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What is the Right Burn Rate at a Startup Company?

Both Sides of the Table

So if your costs are $500,000 per month and you have $350,000 per month in revenue then your net burn (500-350) is equal to $150,000. But those of us with longer memories remember that the revenue line can move south very quickly when the market overall turns south. Gross burn is the total amount of money you are spending per month.

Burn Rate 383
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Who are the Major Revenue-Based Investing VCs?

David Teten

So you’re interested in raising capital from a Revenue-Based Investor VC. A new wave of Revenue-Based Investors (“RBI”) are emerging. For background, see Revenue-Based Investing: A New Option for Founders who Care About Control. Rational burn profile, up to 50% of revenue at close, scaling down. Bigfoot Capital.

Revenue 60
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Flexible VC, a New Model for Companies Targeting Profitability

David Teten

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. Flexible VC 101: Equity Meets Revenue Share. By tying payments to actual revenues, founders and investors remain aligned around the company’s real-time performance, good or bad. Flexible VC: Revenue -based. Of the Inc.

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How should I finance my new venture? - Startups and angels: Along.

Tim Keane

If, on the other hand, there is some near term prospect of cash flow (say within six months or a year) but no ability to repay in the meantime, then the entrepreneur may try and find a way to finance his “pre-revenue period” using friends and family money that accepts a somewhat lower payment in recognition of a relationship beyond just investing.

Finance 83
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The need for a board grows with complexity

Berkonomics

Bank loans with restrictive covenants are taken on. Second, the audit committee is responsible for hiring an outside auditor as appropriate, reviewing the accounting practices of the corporation and making sure that laws are followed relating to recognition of revenues and expenses. The number of employees grows.

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Your need for a board grows with complexity.

Berkonomics

Bank loans with restrictive covenants are taken on. The operations of the corporation become more complex. Ownership is spread among several classes of investors. The number of employees grows. These events, one or all, usually are triggers for the founders to seek to create a board for oversight and guidance.

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Unintended Consequences: When SAFE and Convertible Notes Go Awry

Pascal's View

The easiest way to do so is via SAFE notes, due to their simplicity, “available online” documentation, no major covenants established to protect the investors, no governance implications at the board level, etc. All of these items are postponed until the elusive priced equity round. It’s going to be great!”.