Most tech companies including unicorns burn cash and are not profitable monthly or annually. In fact, it took Amazon 7 years just to turn a profit! One of my favorite investments and stories of companies who got tired of raising money and getting terrible terms is HOTEL TONIGHT. They were so focused on growth that they were burning $2.5m/month and literally changed the business and became profitable in 7 months. Google “how Hoteltonight turned a profit” for the play by play.
Here is the lesson: don’t just focus 100% on growth or product. You have to show a path to profit! Go through all your expenses. No reason a new startup should be burning more than 25-50k/mo. Raise enough money to get you funded for 12-18 months (so 500k-750k preseed). Get enough traction in 12 months where your business is at least worth twice as much and raise your seed. Again, show a plan to go from seed to profitability.
A great rule of thumb for the path to profitability:
SHRINK: Fixed expenses/variable cost.
OPTIMIZE: marketing Return on investment or return on ad spending.
Think “what would Hoteltonight do?” Ask any questions below!! #mvpallstarfundiii