Maximizing Runway Can Minimize Success

Runway is the amount of time you have until you run out of cash. Or until you raise another round. Or until you can get the business self sustaining/profitable. Runway is survival. And so everyone in the startup world is obsessed about runway.

And yet, if you wanted to make your runway as long as possible you would raise as much cash as you could and/or you would keep your expenses as low as possible. I have seen teams do both and you know what? Neither works too well.

The fact is that the amount of money startups raise in their seed and Series A rounds is inversely correlated with success. Yes, I mean that. Less money raised leads to more success. That is the data I stare at all the time. It makes little sense at face value but it is true based on more than two decades of experience in the startup world.

Keeping your team lean does work and I advocate for that all the time. Tumblr went for close to two years on a two person team. But those are two special people. Most startup teams can't do that. Most startups need to hire at least a half dozen people or more to get a product out the door and then iterate on it, scale it, and make it work. And that costs money.

To my mind, maximizing runway is not the game startups should be playing. Getting somewhere fast is the game they should be playing. You can always raise more money if you are doing well on the metrics that matter in your business. So focus on that and runway will take care of itself.

If you can get the plane to take off, the length of the runway matters less. If you can't, there is no runway long enough for you.


Comments (Archived):

  1. awaldstein

    Just a counterpoint Fred.Yup agree in concept about lean.I’m starting to work with more entrepreneurs in their 30s, 40s and 50s as well. These folks have worked other places, managed budgets and seem, for the best of them, to not equate what they should spend and do with the amount of money in the bank.

    1. pointsnfigures

      if they came from corporate, their career has been in a constant fight about more budget. My first and only job in a corp I had a great boss. But, one piece of advice he gave me was spend all your budget. If you don’t, they will cut your budget for the next year.

      1. awaldstein

        Spend it or loose it is corporate insanity that I must admit, running sales, I of course took advantage of of course.But, smart business people are just that, and understand not so much that control is key but that everything takes time, that big bang is myth not reality in market acceptance, and most important, that patience under fire is almost always the right answer.

    2. fredwilson

      my track recored with a 40 something with a lot of cash is particularly bad

  2. Guest

    Staying *really* lean is one of the biggest pro’s of staying out of the Bay Area or NYC.When I tell founders/ angels/ investors some of our salaries and the amount of money we have left in the bank, there is usually a double take or complete disbelief.We’ve been able to do it and embrace it, but I think it comes with very real drawbacks, and am curious about some of the economic circumstances people have while taking the “lean route”… Is it a cash mound from a previous exit or cushy previous job? Or is it really grinding it out by spending the least amount possible and just making it work. No matter what, I think it is the right move, but everyone’s lean doesn’t quite look the same.

    1. takingpitches

      where is your startup located?

    2. Matt A. Myers

      You exchange time with money, money with time.If you want to speed things up, and get access to the networks and resources of a bigger city – to find the specific human resources that fit your company, and faster – then you end up paying for that.If you have more time to organize then you can save money in the short and long-term, though other risks can occur mainly relating to speed to market and how important that is in each circumstance.

      1. pointsnfigures

        different cities are different as well. I find SV thinks a lot bigger about their startups than other parts of the country. plus, out there you can get mentorship a lot easier than in other parts of the country. Of course, that’s why there is Skype.

  3. giffc

    I like your points, Fred. Couple thoughts:- I think it takes a lot of startups two years to find their formula to the point the plane truly takes off (what do you think?), so would caution wannabe entrepreneurs not to misinterpret this post and think runway will take care of itself- I have not seen a lot of seed stage startups who did a big early raise actually keep small burn. Usually if they have it, I’ve seen them spend it hoping to accelerate / force growth. But you see many more data points than me. Do you attribute failure of high-raise, low-spend to lack of oxygen/aggressiveness? And are you including super-early stage companies here or companies more at the stage when USV usually plays?

    1. pointsnfigures

      love your point about force it. Money can’t force anything sustainable.

  4. SD

    I think its less about “lean” and more about forcing decisions/trade offs. Too easy to put off tough calls if you have lots of time. Having less money forces you to pick the red pill or the blue pill.

  5. jason wright

    it’s all psychology – people tend to live to their income. it’s amazing what can be achieved on an austerity budget, and when that’s all the money there is there’s no other choice, no other option, than to get scrappy – do or die.

    1. jason wright

      basic instincts come to the fore. use ’em well.

  6. WA

    Great behavioral lesson in there perhaps.

  7. Tom Labus

    Keeping it small also reduces incoming mortar fire and desperation increases creativity dramatically

  8. pointsnfigures

    this is a tough one, and interesting data. I know several startups right now trying to figure out how much to raise. I am mindful of raising too much, and wasting it-but the flip side is raise too little and you worry about feeding yourself. Especially in startups that don’t generate any cash.I am also mindful of the series A crunch. Without good investors that are willing to step up to the plate on the next round when you are running low, finding new cash in the business is difficult. It’s very very hard to do a B round in many places of the country.I tend to advise people to get 12-18 mos of runway, but now am leaning toward a little longer than 12. Also have come up with a strategy to try and either jumpstart an A round, or skip over it entirely depending on the business.Edited:with my personal experience, I think Fred is sort of right. When I was trading I found if my account balance got too large, I’d take stupid risks and lose money needlessly. Or, I would make dumb decisions. I wouldn’t get out of losers fast enough-and make other dumb decisions. Once my account got to a certain level, I’d get a check and pull all the excess money out.It’s the trader version of running lean. Of course, John Corzine and his MF Global escapades makes every trader run lean today. Guy should be in jail.

    1. Mark Birch

      The type of startup matters here. Enterprise companies tend to have longer development/ product-fit cycles, so require a lot more runway. SMB SaaS startups generate revenues quickly, but usually takes a long time before revenue reaches profitability, thus also requiring a bit more runway. Therefore, I am getting away from timeframes as it feels more of an artificial construct. Ultimately, it is a matter of raising what you need to reach the next significant milestone of development, no more and no less.

      1. pointsnfigures

        great point and I agree. manufacturing startups have to build and sell inventory. working capital constraints are huge.

      2. ShanaC

        hmm, i see, have you seen timelines for each?

    2. Aaron Klein

      +1 for Corzine in jail.Another +1 for finding the right balance. I did it the wrong way the first time. Scaled too fast and lots of factors conspired to make it impossible to get the financing to go to the next level.That has led me to be exceedingly cautious this time. I laugh at the people who say “always have 18 months in the bank.” That’s funny. But still, we worked our tails off to make sure that we were extending our runway and giving ourselves the chance to take off.And now that we’ve shifted our focus to gaining airspeed and altitude, boy does that feel good.

    3. ShanaC

      how do you come up with the number for runaway

    4. fredwilson

      i like the 12-18 month advice. 12 in the seed round, 18 in the A and B, 24-36 in the C

  9. Cam MacRae

    Typo: corrolated should be correlated.

    1. fredwilson


  10. JimHirshfield

    Sometimes the tank is full, sometimes it’s only half-full…and you can count on it approaching empty. Knowing where all the gas stations are is a good thing, but you’re not taking a tour of gas stations; ya gotta know where you’re headed. What’s your destination? (hat tip to Tim O’Reilly on that one).

