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Demystifying the conversations we're already here at RRE and with our portfolio companies. In each episode, your hosts, Will Porteous, Raju Rishi, and Jason Black will dive deeply into topics that are shaping the future, from satellite technology to digital health, to venture investing, and much more.
Raju: Yeah, I love that. Sympathetic customers. Man, we all should have sympathetic customers.
Will: [laugh].
Raju: And spouses. And spouses. I mean, that’s, like, the ideal. Sympathy. Oh, my God. No, that’s wonderful. I actually think sympathetic customers is… I never even coined it that way.
Raju: I’m Raju Rishi.
Will: And I’m Will Porteous. Welcome to RRE POV, the show in which we record the conversations we’re already having among ourselves, our entrepreneurs, and industry leaders for you to listen in on.
Will: Welcome back to RRE POV. Today we’re going to be talking about managing burn. There’s probably no more hotly debated topic on the boards of startups than how fast to grow, how fast to spend, pacing, sequencing. This is one of those topics that because we spend our time investing money, we also spend an awful lot of time thinking about how fast our companies are consuming that money, and where they’re going to find more money to fuel that burn as we go. And so, you know, Raju, to kind of kick things off, as always, I wonder if you have a framework in mind for thinking about managing burn for your companies?
Raju: I do. So, it’s an interesting question, but I think for startups, it’s fundamentally based on the stage that they’re at. And I think, Will, you coined this ‘tinkering phase’ as the initial phase of a business. I think the burn rate tends to be different at that stage of the business versus the building product phase, you know, building your usage and customers, and then ultimately, when you’re at a growth stage, which is building the business itself. And so, I think that is, you know, one of the layers that we think about in terms of how much a company should be burning, but it’s also based on a couple of other factors.
The industry, it turns out, is actually pretty important because if you’re building a product for the robotics industry, or the pharmaceutical industry, you know you tend to have to do much, much more upfront in those kinds of businesses than a software company or a healthcare company.
Will: That’s right, you can’t really be tinkering in a pharmaceutical company if you don’t have a lab. You can’t really be tinkering with robotics without robots. So, you know, startup conditions matter. Maybe you can get some stuff for free during that early phase as a way to keep your burn down through collaborators or early partners, but the scale of burn, even in the tinkering phase, you’re right, it is kind of a function of the market you’re going after.
Raju: Yeah. It’s, you know, I always say, like, you got to kind of—balancing burn and runway, it’s ultimately based on the market’s appetite to further invest, or if you’re lucky, the ability for the company to control its own destiny. So, those are the two [unintelligible 00:03:06] paradigms. Let’s put the second one on the shelf for a second, and just say, we’re with companies, we’re talking with companies that need to burn cash, and they’re looking for the market to further invest. And so, if you think about it, just from an industry perspective, a robotics investors, which you know, are narrower in nature, are going to look for, does the robot actually do what you say it’s going to do [laugh]?
And, you know, and the same thing with pharmaceuticals. They’re kind of binary. Does the clinical trial work? And versus a software company, or even digital health company, or even some other types of industries that we’re talking about, financial services, does it do most of what you think it’s going to do? And so, there’s not this sort of binary element of it.
But let’s talk about the tinkering phase a little bit, and let’s just focus on the bulk of our market, at least, which is the software industry. What do you think about, Will, in terms of the tinkering phase, in terms of how people should be frugal or non-frugal in terms of their spend rates?
Will: It’s a great question. I think that during this phase, there’s so many unknowns that smart entrepreneurs really strive for minimum viable scale with an orientation towards product and customer proof points. So, they’re not really trying to sell anyone anything so much as they’re trying to prove that they can make something, or even if they can’t quite make it yet, just present something that customers actually really do want to buy. And so, I view the tinkering phase as a real iterative conversation with a lot of potential market participants, potential future customers, where you’re thinking about product requirements, you may be building early prototypes, you may be doing wireframes, you may be putting demos of the software in front of people, and you’re kind of trying to hold together a small team of collaborators. There’s probably some engineers, there’s probably some designers, but there’s most definitely a product management function that’s sitting there, having this conversation, and kind of tinkering with the features, and the elements of what’s to be presented. Again, you may not really be building product yet so much as you’re developing a lot of market proof points.
