Last week Marc Andreessen fired off one of his now famous Tweetstorms about the problems that having too high a cash burn can bring. These are the money tweets (if that’s a thing..):
Marc was talking about large companies with huge burn rates, but they also apply at the earlier stages. I regularly get asked about the dangers of raising too much money, and these tweets nail it. Investors will only invest a lot of money if they’ve been sold a plan that needs it. Hence once the money is raised the burn will go up, and if that’s premature then the problems above ensue.
Mark Suster recently wrote a good post on this subject. His advice to startups is to raise at the upper end of normal. That’s good advice.
