So entrepreneurs, CEOs, and certainly CFOs should always know how much cash they have and if they are burning cash, they should know the rate at which their cash balance is going down. And of course, they should know the date on which they will have no cash left.

If your company is highly profitable and spitting cash (like Apple), then this whole issue is not as important. But companies can go from profits to losses pretty quickly, because of a bad economy or a product cycle transition or some other bad fortune. And when that happens, burn rate can become important very quickly. So having a sense of cash balance and expense structure is always a good idea.

The calculation of burn rate above is what I call the "back of the envelope method". You can do that in a board meeting, a pitch meeting, or in a car driving down the highway (which I did last tuesday) as long as you have two dates in time and cash balances on both dates (assuming there has not been a financing in between).

But there is a more sophisticated way to calculate burn rate. You look at your monthly expenses on your income statement. Add all of them up. And then look at any outlays of cash for capital expenditures or other regular uses of cash on the balance sheet and cash flow statement. Add all of these monthly cash outlays together. This is "gross burn rate". Then you look at revenues, or even better cash reciepts from revenues. Include all incoming cash you are certain you can count on every month. Subtract this from gross burn and you get "net burn rate". This should be the amount of cash that your business is burning in any given month.

Whenever I get a version of this more sophisticated calculation of burn rate, I always do a sanity check by comparing to the "back of the envelope" method just to be sure they are in the same ballpark. If a CFO reports to the board that the Companny has a net burn rate of \$100,000/month, but the cash balance has gone down by \$1mm in the past five months, it's a signal that something's not right. And then you have to dig deeper.

When you do these "deeper dives" you often run into "one time expenses". "Well, we had to lay out a huge security deposit in February that was a big hit to cash" or "our legal fees on the big contract with IBM were a big hit to cash in June". But my view is if a company has big "one time expenses" every month or two, they really aren't one time expenses. The burn rate calculation needs an accrual for these sorts of things in it.

Burn rates can change pretty quickly.  If revenues are ramping faster than expenses consistently month after month, the burn rate will go down. And for good reason – the company is getting closer to making money, which is what all this stuff is about at the end of the day. Burn rates can also go in the other direction if expenses are ramping faster than revenues or if there are no revenues. Burn rate calculations need to take into account the fact that burn rates aren't constant. If your burn rate is going up, from \$83,333 per month to \$100,000 per month, then the \$250,000 you have left will not last three more months. It might only last 2 1/2 months. Assuming a constant burn rate can be very dangerous. Always know if your burn rate is going up or down and include that fact in your analysis.

Most startups burn money for a time. Some for only a very short time. But many for a longer period of time. During that period of cash consumption, it is critcal to keep a close eye on cash balance and burn rate and cash out date. It will tell you when you need to raise money again (at least six months before you run out of cash please!). And it will tell you how much you are investing on a monthly basis on your company. These are important numbers to know, to internalize, and to operate with.

1. RichardF

Burn rate in early stage start up is probably the single most important piece of financial information a controller/cfo should place in the monthly board deck (along with the head count analysis).I’ve always found a simple graph gets the message across best.Important to try and smooth the burn by leasing/renting as much as possible.As JLM says If It Flies,Floats,or Fornicates , you are better off renting it

1. jason wright

Better still, beg, borrow (not leasing or renting – no money involved), and steal.

2. Dennis Buizert

Is it bad to assume that if you have 250k left, you actually have 200k left? I mean, id rather assume I have less left than it actually is then to think Oh cool 250k is still remaining. It would put you in a statement of cost cutting.Or is this assumption the wrong way of thinking? *** Never had to raise money or haven’t done so in anyway shape or form ***

1. fredwilson

i’m not one to set my watch ahead so i am always on timei set my watch to the correct time and make sure i’m on timeactually, i don’t wear a watch. never have and never will.but i do know what time it is to the minute.

1. Rohan

Who needs a watch when you have a phone?My friend pointed out that it helps in large corporates when you need excuses to get out of meetings and would like to check the time without making it darn obvious.. haha

1. Shawn Cohen

When you’re a good estimator, clocks are mostly irrelevant.

1. Carl Rahn Griffith

I am typically accurate to about 10-15mins whenever I need to estimate the time. If it’s a matter of precision I’ll check my iPhone.

2. Shawn Cohen

agreed, but i think that ability develops over a long period. I always wondered how my dad could do it and now I know:)

2. Fernando Gutierrez

When your phone is out of battery watches are quite useful to know the time (I go through almost a couple batteries everyday in my Android, so that not an small issue for me!).

1. Rohan

Haha. iPhone4 much better amigo! 🙂

2. Fernando Gutierrez

I’ve also destroyed iPhone batteries…

3. jason wright

A cheap watch is useful when being mugged – just hand it over and the mugger may feel that’s enough and be on their way. I recommend the elasticated band, easy on and easy off.

4. Rohan

Haha. I was mugged on my 3rd day in London..I can definitely testify. This makes sense! 🙂

5. Rohan

You seem to have quite a track record! 🙂

2. JaredMermey

Fred clearly does not play for Tom Coughlin :)It’s imperative to know the time to the minute (and even to the second, microsecond, etc.), but wouldn’t sometimes a small buffer be good too? You never know when you will run into unexpected traffic and be late to your destination (i.e., an unexpected or bigger than expected “one time expenditure”). Granted, you should always do your due diligence and check the traffic reports to ensure the chances of delays are minimized. Any truth to this?

1. Fernando Gutierrez

The problem with buffers is that you know they are there and you use them in your planning, even if you don’t intend to.

3. ShanaC

Not even as a fashion item?

1. LE

“Not even as a fashion item?”Speaking of WSJ ads that’s the other thing that bothers me. All those watch ads on page 2 and 3.  A piece of jewelry (hey that’s fine if it’s your thing of course) that tells time that you can get from your cell phone or computer. The watch industry is very interesting to study marketing wise of course. Men don’t buy jewelry. But they have been sold the equivalent of a De beers “diamond is forever” lifestyle and spend \$\$ on watches. Complete with mention of how woman look at the watch a man is wearing to see how important he is. De Beers:http://en.wikipedia.org/wik…”A young copywriter working for N. W. Ayer & Son, Frances Gerety, coined the famous advertising line “A Diamond is Forever” in 1947.[36] In 2000, Advertising Age magazine named “A Diamond Is Forever” the best advertising slogan of the twentieth century”(This could have been part of burn rate back then of course – try and calculate that ROI).

