Burn Baby, Burn!
How fast can you burn cash until nothing is left?
Burning cash has never been a bigger secret to success than in the last decade. Young entrepreneurs have learned that the faster they acquire users the more likely they are to succeed. Therefore, startups spend huge amounts on marketing to attract clients without any guarantees that they will become paying customers.
This fly-or-die strategy works well in mature ecosystems where early-stage funding is abundant. However, in emerging ecosystems such as Sao Paulo, Berlin or Singapore, stakes are higher when choosing between growing or building resilience. Preparing for extended periods of capital scarcity may sound boring, but it certainly is rewarding. Keep in mind that attracting and locking-in the right investor for your startup may take longer than accounted for, but running out of cash is deadly.
If you are wondering what I meant by “the right investor for your startup”, please check my recent post — Together, Forever and Never to Part
I started my career as equity trader just a few weeks before the dot-com bubble burst. At that time, I was working within one of the very few value investment teams in Brazil, and the first concept I learned was: “Cash is King”. What basically means that we would only invest in high cash-flow generating opportunities.
Cash is King! Disrupt the markets while building resilience, and your startup will thrive even during the most challenging moments. — Tweet this
I know all of this may sound like an ancient business modeling theory. However, this has been the golden rule that served as foundation for businesses to endure several crisis.
If all of this still makes no sense to you, maybe it’s worth just listening to this 70’s classic and wonder why it still plays at parties.
Satisfaction came in a chain reaction Do you hear?
I couldn’t get enough, so I had to self destruct,
The heat was on, rising to the top
Everybody’s goin’ strong
That is when my spark got hot
I heard somebody sayBurn baby burn! Disco inferno!
You just read one of my sharp, short and sincere stories. If you enjoyed <CLICK HERE> to browse for more.
Derek Bittar is the co-founder of IndicatorCapital, Kauffman Fellow and avid road cyclist. He often writes on Building Value Together to empower entrepreneurs in emerging ecosystems, he sometimes writes on Long Ride Vélo Club about his epic road cycling adventures.
