#208 VC Cash Runways and Burn Rates - Metrics That Matter
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VC Cash Runways and Burn Rates - Metrics That Matter
Hope everyone is enjoying audit season! :) It’s the time of year where finance folks talk a lot about cash runways and burn rates (how much you spend each month). For venture capital auditors and finance professionals, these are a few of the metrics that really matter!
In the absence of revenue (a reality for most early-stage startups), your year-end valuation and audit process will likely center around the most recent fundraise valuation, cash in the bank, and cash burn (how much you spend each month).
Check in w/ Your Portfolio Companies - Example Email
There are 5,000+ VC firms out there. Unfortunately not all of them are on top of their portfolio metrics. Don’t be one of those firms!
We recommend emailing each portfolio company and asking them for the following as of 12/31:
Revenue (if applicable)
Ending cash: cash in the bank at 12/31
Beginning cash: cash in the bank on 12/1
Monthly cash burn: #3 minus #2
Runway (months of life): Ending cash / monthly cash burn
Example Email Response & Calculations
Revenue: $0
Ending cash: $2m
Beginning cash: $2.1m
Monthly cash burn: $100k
Runway (months of life): 20 months
Is this simple? Seems so. Does everyone do it? Not even close! :) Take this first step to make sure you have a handle on basic metrics for your VC portfolio!
Picture: Old South Congress in Texas Monthly (Jeremy Woodhouse/Getty)
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