    1. Aaron Klein

      +1 on a great quote.I discovered an interesting rule of thumb. This might be too simple or only apply to myself, but it was the inflection point for shifting focus from runway to gaining airspeed and altitude.At the end of every month, I’d take cash on hand and divide by that month’s loss. A simple, quick way to see when I’d be out of gas. :)This month, the resulting number went up β€” sharply. For a second, I thought I’d done the math incorrectly. Then I realized how fast Stripe was filling up our gas tank while expenses were staying flat. And how quickly we were going to be profitable if we weren’t careful.All I can say is…it’s killer fun to be able to focus a lot more on the destination (and the new A+ engineers you get to hire along the way) than worrying about finding your next gas station.

      1. JimHirshfield

        Woo Hoo!! R O A D T R I P !!!!!

        1. Aaron Klein

          LOL. Great choice of photo. I like how you roll, Hirsh.

          1. JimHirshfield


    2. chipcorrera

      Agreed that knowing where the gas stations are, is definitely a good thing. But I’m sure you’ve also run into the case that a well known gas station that you thought was open turns out to not be when you get there – they’re closed, they haven’t received fuel, etc….You should not run until completely empty and you should know where there might be some alternatives, even if that gas cost a bit more.

      1. JimHirshfield

        For sure! Not all rest stops are gas stations.

  11. LIAD

    constraints drive innovation.progress is made by people who don’t understand what they’re up against or those who have no choice.

    1. JLM

      .Pure ignorance has overcome more obstacles than we give it credit for.The first time I jumped out of airplane, I was totally ignorant. It was very easy.The second time, I gave an informed consent. Much more difficult as I knew what was going to happen.The 92nd time, I was scared shitless and was looking forward to celebrating the end of that nonsense. I had seen too many injuries by then.Ignorance is a great driver of things, sometimes.JLM.

      1. Cam MacRae

        My first jump at PTS was a side door exit from a C-130. I was in the second stick. The pilots put the first stick in the trees. You can be very certain I was glad to be ignorant!

        1. pointsnfigures

          At least you were static line and didn’t have to think about pulling the ripcord! C-130 rolling down the strip, airborne daddy gonna take a little trip…..

          1. JLM

            .Hey, Leg, that’s Airborne Ranger gonna take a little trip…Just kidding, Zoomie.JLM.

          2. Cam MacRae

            Not a lot of thinking time at that altitude…

        2. JLM

          .Ahh, the C-130 — made a lot of one way trips on that baby.My favorite? Money jumps on Hueys. Coffee didn’t even get cold, no?JLM.

          1. Cam MacRae

            I never had the pleasure (before my time). Old enough for a one way ticket on a Caribou though. Neat bit of history.

      2. Elia Freedman

        Well said, JLM. About ten years back I went to Ohio to visit family. My cousin and his wife graduated from chiropractic school and he was talking about starting his own business. She was scared as the advise most gave her was work for someone else for a while.I said she needs to understand something. In our family we don’t know any better. Both his grandfathers, his father and uncles, his brother and cousin (me) all just started our own businesses. Ignorance is bliss.

        1. JLM

          .The Americans were the foremost amphibious planners in the history of warfare — goes back to the Battle of Trenton when Big George undertook a double envelopment amphibious operation against Trenton.In the planning for D Day, much was said about which units were to lead the first wave knowing that they would likely be shredded and combat ineffective for months thereafter.The planners — led by Omar Bradley who was America’s best and most experienced amphibious planner, a little known fact — concluded they had another problem.The most experienced units would quickly understand how dangerous the landings were going to be and would balk at the prospect of leading the first wave.They very cynically assigned the first wave to units which were not as savvy and salty thereby avoiding the arguments about the foolhardiness of the invasion plan which was literally based on running out of the surf into the waiting arms of the German fortifications.This was an example of harnessing complete ignorance in a nasty piece of business.As it turned out, Omaha Beach was a bloody mess and likely their decision contributed to its eventual success.JLM.

          1. Elia Freedman

            A far more critical example than my family’s career choices, that’s for sure. πŸ˜‰

          2. pointsnfigures

            My friend Walt Ehlers was in the “back half of the third wave” at Omaha. (his words). It was his third amphibious landing (Africa, Sicily came before). His troops were raw, but he wasn’t. Everyone under his care survived the first day. He earned his Medal of Honor four days later in the hedgerows. He can speak very seriously, and also jokingly about different events from that time. He sits in an LA VA hospital today, recovering from his second broken leg.

    2. fredwilson

      i like that framework

  12. Bo Sartain

    This makes sense because companies that manage the cash too carefully are probably going to fail to take enough calculated risks-antithetical to a startup.One of the biggest problems I see is founders paying themselves a salary with their seed money (I’m talking a few hundred thousand of investment), and I’ve heard many a founder say they can’t keep going if they don’t bring some cash home. This isn’t going to help the company succeed. Founders need to take the money and spend it on the things they don’t have, such as acquiring different and necessary skills, product development and marketing. Founders tend to want to maximize the runway when they are finally making a salary in their business. Now jobpreservation outranks growth, a recipe for failure.

    1. JimHirshfield

      So…only kids living at home with their parents or the wealthy should start companies? huh?

      1. Bo Sartain

        Of course not, but I think founders need to keep it in check and stay hungry.You also hear people say if your going to fail you want to fail fast. Maximizing runway to preserve salary is not the way way to fail fast if the company is going to fail.

        1. pointsnfigures

          On the flip side, I have seen people “start” companies, try to raise cash to pay themselves a salary just until they find their next real job.

          1. JimHirshfield

            That’s just nuts.

          2. Drew Meyers

            Agreed, you’d think VCs would see through that..

          3. JimHirshfield

            People see what they want to see.

          4. ShanaC


        2. JimHirshfield

          Yeah, of course, but they can’t be literally hungry. Founders deserve a living wage. Otherwise, I agree with you, they shouldn’t be living high on the horse off of an early-stage round’s financing.

          1. pointsnfigures

            I have said the same thing, curious what you think a founder’s living wage should be.

          2. Drew Meyers

            Enough to pay their bills and not have their monthly expenses occupying space in their mind.

          3. JimHirshfield

            There’s no one answer. A lower number for the founder that recently graduated, a higher number for the founder that kicked ass within a larger corp and is no going out on their own…and everywhere in between.

      2. baba12

        Yes. If you look at most entrepreneurs in the internet business world most come from upper middle class families. Rarely are you going to find someone who grew up in the inner cities and managed to start a company etc. If you grow up in a house with limited means to begin with, your goal is to find a way to get a steady income going, being an entrepreneur et al maybe something you wait for. Most of the time you never try and bring your dreams to a fruition as there isn’t the capacity to risk it all.

        1. JimHirshfield

          Some truth there, but a generalization.