Raju: I agree. I agree with that a hundred percent, Will. I mean, and you got to be scrappy. How do you get the proof points without actually investing all the money in building the product? Because typically companies that are at that tinkering stage, let’s just put some verbiage around it: they’re pre-seed, right? They’re pre-seed companies. They have raised some angel money, typically it’s less than a million, or maybe less than 2 million, if it’s a really interesting, frothy industry.
You can’t always just build product at that stage. And you’ve got to get proof points, you got to talk to customers, you got to use wireframes, you got to use demos, you got to create, sort of, linear workflows that aren’t open-ended yet, and see if you can get people to be interested enough to pay money for this kind of solution. Consumer companies can do things a little bit differently. They can launch a very, you know, sort of lightweight product that has just an initial use case in there, and I think you’re just trying to demonstrate enough value at that stage to prove to the world that you’re worth getting that next round of investing.
Will: Yeah, absolutely. I think your entrepreneur at this phase is kind of, they’re the chief tinkerer, right? And we often get asked, kind of, what we look for in people that we back. That deep, deep understanding of the problem to be solved, and that, kind of, intellectual curiosity, that willingness to tinker with what a solution might look like, I think, is paramount. And the thing about burn rate at this level is that you can’t be committed to delivering on any kind of a financial plan at this stage. If you’ve taken pre-seed money at this stage to fund your burn rate with financial expectations in terms of the performance of a business, you created a lot of unnecessary pressure at a time when it’s actually really not appropriate yet.
Raju: Yeah, I agree. And I think at the end of the day, tips that I’ve learned in the companies that I’ve started is, sometimes I started those companies as consulting ventures. I was always designing it to be a product, but it’s really nice to get paid to tinker on somebody else’s dime. And so, you work with those early customers, and they’re like—you know, you’re not—you’re going to deliver a product for them, but you’re also really learning about the appetite for that product and what is a must-have, and not necessary. And that’s a little—it’s hard to navigate, you know, because you don’t want to give up your intellectual property to a customer, but I find that that is a trick—at least for enterprise software companies—where you can start working with them—a handful—and they can, you know, give you value in terms of what that product piece is going to be. Your contracts need to be really, really tight so that you own the intellectual property, but at the end of the day, you know, you’re helping them create value. So, that is, you know, part of that tinkering phase.
Will: Yeah.
Raju: Let’s move to the building product phase, Will. I mean, you know, so now you’re at this point in time where you’ve got a company, let’s just say it’s in the software industry, you’ve got enough proof points, you’ve raised now a seed, and you know, you’re moving on to this building product phase where you’re trying—you want to get some revenue in the door, and you’ve got to build that product. How do you avoid getting over your skis in that situation, where you’re just throwing a lot of money at product, or worse, you know, you don’t even have the product, and you have a big sales [laugh] organization—
Will: [laugh].
Raju: You know? You never want to see that as a VC, but it happens.
Will: You know, I think that the most important ingredient at this stage—and a lot of entrepreneurs don’t believe this is possible—but the most important ingredient is sympathetic customers. So, if you are solving a problem that’s meaningful enough, having customers who are willing to either prepay for something that is still in development or provide some early financial commitment—and it’s often a really good litmus test of whether or not the problem is meaningful enough for people to solve. If it’s not urgent enough for them to help find the money to create a solution, knowing that there’ll be a lighthouse customer, knowing that they’ll be an early access customer, knowing that they’ll have an advantage for having done that, that’s a great proof point. And if you can do that, you may, in fact, be able to create a little bit of self-funding dynamic during this period, and also create a really engaged conversation, so that you’re not building product in isolation.
And I love to see that, even if it’s a small group of customers—one or two—who are along for the ride because they’re intellectually committed. And the people in those customers are senior enough, and they know that the problem is important enough that they’ve made a commitment to, kind of, help this along. Not every company can do that, of course, but that’s certainly something to look for, and I think to strive for, in this period. Because if you’re building product in isolation, you need to have a really good reason why during the product development phase.
Raju: Yeah, I love that. Sympathetic customers. Man, we all should have sympathetic customers.
Will: [laugh].
Raju: And spouses. And spouses. I mean, that’s, like, the ideal. Sympathy. Oh, my God. No, that’s wonderful. I actually think sympathetic customers is… I never even coined it that way. I always told my companies to go after design partners that are willing to pay you, but also willing to give you enough feedback that they’re helping you build the product appropriately, and they’re not constrained by timelines. Like, if you miss a timeline, you know they’re not going to sort of crucify you or anything like that. It’s a situation where they’re accommodating because they feel like they’re enrolled in that process. But I like sympathetic customers better than design partners. It’s a great word. I think we’re going to start using that in some of my companies. So.
