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Here's the entire tweet storm if you find the embedded storify version difficult to read: 1/Cash burn rates at startups: Recently @bgurley and @fredwilson have

Here's the entire tweet storm if you find the embedded storify version difficult to read: 1/Cash burn rates at startups: Recently @bgurley and @fredwilson have sounded a vivid alarm -- http://online.wsj.com/articles/venture-capitalist-sounds-alarm-on-silicon-valley-risk-1410740054 http://online.wsj.com/articles/venture-capitalist-sounds-ala... 2/I said at the time that I agree with much of what Bill says (https://twitter.com/pmarca/status/511617992757506048 https://twitter.com/pmarca/status/511617992757506048 …), and I want to expand on the topic further: 3/New founders in last 10 years have ONLY been in environment where money is always easy to raise at higher valuations. THAT WILL NOT LAST. 4/When the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co's will VAPORIZE. 5/High cash burn rates are dangerous in several ways beyond the obvious increased risk of running out of cash. Important to understand why: 6/First: High burn rate kills your ability to adapt as you learn & as market changes. Co becomes unwieldy, too big to easily change course. 7/Second: Hiring people is easy; layoffs are devastating. Hiring for startups is effectively one way street. Again, can't change once stuck. 8/Third: Your managers get trained and incented ONLY to hire, as answer to every question. Company bloats & becomes badly run at same time. 9/Fourth: Lots of people, big shiny office, high expense base = Fake "we've made it!" feeling. Removes pressure to deliver real results. 10/Fifth: More people multiplies communication overhead exponentially, slows everything down. Company bogs down, becomes bad place to work. 11/Sixth: Raising new money becomes harder & harder. You have bigger bulldog to feed, need more and more $ at higher and higher valuations. 12/Therefore you take on escalating risk of a catastrophic down round. High-cash-burn startups almost never survive down rounds. VAPORIZE. 13/Further, to get into this position, you probably had to raise too much $ at too high valuation before; escalates down round risk further. The blog post author then goes on some further back and forth about specifics.

epistasis 12y ago
Storify, or the embedding of it, hid some tweets from scrolling, I had to select-drag to make them visible: 14/Seventh: Even if you CAN raise an up round, you are increasingly likely to incur terrible structural terms like ratchets to chin the bar. 15/That nice hedge fund investor willing to hit your valuation bar? Imagine him owning 80% of co after down round. How nice will he be then? 16/Eighth: When market turns, M&A mostly stops. Nobody will want to buy your cash-incinerating startup. There will be no Plan B. VAPORIZE. 17/Finally, there are exceptions to all this. But if you're reading this, you're almost certainly not one. They are few and far between. 18/Worry.
- macNchz 12y ago
  This is an absolutely ridiculous way to communicate.
  - idlewords 12y ago
    In this case the medium fits the message
deleted 12y ago
[deleted]
ANTSANTS 12y ago
I think it's funny that a "tweet storm" amounts to maybe two or three paragraphs of terse writing.
jacques_chester 12y ago
Here's my abridged version: 1. Spend less than you make. 2. That's it. You worked out business. And personal finance. And, depending on who you ask, public finance.
- mcosta 12y ago
  When you start you make 0. It is difficult to make less. And time is money.
AnonymousRant 12y ago
I find it very hard not to get angry at these posts. I'm thinking also of Fred Wilson's burn-baby-burn piece from a week or two ago. I am the cofounder of a bootstrapped startup company with 7-figure annual revenue, a better than 100% growth rate for the last several years, a great team, a fantastic market, and a genuinely useful product. One of the biggest problems facing my company right now is dealing with all of the venture-funded idiots coming after my customers, market and employees without so much as a hint of a viable business model. They outspend us on marketing 1000-to-1 and they offer to serve our clients essentially for free, apparently just to be able to win a logo for the "traction" slide in their deck in the hope that they will have enough proof points to get them their next hit of venture money. I know that nearly all of them are going to vaporize eventually, but in the meantime they completely poison the well for all of us who are trying to do what Andressen, Wilson and the rest pretend they want startups to be doing - creating sustainable businesses in sustainable markets. Posting this as an anonymous coward because who knows - I may need to raise venture money myself, though I'm pretty sure we wouldn't qualify with "5x being the new 2x" I don't think anyone is interested in mere 100% growth, even if it comes with the advantages of sustainability built on the back of a real business.
- yuhong 12y ago
  >Posting this as an anonymous coward because who knows - I may need to raise venture money myself, though I'm pretty sure we wouldn't qualify with "5x being the new 2x" I don't think anyone is interested in mere 100% growth, even if it comes with the advantages of sustainability built on the back of a real business. OT, but I wonder if this is actually a problem.
- deleted 12y ago
  [deleted]
- bane 12y ago
  > They outspend us on marketing 1000-to-1... In most industries this is called "dumping" and it's absolutely destructive and infuriating. https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy) Between this problem and all the other issues that are coming from this age of startups (like trying to build a business on a startup and then it just poof goes away one day), the Startup world is in definite need of maturity and more grown ups.

