The Only Financial Metric That MattersIn 5 years, Bird burned through $883 million of venture capital funding. Today, the company is only worth $44 million. Why? The founders forgot about the 1 financial metric that matters. Let me break it down in 60 seconds…
In 5 years, Bird burned through $883 million of venture capital funding.
Today, the company is only worth $44 million.
The founders forgot about the 1 financial metric that matters.
Let me break it down in 60 seconds…
Most founders don’t care about finance.
But there is one financial metric that matters most:
But for the past 5 years, runway didn't matter much.
Fundraising was easier.
Capital was cheaper.
And you could spend money like a drunken sailor with a broken business model!
Bird raised $883mm. They are worth $44mm.
Lyft raised $4.9 billion. They are worth $4 billion.
Bull markets are won by storytellers and growth gurus.
Bear markets are won by frugal founders with durable business models.
We’re in a bear market.
What is runway?
What is “good” runway?
How can you extend runway without killing momentum?
What is runway?
= Cash in the bank / monthly burn rate
Cash balance = money you raised
Monthly burn rate = employee salaries, AWS costs, or office space
If you have $12 million and you burn $1 million per month...
You have 12 months to live.
What is “good” runway?
In May 2022, Y Combinator sent an email.
The key quote:
“Regardless of your ability to fundraise, it ’s your responsibility to ensure your company will survive if you cannot raise money for the next 24 months.”
1) Create Cost Flexibility
• Downsize office space
• Hire contractors vs. full-time employees
• Cut your vendor contracts to monthly vs. yearly
Cost flexibility keeps you nimble and adaptable to any economy.
2) Put your spare cash to work
Rates are rising.
For founders, this means you can earn up to ~4.6%* on your spare cash through U.S. Treasury Bills.
On $10 million, this is an extra $460,000 to extend your runway.
2023 is the year for wartime founders.
Wartime founders create cost flexibility.
Wartime founders put their spare cash to work.
And wartime founders get back to building no matter what the economy says.
I'll leave you with one question:
If you could never raise money again, how would you make sure your startup survives?
Do those things now.
~4.6% is sourced from treasury.gov December 2022 52 week coupon equivalent rate yield. $460,000 calculated assuming treasury.gov's December 2022 52 week coupon equivalent yield based upon a $10 million deposit and held to maturity. Rates are indicative, and trade execution can affect the actual yield to maturity of the T-Bills. Projected and/or hypothetical performance is intended to show only an expected range of possible investment outcomes based on historical average returns and standard deviation of each investment type contained in the investment mix recommended by Helium, but does not take into consideration the effect of taxes, changing risk profiles, or future investment decisions. Projected and/or hypothetical performance does not represent actual client accounts or actual trades and may not reflect the effect of material economic and market factors. Meow is not an investment adviser however we’ve partnered with Helium Advisors LLC (“Helium”), an SEC-registered investment adviser, to bring you certain investing features. All investment advisory services are provided by Helium. We are not affiliated with Helium however we receive compensation as a percentage of assets managed by Helium for promoting Helium’s investment advisory services. Our partnership with Helium gives us an incentive to refer you to Helium instead of another investment adviser that is not a partner of ours. This conflict of interest affects our ability to provide you with unbiased, objective information about the services of Helium. This could mean that the services of another investment adviser with whom we are not partnered may be more appropriate for you than those of Helium. Investing involves risk, including the possible loss of principal, and there is no assurance that the investment will provide positive performance over any period of time. Helium accounts are not bank guaranteed or FDIC insured.
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