          1. baba12

            I am not generalizing. If you do a search for a list of entrepreneurs who went to inner city schools or tech startups with founders who went to inner city schools, you find that there all these new programs that are trying to teach innovation in inner city schools etc, these are just BS & a waste of time, as it is not the issue that needs focus.But in any case if you can point to me 10 tech startups wherein the founders went to large public school systems in inner cities like NYC, and I mean not the magnate or charter schools but say went to an average school in the Bronx or Brownsville neighborhood of Brooklyn and either consciously dropped out of school to focus on a tech startup or went through a program at a university to go on and launch a tech startup I’d love to know about it.Silicon Valley and other areas are not interested in investing in such people, after all it is not necessarily going to pay off. So yes I am making a sweeping generalized statement and in this case the outliers are just that and not the norm.

          2. JimHirshfield

            I has no dataz.

          3. LE

            I tend to agree with you but perhaps for a different reason. Well as I said in my previous comment there is the environmental issue.In a public school you are surrounded by a community that is quite different from a non public or a higher achieving level public school. The people you associate with are different. They come from different types of families that are committed to education and that place tends to increase the motivation for any member of the group. Less slackers for sure. It’s overall a better experience. It’s not just about education it’s about who you are attending classes with and how they were raised. For most people anyway.Look by the time someone gets to Stanford, Harvard, Wharton, Mit and the like they have some advantage that got them there. They have worked their ass off (not everyone is connected) and/or had a good education and environment prior to that. Like Fred at MIT or JLM at VMI. Would guess JLM’s father was encouraging with that.I was reminded of this when thinking about my stepson who plays and is quite into sports the other day. He is starting to complain about the amount of practice that the coach gives him (he is 11). Before this year it was all fun. Now it’s work for him and less fun. I think he will continue but he may not. So the people who end up playing the same sport when they are 17 have already worked hard every year and stayed in the game. The people who are complainers (or are not encouraged and guided) will drop out. Because a kid can’t think of the future they only know now.Now of course if I believed in school sports I would be that parent that kept him in the game and made him continue. But I’m not that parent (and I don’t like that he plays sports). So I will not offer him any guidance to keep him playing. He will be like the kid who looses academically. While the other parent who is into sports will keep their kid in the game. All this is environment it goes way beyond simply what school you are “educated” in.

          4. baba12

            I specifically stated “inner city public schools” the public schools in most parts of the country i.e. in cities will less than 1Million or more people are the cities that have also got problems in their public school systems. What you state is accurate but what you forget is that for many of the kids in inner city schools there isn’t any guidance either in school or at home. We can find fault with parents, teachers, administrators etc but that does not resolve the issue at hand. People are trying to do things with charter schools ( I don’t agree with them) etc, but we have been coming up short now for over four decades in the public schools in large cities that also happen to have large minority populations.Since the passing of the civil rights act in 1964, which was not something many people welcomed voluntarily there was no way legally to discriminate minorities based on color. In the ensuing years, not in a calculated manner nor consciously or in a conspiratorial manner a lot of the majority white population in these large population centers started to leave the cities and move into suburbs. By the mid 1970’s most of the large urban centers like NYC, LA, Chicago, Atlanta, Philadelphia etc started to see decline in their public schools performance and the quality of the education being transferred to the kids declined as well. Since then till now that decline has not been arrested by and large exceptions being magnate schools and some others where a lot of hand holding has occurred. Today we discriminate based on education and since most of the white folks are either in very good public school systems like those in Falls Church Virginia or Atherton Ca, or Topeka Ks get a quality education, family structures that are relatively stable and are able to end-up in the Harvard’s and the Stanford’s of the country. Now there are always a token number of minorities who live and go to schools in these school systems and end-up in the MIT’s and Yale’s as well.But by and large we have collectively as a society failed to address this divide and many believe lack of money is the primary cause, many others believe it is lack of family structure that is to blame. For everyone there is a case study and tons of papers written that will allow them to prove their view point. The solutions we put forth tend to be pissing on a forest fire.The post by Mr.Wilson was not about this at all, somewhere it meandered and I am sorry to have gone to the deep end on this. I apologize for my transgression but I feel strongly about this and I express myself. I do what little I can (piss on a forest fire) just cuz it allows me to feel good for myself.

          5. LE

            In the ensuing years, not in a calculated manner nor consciously or in a conspiratorial manner a lot of the majority white population in these large population centers started to leave the cities and move into suburbs. By the mid 1970’s most of the large urban centers like NYC, LA, Chicago, Atlanta, PhiladelphiaWell at the end of the 1960’s my family moved from one of those neighborhoods. I was there first hand through the process and saw it happen. And this was moving from a neighborhood that my mother as a kid moved to (different part of it not same house or anything) when her mother moved from another part of the city that there was “flight” from.The neighborhood became dangerous and different. It was really a very simple and prudent situation to make.Likewise the neighborhood that we moved to has started in the direction of being crappy maybe 10 to 15 years ago. It’s not the same neighborhood that I grew up in. Racially it is exactly the same (pretty much all white) but the people that live there now aren’t the same as the ones that moved their when it was new (in the 60’s). I don’t think there is any way to avoid this type of thing.

          6. baba12

            I think if we have stopped evolving then maybe what you say may hold some truth. But I believe that the glass is half full and we just have to work at it, nobody said taking a dump was effortless. So we shall continue to struggle and be flawed in the meantime.

          7. ShanaC

            me too

        2. Mark Gavagan

          β€œ…people of equal talent (to Albert Einstein) have lived and died in cotton fields and sweatshops.” – Stephen Jay Gould

        3. LE

          I read a bit of this article yesterday in the WSJ about the lost generation:…John Connelly thought he was right on track in life. The son of a New Jersey auto mechanic, he was the first in his family to go to college when he enrolled at Rutgers in 2009. Four years later, the 22-year-old found himself $21,000 in debt, without a permanent job and sleeping on friends’ couches in New Jersey and Brooklyn.”I hear a lot of stuff that people in my generation aren’t buying cars or houses, and I’m a step beyond thatβ€”I can’t even pay rent on time,” Mr. Connelly says. “I have a hard time planning 10 years in the future when I can hardly plan three months in the future.” At Rutgers, Mr. Connelly was an honors student and president of the student assembly. But wary of taking on more debt, he ended up withdrawing from school with three credits to go until graduation. After a summer spent living with friends while working a temporary job at a Brooklyn nonprofit, he found a grant that allowed him to re-enroll in school this fall. But he still doesn’t know what he’ll do when he graduates at the end of the semester. “I kind of did everything I was quote-unquote ‘supposed’ to be doing,” he says.$21k of debt is nothing he obviously qualified for quite a bit of aid. So while some would see this as a money issue “he didn’t have rich educated parents” I see it more as an issue with lack of guidance and direction (which can come with rich or upper middle class parents as well). His relationship with his parents and/or his parents didn’t and weren’t able to provide the proper guidance and direction to allow him to make the right decisions. That is why he is where he is despite having high enough grades and likability to be an honors student and president of the student assembly.Rutgers failed here also because with the mass of students there there was nobody to give him guidance and quite frankly one can only guess the friends he hangs out with what they are all about.So while you may focus on the money (and that’s a really important factor for sure) there are other things that even with money having an upbringing where you aren’t surrounded by the right community and don’t have the right guidance you won’t get opportunity.