1. ShanaC

(Note: it still would make me happy to get a diamond engagement ring)Advertising does cause the “I wants”.  This doesn’t meant I still don’t find it weird that there aren’t a lot of ways for guys to express their style.  I mean, you all own the same collared shirts and khakis as far as I am concerned (only difference may be material)I get more choices, why shouldn’t guys?

2. LE

“you all own the same collared shirts and khakis “Many years ago I standardized on levis and button down shirts. It greatly simplifies things. Less to think about. Comfortable. “I get more choices, why shouldn’t guys?”That’s easy. There is nominal demand from guys as compared to women.  Not to say that guys couldn’t be brainwashed into buying more clothing. There was a time that men always wore hats for example.

3. ShanaC

I miss those times, it is annoying to describe to your female friends about a guy across the room when you all dress the same!!

4. Carl Rahn Griffith

I stopped wearing my watch a few months ago, for a variety or reasons. I’ll never wear one again.It’s a rather classic Tag H that I’ve had some 24years – I’m sure I ended up wearing it daily these past few years simply out of habit/emotional attachment.It’s now the timepiece on my desk at my home office. Having a well deserved rest.We’re both happier, now 🙂

3. Fernando Gutierrez

Almost going out of cash is one of the worst things I’ve experienced ever. Mine is a traditional business and it was very fast. In a week my biggest-always-punctual-client delayed all payments and my bank cut my financing. I had to fire sell a couple personal items to make my payments, but I could solve things with the bank (and started to work with a new one) and in a couple of weeks everything was ok. But what a couple of weeks. Now I’m much more conservative and never consider anything paid until it is really paid.

1. fredwilson

good plan

4. jason wright

I wonder why the word ‘burn’ got attached to ‘rate’ to describe this? It makes the necessary monthly expenditure of a business sound like the actions of a mad person. I mean, what sane person would burn money?

1. fredwilson

invest is a better wordbut this is what the startup world calls it

2. David Clarke

To belabour the ‘burn’ analogy, I do love the (possibly apocryphal) quote attributed to an LP in ICG back in the day: “I thought I was investing in an incubator, turns out it was an incinerator…”

3. Jamie Flournoy

Dunno, but here’s a guess: picture a fuse attached to a powder keg. How fast is the fuse burning down? If you can make the fuse longer, or the burn rate lower, you have more time before the KABOOM.

4. Cam MacRae

The etymology of the term can be traced to the dot com boom: In many cases “burning” cash was an entirely apt description. Some really good parties though!

5. awaldstein

Marketing invariably has the largest non-personnel spend in mid-stage on companies.The best marketers contribute to managing burn by not only spending smartly but understanding what part of spend allocation can be stopped, pulled back over a quarter.Huge advantage to have more granularity in these variable marketing spend categories.

Does sharing burn/runway with employees correlate to more alignment & motivation or more calls to recruiters?

1. jason wright

It may result in runaway.

2. Rohan

Depends on what you believe it means.And depends on how much they believe in you, I’d think.

1. FAKE GRIMLOCK

IF PUNY THING LIKE MONEY MEAN CREW QUIT, YOU NOT HAVE REAL STARTUP.

1. chandikajay

Co-Founder <> Engineer #10 bought with google beating salary+stock.

1. FAKE GRIMLOCK

PAYCHECK JUST FROSTING ON CHANGE THE WORLD CAKE.

2. PhilipSugar

PLEASE TELL ME YOUR STARTUP.  ME THINK YOU LIVE IN FAKE REALITY.

3. Jack Sinclair

I believe this goes back to the discussion importance and value of transparency in a company. I am a huge fan of the long term benefits of transparency.  If you are sharing your financials with employees you will want to address items like burn rate, especially if there is a single digit number of months of burn left.  You will be able to give everyone a clear picture of what the burn rate means for the organization and how they should think about it.

1. PhilipSugar

I really respect your thoughts and of course the proof is in your success, but that is one I just can’t get my head around.To me the key is what you do with the information.  I..e. push down on the accelerator or back off, come up with Plan B, C, & D.Those are the brutal hard facts that I believe most employees are not good at dealing.  You have to compartmentalize and it has been my limited experience that very few people are good at that, I even have partners that really just don’t want to know.  They just want to know I am going to take care of it.Don’t know just another viewpoint.

1. Carl J. Mistlebauer

Philip, As they say, “when the going gets tough, the tough get going…”Human nature is an odd and unpredictable thing; sometimes in dire situations you end up finding out the hard way, who your most loyal and dependable employees are.  …and usually you end up being surprised.We also forget that we, people like you and I, in turn have a dramatic influence on the “human nature” we observe.  Yes, I find that all my employees have the attitude, “They just want to know I am going to take care of it…” but that is a just a measurement of your roll in their employment life and the respect that they have for you; it has nothing to do with the issue of if employees can deal with “brutal hard facts” or not.The ideal, is to be transparent, to accept your employee as partners, and to understand that their respect for you will mean that they expect you to take care of it.

1. PhilipSugar

Here’s the thing.  Most employees don’t want to be partners.  Partners mean you put up your house.  Partners means you take a 50% salary cut or not get paid for a month.I have partners in all of my businesses and most partners don’t even want to act like partners much less regular employees.Actually, I don’t worry about adversity as I worry about success, that is where I’ve had the most problems.  (yes I’ve tried the open books theory)Because you can talk about employees as partners where they don’t participate in the downside but  they will expect to be full partners when you are on the happy side of the burn rate equation which is the tax rate issue.And to go totally sideways to see this at its worst, you have to go no farther than Wall Street. I (and that is the part that makes me sick. I would mean you sitting at home with no comapny behind you) made \$100M on paper in short term trades with long term consequences, give me \$25M I am a partner!!!! Ooops we lost \$billions and need the fed to bail us out. How about you sell that Hamptons house and give the firm the money! What a laugh.

2. Carl J. Mistlebauer

First off, Philip, the word “partner” has levels of meaning; in regards to employees, you do have those who view themselves as YOUR partner, and then you have those who view themselves as hired guns. A good CEO should be able to recognize the difference.Customers can also be partners. I have retailers that are actually my best salespeople, as they recommend our product and our company to other retailers. But again, I have retailers who could care less and only stock our product because their customers want it; they would love to sell our competitor at our retail price because they can make a greater profit.While at a non profit I had employees volunteer to take at 50% pay cut for three months and I had employees who quit when asked to make a sacrifice.When I speak of partnership, I speak of “involvement” and “commitment” which is much broader than just “skin in the game.” The reality is employees do participate in the adversity: They lose their jobs.

