Thread by @epaley

Startup founders: In a crisis, your cash position is your shield.

/1

“What’s your burn?” is going to be asked of many founders in the coming weeks, but before you answer, stop and think.

What’s your *actual* burn rate?

Not the autopilot number from two weeks ago, the “oh no, all our customers have abandoned us burn.”

For example...

/2

Maybe you’re currently burning $500K a month and have $6M in the bank. Looks like you have enough cash for a year.

But does that figure assume your current $1M monthly cash "revenue" inflow stays constant?

That’s an uncertain and risky proposition in this new landscape.

/3

Imagine your cash inflows go to zero this month.

Now your burn rate is effectively $1.5M/month. COVID-19 just cut your runway down from a year to four months.

Even a 50% drop would take you from a year of runway down to six months.

That’s a terrifying position to be in.

/4

Hopefully, a year from now, COVID-19 will over and fundraising will be easier.

But if you only have six months of runway, you’ll want to start fundraising in three, at which point the pandemic might still be in full swing. That’s not good.

Right now, time is the enemy.

/5

The startup ecosystem has been in growth mode for so long, it's hard to change that mindset overnight.

Now is the time founders need to shift from growth mode to defensive mode and use that shield.

/end