Burn Rate

Jason Calacanis sent out another one of his emails last night and has even posted it to his blog. For anyone who went through the trials of Web 1.0, circa 1999-2001, it’s a must read. It really took me back to my days at WAM!NET, a start-up I spent over 20 years at from 1998-02 (I consider them, “dog years”).

Money quote:

If you’re going to hit the wall, you should do so with three or four
months of capital left in the bank. You should cut down to your core
staff and tell them “we have 120 days of cash left and we’re going to
try to land the plane safely. If you want to leave at any point during
the 120 days you’ll get the reference of a lifetime from me. If you
help us land the plane safely I think we’ll all be better off because
of it.”

Burn RateI wish I had this kind of advice back in 2001 when we had to layoff 20% of our workforce. In a day that really sucked, I personally took out 75% of the marketing department I headed. It took a toll that is still with me today but I’m sure all the people affected are doing fine these days. But back then all I had was Michael Wolff’s book, “Burn Rate,” which told the story of an early web entrepreneur’s crash in a scathing memoir. I clearly remember referencing the book when writing our S-1 and being told our CFO had just resigned, almost exactly like in the book. In hindsight, I wish I would have kept my mouth shut and just looked for another job; lessons learned, etc.

If you are leading a tech firm today and grappling with what to do, I’d suggest reading Jason’s thoughts. If you think they are extreme, you have the wrong job; in my experience they are right on the money, as painful as they are to implement. He also just sent a follow up email offering to help coach a start-up with less than 6 months runway; I’d take him up on the offer.

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4 Comments

  1. Wow, Tim.

    Didn’t know you were at Wam!Net. We used it at a prepress house called Pixxon way back then. I may even have some of the Purple Wam!Net sneakers still around!

  2. Wow, Tim.

    Didn’t know you were at Wam!Net. We used it at a prepress house called Pixxon way back then. I may even have some of the Purple Wam!Net sneakers still around!

  3. Yeah, I was in marketing starting with the graphic arts vertical, then doing a stint in Europe and finally heading up marketing at the end. Like a lot of other folks who worked there it ended poorly but overall was a great experience. Wish I would have done a lot of things differently there in retrospect.

  4. Yeah, I was in marketing starting with the graphic arts vertical, then doing a stint in Europe and finally heading up marketing at the end. Like a lot of other folks who worked there it ended poorly but overall was a great experience. Wish I would have done a lot of things differently there in retrospect.

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