3. FAKE GRIMLOCK

STARTUP IS TEAM. NOT MINIONS.

4. PhilipSugar

For the purpose of this discussion  “partners” are defined as those you share your most intimate financial details with.  How much money you have and how much you are spending.I agree I have lots of partners on different levels including the one I’m married to, she just wants me to take care of it.

2. FAKE GRIMLOCK

IF DOING SOMETHING YOU NOT WANT EMPLOYEES TO KNOW ABOUT, STOP. YOU NOT STARTUP.

1. PhilipSugar

YOU EVER DO STARTUP?

2. LE

“transparency in a company. I am a huge fan of the long term benefits of transparency”Old school, based on thousands of years of human nature says this is not the case. It’s hard to believe that even though many things have changed that this is going to be one of them.  Just like you don’t share your secrets with competitors. Anything open is probably just “openness theater” selectively releasing certain information. And yes of course you can always find outliers to anything.For example over the years I’ve noticed that woman don’t want to hear you whining and complaining about problems at work. They want you to just do it. It’s not manly to them. (In general, obviously I’m not saying all woman of course.)  As @philipsugar:disqus says below “They just want to know I am going to take care of it.”But now let’s see where behavior like that comes from.If we look at  teleology we could say that a prehistoric woman doesn’t want to see the other man beat out her man to kill the animal. She wants to know there will be food on her table. She doesn’t want excuses. It isn’t conducive to survival of her and her offspring.

1. FAKE GRIMLOCK

HUNDREDS OF STARTUPS PROVE YOU WRONG.BY WINNING.

1. LE

So you are refuting what I am saying about human nature by saying:”HUNDREDS OF STARTUPS PROVE YOU WRONG.”Hundreds? Hundreds? According to the SBA 600,000 businesses are *started* each year in the US. We aren’t talking about total number businesses. Just ones started.http://hudson.sba.gov/idc/g…Not to mention the fact that two top commenters on this blog you and @jlm:disqus choose to hide their identity and, in a sense, not be transparent. (Which is fine I have no issue with that as I don’t use my name either). Why is it we don’t know who you are? Apparently you see some value in not revealing who you are. (Once again that’s fine and is consistent with what I am saying.)By the way, when you say “hundreds of startups” are you talking about successful profitable startups ones with which this strategy has worked? Vs. failed ones? How many of those are there? What are the raw numbers you are comparing to the legacy strategy that is more typical of the way business has always been? And of course you are talking about venture and angel funded startups. A small subsection of business where you are able to loose money until if and when you become profitable. Have you ever started and run a non funded business? There may very well be a new paradigm. But it is certainly to early to overturn the way things have been for quite some time now (with regard to openness). Not to mention the fact that we aren’t that many years into this thing. And there was the dot com crash as well.

2. FAKE GRIMLOCK

GRIMLOCK IS GRIMLOCK.TRUTH IS TRUTH.

2. Jamie Flournoy

Yikes. Goodfellas is not a good template for business and romantic relationships.

4. fredwilson

Great question!!!!I am a fan of honesty and transparency on this issueBut you need to be able to speak confidently about fundraising

1. ShanaC

maybe we need a post on successful ways to talk about hard issues in a startup

1. FAKE GRIMLOCK

THAT GOOD IDEA.BEST WAY DE-PUNY PEOPLE IS SHOW DO HARD THING NOT THAT HARD.

1. ShanaC

Thank you!

5. andyswan

You’ve got to be a general and do whatever is most likely to achieve victory.

1. PhilipSugar

I like that analogy, because I don’t think you’d tell the troops we are expecting a 30 percent casualty rate, but we need this objective.

1. Cam MacRae

Are they conscripts or volunteers? Either way, if they’re any good they’ll know before you.

6. Tom Labus

It’s essential that everyone know exactly where the ship is at all times. Without this knowledge, decisions based on wrong or incomplete info can lead to the sinking of the ship or abandoning.

1. LE

“exactly where the ship is at all times”Depends. The other side to that I could argue that it also causes anxiety that leads to the wrong behavior or impedes clear thinking with less of a benefit than you might think. Assuming you are always working your hardest worrying about the fact that the airplane is on a collision course doesn’t give you the best ability and confidence to control the airplane.  Or prevent other people critical to the organization from jumping ship (with no easy replacements). And you have to prevent people from their folly. I know of an importer who had a heart attack. His first thought was not to let his suppliers overseas know of this fact because they would cutoff credit to the company. Nothing personal it’s just business. (He is alive of course many decades later).

1. Tom Labus

I’ve done both but have learned to let people know where we are.  It seems to save time and energy in the long run.  I just wanted to add that these comments refer to employee communication. Vendor and outside world is another ball game.

7. Aaron Klein

I’m firmly in the alignment and motivation camp, at least in early stage.If you’re at three people and you can’t share your runway length for fear of losing them, you’ve hired the wrong people.

agreed but you must hit a point at employee 10-15 where they are sufficiently risk averse not to be able to stomach the true picture of pre-revenue, cash flow negative startups.

1. Aaron Klein

Very possible and that’s where I’d fall back on @andyswan:twitter ‘s comment. You’ve got to be a leader and figure out how to get your team from A to B.

1. Laura Yecies

I think transparency is the best way to handle this no matter how few people.  Bottom line is if they are smart and at all familiar with the start up world they are doing the runway calculation anyhow and chances are they are doing it innacurately on the negative side.  It’s much better to lead this discussion as an entrepreneur.At SugarSync we’re over 50 people and I’ve been sharing the board deck with the entire team the day after the board meeting since I started 3 years ago.  Everyone is quite clear on what our burn is and what the key cost and bookings lever on.  They also know a big party is in store for them when we hitj cash flow positive on a recurring basis.

2. Aaron Klein

And I’m one of your longtime customers… 🙂

2. LE

“agreed but you must hit a point at employee 10-15 where they are sufficiently risk averse”Along the lines of what I call (and similar to) “tell a story don’t ask a question” it would be helpful to have a potential hire read what Fred has written above (say while waiting in the conference room) and gauge their reaction. Even if they aren’t financially oriented something can be gleaned from their response.