          1. JLM

            .Not to go all weird on you but there is an interesting side story here — the draft and universal service.In my generation, the Viet Nam generation, nobody worried about getting a job — they worried about getting drafted and shipped to Viet Nam. You sleep on a couch, you go to Viet Nam. It was a tough time in America in many ways.Much of the uncertainty of the future for the current generation could be solved by the following:1. Institute universal service, like other countries, and require two years of service for everyone. Join the military, work in a hospital, work in public works, build parks, etc.2. Require those able to take military training — not necessarily to serve but just to be trained as part of their universal service.3. Forgive college debt on a sliding scale after universal service. After two years of universal service, the person will be accomplished and the ensuing service will have real value to society and the rate of debt forgiveness should be pretty damn quick.4. Provide real vocational training as part of universal service. If you can repair an AC unit in Texas, you can live pretty damn well. Hell, I’ll give you a free room at my house.Measure everything by a simple standard: Are we creating independent taxpayers here?JLM.

          2. LE

            Re #1 – As far as universal service that would a) cost money and b) take a job away from someone else with that job.Also this is a drastic change on a large scale and would cause almost certain unintended consequences if not really well thought out. Better thought out than giving out free gas after the storm and not knowing that people would game that system in poor neighborhoods. You don’t trust anyone to design this type of system do you?Re #3 – Already a way to get college debt forgiven for certain types of careers (medicine as one that I know of) after service. I think what you are talking about though might be an incentive where the government figures out a way to get people to go toward certain careers. But it would have to be fluid and change with the times. At one point law is up and weather forcasting is down and then vice versa. My wife is in a specialty right now and can write her own ticket. I keep telling her (she is much younger [1]) to suck everything out she can now because that could change.Re #4 – Vocational training is a good idea but might not be after enough people become HVAC mechanics that you no longer desire them like you do now. So how to design a system that doesn’t get stuck in what was good 4 years ago? That’s the hard part.Didn’t the soviets try a variation of this with “central planning”?In any case it sounds that you are suggesting that people take into the account the probability of their actions will result in something that will earn them money, right? What’s the chance of that happening? People are instead taught to do what their passions is and to follow their dreams. Not to do what is practical for survival.[1] We met around the time that Obama was running the first time. She even had one of those tshirts. I told her what the story was with him and I of course was proven right. How cool is that to happen?

          3. sigmaalgebra

            Those early years, say, before age 30, are justprecious for lives. To force everyone to take outtwo such years just trivializes what else they mightbe doing with their lives. E.g., maybe someoneis on the way to a career as a concert violinist –then those two years out would shoot their careerin the gut. Similarly for many athletes or academicstars. Similarly for many people charging aheadin software as a career. Great: Force Bill Gates,Page/Brin, or Mark Zuckerberg to give up twoyears in their 20s or late teens — outrageous.For the females, a lot of them are using their lateteens and early 20s to find a husband and starta family. The US needs to emphasize familyformation since the women in the US of WesternEuropean descent are having on average fewerthan 2.1 children meaning that they are goingextinct, rapidly, literally.Generally big government should take its clumsy,wasteful, bureaucratic hands off the crucial aspectsof the lives of citizens.Grabbing two years from each young person is arrogantand, for our most promising young people, astoundinglydestructive.

          4. JLM

            .I love the passion of your comment and you raise critically important considerations. I remember with great clarity talking late into the night with draftees about the disruption that being drafted had injected into their lives. It was truly painful.A well designed system could effectively accommodate such interruptions and put their talents to work in their fields. No reason a violinist could not serve as a musician in some capacity entertaining folks.The system of college deferments and critical job deferments, even under the old draft system, was in place. It would not be unfair to note that many citizens gamed the system — Dick Cheney had a divinity school deferment for years.The price of citizenship should require a bit more service than just being a “taker” and paying one’s taxes. It should require service to the nation.Other countries — even the US formerly — recognized and currently recognize this notion.This view of citizenship and its burdens is likely the fundamental basis upon which you and I essentially differ.I think that universal service would create a bond of ownership of our government and result in a more informed and energized electorate.JLM.

          5. sigmaalgebra

            As far as I can see, the situation is muchmore general. At present, there is next tonothing can study in college that will leadto a career upon graduation. Why?Because the job and hiring machine in theUS is not just broken but totally destroyed.What is left are largely jobs that cannotbe shipped out of the country because theyhave a geographical barrier to entry. So,we’re becoming a country of tradesmen,auto mechanics, auto body repair peoplepizza shop owners, etc. Yes, there may beopportunities in medicine, but the educationalrequirements are huge, and that field isnot a piece of cake, either. Yes, there canbe opportunities in doing an information technology startup, but a recent statementof Mark Andreessen is that each year thereare only about 15 such startups worth ofa Series A — so, can’t soak up a lot ofcollege graduates with that. A few peopleare getting absurdly rich, and nearly everyoneelse starting a career is in deep trouble.

      3. ShanaC

        it’s starting to happen already. The problem is how to stop accelerate everything

    2. Mark Birch

      Absolutely no.

    3. Cam MacRae

      I’ve heard many a founder say they can’t keep going if they don’t bring some cash home. This isn’t going to help the company succeed.Implicit to your argument is that if they don’t bring some cash home the company will fail.Horses for courses.

    4. Elia Freedman

      “…take the money and spend it on things they don’t have.” Like food?

    5. Elia Freedman

      I’m seeing more start-ups that are in it for the start-up, not for the idea. These people seem to be attracted to the idea of building something and being apart of start-up culture, but don’t really have any specific clue about a massive problem that they really want to solve.Most of the start-ups I associate with are the latter and none of them would trade salary for company success. They’d all rather live off savings than see the idea die.I wonder if you are seeing a lot of start-ups in the former group, those who just want to be in a start-up and live that culture without any real clue about the true sacrifices to make that work. That would explain their willingness to take a big seed stage salary and dichotomy between your comment and other people’s (including mine) responses.

      1. LE

        These people seem to be attracted to the idea of building something and being apart of start-up cultureThis is typified by a hacker news commenter who had expertise in engineering and robotics (and had some patents apparently) also a Phd to boot (and a decent job which he left) and decided to leave it to be a co-founder at a web clothing startup. (I may have some of the facts wrong but that was the basic idea).

        1. ShanaC

          i know that guy (or versions of that guy) – actually he’s taking a lower salary than you think

      2. panterosa,

        I believe @fakegrimlock call the former STARTHOLES. They are really such a noisy bunch, no signal, no clue.

        1. LE

          Deprecated from that by a notch is the ecosystem that has evolved catering to the start holes – the pick-asses.

      3. Bo Sartain

        That’s awesome. All I’m saying is don’t let founder salary undermine the passion for the idea.

    6. LE

      they can’t keep going if they don’t bring some cash home. This isn’t going to help the company succeed.Perhaps you could elaborate on the nuance of that thought because it seems like you are saying they shouldn’t take money for their living expenses.”some cash home” doesn’t equate to “cash home to live in luxury” to me.