epistasis 12y ago

Storify, or the embedding of it, hid some tweets from scrolling, I had to select-drag to make them visible: 14/Seventh: Even if you CAN raise an up round, you are increasingly likely to incur terrible structural terms like ratchets to chin the bar. 15/That nice hedge fund investor willing to hit your valuation bar? Imagine him owning 80% of co after down round. How nice will he be then? 16/Eighth: When market turns, M&A mostly stops. Nobody will want to buy your cash-incinerating startup. There will be no Plan B. VAPORIZE. 17/Finally, there are exceptions to all this. But if you're reading this, you're almost certainly not one. They are few and far between. 18/Worry.

macNchz 12y ago
This is an absolutely ridiculous way to communicate.
- idlewords 12y ago
  In this case the medium fits the message

deleted 12y ago

[deleted]

ANTSANTS 12y ago

I think it's funny that a "tweet storm" amounts to maybe two or three paragraphs of terse writing.

jacques_chester 12y ago

Here's my abridged version: 1. Spend less than you make. 2. That's it. You worked out business. And personal finance. And, depending on who you ask, public finance.

mcosta 12y ago
When you start you make 0. It is difficult to make less. And time is money.

AnonymousRant 12y ago

I find it very hard not to get angry at these posts. I'm thinking also of Fred Wilson's burn-baby-burn piece from a week or two ago. I am the cofounder of a bootstrapped startup company with 7-figure annual revenue, a better than 100% growth rate for the last several years, a great team, a fantastic market, and a genuinely useful product. One of the biggest problems facing my company right now is dealing with all of the venture-funded idiots coming after my customers, market and employees without so much as a hint of a viable business model. They outspend us on marketing 1000-to-1 and they offer to serve our clients essentially for free, apparently just to be able to win a logo for the "traction" slide in their deck in the hope that they will have enough proof points to get them their next hit of venture money. I know that nearly all of them are going to vaporize eventually, but in the meantime they completely poison the well for all of us who are trying to do what Andressen, Wilson and the rest pretend they want startups to be doing - creating sustainable businesses in sustainable markets. Posting this as an anonymous coward because who knows - I may need to raise venture money myself, though I'm pretty sure we wouldn't qualify with "5x being the new 2x" I don't think anyone is interested in mere 100% growth, even if it comes with the advantages of sustainability built on the back of a real business.

yuhong 12y ago
>Posting this as an anonymous coward because who knows - I may need to raise venture money myself, though I'm pretty sure we wouldn't qualify with "5x being the new 2x" I don't think anyone is interested in mere 100% growth, even if it comes with the advantages of sustainability built on the back of a real business. OT, but I wonder if this is actually a problem.
deleted 12y ago
[deleted]
bane 12y ago
> They outspend us on marketing 1000-to-1... In most industries this is called "dumping" and it's absolutely destructive and infuriating. https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy) Between this problem and all the other issues that are coming from this age of startups (like trying to build a business on a startup and then it just poof goes away one day), the Startup world is in definite need of maturity and more grown ups.