3. FAKE GRIMLOCK

WHEN TOO BIG TO BE REAL STARTUP, RULES CHANGE.NO SELL OUT BEFORE THAT.

2. LE

“you can’t share your runway length for fear of losing them”On the other hand I think it can be harmful to an organization to have people who have the same degree of risk aversion (in either direction).  There needs to be a balance (this works with parenting as well). To much of the same thinking can lead to disaster.

1. Aaron Klein

That’s true. But if you’re hiring highly risk averse people into a startup, either they’re stupid or you’re lying.

3. Rohan

Agree. Besides, when you are small, it’s not that hard to tell, is it?

1. Aaron Klein

Pretty tough, though some people are very good at burying their heads in the sand.

1. Rohan

When that happens, the atmosphere within the team generally sucks. So, net net negative in any case! 😀

4. Brandon Marker

Sounds like a good way to weed people out of the mix early on and get the hungry ones on board. I find it odd that people are trying to pay high dollar for “top” talent that get scared off in situations where the burn rate is worrisome. Find some top talent that believe in the model, share the burn rates and get their input on how they will keep improving it for the company. Oh, and pay them less.

1. Aaron Klein

I think the key is sharing the whole plan. You don’t have to include dollar amounts. More like “our theory is that we can build X, hit milestone Y, and raise Z in financing off of that. And here are our deadlines for Y and Z because we think it will take that long to do a financing.”That really breeds a sense of shared responsibility. It’s “our” plan instead of your plan.

8. FAKE GRIMLOCK

NOT TELL TRUTH SAME AS TELL LIE.

9. Frank Traylor

I’ve always shared burn/runway with employees. It hasn’t been a problem. That’s because they don’t really care about burn/runway, they care about your plan, the outlook. If you tell them that you’re burning \$100k/month and you have \$600k in the bank it doesn’t take them long to determine there are 6 months of cash in the bank. You of course have a plan. That revenues are going to ramp, that the next tranche of funding will be raised, that you’ll find a pot gold, whatever. There’s a reason you’re not leaving right.The most important thing is that your plan comes true. In my experience that creates incredible dedication and trust in the team. If things look like the world is going to end and you say paychecks will keep coming, and they do, you’ve earned their trust.

10. fredwilson

LIAD, this one simple question spawned one of the best comment discussions I’ve ever seen on AVC. thanks for doing that.

7. William Mougayar

I totally understand the mentality behind calling it “burn” rate, as it’s about a rate of investment. But this is really the same as the total Expenditures in the Budget spreadsheet, isn’t it?

1. Rohan

I think the term is relevant because it’s similar to having fire up your ass. Act now or you will be up in smoke. hahaBurn rate has natural marketing built into it (vs Total Expenditures etc).Easier to communicate I think. :DPS: Please pardon my language. 😀

1. awaldstein

Please explain what you mean by ‘natural marketing built in’. Marketing is the most controllable variable burn certainly but natural?

1. Rohan

I think I’d commented this story on your blog once, Arnold. At the risk of repeating it, I was thinking of this story.–‘Leaning Tower of Pisa’ strategy: Remember the famous Pantheon of Rome?The Pantheon, in Rome, is a very easy destination to get to. It is located in Rome, where most tourists land and is one of the best examples of great architecture.Let’s contrast this with the Leaning tower of Pisa. While the Pantheon has an incredible amount of history associated with it, the leaning tower, well, is just a leaning tower in the middle of a lawn.But, every year, the leaning tower gets 100 times more tourists than the Pantheon.That’s an example of great marketing. The leaning of the tower makes it instantly marketable.This week, let’s remember that great marketing is not done ‘to the product’ (e.g. doing a marketing campaign about the great history of the Pantheon), but that great marketing is the product itself (e.g. building a tower that leans!).–The simplicity of the ‘leaning tower’ message makes it irresistible. I find it similar with ‘burn rate’. It paints a picture and appeals to emotion. You can instantly picture a start up leaking cash and almost has a natural call to action.That’s what came to mind.

1. jason wright

I don’t think they built it to lean. It wasn’t planned. It was bad planning, which leads to high and unsustainable burn rate and failure. Perhaps tourists go to Pisa in such numbers because each hopes that they will be there to see it finally topple over. That’s the human condition, schadenfreude.

2. Rohan

No they didn’t. You’re absolutely right about that.Apple builds the marketing into products and there are many great examples there. The leaning tower does make for a good story to illustrate the point though.. haha

3. awaldstein

Burn rates can certainly be emotional but rarely poetic 😉

4. Rohan

I’m guessing they become poetic when you are Apple and have ‘made it’ – atleast temporarily. But, I guess the secret to lasting success is never believe you made it. Love what Bono from U2 says – ‘We, at U2, never think we’ve arrived, as a band.’

5. fredwilson

Maybe never arrived. But they have come and gone and are no longer relevant.

6. ShanaC

This may have as much to do with Italy versus Greece.  And the respective marketing of both.  If you are visiting Pisa, you may as well visit Rome, Milan, Venice.Greece – crete, umm, some more Islands?

7. Rohan

Greece? Are you thinking of the Parthenon? vs Pantheon in Rome?

8. ShanaC

@rrohan189:disqus Uhh, yes *headthunk* I forgot the difference?

9. Rohan

happens to the best of us! 🙂

10. LE

@fredwilson:disqus Re: u2 you said:  “Maybe never arrived. But they have come and gone and are no longer relevant.”I am really bothered by those almost half page ads that appear in the print WSJ saying a portion of the proceeds goes to some or other cause he cares about. The cost of those ads is ridiculous and they appear constantly. I’d love to know the burn rate on that:http://www.luxist.com/tag/b

11. fredwilson

i’m not a fan. i was a long long time ago.

12. Carl Rahn Griffith

It’s a Purple Cow, effectively.

13. Rohan

Exacto! This is a Seth Godin story! 😀

2. fredwilson

You are a born marketer my friend

1. Rohan

* Blushes ** Bows *You are too kind. 🙂

1. Carl Rahn Griffith

A modest marketeer?!?Shurely shome mishtake? (sic) 😉

2. Rohan

Hahaha. That’s Fred’s assessment.. not mine.. 😉

3. Carl Rahn Griffith

It’s quite remarkable how often companies do not have itemised burn rates which then correlate accordingly based on growth plans and corresponding increases in burn.Spreadsheets do not a successful business make – but they go a damn long way towards it…No whiteboard/s, no detailed spreadsheets – alarm bells.

