6 ms·

How did they blow through $102M in ~14 months?

by czbond 5y ago

deleted 5y ago
[deleted]
coldpie 5y ago
Welcome to the tech startup world, baby.
CyberRabbi 5y ago
It might be hard to believe but that is closer to the norm than not. Unicorn-bound tech startups tend to operate by spending all their cash to grow the business as fast as possible, intending to raise another round once the previous round dries up. An annual cycle is about right. What happened here isn’t necessarily poor management of finances, instead they failed to grow the business and thus couldn’t attract more investors for a second round.
- czbond 5y ago
  >Unicorn-bound tech startups tend to operate by spending all their cash to grow the business as fast as possible That seems slow and risky. I come from the world of B2B slow and steady startups - painful both ways I guess.
- doctor_eval 5y ago
  IMO “failure to grow the business” is totally the same as poor management of finances, when the financial health of the business demands growth. If you keep your burn rate high while you fail to reach your sales targets then you need to pivot well before you run out of cash. I’m continually astounded by the acceptance of businesses which fly themselves into the ground. Repeatedly failing to meet targets requires change, not just charging ahead and damn the torpedoes.
  - CyberRabbi 5y ago
    I don’t necessarily disagree with you, just wanted to draw a distinction between a blatant failure to manage finances and an excessively aggressive growth strategy that fails to pan out.
    - doctor_eval 5y ago
      I think it's fair to draw this distinction, sure. The bean counters aren't necessarily able to change direction of the business, even if they can see it coming. And I also think it's OK to have an excessively aggressive growth strategy too. Why not? Maybe it will work out. The problem is when such a strategy can't be falsified until after all the money is spent. That's not a strategy, that's just gambling. It's been really common in my experience - when a strategy isn't hitting its objectives, double down on it, and spend more! Until ultimately all the investor's money is wasted.
sillysaurusx 5y ago
http://www.paulgraham.com/pinch.html http://www.paulgraham.com/pinch.html It’s only a difference of scale, not of kind.
- czbond 5y ago
  Thanks for the link!
x0x0 5y ago
LinkedIn says they had north of 600 employees -- 666 oddly enough. 456 in the US. If your average payroll cost is $100k for 600 employees, that costs the business $135k, so payroll alone is $76m/year, or $6.5m/mo. If average payroll were closer to $200k, double that obviously. You can blow through $100m in no time. On, unbelievably, $600k in revenue in 2021 per The Information. https://www.theinformation.com/articles/why-stripes-fast-horse-is-losing-the-one-click-checkout-race https://www.theinformation.com/articles/why-stripes-fast-hor...
- czbond 5y ago
  Great contextualization.... I can see the payroll now. But on $600k revenue?? That is super nuts. There are sites selling on 'empire flippers / flippa' that make equal to that revenue for a WHOLE lot less valuation. nuts...
  - reducesuffering 5y ago
    Pieter Levels is a 1 man PHP shop doing more revenue than that and at 95% margin.
ptudan 5y ago
Seems like they have a bunch of highly expensive sports sponsorships. This seems to happen often when you have a bro-y CEO who wants to rub elbows with that kind of crowd. I can't imagine that moved the needle much for them - but it sure costs a lot
danielmarkbruce 5y ago
At least in my experience, many more founders than you might expect have zero business sense and basically think that "growing the business" = hiring lots of employees. At 200k a pop all in, 100 employees will cost you 20 million. And so on.

How did they blow through $102M in ~14 months?

by czbond 5y ago

How did they blow through $102M in ~14 months?

deleted 5y ago

[deleted]

coldpie 5y ago

Welcome to the tech startup world, baby.

CyberRabbi 5y ago

It might be hard to believe but that is closer to the norm than not. Unicorn-bound tech startups tend to operate by spending all their cash to grow the business as fast as possible, intending to raise another round once the previous round dries up. An annual cycle is about right. What happened here isn’t necessarily poor management of finances, instead they failed to grow the business and thus couldn’t attract more investors for a second round.

czbond 5y ago
>Unicorn-bound tech startups tend to operate by spending all their cash to grow the business as fast as possible That seems slow and risky. I come from the world of B2B slow and steady startups - painful both ways I guess.
doctor_eval 5y ago
IMO “failure to grow the business” is totally the same as poor management of finances, when the financial health of the business demands growth. If you keep your burn rate high while you fail to reach your sales targets then you need to pivot well before you run out of cash. I’m continually astounded by the acceptance of businesses which fly themselves into the ground. Repeatedly failing to meet targets requires change, not just charging ahead and damn the torpedoes.
- CyberRabbi 5y ago
  I don’t necessarily disagree with you, just wanted to draw a distinction between a blatant failure to manage finances and an excessively aggressive growth strategy that fails to pan out.
  - doctor_eval 5y ago
    I think it's fair to draw this distinction, sure. The bean counters aren't necessarily able to change direction of the business, even if they can see it coming. And I also think it's OK to have an excessively aggressive growth strategy too. Why not? Maybe it will work out. The problem is when such a strategy can't be falsified until after all the money is spent. That's not a strategy, that's just gambling. It's been really common in my experience - when a strategy isn't hitting its objectives, double down on it, and spend more! Until ultimately all the investor's money is wasted.

sillysaurusx 5y ago

http://www.paulgraham.com/pinch.html http://www.paulgraham.com/pinch.html It’s only a difference of scale, not of kind.

czbond 5y ago
Thanks for the link!

x0x0 5y ago

LinkedIn says they had north of 600 employees -- 666 oddly enough. 456 in the US. If your average payroll cost is $100k for 600 employees, that costs the business $135k, so payroll alone is $76m/year, or $6.5m/mo. If average payroll were closer to $200k, double that obviously. You can blow through $100m in no time. On, unbelievably, $600k in revenue in 2021 per The Information. https://www.theinformation.com/articles/why-stripes-fast-horse-is-losing-the-one-click-checkout-race https://www.theinformation.com/articles/why-stripes-fast-hor...

czbond 5y ago
Great contextualization.... I can see the payroll now. But on $600k revenue?? That is super nuts. There are sites selling on 'empire flippers / flippa' that make equal to that revenue for a WHOLE lot less valuation. nuts...
- reducesuffering 5y ago
  Pieter Levels is a 1 man PHP shop doing more revenue than that and at 95% margin.

ptudan 5y ago

Seems like they have a bunch of highly expensive sports sponsorships. This seems to happen often when you have a bro-y CEO who wants to rub elbows with that kind of crowd. I can't imagine that moved the needle much for them - but it sure costs a lot

danielmarkbruce 5y ago

At least in my experience, many more founders than you might expect have zero business sense and basically think that "growing the business" = hiring lots of employees. At 200k a pop all in, 100 employees will cost you 20 million. And so on.