Oh man, that burn rate thing is true. Back in '98 or so, when I was living in Bloomington, Indiana, I interviewed with a guy who was forming the "first dot-com in Indiana" (despite the fact that my own vivtek.com dates to 1997, and I'm pretty sure efax.com was based in Fort Wayne). I think it was some kind of real estate site; he was a local ISP.
During the interview, he took a phone call to scream at AT&T about connectivity issues. When it came to money, I named what I thought was a fair market price and he sat there, stunned, and blurted, "You make that much with that site"?
Well. I made that much with consulting work, and so that was kind of the clue for me that this wasn't going to work out. About two weeks later, after not having heard anything from him, I told him as much and asked him to destroy the code samples I'd sent him. He responded that the disrespectful manner in which I'd treated the officers of the company had already led them to decide not to hire me.
But you know? He sure did get his venture capital, apparently in rather large amounts; I heard figures around a million. He moved offices from the building they already had in Bloomington, up to Indianapolis, and later I heard that he'd been advised that their "burn rate" was not high enough. They weren't spending enough money. So they started flying by private jet instead of regular flights, for instance.
Madness.
Yes, he crashed and burned. I don't know what became of him, but when the economy went south a couple of years later and I qualified for EIC, I knew exactly why.
That isn't happening now. Everything I read about startups includes "how to manage your business". People understand business processes, mostly. There is a concept of spending money only if it's actually necessary, not to increase an artificial burn rate metric to impress capitalists that should damn well know better.
My intuition tells me that this isn't a bubble - it's just what we should have done the first time around.
During the interview, he took a phone call to scream at AT&T about connectivity issues. When it came to money, I named what I thought was a fair market price and he sat there, stunned, and blurted, "You make that much with that site"?
Well. I made that much with consulting work, and so that was kind of the clue for me that this wasn't going to work out. About two weeks later, after not having heard anything from him, I told him as much and asked him to destroy the code samples I'd sent him. He responded that the disrespectful manner in which I'd treated the officers of the company had already led them to decide not to hire me.
But you know? He sure did get his venture capital, apparently in rather large amounts; I heard figures around a million. He moved offices from the building they already had in Bloomington, up to Indianapolis, and later I heard that he'd been advised that their "burn rate" was not high enough. They weren't spending enough money. So they started flying by private jet instead of regular flights, for instance.
Madness.
Yes, he crashed and burned. I don't know what became of him, but when the economy went south a couple of years later and I qualified for EIC, I knew exactly why.
That isn't happening now. Everything I read about startups includes "how to manage your business". People understand business processes, mostly. There is a concept of spending money only if it's actually necessary, not to increase an artificial burn rate metric to impress capitalists that should damn well know better.
My intuition tells me that this isn't a bubble - it's just what we should have done the first time around.