Was laughing when reading "12 months of runway" as "low runaway". My bootstrapped company is "low runaway" by default since the past two years. Every. Single. Month.
Funny how your mind gets busier to work and build revenue in Europe without a comfortable cushion like SF guys seem to have.
I think this article is targeted at larger companies with employees, where you need to think a bit more carefully about how much cushion you need, and when is the "last minute" to pull the plug. Depends on the country, but in many, not paying employees salary/wages you owe them for work they've done is a bigger deal legally than going bankrupt with other kinds of debt is. So it's usually better to start laying people off before the very last minute, vs. holding out until you literally have no money left, at which point you just don't send out people's final paycheck. The 2nd approach can lead to a very messy bankruptcy, with lawsuits and government labor agencies involved.
As the article says,
> If you don't do this [i.e., lay off staff and shut down gracefully] and instead end up with zero cash and outstanding payroll, tax or other obligations, things will get Very Bad.
I've worked at bootstrapped companies where we were always squeaking by every month fighting to become profitable. But at least you are in control of your own destiny. Nobody can force you to shut down as long as everybody wants to keep hanging in.
Unlike this is the ticking time bomb you have on your back the moment you take on investment. It's now do-or-die and when the money runs out you pretty much have no choice but to liquidate - often the decision isn't even yours to make.
This article mainly applies only to the later. It is exciting when you get a big investor check but it's not the only way. I always encourage friends to think about investments that way - rather than just a free bag of cash!
Amen. Yeah it's exciting to get a big investor check. You know what's way more exciting? Being profitable.
I occasionally get approached to help seed startups whose entire plan depends on a) getting funded and b) getting acquired. I enquire about a path to profitability and the answer frequently reveals a token effort. The CACs are unrealistic, market penetration estimates are hopelessly optimistic, etc. The entire play is acquisition or death.
Being profitable is hard work. Much more fun to play the startup game, throw some wild parties, and be acquired than building a real business making real money.
I don't think you understand what "low runway" means.
If you have "low runway" every month than your company is already dead. Runway is the time left, with current revenue and expenses, before your company is out of money.
Bootstrapped companies should typically have infinite runway by either keeping expenses minimal or growing revenue.
The problem with people that make generalizations is that they're always wrong. /j
Everyone here in the SF Bay Area doesn't have a comfortable cushion. I bootstrapped my business in 2014 and didn't make a single penny the whole year--in fact, was in the red since I'd personally been lending money to the company.
that's stereotyping, plenty of companies in Europe have good access to capital and plenty of startups in SF don't. I do think there has been a culture issue in SF (and I think that party is coming crashing down) but not everyone in SF acts the same
Funny how your mind gets busier to work and build revenue in Europe without a comfortable cushion like SF guys seem to have.