1. Rohan

‘Spreadsheets do not a successful business make – but they go a damn long way towards it’ Really like that Carl! 🙂

2. fredwilson

If you have no revenues and no balance sheet cash layouts then yes

8. Rohan

‎’Live so that when your children think of fairness, caring and integrity, they think of you’–The ‘on a different note’ quote of the day, of course. One that never fails to inspire me! :DHave a good start to the week, all..

1. fredwilson

such good parenting and life advice

1. Rohan

Comes on the heels of my latest realization that integrity is not intrinsic. It takes work. And a big realization in this regard has been removing ‘try’ from my vocabulary..http://www.alearningaday.co…(I think you’ll love the graphic.. if you haven’t already seen it.. :))I hope I’ll have all these realizations by the time I have kids.. haha

9. Matt Grosso

1. fredwilson

Awesome comment mattSome of our most explosive investments spent/spend more on servers and bandwidth than they do on people

1. FAKE GRIMLOCK

KNOW HOW MAKE REVENUE > COST FROM EACH USER IMPORTANT BEFORE USER SHOW UP

2. ShanaC

Since there seems to be a lot of variables involved, do you have an example spreadsheet?

1. Matt Grosso

Good idea; if I can find the time I should clean one up and post it.   I’ll first have to remove all the confidential parts (ie: in retrospect really embarrassing assumptions). cloudability should also be able to help.  They aim to be “mint-for-the-cloud” and just left beta.

Hey Fred, is it possible to share some of the burn rates of the the USV portfolio companies?Can we also get a cross-comparison of the burn-rates of the USV companies with other VC-backed portfolio companies such as Drop Box, Spotify, Quora, Badoo, Color, AirBnb..etc?

1. SofSof

Crad,What about a burn-rate comparison of tech companies with successful exits versus companies that fail? What about the companies in between?!

2. fredwilson

That is private portfolio company data. Only they can make the decision to share it.

can you ask a few companies to share some minor burn-rate related info so we can at least have some data to study and learn from? What about asking one company? (cough cough twitter)After all, transparency is the answer.

3. kenberger

sure Crad, just provide your personal credit card numbers and social security here and Fred will respond in kind 😉

1. fredwilson

man. that gave me a chuckle Ken. thanks.

4. ShanaC

what makes a successful company?

11. JimHirshfield

Burn rate = How fast the airstrip is disappearing under your jet. Can your team on the ground extend the tarmac just enough to get you airborne?Pro tip : Your seat cushion can NOT be used as a flotation device.

1. fredwilson

AhhYou crack me up Jim

1. JimHirshfield

Happy to start the week off with a chuckle.

2. jason wright

How to generate more lift sooner – lighten the load, bigger wings, more powerful engines.Taking off against the prevailing wind – which seems to be where the analogy falls down, but it could be the equivalent of the ‘counter intuitive’ bet some investors make in a market.

1. JimHirshfield

True!Also…In the event of a change in investor pressure, please secure your participating preferreds before your commons.

2. ShanaC

Much like a real airplane, all these things must be in balance to take off.

12. andyswan

Graph your runway.   Graph your runway rate of change.  Every month, every projection, every pivot, every hire.Lines don’t lie like numbers can.  Runway lines accelerating towards zero are an awful thing to stare at and are very likely to induce change before it’s too late. Control your lines.

1. William Mougayar

Agreed. Lines tell you where you have been and where you could be going. But in the numbers, you can also add +- % rate change, mtm, qtq, ytd, etc..

1. andyswan

Graph the derivatives too!

1. William Mougayar

Lol. I wouldn’t push it that far. Good sense of humor though 🙂

2. mike gilfillan

A picture is worth a thousand numbers. Befriend the trend.

3. karen_e

I like this comment a lot. I need to learn more how to graph my numbers.“You can’t manage what you don’t measure.”

4. Jamie Flournoy

I like this; it’s the financial equivalent of a burn down chart. (Instead of plotting burn rate up to the current date, you project the amount of money left into the future, all the way down to where it crosses the axis & you’re broke.)Plotting them on the same graph (money left vs. unbuilt features left) and posting it where everyone can see it all day would be a hell of a motivator for a startup.

13. baba12

Mr.Wilson as founder and partner at USV you have come across umpteen startup ventures, some you have invested in and others you have not. You have seen enough to  know a pattern emerge in terms of burn rates. It would be beneficial to many of us to have you shed some light on the patterns that may have emerged. Patterns I am talking about are the various burn rates you have seen. I am sure burn rates have a role to play in how the investments pan out. Knowing when to increase spending because it may catapult you into orbit is important and possibly if there is a way to look at the burn rates of USV portfolio companies without naming them and graphing that data maybe of value.Could I request that that be a MBA Monday’s project.

1. fredwilson

maybe a follow up post for next week. great suggestion

2. kenberger

now *that’s* a much more sensible and respectful way to pose that question than the other method elsewhere in these comments that Fred and I shared a chuckle about. Well done.

14. kenberger

you write back-of-envelopes while driving down the highway?! Hope you weren’t in the driver’s seat, unless it was after you jumped into that Google self-driving car you had been following.

1. fredwilson

i didn’t say write. i was driving. another vc was in the passenger seat. we just did it from memory and said it outloud. nothing was ever written.

1. kenberger

thought you knew i was kidding !here’s an old article with me featured. I was interviewed about the health effects of using mobile phones, and they turned it into the road dangers of driving while calling ! http://www.salon.com/2000/1…

15. johnmccarthy

A “Burn Rate” will never stay constant and at best is a point-in-time reference.  The business of running a startup has a huge degree of variability and as you point out, relying on a single number is dangerous.  Anyone that asks “what’s your burn rate” without follow up questions on what future cash flow forecast includes is setting themselves up for a surprise. Every company needs a cash flow forecast which will show all expected non-routine cash uses (security deposits, large legal bills, annual license fees,  catch up on payables after a financing, etc) as well as the impact of lumpy revenue and collections (ie. annual subscriptions or anything else that gives rise to deferred revenue).  This can be a simple or complex forecast  but it should be shared regularly  with the board.

