Some founders are in the dark about how much money they’re spending each month, and it’s a major problem.

I’m often shocked to discover founders who have no clue about their monthly burn rate. When I ask, “What’s your monthly burn?” I sometimes get blank stares or a dismissive, “Our accountant hasn’t closed the books yet.”

I don’t understand how you can raise (and spend) millions of dollars with this attitude.

Daily Vigilance

When I founded and ran Vungle, I would open our bank balance every single day and night. I had a spreadsheet and would evaluate the impact of each expense on our runway and net burn.

I caught some ridiculous expenses and even uncovered someone embezzling.

This financial discipline took us to $60M+ EBITDA while competitors were going bankrupt.

Calculated Burn

We had months of insane burn, especially in the beginning but I knew exactly what was happening and it was calculated.

So I’m not against high burn at all. In fact, I’m planning to ramp up burn significantly in my new startup too.

I just cannot grasp this reality. It’s like playing a 1st person shooter game with no care for remaining ammo and health. You just hit that trigger and keep firing until you get shot.

Sloppy Spending

In 2021, you could get away with being this sloppy as VCs didn’t push much on financials.

I most often see this behavior when Founders raise money without a board (often convertible notes).

Also, if you think I’m kidding, go ask some CFOs, Accountants, professional CEOs or VCs just how common this is!

Conclusion

Ignoring your burn rate is like playing a video game without watching your health or ammo. You need to be aware of your spending to stay alive. It’s especially important for founders to maintain financial discipline, catch unnecessary expenses, and plan for calculated burn.

If you are a founder, make sure you know your monthly burn rate. Open your bank balance. Create a spreadsheet. Stay on top of your finances. Ask CFOs, accountants or VCs to get a deeper understanding on how common this is.

Don’t let financial ignorance sink your startup!

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