Will: Hopefully they want you to be successful [laugh].
Raju: Yeah, exactly.
Will: That’s what makes them sympathetic, right?
Raju: And we talked about this, like, in terms of product-market fit before. If you’ve got a customer that is willing to use your product, even if it’s broken—in one of our prior podcasts, we talk about that—that’s the sign to me that I should just invest in that business. Because, you know, I talked to a customer, and they’re like, “Yeah, it doesn’t really—like, I really have a tough time ingesting the data,” or, “I’ve got to, like, once they give me an output of the data, I’ve got to munge it in different ways.” And I’m like, “Are you going to churn? Are you thinking about leaving?” “No, no. No, it’s so valuable. I’m never going to leave, but, you know, the products are not right. It doesn’t work entirely.” Those things can be fixed. But yeah, it is both a metric of whether you have product-market fit, if you can find those customers, but it’s also a way of maintaining a low burn rate because you’re not necessarily having to deliver everything concurrently.
So, you know, the third and fourth stages are building usage and building the business. You know, let’s spend more time on this section because this is kind of where I feel like a lot of startups get—I’m sorry to use the word burned—but burned because [laugh] they—you know, let’s presume you’ve gone through the tinkering phase, and you’ve raised angel money or pre-seed money, you’ve gone through this sort of building product phase, and you’ve got a product in market now, and now you’re trying to, like, grow. You’re building users, you’re building the business, you’re going from, like, for an enterprise company, a handful of clients, to, you know, dozens or even multi-dozens, and you’ve raised either your seed or your Series A. And granted, you know, just for our listeners here, we’re avoiding industries like robotics and pharmaceuticals because the cycles and the way you would think about this would be very different. This is a typical, like, software-oriented, it could even be consumer businesses, whether it’s consumer or enterprise, but just software businesses that are, you know, more sort of down the straight and narrow for what we invest in typically.
But let’s say you’ve gotten to that Series A or Series B, and now you’re, you know, building customers, you’re building the business, and you know, you feel like you got product-market fit. Let’s spend cycles talking about some of the warning signs that, hey, you know, you’ve kind of… maybe burning too much money. And I’ve got a handful, but I’d love to hear from you, Will, first. Like, what do you look for that says, “Wait a minute. Maybe we should just reduce burn a bit.” You know? What are the characteristics that you look for in board meetings?
Will: I think this is such a great question. I think this is a scenario that you and I have confronted many times in our lives, whether as entrepreneurs or investors. Because there’s so much momentum inside the company at this stage. Like, you’ve been spending all this time building product, you’ve been in dialog with this great group of sympathetic early customers, you’re convinced that you have something that the market desperately wants, and you want to get it out there, and you want to—you know that you can begin to achieve really significant growth. And this is where I very often see the move to onboard a significant sales and marketing presence to try to accelerate the early release of this product out into the market and accelerate the scaling. And I find the warning signs are salespeople not selling [laugh].
Raju: [laugh].
Will: Like, marketing generating a lot of leads, and things are not moving through a pipeline. And not moving through a sales forecast. And I very often find that this is a place where sequencing has gone wrong because people have missed the fact that while you’ve been developing product, and you’ve been talking to all these sympathetic customers, you needed to really be learning the sales methodology and the sales playbook that was going to work. And far too many companies I see have gone and hired a bunch of veteran salespeople, perhaps from bigger, well-known companies, and those sales people come into a startup or into an early market with a new product, and they don’t know what to do.
And so, this transition phase out of product development into early market is a place where people can rush things, and onboard a lot of people who are there too early still. They’ve gotten the sequencing wrong, and suddenly they’re burning a lot of money not selling anything. This is a scary, scary time, and it’s a place where often there are boards full of new investors with high expectations, and things need to slow down before they can really begin to scale the business.
Raju: Yeah. And I have similar warning signs. I look at, sort of, three or four different factors. One is, lengthening sales cycles. Because people generally don’t tell you that they’re not selling; they just tell you the sales are coming. [laugh]. You know, “They’re on their way, dude. I’m telling you next quarter, it’s going to be a blowout quarter.”