16. Carl J. Mistlebauer

I am a big fan of “back of the envelope” and or “cocktail napkins” accounting….A really good CEO should always know their burn rate and their margins while CFO’s seem to produce numbers that look good but are not always wise to use for running a company.Kind of like the gas gauge on a car:  It usually does it job and is relatively accurate but you sure would hate to find out that it isn’t accurate if you rely on it solely.

1. fredwilson

me too. i feel like you should be able to get into the ballpark in your head if you are really on top of things

1. PhilipSugar

Yes I really liked that you did a back of the envelope and liked the comment of we always seem to have an extraordinary expense every quarter.

1. fredwilson

the extra-ordinary

2. William Mougayar

Exactly. It’s like the car message that tells you “you’ve got 40 kms left in the tank” vs. it should say “& there’s a gas station at this location in 8 kms”.

1. Carl J. Mistlebauer

Nothing worse than driving on a lonely road, late on a very cold night and realizing that you should have stopped at the LAST gas station…..The famous, “…should have, could have, would have…” life lesson.

1. William Mougayar

You’ve done this?

1. Carl J. Mistlebauer

Yep, two weeks ago….Thinking about creating a Zynga like game called “Life Lessons”It was a beautiful night, the stars and moon were very clear and nothing but dark cold harvested farm fields as far as the eye could see….and only 5 miles from home!It was a very peaceful end of a very stressful day!

2. William Mougayar

On the bright side, now you know exactly how far you can push it for next time.

3. Carl J. Mistlebauer

Actually, I thought that maybe some higher power was attempting to tell me to slow down, take care of the little things in life, and take some time to just enjoy the small pleasures in life….Nothing like always attempting to find a positive in the most embarrassing of situations….

2. Cam MacRae

Do enough driving in Australia and you’ll see signs like this…

3. Tom Labus

Cash flow, cash flow and cash flow.

1. Carl J. Mistlebauer

Tom,Cash flow, that great test of one’s talent.Cash flow, where you not only have to know your expenses but your income too!I never really had to think about “burn rate” because I always got stuck with start ups and or turnarounds that had to fund their own operations; which translates into cut expenses immediately, close out any inventory you can immediately, and get a serious grip on what sales, who sales, and what your customers want….So, you got to figure out real fast who your “partners” are in regards to employees and customers….

1. Tom Labus

That’s always interesting when you have to manufacture additional revenue without any help.But when you do pull it off, you suddenly have lots off new friends.

2. William Mougayar

Or cash in the bank account.

17. Alex Urevick-Ackelsberg

I’m a bit confused by your usage of Burn Rate here. At first you mention that it is important to all businesses (e.g. to all except Apple), but then you end your piece by stating “Most startups burn money for a time.” So is burn rate, as you’re describing it, only applicable to companies that are not (yet) profitable? At my startup I use the term to describe the average rate at which we spend cash, but at this point we are profitable (luckily our expenses are currently ~30% less than our average revenue, 40% if you don’t count partner draws), so am I using the wrong term?

1. fredwilson

it can be used in multiple wayssome use it to explain operating expensesi prefer to use it to explain cash consumption

2. FlavioGomes

I view Cost of Goods, Operating expense and Burn as distinct yet interdependent.I use burn to describe a negative cash position in a given period of time.

18. Mark Essel

I wonder if a simple polynomial or exponential integrated model is more useful for startups or companies going through high shifts in cash flow, both inbound and outbound. Linear would only be good for very slow changing businesses over a number of months.

19. Elia Freedman

I have run a company for 14 years now and people in the community here in Portland have wondered, given all the ups and downs we have had, how I have kept it in business. For example, at one time we lost three big contracts and our sales dropped 75% in one year. I always tell them that I really don’t care about anything else when we are losing money. Burn rate is the only financial number that matters.But it isn’t just the number that is so critical. It is reacting to changes or fluctuations with the company’s revenues and cost structures. Knowing burn rate without doing something with it is useless. When we lost all that revenue, the only thing that saved us was being brutally honest about what it meant to the company and what I needed to do to keep us moving forward.

1. fredwilson

gut check time. that single experience is worth more than anything else in business.

1. Elia Freedman

I let go all but one other person from a high of 11 employees, lopped every expense I could including backing out of an office contract, and me and the remaining person slashed our payroll and eventually went off payroll for six months to keep it going. None of this would have happened if the two of us remaining didn’t believe in what we are doing and the potential upside of the business.Thank goodness for my wife. She is an incredible woman who has given me the flexibility to pursue this even though we had no income for months and has done an amazing job raising our two girls through all this pressure and strain. (You do some but most entrepreneurs don’t seem to talk abut the role their significant others play in this insanity of start-up land.)

20. leigh

Cashflow issues make me want to throw up.  We are on track to make a phenomenal amount in our first year in business – that is if we survive Q1.  Sadly, it takes months for our projects to get through Corporate legal with signed docs and eventually into a cheque landing in our hands (which is why banks won’t help us).  It makes cash flow for a new business like mine ridiculously problematic — Canada isn’t set up to help a company like ours so it’s up to us — we don’t need investment capital but we may be forced to take it.  blech.

1. William Mougayar

That seems to be intrinsic to a service-based business, especially if you don’t have a recurrent revenue stream from previous clients. Tough spot to be in, but if you treat it like a start-up, your burn rate is whatever you can afford to spend on yourselves to keep surviving.

1. leigh

As the Australians would say, you’re not wrong but we made the decision to sell services as a small company similarly as we did when we were with with big companies. Now we only need to manage our own success and of course, make friends with the lawyers 😉

2. Tom Labus

You need a bigger “pipeline” to fill the gaps.

3. fredwilson

sounds like you need a loan

1. leigh

Tell me about it 🙂  ps. Chris Dorr is in Toronto and participated in a client planning day yesterday with us — he’s great and adds a valued perspective.  Thanks for that connection

21. James Schaffer

Having seen enough one-time big expenses, I’ve finally started calling them the “recurring non-recurring.”

1. fredwilson

yes!

22. Chris Johnson

Accounting for “one time expenses” is tricky.  I have stayed in delusion land until I presumed that all “one time expenses” would be annualized in some manner. That should be budgeted.

