Make your burn rate know who's boss

Running an early stage startup gets a bit stressful at times and, as a founder, you quickly realise you only really have control of two things — how you use your time and how you spend the company’s money. These two variables pretty much define everything you do and they have the ability to make and break you and the company as a whole.

In the first few months of a startup closing funding is one of the most important things to do, it will allow you to hire a team and then expand as needed. However, to get investment you need to show product growth and this is what takes time. The founding team needs to build product, launch it, then wait and see the traction it gets. There’s no way of shortcutting this process and if the product doesn’t work as well as expected, you’ll need to iterate it, update it, then wait and see the traction again.

Stickers on your laptop + looking stressed = startup founder

Stickers on your laptop + looking stressed = startup founder

This process is very costly in time and money, eating into your company’s runway every single day. Therefore knowing your burn rate and how long your company can last without closing investment, is one of the most crucial things for a founder to know. It defines how long your company will stay alive and massively dictates how you spend your time and money. If your burn rate is high, your runway short and you’re not seeing enough traction in the product you’ve launched, you’ll know the team will need to iterate, launch and wait again, spending both time and therefore money on it.

To solve this problem, some founders will try and cut corners by launching scrappy product in the hope it will gain traction. Therefore prioritising time over money. Others will outsource development costs, getting things done fast and cheap. Thus, prioritising money over time. However, at Availo, we’re trying to do something different. Lengthening our runway and cutting burn rate by taking salary reductions, rejigging the team and investing our time and money in the best way possible. We push out the best product even when our resources are tight. To do this myself and the founders have had become ruthless at prioritising the right things at the right time, treating the finite resources of money and time in an equal way. We’ve become acutely aware of how we use them both.

Our never ending focus for good design, means we end up pushing out great product

Our never ending focus for good design, means we end up pushing out great product

If you want to make an early stage company survive, you’ll need to know your runway, learn how to become frugal and crucially, make your burn rate know who’s in charge. If you let time and money dominate what you do, you’ll be fighting a losing battle to the end.

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Rob Bye

Rob Bye, London, United Kingdom

Industrial design and a co-founder of morrama. He has worked at startups and top companies such seymourpowell.