      1. Bo Sartain

        Sure, the startup already has all of the skills and effort that the founders bring to the table, but I think that is rarely the complete set of skills that the company will need to succeed. Where are the holes? It varies from company to company. Maybe the company needs a VP of Marketing, maybe a CTO, maybe engineers. Take the seed money and go and get that additional talent to give the company the best chance for success.

  13. SD

    Its important not to confuse “runway” with size of raise. Runway is about the decisions that are made – if an enterprise raises a bunch of money, then either squirrels it away or picks too many different projects, these are bad outcomes. But if it raises a bunch of money, then aggressively spends to pursue a focused goal (making clear decisions about what NOT to do), that can make a great deal of sense.

  14. Jack Holt

    This is an atypical post from Wilson (sort of hollow). And makes me think he just hung up the phone with one of his portfolio companies who needs to focus more on milestones than runway.

    1. fredwilson

      what was hollow about it?

      1. Jack Holt

        Long delay..anyway, I suppose I felt it less insightful than other bits of your advice because to an entrepreneur it seems so obvious. We know the hard part is getting the product shipped and market fit. If we could do it with less runway/dilution we would.

        1. fredwilson

          if you could have ten years of runway, would you?my point wasn’t only that sooner is better than later, it was also that there is a time when running out of cash is a good thing

          1. Jack Holt

            I see your point – maybe I’m the exception because we have about a year left of runway and, although I absolutely know the milestones I need to hit, it’s still the thing that wakes me up at 3am (like this morning, as a matter of fact).To answer your question about the 10 years runway, probably not. The stress of running out of money seems to sharpen my thinking, which I think is your point.

  15. Richard

    Save money for the pivot…chances are its coming.

  16. Elie Seidman

    Very true. Been there, done that. Started one startup very lean and forced me to be creative. On the heels of that success, did a new startup with a $6M+ seed financing. Embedded the wrong DNA into the company – a belief that we could solve problems with money instead of finding creative solutions for super cheap and fast growth.

    1. fredwilson

      i have seen that movie a lot Elie. its a big cause of the sophmore slump in entrepreneurship

  17. William Mougayar

    Well said. Setting the expectations all around about what determines a successful lift-off, what altitude, metrics, milestones so you’re not shooting for the moon immediately in 6 months. A small lift off that lands somewhere is better than a bigger one that doesn’t land.Another thing I observed that’s not proportional either is the value you receive from an investor is not related to the size of their investment.

  18. laurie kalmanson

    Sitting at the gate != flying.

  19. Dave W Baldwin

    Love the last line! The problem with too much money will allow losing of focus and probably too much time on vacation in most cases.

  20. JLM

    .Like most things in the real world, there is a bit of truth to be found on both sides of the mirror.Pressure — entrepreneurial panic perhaps — harnesses our energies and focuses our minds to work harder and more efficiently. Runway is a metric of entrepreneurial panic. That is certainly true in every business in which I have been involved. Makes sense.On the other hand, finance — lack of money — has killed more businesses than almost any other controllable consideration. Investors are fickle. You already knew that.This argues for getting a bit more than you think you need because stuff happens.The world is divided into providers of capital and users of capital. Seek your advice from either encampment and you will get predictable advice.I caution entrepreneurs to go to the well and get a full bucket and then — knowing thyself — set a schedule and adhere to it that creates a bit of harnessable entrepreneurial panic.This would be very, very difficult for a first time entrepreneur to embrace as they are overwhelmed by the loss of their business virginity. No slur, mind you, just an observation.JLM.

    1. pointsnfigures

      Lack of money can force you to make emotional decisions out of panic. Fear starts to play into your head more than it should. Been there done that……

      1. JLM

        .No doubt. The spice analogy — pinch makes it all the more savory, handful ruins it.One’s ability to deal with entrepreneurial panic is a skill that requires development.This is why the military is such good training for business. Until they start mortaring the parking lot, business is still pretty easy stuff.Whenever I coach a panicked CEO, I always start with:Anybody dead?Anybody bleeding?I think we can figure it out together.JLM.

        1. LE

          Exactly. You have to be like OJ’s lawyers.Remember when OJ was arrested and his face had incredible pain and anxiety in it. Then he met with his lawyers who gave him hope and all the sudden his attitude changed when he appeared in court. Cool and collected and almost happy. They told him “we can handle this it’s not as bad as you think it is”. And he believed them.That’s where the charisma (which I mentioned you had) comes into play. Not everybody can pull that off.

          1. CJ

            Not everyone has OJ’s lawyers.

          2. JLM

            .Fair play. Deft stroke.JLM.

          3. JLM

            .The prosecution gets last pick on the legal talent most of the time.It is not a search for the truth, it is a journey to see what you can prove. The evidence.JLM.

        2. Chris McCoy

          Can patience be learned?”One’s ability to deal with entrepreneurial panic is a skill that requires development.”

          1. JLM

            .Sure as the most impatient person on the planet, I can assure you that patience can be learned.One does not stifle the natural call to immediate action just the timing of unleashing the action.Even those characteristics that are in our DNA can be controlled and harnessed.It takes a bit of work.JLM.

      2. Elia Freedman

        I also find that lack of money, which can play emotional tricks, is also very focusing. “I need to make payroll. How am I going to do that?” is maybe the most powerful and focusing question I’ve ever asked myself. Unfortunately I’ve asked it of myself a lot of times!

        1. LE

          Creativity goes up when people are in a crisis and not fat and lazy. It’s one the reasons I feel rock stars do their best work before they become famous or when they go through some crisis. [1][1] Dixie Chicks post George Bush “Texas” comment where they did their best album and reinvented themselves (got rid of the banjo) because of the anxiety that situation produced.

          1. JLM

            .One of the Chicks lived around the corner from me.Nice folks but one of the truly stupidest things ever done in the history of country music.They have never recovered their financial footing after that blunder.W was an incredible Texas Governor and whatever success we enjoy today is still an extension of his policies.JLM.

          2. LE

            I’m in favor of people being able to say what they want without having to bow to political correctness. I hate the shit that happened to Paula Dean. I hate the crowd mentality.Of course I also realize that the crowd is the crowd and if money (or acceptance by the group) is important to you you have to watch what you say or you will suffer the consequences.My point was that the pressure of that “mistake” put them into a creative mode where they did their best mainstream work. I loved the album that came from the after effects of that incidents.I could care less what they say about Bush or Texas or even if they don’t like Jews whatever (hypothetical of course) unless it rises to the level of putting a negative halo on the experience of listening to the music. The music is good and it still, to this day, gives me plenty of enjoyment to listen to it.At the 49th Grammy Awards Show on February 11, 2007, the group won all five categories for which they were nominated, including the top awards of Song of the Year and Record of the Year, both for “Not Ready to Make Nice”, and Album of the Year, for Taking the Long Way. Maines interpreted the wins as being a show of public support for their advocacy of free speech.[84] It had been 14 years since an artist had swept those three awards.[85] After the Grammys, Taking the Long Way hit No. 8 on Billboard 200 and No. 1 on the country album charts and “Not Ready to Make Nice” re-entered the charts at No. 4 on the Billboard Hot 100.