23. LE

1. PhilipSugar

It is written from a VC’s perspective, but understand it has a ton of application to non VC funded companies.As everybody knows I comment from just the entrepreneurs perspective.So you can see the majority of my comments here are about the consequences of sharing this info if you are not VC funded.I think its really important for any company to understand its burn rate.  Whether you are burning somebody else’s money or your own you better know it.However, when sharing the info, I think its one thing if you are raising VC money, its another if its your own.BTW: I think if you run out of VC money and have to take a bridge round you will find out the pain of OPM.On a final note, one attitude I see that is a real negative on the Entrepreneurs side is the attitude if I lose a VC’s money well its just a VC, certainly not as important as mine or my friends.  You know that’s really got to piss a VC off.  We’re talking about their lives here.Funds have a seven year life.  Double your money, raise another fund, Triple you will have people fighting to get in.  But just give the money back, you better go look for a job.  So when you flush an investment, there is a person behind that, a person that put trust in you, a person that is counting on you, not just OPM.  Look things are not going to go as planned, and we’re all big boys and girls, but it still is tough.

1. LE

“I lose a VC’s money well its just a VC, certainly not as important as mine or my friends.  You know that’s really got to piss a VC off.  We’re talking about their lives here.”Well certainly there is a slight correlation between the lack of conscience in business and the ability to make money. For all the talk that goes around (on this blog and elsewhere) about “doing the right thing”, “transparency” and other admirable thoughts that isn’t always the thing that leads to, at least, money success.  It sounds good though. People do throw people under the bus in business to achieve their goals. If that wasn’t the case,  google’s “do no evil” wouldn’t be unique in any way. I mean you don’t find men of clergy having to make that statement. Today brings us definitive news of foursquare competitor gowalla throwing in the towel. The TC article states:”The deal offers Gowalla’s founders a graceful exit despite being unable to keep up with Foursquare’s growing user count. Rather than fade away, the move to Facebook will surely bring them plenty of high-fives.”http://techcrunch.com/2011/…Graceful exit? Seems more like a lifeboat to me. So yes high fives for finding a lifeboat.

1. jason wright

The VC plays the probability game when making investments. There’s a lot more to it than just that of course, and there are strategies to minimize risk. Some strategies have gone to the point where some VC companies are no longer really VC companies, they’re simply wet nursing baby startups on behalf of the real mothers.

2. fredwilson

wisdommmmmmmm

24. Modify Watches

Thanks for this. One thing I struggle with is thinking through what’s truly “repeatable” revenue? Is there any merit to just looking at cash-out and not thinking about cash-in? We’re young enough that we’ve had major spikes from customizing watches for Google and Facebook, but we can’t necessarily count on other companies doing the same thing

1. Dave

Best way I’ve seen it done is to track both revenue and expenses as fixed/recurring v variable. Some revenue is recurring in most businesses, whether a regular order, recurring annual SaaS subscriptions, etc. Trying to keep variable revenue roughly matched with variable costs is prudent if you are trying to avoid raising more money or if you are worried a blip of revenue won’t come back. You pay more to have flexiblity–contractors, outsourced production shops, etc.–but better than taking on too much fixed costs too early in employees, real estate,etc. At some point though you often hve to take a leap of faith to take on fixed costs in order to grow and meet market demand.

1. Modify Watches

Thanks for taking the time to write this, very helpful

2. fredwilson

cut it in half. and maybe half again.

25. Moses Nakamura

Can there be such a thing as a too long runway?  Can it be useful to shrink your runway, burning money faster, in order to ignite a fire under your ass?Clearly there are usually other advantages to burning money other than making you more desperate, ie whatever goods/services you get in exchange for burning money faster.  If there is a case where there doesn’t seem to be anything tangibly useful that you can get from burning money, is the personal psychological effect a compelling enough argument to burn faster, or should a slower burn rate be considered a greater good?

1. fredwilson

yes. it leads to a loss of focus.

26. Steve Hallock

Burn rate is a powerful number in personal finances too.  I’m amazed how many people don’t have a good handle on their own monthly expenses.  An individual, family, or business should always be thoughtful about how much money they need in the bank to be robust to shocks, how much they need to earn to keep moving forward, and how much they need to raise to make up for shortcomings – tough to do any of that without knowing your burn, or as you mention, dismissing “anomalies” that keep happening.

27. Dave

Great review. I’d remind those in the small/mid-sized, but not profitable, camp to really focus on cash burn/cash flow not GAAP revenue. GAAP revenue recognition for SaaS companies is so disconnected from cash flow that it is nearly useless.  GAAP revenue will be important for acquirors though. But cash is cash. Following on the point made below, one-time items consume cash and have a habit of recurring at startups–lease deposits, severance costs, legal fees, capital expenditures, etc. They might end up having a different flavor the second time they pop up (such as your lease deposit may be replaced by capital expenses to purchase specialized hardware), but they almost always exist and if you miss them you run out of cash.

28. jason wright

Perhaps burning the company check book would help.

1. fredwilson

ha!

29. JohnEBoyd

Great post.   Likely would have helped many avoid mistakes pre-2000.   The “lean” startup models appears to gaining traction.  Watch every dollar.

30. ch1ld3rs

Hey Fred!Just to let you know of the brief mention of your blog on my site http://www.adrianchilders.c…. Thanks for shedding some light on the censorship bill.Adrian

Hey Fred!Just to let you know of the brief mention of your blog on my site http://www.adrianchilders.c…. Thanks for shedding some light on the censorship bill!Adrian

1. fredwilson

thanks!

32. Dan Bowen

So was this written after a ‘panic’ call from a portfolio company?

1. fredwilson

nope. i really try to avoid posting about stuff that is happening to me in real time. makes for pissed off people.

33. John Revay

Minor comment  – Burn Rate A & Burn Rate BI agree w/ Fred’s back of the envelop method.  That said when you get down to 2 1/2 months of cash (\$100K/month – w/ \$250K in the bank) you may want to switch to a modified burn rate;Bear min to keep the lights on and the phone ringing.1. Payroll2. Medical Insurance3. Rent & UtilitiesYou may be able to stretch on Rent and depending who’s on the payroll – you may skip or short pay certain people re: founders, or other people that may be able to skip a pay check now and then.Worth doing this – if there is a chance that a new round will be closing shortly or if you have cash coming in for other sources.

1. fredwilson

crisis burn rate must be more exact

34. Robert Thuston

More on this.  Great topic.

