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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

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.

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.