          3. JLM

            .What was said was gratuitous and stupid. It was not an exercise in free speech. It was an exercise in taking oneself a bit too seriously.Even though I may disagree with President Obama’s policies, he is still our President. He is still my President. If I cannot favor him, then I should respect his office.On the most honest level, he also got elected President two times in two tough campaigns.I might want to think I know better but really the guy mopped up the field so who GAS what I may think.If I were so damn smart, I would be President, no?Humility. Respect.The Chicks paid a huge price for their hubris.JLM.

      3. LE

        Very true.By the way if you haven’t already done so watch “Hank” on netflix about Hank Paulson which just came out.

      4. Barry Nolan

        Totally. Imminent failure becomes all consuming

      5. ShanaC

        Yup. Panic is a hole to dig something out

    2. JimHirshfield

      “…go to the well and get a full bucket…”So, I think Fred’s post is kinda sayin’ make sure your bucket’s the right size; too big and you might dump your biscuits.

      1. JLM

        .That bucket looks about the right size, no?JLM.

        1. JimHirshfield

          Only if your chickens are genetically modified. #frankenfood

        2. ShanaC


  21. baba12

    Does Mr.Wilson subscribe to the “Jugaad” philosophy ( ) when it comes to requiring the USV portfolio companies be frugal and making do with what they have and finding ways to make things work with what they have.Not sure how one values/views a company that only takes what it needs and when it needs it.

  22. John Revay

    “If you can get the plane to take off, the length of the runway matters less. If you can’t, there is no runway long enough for you.”#MoneyLine

  23. Matt A. Myers

    I’ve maximized my runway!I’m close to broke but while reaching this place I’ve brought my theory, ideas, plans, and projects as far as long as I possibly can – secured what I’ve needed and built relations with people most important to the next step to succeeding.I’m basically at the point I won’t need investment, though it would speed things along and could be nice to have the added expertise on the team for various future aspects of business growth and development.I’m optimistic. πŸ™‚

    1. JimHirshfield


      1. Matt A. Myers

        Shhhhhhh.. Soon soon..

        1. JimHirshfield

          Oh, “stealth mode”? That doesn’t strike me as your style.

          1. Matt A. Myers

            It depends on what group I’m talking to. There is value behind keeping things quieter until more ready, and being selective of who and how many hear about them – until a certain point – and then it’s more valuable for everyone to hear it which counteract any of the negatives that come with it.

          2. JimHirshfield

            Is it a speakeasy or a startup? πŸ˜‰

          3. ShanaC

            is there a difference

          4. JimHirshfield

            It’s all perspective.

          5. Matt A. Myers

            Isn’t word of mouth the best way for something to grow? ;)And reasoning is the online audience on here, as well as my main accounts are primarily in the same space as web development and therefore higher concentration of potential competitors. I knew what I was working towards years ago – and if I had mentioned it online then imagine I would have gained a few additional competitors; I have had even local people start to try to copy what I am doing, though no one is as persistent as I am it seems, and I have a solid foundation of theory and understanding to build a road map and prioritize things.

  24. ScottjHoward

    This post gave me a notion of a potentially better way to define traction:Traction = Velocity to Relevant (to the Startup) & Comparable (for the VC) Milestones. Time, Volume / Amplitude, and Cost are secondary factors.Thoughts?

    1. ShanaC

      define relevant.

      1. ScottjHoward

        Whatever the startup has identified as the KPIs of their model, CAC, LTV, Rev, Daily Actives, etc.. If we have achieved a unit measure of 1 and the VC is looking at Comps that say the measure needs to get to 10, we need invest deeply to drive the 9 unit increase as fast as we can.

  25. davidu

    Fred, a corollary is that once you start to achieve lift, you need to fund the operation to accelerate momentum. At that point, not funding growth causes a series of fits and starts where companies fund-raise from milestone to milestone, but never in a continuum, causing far more stress and friction that ultimately inhibits the ability to achieve escape velocity.The trouble is, not everyone always agrees on what constitutes lift. πŸ™‚

    1. fredwilson


  26. kirklove

    Last line is money. It’s no “you got dusted”, but not too shabby, Buster.

    1. fredwilson

      tough competition

  27. Charles Birnbaum

    “If you can get the plane to take off, the length ofthe runway matters less. If you can’t, there is no runway long enough foryou.” <– This quote wins.

  28. Barry Nolan

    Apt. Using ALL the runway – Russian style…

    1. JLM

      .When they hit the numbers at the far end, I was rooting for the Russians.Whoever calculated weight and balance was puckered up pretty tight that flight.JLM.

      1. Barry Nolan

        I love the aussie commentary. The Vodka Burner…we have Smirnoff!

      2. Cam MacRae

        Rotation is old hat; use the curvature of the earth instead!

  29. Jeffrey Hartmann

    Absolutely awesome insight here Fred. You have to get the plane to take off, and it is much better to punch it then slowly increasing your speed over a long period of time. Small planes take flight with a lot less thrust than a 747 as well. I really think this advice goes hand in hand with Mark Susters Ring the Freaking Cash Register post (http://www.bothsidesoftheta…. While you don’t want to sacrifice your long term strategy for short term gains, if you have revenue and growth your much further along on to being a cockroach. Startups fail because they run out of oxygen, focus on revenue growth and what it takes to get to cash flow positive. That is the way you don’t die.

  30. ShanaC

    And what of bootstrapping?

  31. James Ferguson @kWIQly

    Balance between long runway vs. running on empty is a fine path to tread.If capital markets were efficient , companies needing and worthy of funds would get it (regardless of stage and traction, team make up etc) and others would not (regardless of stage and traction, team make up etc).This debate is how the entrepreneur balances internal perception of worthiness, with what can be effectively communicated in a timely manner.The fact that companies go down that “should have flown” is an extreme case of 20-20 hindsight. In every case such companies had an impedance mismatch between their perception and that of the market.To be “at take off speed” is to be *in a position* to be able to avoid dilution by deferring funding and picking up more speed,in the interim – but that may be brinksmanship – not worth the risk!A “point of no return”, is reached if the runway is shorter than perceived and desperate or inefficient measures are suddenly called for. (Go big or go home)There is a “point of no return” before the end of the runway which says “too little too late”, if it is reached before organic flight can occur – you crash.So the biggest mistake an entrepreneur may make is to assume that the investment market knows the things that are “obvious” from the driving seat.TL;DR Can you communicate value?

    1. JLM

      .VC funded markets are notoriously inefficient.Capital markets are impacted by political policy. Today the US SBA is still woefully inadequately underfunded.JLM.

  32. panterosa,

    Hustle, regardless of runway length, and hungry, because of runway length.

  33. chipcorrera

    A completely critical part of this is the lean machine. Otherwise, folks get confused by building a faster, big machine that will go quicker but gets very expensive to run and if you have a long way to go, you’re very likely to run into all types of problems.