35. FAKE GRIMLOCK

RE: TRANSPARENCY1. PRODUCT = TEAM. THING YOU SELL JUST SIDE EFFECT.2. TEAM ALL ROCKSTARS. OR YOU HIRE WRONG ONES.3. TRUST REQUIRE TRANSPARENCY. OR TEAM LEAVE FOR BOSS THAT NOT UNTRUSTWORTHY IDIOT.4. WHEN TEAM LEAVE, YOU HAVE NOTHING.THAT WHY SHARE FINANCIALS WITH TEAM.

1. LE

“FINANCIALS WITH TEAM”Define which employees are part of the team. All of them, every employee? Or?

1. FAKE GRIMLOCK

IF EMPLOYEES NOT PART OF TEAM, YOU DOING IT WRONG.

2. PhilipSugar

ME THINK YOU NEVER DO STARTUP.YOU CARRY SOMEBODY ELSE’S BOWL???HOW ABOUT HUNDREDS OF PEOPLES BOWL’SYOU TELL ME THAT I UNDERSTAND YOUR POINT.EASY TALK.  HARD DO.

1. FAKE GRIMLOCK

DO RIGHT ALWAYS HARDER THAN DO WRONG.THAT WHY WORLD FULL OF WRONG.

36. William Mougayar

Have you seen this related post today? “Most startups are spending money too fast. Slow it down.”http://www.humbledmba.com/m…27 comments on HN http://news.ycombinator.com…And a hillarious cartoon in the post!

37. Jamie Flournoy

To the folks arguing for keeping the finances secret from employees: Would you also agree that the engineers should keep the bug list secret from the CEO? How about if the salespeople kept the sales pipeline secret from the CEO?To me, those would make about the same amount of sense, which is to say, not much.A big part of the CEO’s job is to raise money. A smart employee (which is hopefully the kind you want) is going to notice if you always claim that the company is at death’s door but you’re still hiring, or if you call a meeting on Thursday to tell people that tomorrow’s payroll is kind of not going to happen until next Wednesday, or maybe a few days after that. Is the CEO not competent to assess the state of the company’s finances or sales pipeline? Are they just jabbing the team with a cattle prod hoping that this will produce maximum productivity?Another big part of the CEO’s job is to keep the team on the same page. Engineers make a hundred little decisions every day, many of which are tradeoffs that can either accrue technical debt or reduce the cost of expected future changes. If they know that the demo in 3 weeks is a live or die moment, you turn the knob all the way to “get it working so people can see what the product can do”. If you just did a release and customers are buying, then maybe it’s time to add a major new feature to expand your market, which may mean a lot of time with no feature payoff followed by a sudden burst of high value features that can make you another pile of money.If they’re working in “accrue maximum technical debt to get the to the next live-or-die demo ASAP” then you end up a year down the road with a code base that is so fragile that they can’t get anything done and end up needing to do a major rewrite, and that may kill you. It’s critical that the people making decisions on your team have the best information available, and if you’re thinking you’re the only decision maker, you’re wrong.

38. Arvind

When you’re coming down to the very end of your cash, you can also quickly figure out that you actually have less runway than you thought.  (a) remember about any accrued PTO obligation–if no one has taken any vacation in the past year, you may be sitting on 2 -3 weeks of additional comp expenses; (b) as you operate within the vicinity of insolvency, your fiduciary responsibilities as a director shifts from the interests of shareholders to the interests of creditors, and (c) if you have money sitting in a bank account and you have a line of credit from that same bank, you may discover that the bank may sweep your cash from your account if your bank balance falls below what you owe on that line of credit.  So what may look like you have 4 months at your current burn rate may actually turn into 2 or 3.

39. W. Michael Hsu

Fantastic post Fred. Many entrepreneurs know that they need to track budgets and forecasts but fail to see the differences between cash burn and income statement projection. The back of envelope method is a quick and dirty way to do a sanity check – but having a sophisticated burn rate projection involves a ton more work and deliver a ton more value – having the right person who is detailed and knowledgeable enough to look at it from all aspects are also hard to come by.I am then curious to ask – would you then argue that a projection based on only income statement numbers (not taking into account true cash flow) is a time waster that only accountants do but provides little to no value to the entrepreneurs? Or does that offer a different set of insights?

1. fredwilson

i like to triangulate to get to numbersi think having the accountant’s numbers is useful in doing that

40. Jim Tousignant

Great post Fred!

41. LE

“Time to protect the planet”Wow. I like that marketing wise. Pink ribbon. Another luxury brand tie in with payback that can’t be determined (how much of the watch price is supporting the cause you think you are supporting?) :http://www.hamiltonwatch.co…Which shows another principle. Most likely the only cheddar Harrison is getting is money to support his cause. So while he would probably laugh at whatever fee Hamilton would pay him for his endorsement this allows him to rationalize something he probably wouldn’t do. (Or accept a fee way below his actual endorsement value.)

42. PhilipSugar

I think the harder issue is when you are successful.Lets take a hypothetical.  You gave up six figures of salary, guaranteed a six figure line of credit, and deferred a good amount of expenses.  You’ve put together an agreement that says you want double that back if and when the company can pay it.Now you’ve made just enough to pay that back.  Everybody knows the numbers because you are transparent.End of year bonus time comes.  Again I have dots not lines but life is not fun.Problem is when it comes to putting up money people are super risk adverse, when it turns out things were successful, people think a three percent return is fair.Its actually why I think I sympathise with VC’s, even though I’m just an entrepreneur and have seen some really bad VC behavior.

43. LE

“gossip machine gets going”When firing people in the past I’ve always followed the strategy of giving them something they can carry back to their wife and friends such as:”he says I do a hell of a job – better than anyone ever with the [insert something positive they did] but unfortunately because of [insert some reason] they need to lay me off [insert something that says the door is open and they might get hired back]”My point is that you have to frame things in terms of what people will repeat to others. The talking points.

44. PhilipSugar

No seriously.  This is before I ever took VC and bootstrapped and what I’ve gone back to.  Nothing to do with VC.Well maybe a little.Because think about it if you are a VC you actually want open book policy.Everybody knows you’re burning through money by the trash can, the one way a VC does get some control is that if everybody knows what the runway is and what metrics are needed to get some more money.  Its a good thing, nothing wrong.I’m just telling people its one thing if you are on that trajectory, but it is different if you are not.No different than when a VC says an outside board should have the ability to fire founders when founders hold a majority of stock.People put a lot of stuff out there, when they’ve never even been to their first rodeo.