Freakout Levels Over "Burn Rate" Are At Historical Lows
When Benchmark Capital's Bill Gurley first expressed his concerns about "burn rate," the rate at which companies burn through his venture capital, startups started wondering whether they were setting money aflame too fast.
Gurley's canary in the coal mine (of smoldering cash) happened on September 14, 2014. In other words, way too late into the boom to be introducing the concept. It's like teaching addition in the middle of AP Calculus. Some self-reflection and basic advice followed. The term suddenly seemed ubiquitous.
But judging by Google Trends, Silicon Valley is not nearly frightened enough. One could argue that maybe the number of searches for "burn rate," aren't as high because everyone knows what it means, they just needed a reminder that it's important. The rudimentary nature of the "conversations about responsible spending" that followed, however, indicates otherwise.
Fab burn rate was $14 million a month. What were they doing, bathing in caviar at lunch? #TCDisrupt
— Alexia Tsotsis (@alexia) October 20, 2014
When Y Combinator graduate Danielle Morrill said she was burning $200,000 a month, another YC alum reprimanded her: "that's a fucking bubbly burn."
Ouch! OUCH! Talk about burn. I was stuck on this comment for days. Were we really out of control with spending? Hadn't I read everything I could, asked tons of questions, shared numbers and projections and models and plans with smart people with a vested interest in us not fucking this up?
It may not be enough to rely on parties with a vested interest. As Dan Primack pointed out yesterday: "The only people spending cash faster than entrepreneurs are their venture capitalists."
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