Back when Silicon Valley Bank was still pitching a package of financial moves to its customers, it noted in a presentation to its own investors that “elevated client cash burn” was “pressuring [its] balance of fund flows.”
The previously central bank to Silicon Valley told the stock market that while it had anticipated a “modest, progressive” decline in startup cash consumption as venture dollars slowed, burn had “not moderated” in the first quarter of 2023. This hurt its deposit base, which in turn was a precipitating factor in the run that later smashed the bank.
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Regardless of our inability to note an incipient bank run, the dataset formed an interesting conclusion in our minds: Startups were failing, at least in the United States, to truly reduce their burn rates.
New data paints a slightly more nuanced picture. Thanks to Brex data shared with SaaSletter, we can get a bit more granular. It turns out than when you compare later-stage startup spending cuts with their earlier peers, the bigger startup are doing a better job.
The question, then, is whether that makes sense. Let’s explore.
Cut spend, cut burn
Recall that in the first quarter we saw late-stage round sizes and valuations fall sharply. Capital flowing into larger, more richly valued startups is in retreat, and unicorns are currently wedged between a rock (falling venture capital investment), a hard place (a completely dead IPO market and slow M&A activity for companies of their size), and a rocky hard place (the fact that many late-stage startups are carrying paper valuations that will not convert into new investment at par).
Late-stage startups are getting the hang of spending less by Alex Wilhelm originally published on TechCrunch
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Photo and Author: Alex Wilhelm