There are so many dynamics at work when it comes to burn rate. At previous startups in which I was involved, we were expected to increase spending by the investors. While we wanted to walk it slowly, they wanted us to spend more (on headcount.) As was expected, the lesson of ten-women-cannot-make-a-baby-in-a-month was relearned.
The real problem is startups raise money too early. In my mind there should be two main reasons to raise money: 1) You have figured out a way to make $1 while spend less, and your data tells you you can do this x times over, 2) You cannot afford to pay for your servers or dev time due to customer growth. Can you think of more reasons?
Sometimes it is more risky to be less aggressive.<p>This is a lesson I learned from Vinod Khosla - who by most metrics knows what he is doing. In nascent markets user acquisition costs rise quickly. In network effect businesses, switching costs are high.<p>So should you lower your burn? Not necessarily. Ask yourself just as often "should I increase my burn."
<i>Funded</i> startups tend to spend money too fast (from what I've seen).<p>Maybe another reason to bootstrap/self-fund with consulting (what I'm doing right now).
"There is no liquidity reason that explains why there's plenty of money available to seed concepts and not enough money available to A rounds."<p>Is this true? I'd have assumed that most seed funding is provided by smaller investors who are investing personal funds while venture capital is using institutional capital.<p>We're now year three+ after the general market downturn, which means deleveraging, wealth destruction and a preference for liquid asset classes (i.e. look at Treasury yields) shrinking the availability of institutional capital available for VC funds. And isn't this exactly what we are supposed to see in this situation? Smaller and knowledgeable investors pump up the bottom end of the market because it offers a much better return than sticking cash in anything else?
Thanks for posting this. I'm not too knowledgable about the burn rate of others, but I know that we've kept ours very low. Much of this was motivated by the fact that we have a serious hardware play, and lots of our seed capital is allocated towards that.<p>Regardless, when the problems are interesting and hard enough, we find that our clamp on spending is a really great recruiting filter. The people that join the team are truly passionate about our product and technology. It's painful at times, but spoiled grapes don't taste very good either.