Comments on: You’re burning too much money

By: Should the current market environment change your fundraising strategy? | Seth Levine

Wed, 24 Aug 2011 17:46:59 +0000

[...] mean just because you run your business on AWS). Think about your spending plans – you’re probably burning too much cash – and think about taking incremental spending risk, not step function risk. Gauge your [...]

By: Have less funding than your competitors? Good! | Seth Levine

Have less funding than your competitors? Good! | Seth Levine — Thu, 17 Mar 2011 13:00:58 +0000

[...] these lessons have never been more important. I wrote about the same idea a few years ago when I suggested that you were burning too much money. The same holds true now, with the difference being that you may be in a great position not only [...]

By: S Freeman

S Freeman — Wed, 10 Oct 2007 06:36:04 +0000

The figures in the above article seem right on target for many small established businesses. We spend 100K per month just trying to pay off old debt that is due now as well as keep current with our monthly operating expenses and payables. Does anyone have advice for emerging from a larger company split trying to slow the burn rate?

By: Azam Khan

Azam Khan — Tue, 25 Sep 2007 22:21:17 +0000

Yeh its definitely psychological. Entrepreneurs have an itch of going all in and spending more than needed may be a part of their fantasy of embracing the entrepreneurial path (which they feel is superior to most other paths) that should entail the prerequisite desires for the climb to power. I'm sure thats oversimplifying it but its obvious entrepreneurs are optimistic about their business (and they have to be). We talk about living on the fringe in an article http://www.revupnet.com/2007/09/05/the-fringe/ that kinda touches up on those drives. There is no excuse for overspending though. There have to be ways to visual or auditory or feeling to keep the spenders in check.

By: Jason Vu

Jason Vu — Fri, 20 Jul 2007 01:51:13 +0000

It should be much lower in China, India and Vietnam

By: Luke Groesbeck

Luke Groesbeck — Fri, 06 Jul 2007 14:01:06 +0000

We’re almost ready to line up our first round of funding. I’m pretty aggressive about keeping costs low, and I plan on doing so with my own salary. One of our early hires, though, will be a VP of Sales with some reasonably high salary expectations. Does anyone have any experience with paying themselves less cash than people they hire? I’m young with no family or mortgage, would rather trade cash for equity anyway, and believe that controlling costs is a important part of making the equity actually worth something. Does it create strange personal or professional dynamics to pay hires more?

By: Jonathan Treiber

Jonathan Treiber — Thu, 05 Jul 2007 10:21:01 +0000

This is a very enlightening post. I am personally surprised by the numbers you threw out there, especially for early-stage seed level and angel level start-ups. Much like the other readers, I can’t imagine spending even $40k/mo. There is no way, unless you have a staff of 5 full-time execs making over $100k/year and some serious office space, I could get to that number. Maybe I’m just frugal, and I’m happy it’s not the other way around. We’re angel-stage and burning about $15k/mo. No office space, no salaries, all sweat equity, outsourcing what we can. This will ideally change over time but not before we do our next raise. Running out of money would make me sad after all this hard work.

By: fewquid

fewquid — Wed, 04 Jul 2007 22:19:01 +0000

Great piece. I’d say $40k for seed stage is bang on once you’re past the “founders taking no money” stage and factor in everything else (legal expenses etc). We’re at about $20k/mo now in real terms, but making it work by not actually paying ourselves… Hope to change that soon.
I think almost all CEOs in tech (me included) like gadgets. When you combine optimism and a pile of cash, it’s all too easy to get carried away buying shiny new things you don’t need. Same goes for hiring people you don’t use effectively, renting too much space, buying aeron chairs etc etc etc.
Optimism is a key trait for success, but caution is always a good ally. Build castles in the sky, but don’t try and move your furniture in until you’ve built something with a bit more substance…

By: Jon

Jon — Wed, 04 Jul 2007 12:23:08 +0000

It make me wonder if I am not spending enough money : -S

By: gluphus

gluphus — Wed, 04 Jul 2007 09:17:23 +0000

seed stage $40k/mo?
where, in the name of high school football, do you get $40k/mo to burn?
perhaps you should make all your newly funded ventures spend sometime in Bentonville or perhaps assign a nice Italian man from Jersey to insure all monies are well spent…
But your article is right: watch the pennies, start with discipline, it will serve you well. It might add a few minutes of frustration to the work day, but it will save bankers/spouces/VCs owning you down the road.
Happy 4th everyone!!!