But if you do see a stretching of those sales cycles, and you think your unit economics are such that, you know, you can close a deal in three months or four months or five months, whatever that number is for your business, and all of a sudden you’re seeing, you know, a bunch of deals kind of stretching. So, that’s one. The second thing I see is a lot of discounting, where you’re kind of manufacturing the deal by cutting costs. And yeah, maybe your pricing was wrong, but if your pricing was wrong, then your business model is wrong. And this is something that’s really, really important to understand because you’re assuming that, you know, a sales rep, the product sells for X number, they can hit a quota of, you know, let’s say, $500,000, so you’re going to pay them 80,000 and their OTE is going to be $160,000, or you know, something like that, and all of a sudden, you know, they can close four deals a quarter, but now they’re, they are closing four deals a quarter, but they’re not closing $50,000 or $100,000 deals, they’re closing $25,000 or $50,000 deals.
Will: Yeah [laugh].
Raju: So, that means you have two expensive salespeople, your basic, sort of, unit economics on how you manage that product, and how many people are supporting that product, and the payback period, and all of those things are screwed up. And so, you really have to think about, like, now my burn rate’s out of whack because my salespeople are too expensive, and I’ve got a service engineer that sits attached to them, and marketing is spending so much money to acquire a lead, but that lead is, you know, going to generate revenue that’s a lot lower. So, I look at that. So, lengthening sales cycle, I look at discounting, and the last thing I look at is churn. And—
Will: Yeah.
Raju: This, unfortunately, you can’t detect right away. Because you sign a deal, and typically they’re one-year deals, and it’s in that second year that you see, you know, people churning out. So, what I like to look at instead, as a precursor, is usage. How often are these people using the product? What is the value that they’re getting?
Because those three factors—churn, discounting, and lengthening sales cycles—are warning signs that you’re burning too much, and you may need to rejigger things, either your business model or your product needs more meat behind the bone so you can sell it for a higher price point, or maybe you have to hire lower cost salespeople. Or maybe you just need to fix discounting, [laugh] you know, and your CFO needs to be a lot, you know… more strict and stringent. So, those are good factors.
Okay, so the next area, let’s move to—you got the warning signs: your sales cycles have gone up, you know, you’re churning a little too much, you know, you’re winding up discounting or, even worse, you know, like, you just not—you don’t have the right ICP, you feel like your initial ICP, your Ideal Customer Profile was X, and it’s not really that, and you got kind of lucky, or there’s a handful of early adopters, but there’s not subsequent followers. What do you do? Now, I’ve got—my burn is too high. And I know you have a few stories here, Will, where you can talk about companies that had high burns, and what they had to do or maybe couldn’t do in time. I’d like to hear our stories, but before we get into those stories, you’re in a board meeting now, Will, and you know, you’re looking at these metrics, and you’re saying, “Wow, you know, like, hey guys, we’re going to run out of cash before we’ve sold enough product.” What do you do? What do you recommend to the companies?
Will: Well, I think the way to have this conversation is to force people to agree on the facts objectively, rather than pivoting to the personal. Were these bad decisions? Do we have the wrong people? Rather than turning it into a conversation about cutting burn to focus on the objective indicators and what’s there and what’s not there, and to help people see what should be there that’s missing. And to your point earlier, I mean sales cycles, elongating churn, low customer usage, like, let’s, as a board and management team, be really clear-sighted about the reality that we are actually living in, as opposed to what we wish it were.
And this is where I find so many entrepreneurs and management teams really struggle because they’ve invested so much in getting to this stage, and they want to believe that things are going to be great. And they’ve probably hired a bunch of salespeople that they think are going to start to be productive any time now. And until you can agree on a common set of both the facts as they are, and what they should be for things to actually be great, you’re having the conversation, kind of, it’s really just a matter of opinion. And so, I try to drive those conversations to what should great actually look like at this stage, and then force people to really live in the reality of what they have. And the reality of what they have may be not dire, but things need more time, at smaller-scale, that there needs to be a deeper conversation with some of those sympathetic customers about what’s missing.
It may be—and I find this is often the case—it may be that the product story is not being told well, something that the entrepreneur often has to step in on, or that there are basic elements to the product, non-sexy elements to the product, but that are still fundamental for the customer to implement and be successful that the team has overlooked because they weren’t that sexy.
