That seems unlikely. That may just mean that 82% of the time, the founders don't pull the plug until they totally run out of money.
"Cash flow problem", as a real term rather than an euphemism, has a very specific meaning. It's when the business is profitable but there's a lag between paying out cash to buy needed labor and materials and receiving payment for goods and services. Manufacturers and farmers have that kind of problem.
I had a friend who got into Walmart -- he was ECSTATIC. His product was a smart electronics product, and quickly shot up to being a heavy seller.
It sold so well---that he was bankrupt within six months.
Why? Because he paid his supplier upfront. Walmart didn't pay him until 60 or 90 days after sell-through. After the first run, Walmart wanted more, his P&L (accrual) showed profit, so he took a loan. Then another. Then suddenly he couldn't get any more loans. And he couldn't get a hold of product. And because of his fixed costs, there was no way to future payables could save him.
So common, and no one seems to know about it.
Instead of a mesh network of equal nodes, we have a tree of exponentially larger nodes (from bottom to top)
Henrique here co-founder of Brex (YC W’17). I wanted to introduce the HN community to some new data we gathered at Brex as part of our new blog.
We specifically looked to highlight data that is not available to other startups.
+ We focused on startup cash burn rates by funding stage (pre-seed, seed, Series A, etc.) because for many startups there is always this question about how much you should be burning.
+ Separately, we looked at some of the most popular vendors for startups on Brex in categories like cloud services, CRM, rideshare etc.
+ We analyzed the size of the "stealth" startup market. For Brex, it was hard being in stealth for over a year and it's helpful to know just how many of you are out there
+ We looked at regional trends in startup cash burn to help startups adjust their benchmarking for their locations
Note, we were careful to aggregate the data and only share things we thought could actually help startup founders and early employees
Let me know your feedback!
Henrique
Another interesting one we're looking at is the breakdown of burn by industry and stage. We can also then compare the major factors across these breakdowns to give really good comparisons for startups.
Would be really good to get a 2x2 grid of monthly burn x money raised for Series A companies. Or if that's too hard, a "Months the Series A will last at at current burn rate" bar chart.
For example:
> CRM: 61% of startups use Copper (formerly) ProsperWorks for their CRM
Then below:
> CRM: Salesforce 13.0%, Pipedrive 26.1%, Copper 60.9%
That adds up to 100%. So startups don't use any CRMs other than those three? Bullshit. Therefore that "61% of startups use Copper" statement is also false.
Also weird that they think Intercom is customer support software, cause it's more of a CRM for us and everyone we know.
As for Intercom, that's interesting we use it mostly for support chat.
Startups that spend more money need to raise more money, I don't know what I'm supposed to take away from this fact.
How many startups needed to but were unable to raise capital in successive rounds? If the failure rate of successive raise attempts is low then I'd suspect that the driving factor would be the desire to raise capital.
Given that we've been in a record bull market for nearly a decade and there are signs of slowing, it may be hard to extrapolate these findings to the future. It would be interesting to try to model what things would have looked like on this data set at lower levels of investment. This type of information would be hugely valuable if there is an investment regime change occurring.
