Burn, Baby, Burn

Burn, Baby, Burn

Insight from Toptal

Let's talk burn rate 🔥

Specifically, how do you nail that Goldilocks zone of "just right" spending?

To start, runway is king. Aim for 12-18 months of cash in the tank. 

That means if you've got $600K in the bank, you're looking at a max burn of about $50K per month. We love simple math.

That being said, your burn rate should evolve as your startup grows. Fred Wilson (VC at Union Square Ventures) provided the following benchmarks:

• Building product? Keep it tight at $50K/month.

• Chasing users? You can crank it up to $100K/month.

• Scaling the biz? Now we're talking $250K/month.

Now, don't freak out if you're burning more than these numbers. High burn isn't always bad (especially if you’re fueling rapid growth).

As a matter of fact, for all you SaaS guys and girls, Brad Feld coined a formula called the "40% Rule": your net burn rate plus your growth rate should be around 40%.

As always, it’s important to note that these aren’t hard rules, just benchmarks. 

Your perfect burn rate depends on a cocktail of factors:

How much cash have you raised? What are your chances of raising more? How fast are you growing? What's your stomach for risk?

You want to ride that line between aggressive growth and not setting your cash pile on fire. 

Check your burn monthly, have a plan to slash costs if needed, and always keep at least 6 months of runway in your back pocket.

Cash is oxygen in this game 🌬️