Raju: Right. I agree. You know, our theme of sequencing, sequencing, sequencing, is—you know, I’ll throw out a couple of things that I do is, more startups will die from indigestion than starvation. I’ve said this a few times in our podcast. And it may be that you’re trying to do too many things, and you got to focus in on the handful of things that are really valuable to your customers, and just defer roadmap items, and maybe even partition the product so that you’re just providing X instead of X, Y and Z. So, I think that that is a tool that I use.
The other thing I talk to, you know, startups about is being honest about who their ICP is. A lot of people really think that because if it works for X customer, it’s going to work in every industry, and it doesn’t always work in every industry. Your ICP may be much narrower than that. So, you want to reduce the product scope, and you want to reduce the customers that you’re going after until you see repeatability. And that’s, kind of, one of the tools that I do.
By the way, one of the metrics that I failed to mention in the prior section that I look at is time to revenue. Because there’s four reasons, actually, why—
Will: Yeah.
Raju: —you have a warning sign, the lengthening sales cycles, of course, right? The churn, yes, discounting also, but sometimes you just don’t get cash in the door fast enough because your time to revenue is a lot slower than you think. You think, “Oh, I’ve just signed this customer,” but they’re like, “No, no, no, no, no. You got to train me, you got to get me up to speed.” Or, you know, the industry is really slow moving, and your assumptions around, like, when you’re actually going to get paid is wrong.
And so, your burn rates are going to be super high because you’re having to handhold a lot of your customers through a lot of implementation that you didn’t really predict. So, you know, that’s part of what I was going to focus on, like, indigestion versus starvation. Like focus on your ICP that you know you have sold to, reduce the product scope, and then try to reduce that time to revenue, right? Really talk to customers about, like, “When can I actually get paid,” because sometimes the issue can be that there’s a lot of nuances in terms of what the customer is expecting that you don’t have, and so they’re not willing to pay you until, you know, they can actually do transactions, or actually use the software properly. And the implementation timeline can be very high.
Will: That’s a great point. Time to revenue needs to be quick for the startup that’s burning money. And honestly, if you can’t increase time to revenue for a customer, the venture model may not be the right model for scaling a company. When I first came to RRE more than 20 years ago, because I was doing stuff in hardware and systems, I used to go and meet with a lot of companies that were really being built to serve the telecom build-out, the telecom boom, and there had been some just incredible MNA transactions, new hardware equipment companies that were bought by the likes of Lucent—where you were at the time—and Nortel, and Cisco and others that had driven a huge wave of investment in new communications equipment companies. And as a new associate, I got asked to go and meet with a lot of these teams.
And this was during the kind of the [unintelligible 00:25:45] meltdown, and it was amazing to see the burn rates inside of these companies. And I would go up for these due diligence meetings—I say ‘up’ because for some reason, a lot of the companies I went to see were in Boston—and you’d go in and there were 30 hardware engineers, 30 software engineers, 10 people doing QA and documentation, a fully kitted out management team, a burn rate of $2.5 to $3 million a month for a company that had never shipped a product.
Raju: Oh, my God.
Will: [laugh].
Raju: That’s crazy.
Will: And you came into these companies to do due diligence, and people believed a set of things that were no longer true. They had lost the sympathetic customer conversation, in part because the formerly sympathetic customers were in the midst of going out of business, but everyone inside of the company believed a set of things that were less true every day, and became less true as their cash horizon came closer and closer. And so, I’d walk out of these places, and I’d be like, my God, this company’s burning $3 million a month, and it’s going to hit a wall unless people confront the reality of the fact that their customers aren’t going to be there, or they’re not going to buy what they have. And sadly, that is what happened to a lot of teams. It’s a classic example of the creative destruction cycle that happens in venture routinely. But it opened my eyes as a young associate in the business, and kind of focused me in on this question of burn rates, and how much you can prove without burning a lot of money.
Raju: Right. Exactly. No, I love it. You know, I’ve got a few other tips that I give folks. You know, just if you find yourself, you know, in a situation where, like, you’re overextended, and you know, you’ve got to cut, it seems like the wrong thing to do because people are like, “We’ll just take 10% off of every business unit.”
That’s not necessarily the right way to do it, right? If you’re not selling, you know, it might be the sales organization that really needs to go because you’re just too early for that. And if you’ve got too many product lines, and, you know, people don’t care about the Y-Z, they care about X, you might have to cleave part of the business, right, like, some capability, some, you know, nuances. And if you need to balance some of that, you know, you can balance full-time with, maybe, contract labor for a period of time. But, yeah, it’s really a tight thing.