    1. ShanaC

      premature optimization problems

  34. Jeff T.

    This is, I think, is one of the hardest compromises I face while trying to build my business. Stay lean, but move slower, longer or invest in people and move faster, but for not as much time. I think this does very much depend on the stage of the business, and also the competitive environment. When I first started I was extremely lean, could work slowly on a prototype, and had the luxury to do so because I felt that I was much ahead of any competitive threats. Now that I see threats approaching, if I were to still stay lean, and by extension maintain my runway, I believe I would be giving up a competitive advantage.So now the decision is made to invest and the question becomes on what (who, in reality), how much runway am I willing to give up, and what combination of the two do I believe maximizes my chances to stay ahead of my competition and also allow me to maintain my business (profitably or to get to that next round of financing).Pre-series A this discussion is constantly bouncing between the back and front of my mind, but they are always present.

  35. Guest

    More $ is needed if it’s genuine tech innovation that might have a chance of monetizing via IP licensing to others and becoming a utility.If the $ are just for marketing and customer acquisition because you have no in-house tech or design IP, e.g. website is just a generic WordPress template and you’re burning $ to buy traffic, few investors would give you the investment anyway.

  36. mikenolan99

    Pilots have two terms – Vx and Vy – the speeds at which airplanes go the highest over distance (Vx), and the speed at which airplanes gain altitude the fastest over time. In a Cessna 172 Vx is 64 knots, Vy is 78 Knots.The rule of thumb for which speed to fly is easy: We use Vx immediately after takeoff to clear any obstacles, then fly at Vy to reach cruising altitude quickly.Starting a company is much the same – at what rate of spending (burn) do we take off at – to clear obstacles (market penetration, MVP, etc.) and then at what rate do we burn cash until we reach our desired altitude (positive cash flow.)Airplanes come with owner’s manuals that tell you these speeds. Start-ups don’t.

    1. JLM

      .Love the aviation analogy. Stronger than an acre of garlic.Well played!In higher powered planes, you may want to watch CHTs as you climb.JLM.

      1. mikenolan99

        I also love the Best Glide Speed analogy – and wrote a blog post a few years ago about it. http://www.askbetterquestio…Basically, best glide speed is the speed at which an airplane stays in the air the longest without power. Any faster or slower than that speed results in a forced landing sooner.In business, when the end appears inevitable, you run the company at the leanest, but most effective speed possible… and try to restart the engines!

        1. JLM

          .Minimum turn back altitude is a good one also.What is the minimum altitude in a specific aircraft that must be achieved to allow a 180 engine loss turn back to the airport and a safe landing.That is the altitude you should be shooting for at takeoff.JLM.

          1. mikenolan99

            So many good ones – hell, we should probably write a book!”Your Plane / My Plane” – who’s in control of your businessPre-flight planning – better to steer clear of storms than to be surprised by themAnd, return your seat back to its full and upright position… uh, OK – maybe they don’t all work!

          2. LE

            This is an example of why in sales you try to find commonalities with the person you are selling to. Any mention of aviation fortifies the halo of the person mentioning greatly.As a kid I remember when my parents took me to see “Airport” and when George Kennedy got the plane out of the snow and wanted to thank “Mr Boeing”. That movie made a huge impact on me. I remember driving home with my parents from the movie theater being absolutely high.

      2. fredwilson

        yeah, it was great

  37. iggyfanlo

    Funny… someone mentioned “runway” to me just the other day… my response was that the best startups are Harrier Jets…. they can take off vertically (no runway).. think eBay and then can turn their jets to move aggressively horizontally..

    1. fredwilson

      that’s great

  38. charles atlas

    could it be that too big of a series A lets the founder hire senior people that he/she can use to blame for problems.i,e, responsibility is diffused? senior hires are responsible for liftoff but don’t have control because company direction is set by founder vision?

  39. William Mougayar

    “You can always raise more money if you are doing well on the metrics that matter in your business. This is the money quote, and I didn’t see anyone pick up on it.The trick is managing the expectations of the investors about these metrics, so that they agree with you about what is traction and what is not.

    1. Matt A. Myers

      Expectation is everything in life, it seems, for most – and expectations matter when in the position of needing to make predictions of course.

  40. Mark Gavagan

    Paul Graham speaks* about the problem of some VCs over-investing in startups (putting-in too much cash at a very high valuation) just to get a certain percentage of equity.*TechCrunch video @5min 10sec… “Paul Graham’s Prescription For VCs: Move Fast, Take Less Equity” (July 2013)

  41. CB Insights

    Hi Fred — This falls into the “plural of anecdote is not data” realm unfortunately. If you look at the data (we did), there is little to no relationship between initial runway and success. In fact, there is a very slight positive correlation.

    1. fredwilson

      i am looking at my data, not yours

  42. BHB

    Hey Fred -Any chance you can share some of the data alluded to?

    1. fredwilson

      it’s my twenty five year track record and the track record of all the firms i have worked out. i don’t want to share that publicly.

      1. BHB

        Fair enough – Thanks Fred

  43. ZekeV

    Cross-referencing Charlie O’Donnel’s recent post on “de-risking”. More runway de-risks a startup. But at the same time, it lowers the potential upside for existing stakeholders. Seems like there must be a balance. However, that balance might look very different to a founder vs. an investor. And within that, depends on what sort of founder or investor. If you’re the kind of investor that is looking for truly exceptional performances within a portfolio of speculative projects, then you want a founder who is willing to go for broke in pursuit of the big opportunity. Very few founders are capable of pulling this off, and those who aren’t probably fall in the camp of people who would be better off with more runway, no?

    1. fredwilson

      you posted that link once already, why are you spamming this blog?

