Many founders are struggling to keep their startups alive right now. , because they are spending more than they make and their cash is running out.
Maybe they funded it themselves so far, with their time or savings or profits from another business.
Or maybe they raised a little or a lot of money from outside investors too.
Either way, their revenue growth won’t make up for their expenses any time soon.
The burn rate will catch up.
Paul Graham calls these companies “Default Dead” since they will go away at this rate.
They will go away if they spend more than they make for too long.
Most startups get closer to this line than they let on. They live pretty close to the edge, when they admit it.
Funders are not in the mood to keep investing in companies that aren’t showing a trend towards revenue growth with low burn rates.
There’s a way to avoid this “default” scenario:
RUN YOUR COMPANY LIKE YOU WON’T GET ANY OUTSIDE FUNDING.
Sustain it through revenue AND your own investment of time or cash.
If there isn’t much cash or revenue, then survival is sometimes called “cockroach mode.” Expenses reduced to a level that nothing will kill you.
Low-burn, breakeven, and profitable companies are “Default Alive” companies that can keep going and keep experimenting.
Most early-stage investors don’t want to fund your survival experiments. No matter how excited (or desperate) you are.
There are a lot of practical founders out there who are not struggling to survive. They can fund their own burn rate or they are breaking even.
They are lean and mean and will keep fighting.
Startups are always hard no matter what approach you take.
Things that aren’t sustainable usually don’t last long.