So, I’ve got a bunch of tips that I give people around this. And I don’t know if you’ve got any as well, Will, but I’ll go through some of my tips—
Will: I’m sure these are going to be great.
Raju: —just in general, just the highest level general tips about burn management at any stage, right? I mean, I think one of the things people need to think about is maintaining that six month of runway period, and then, you know, like, at that point they got to be able to fundraise. And, you know, there is another reason why things change, and that’s that the market changes [laugh]. And we’ve seen this right in recent years where—you know, 18 months—where the appetite—investors were writing a lot of checks, and now they’ve kind of pulled back on writing checks. So, the world can change around you, sometimes.
It may be not your product and your customer base, but like, people become a little skittish. They’re not buying because they’re afraid. Their, you know, CFO has mandated you got to cut costs, and even though it’s a valuable product, and you know, marketing could use it, marketing’s like, “I’ve been told I can’t spend money.” And, you know, so anyway, maintaining six months of runway because unexpected changes in costs happen, or in terms of revenue happen. I like to tell people to hire a VP of Finance that, really, you know, starts with the word no [laugh], and works backwards.
Like, I think, actually my wife would be excellent at this. That [laugh]—no, I’m kidding. I always make fun of her. She’s lovely. She doesn’t say no [laugh]. She’s a [unintelligible 00:29:44].
Will: She is lovely.
Raju: But you know what I mean. Like, getting a VP of Finance that actually is not afraid to say no because they are the first ones that are seeing, kind of like what the handwriting on the wall. The other thing is, like, continuously conversing with investors. Not just yours because yours are going to be the ones that can support your business in a pinch, but also with outside investors because you want to feel whether the interest level is waning, you know investors are pulling back a little bit, and you know, maybe it’s going to take you a little longer to fundraise. Or, better yet, you have relationships with half-a-dozen people that are absolutely committed to doing the next round, and now when you want to get to it, they are familiar enough with the business to move quickly.
I think that’s a really tip because burn management is really kind of like, I don’t want to say you kick the can down the road every time you raise a next round of financing, but like, you are driving toward a next round of financing unless you’re going to be cashflow positive. And if you’re not going to be cashflow positive, the reality is that the next round of financing comes from other investors or strategics, and so you’ve got to be having those conversations.
You know, the fourth tip I’ve got is, you know, scour through your recurring costs. A lot of people in R&D just leave, you know, certain expenses—you know, whether they’re instances of AWS or, you know, whatever—you want to basically—because they’ve got test instances, they’ve got an instance that, you know, is for, like, pre-production—and you’re just burning money through that. But there’s also recurring revenue costs in terms of licenses that you’ve got, software licenses that are not being used. And you know, when you cut, you know, you should be looking at those.
But also when you actually do have to cut parts of your organization, it’s better to do it more aggressively upfront, rather than whittling, you know, slowly. Like say, I’m going to cut a third of my you know—like, 10%, and then another 5%, and another 5%. That kind of demoralizes the organization. So, those are some of the tips I have when you have to deal with this, but I don’t know if you’ve got others, Will, that come to top of your mind.
Will: I mean, those are great tips from someone who’s seen these decisions firsthand in a lot a lot of companies, so I’m sure our audience appreciated that. I think what I can point to is maybe some external factors that have to bear on this set of decisions. I feel like market timing kills companies more than anything, and I feel like people in our business have to be experts in thinking about the rate at which a market can absorb a new innovation. And so, I think for the management team to be really clear-eyed on how fast customers can really onboard things, and how fast customers really do buy new capabilities, that you know, good planning, good FPNA starts with understanding that, and that has to be fundamental to not getting ahead of yourself. Likewise, you may find that what you thought was a six month or a one year buying cycle is really a two to three year buying cycle, and you’ve got to kind of accept that hard logic.
And maybe it means you go and get a whole bunch of sympathetic customers for pilots, knowing that it’s just naturally going to take them a period of time, rather than thinking you’re going to progress a small few of them through to bigger deals. So, I would just say, having a really skeptical view on market timing and what it can mean for a business is a big thing. Because no amount of spending, no amount of burn, can overcome that market timing dimension. I have seen great companies that hit a market right and scaled to over $100 million in revenue without ever burning more than $200,000 a month. Pretty remarkable.