  44. sigmaalgebra

    I have four reactions:(1) Fuel PlanningSince at FedEx for a while I was flying jump seat onthe planes and also working on fleet scheduling andvarious flight cost optimization problems, I gotsome familiarity with aviation flight planning, inaviation now carefully worked out due to a longhistory of too many ‘smoking holes’.So before takeoff there is a careful calculation offuel needed to reach the destination airport andalso, in case the destination airport is closed,selection of an alternate airport, a significantdistance away from the destination airport, andreserve fuel with provision for bad weather, waitingdue to air traffic control, missed approaches, etc.And runway length is also carefully considered interms of total gross takeoff weight, airtemperature, runway slope, winds, clearing obstaclesat the end of the runway, possible loss of anengine, etc.There are old pilots and bold pilots but no old,bold pilots.I can assure you that nearly all experienced pilotswant more runway length and more reserve fuel.Actually, once the founder, COB of FedEx, F. Smith,flying in one of the planes he used as an executivejet, encountered a lot of bad weather and closedairports, cut it really close, and actually flamedout on the taxiway just after finally landing.The discussions I’ve seen of ‘runway length’ forstartups are nowhere nearly as carefully done andpromise to result in too many ‘smoking holes’.And for startups I’ve seen nothing on reserve fuelbut suggestions that things are better being shortof ‘regular’ fuel and no reserve fuel.These basic ideas on more funding causing morespending and less progress have been in VCdiscussions for years.The most recent Paul Graham essay at,&gt; VCs generally tell you to spend too much, partlybecause as money people they err on the side ofsolving problems by spending money, and partlybecause they want you to sell them more of yourcompany in subsequent rounds. Don’t listen to them.So, with this aviation analogy, when a pilot runsout of fuel, he just sells more of his company orcrashes. Hmm, and for a company that might have hada third option of staying in business, growing moreslowly, and later catching on as a ‘fad’, maybe fromsome good publicity, with a lot of ‘virality’, orwith a ‘network effect’ and becoming a big success.I’m reminded of children’s stories about the threelittle pigs and the smart one that built the brickhouse and the squirrel that put away nuts for thewinter.Of course, likely there are cases when apparentlyless funding gave better results.If a VC wrote me a big check, then at leastinitially I’d spend it slowly and otherwise justleave it in the bank and let it draw its now 0.1%APR. Of course, a VC would want to see super rapid,explosive growth with lots of hiring, etc. Mostlysoon after the first check, I wouldn’t, yet.(2) PeopleThe post has,> Keeping your team lean does work and I advocatefor that all the time. Tumblr went for close to twoyears on a two person team. But those are twospecial people. Most startup teams can’t do that.Most startups need to hire at least a half dozenpeople or more to get a product out the door andthen iterate on it, scale it, and make it work. Andthat costs money.Related, Graham’s essay also has,> The other way companies hose themselves is byletting their expenses grow too fast. Which almostalways means hiring too many people.I fail to understand how it’s easy or often evenreasonable to hire quickly.Hiring usually should be done carefully, and forsome positions for some startups very carefullywhere the hiring takes a long time and the usualbottleneck is not really the cash but finding thepeople and building the team — get a first cut onjob descriptions, get a good situation on officespace, equipment for the new employees, expensereporting and accounting, especially for conferencesand travel, work out employee benefits and equityparticipation, work out how to bring in candidatesand handle communications, travel, lodging, househunting, work out a little on how to do theinterviewing, check on HR legalities, helpcandidates evaluate the situation on housing,schooling, churches, shopping, costs of living,advertise, network, recruit, interview, make offers,get some rejections, continue interviewing, get someacceptances, help with the moving, house hunting,spouse job, get the new hire in for their first day,do some ‘orientation’, get the employee at theirdesk and computer and familiar with the people,office procedures, and tools, get them up to speedon the parts of the company’s software they will beworking on, get to being a productive member of ateam, help them around rough spots, and get someresults. Just takes a few minutes, right?Net, I’m concerned about a startup with minimalfunding hiring a team of six or so in an effort toget to profitability quickly. That is, the startupcan be out of runway before the new hires havecontributed much if anything.(3) Spurious> The fact is that the amount of money startupsraise in their seed and Series A rounds is inverselycorrelated with success. Yes, I mean that. Lessmoney raised leads to more success. That is thedata I stare at all the time. It makes little senseat face value but it is true based on more than twodecades of experience in the startup world.Here’s a possible explanation: The correlation is’spurious’ and if ‘condition’ on quality of theproject then the effect goes away.Or, a good project doesn’t need or take much fundingand does well, but a poor project needs and getsmore funding and still does poorly.Then we can’t conclude that more funding for a goodproject (a situation, with my candidate explanation,mostly not in the data and, thus, not tested) wouldcause the project to do less well, e.g., become apoor project.(4) MetricsFor> To my mind, maximizing runway is not the gamestartups should be playing. Getting somewhere fastis the game they should be playing. You can alwaysraise more money if you are doing well on themetrics that matter in your business.It appears that the usual ‘metric’ is ‘traction’;apparently that’s not just boxes on the softwarearchitecture diagram completed, hopefully it is notjust users but revenue and hopefully earnings.Then, to me, a startup with a team of more than justtwo and needing more funding better have revenue orrisk becoming a ‘smoking hole’.But, with meager revenue and just one or two people,they would be profitable and have a third option –be profitable, stay in business, and just grow,e.g., like Plenty of Fish.Net, growing the team to six or so seems to me to bea big distraction and waste of crucial time, money,and attention; better just to keep the team of 1-2and devote the crucial time, money, and attention togetting the work done.

  45. george

    Perhaps a valuable lesson is to never lose sight of operating like a startup; it helps shape and sharpen your spending behaviors.

  46. Yepi 2

    Mobilization and runway can bring more money for me? I still do not understand much about this issue

  47. Shelley Taylor

    I hope you’re right Fred. First tech startup I did I raised $8 million over 2 years, little by little. First $75k, then $200k, then$750k, then $1.5 million, then etc… each round was at the point milestones were reached. By the end there were 22 people working in the company when the site went live. That company doesn’t exist – in the end it was competing with major global players and everyone else in my space had raised so much more ($50 million etc) to do deals with major record labels.This time I have raised $150k, work alone (with outsource developers) and in 9 months I have built a platform that powers mobile fan clubs (totally customizable) for talent (musicians, celebrities, fashion designers) with more than 500k fans. We have free and subscription versions for each app (check out Isabel Adrian app on iTunes) Revenue has started coming in. I’ve enjoyed this very lean model, but doing everything myself (except writing the code) means I don’t have time to raise money, which I need now that I have run out (again!). That would be a full time job and then there would be no one home to roll out all of the other artists I have in the pipeline.So, maybe there is an addendum to your theory. Perhaps this model works well if there is a team of 2 (like with Tumblr)… But I can say I am very proud of what I have accomplished (thanks mostly to having done a similar platform just before and during the banking crisis), I do wish I had either a team or runway. It is harder to scale a bootstrapped company.And I wonder how investors like you look at such lean startups. Do you even see them?

  48. James Lopez

    Great headline, great article.

  49. p-air

    Fred, not sure if you saw CB Insights’ rebuttal, but would love to read your thoughts on their data analysis,….

  50. Evan Marwell

    I wonder how this idea applies to non-profits?

  51. Rana Mumtaz

    It seemed so contradictory at first, yet I understand, a lean team can make decisions faster and adapt on a daily basis.

  52. Maui Nokaoi

    LOL….”at the end of every month, I’d take cash on hand and divide by that month’s loss. A simple, quick way to see when I’d be out of gas” πŸ™‚

  53. Jan-Willem Bode

    From experience I know that this is true. Being cash constrained makes you more innovative, more focused, and will help you get the right management metrics as well. Love the closing sentence especially. Thanks!

  54. JimHirshfield

    I think most founders are running scared all the time, independent of bank account size or perceived traction. Things can shift with the wind so quickly. Queue Bowie/Queen…

  55. Matt A. Myers

    I would assume you know exactly what you’ll use funding for that you get, and prioritizing what milestones you must reach – and making sure you get those done first.

  56. fredwilson

    that’s what i have observed over the years charlie

  57. JLM

    .+1.5MM for the song selection alone. Video brings a bit of additional note. And why the Hell not?Well played. Very well played.JLM.

  58. JimHirshfield

    Thank you.

  59. Elia Freedman

    I think you summed up most companies in the stock exchange with that statement.

  60. Matt A. Myers

    Right, so I find it hard to see that you’d have too much runway. If you’re not budgeting and accounting and keeping some money aside for the unknown then you could get into trouble – or knowing you’ll be at $X revenues or refilling coffers at a certain point.

  61. Matt A. Myers