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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?
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.
Earlier quoted context omitted.
The original poster is correct: human gestation is about 10 months (from conception). Most women would be aware of their pregnancy for only nine of those months.
Human gestation is estimated as 40 weeks counting from the last menstruation. Conception is 2 weeks after that on average, so the actual time is about 38 * 7 = 266 days. Dividing by 30, you get 266 / 30 = 8,866666666667 months (almost nine).
Funded startups tend to spend money too fast (from what I've seen). Maybe another reason to bootstrap/self-fund with consulting (what I'm doing right now).
Funded startups tend to spend money too fast (from what I've seen). Maybe another reason to bootstrap/self-fund with consulting (what I'm doing right now).
However, it really depends on what you are doing. Some industries such as bio-tech basically require you to have a lot of money to even begin prototyping.
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.
Nine women.
Nine, ten...the important consideration is the fallacy of assuming that increasing spend provides a commensurate yield in productivity and output.
The more appropriate analogy would have been Brooks's Mythical Man Month.
Earlier quoted context omitted.
No, they require time.
But time is money. And I am not trying to be cute here. It is properly the single most common tradeoff here - you sell your hours for pay at a company, then buy a frozen pizza because you don't want to make it at home, then clean your own house because a maid is too expensive but outsource your taxes because they are so complex and would take you ten times longer to do, you drive a car because commuting by bike is to…
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.
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?
Since it takes a while to raise money, and since running low on cash can lead to a crisis, much fundraising is in anticipation of 1 or 2. But you're right, a lot of status do seem to raise money simply because it's what everyone else is doing.
What's the incentive to slow the burn rate? If the startup blows up, you just start another one.