Raju: That’s amazing.
Will: And it happened because they understood market timing, right? Because market timing worked to their advantage. And they didn’t—like, other companies that were their predecessors probably spent a lot more than they did trying to move the market.
Raju: I love it.
Will: And you can’t spend money to move markets.
Raju: All right. We’re at the section that we have to do. It’s a short one, Gatling gun. I love the Gatling gun section. And so, I’ll just ask you a handful of questions. We’ll make it tight this time, so you know listeners, you know, it can have a shorter run today [laugh] listening to our podcast. So, like most epic cra—this is a burn, burn, burn session, so burn-oriented questions in Gatling gun—so most epic crash and burns that you know about in the startup industry.
Will: Well, I mean, I think WeWork is in a class all by itself—
Raju: Yeah.
Will: —in terms of just the magnitude of the global undertaking, and what happens when the capital markets stop. And try bringing something like that to a gentle halt [laugh].
Raju: Yeah, [laugh] that’s true. That’s a great one, and I had that one on my list. I also had Webvan and Zoom, which were, you know, delivery companies. And Zoom was a robot delivery company, for God’s sake. I mean, like, in 2015. I don’t even know. Like, I mean, like, I don’t even—I think the Roomba wasn’t even o—I mean, I think that was out by then, but still. Like, these companies were just, like, burning cash, burning cash. Okay so, best firefighter movie? And if you haven’t seen firefighter movies, I’ll give you Backdraft or Ladder 49.
Will: Backdraft for me. But—
Raju: Yeah, I think I’m going to go with Backdraft, even though Ladder 49 had John Travolta, who’s like, you know the man. The man.
Will: Yeah [laugh].
Raju: Okay, best Fire Festival?
Will: [laugh]. The one and only Fyre Festival.
Raju: No. Go ahead. You tell yours.
Will: Tell me, tell me yours.
Raju: There are two. There are two, it turns out. Everybody knows Burning Man. Everybody knows Burning Man—
Will: True.
Raju: —but—
Will: No, but you’re talking about the Fire Festival. I thought you’re talking about the Fyre Festival in the Caribbean. The one—
Raju: Oh no, no, that one did crash and burn also, right? Like, that’s so hilarious.
Will: [laugh]. Yeah.
Raju: Literally crashed and burned.
Will: Yeah, those people ended up, like, almost burning up in their tents.
Raju: Yeah. No, no, there it was a Fyre Festival. I think they never actually had the festival because it ran out of money, and there was lawsuit or whatever. But Burning Man is a fire festival. But Diwali is, like, the Indian festival of fire and lights. And so—
Will: Oh wow.
Raju: You get to vote, but I’m going to vote for Diwali because I’ve got to, you know, represent the homeland.
Will: I would like to be a guest at Diwali with you.
Raju: Okay, fine.
Will: Just be the fire and light through your [unintelligible 00:36:19].
Raju: Last question: best campfire item.
Will: [pause] [laugh].
Raju: Best campfire item.
Will: I don’t know what’s yours?
Raju: I’m going to go—well, I’m going to give you a choice of hot dogs or s’mores. It’s either hot dogs or s’mores.
Will: [laugh]. I think hot dogs. I think, yeah, a fire roast of hot dogs.
Raju: Oh, my god.
Will: It’s the best.
Raju: You know what? How about a hot dog inside of a s’more?
Will: [laugh].
Raju: I mean, like that would be epic.
Will: Now, you’re in state fair territory. That’s [crosstalk 00:36:47].
Raju: Yeah, exactly. I think Idaho, Iowa, and then you fry it. And then after you fry it, you fry it again. Then… then it’s good.
Will: Yeah. And then you put it in something else, and you fry that.
Raju: [laugh]. That’s good, that’s good. All right. All right. Thank you listeners. I appreciate you guys tuning in. This was a fun session. Appreciate all the comments that you had, Will. So, this is RRE POV, we’re just signing off on this particular podcast, talking about managing burn. So, look forward to having you guys listen to the next one. Cheers.
Raju: Thank you for listening to RRE POV. You can keep up with the latest on the podcast at @RRE on X or rre.com, and on Apple podcasts, Spotify, Google Podcasts, or wherever Fine podcasts are distributed. We’ll see you next time.