The less money the company raises the lower the dilutions that the founders will suffer until an exit. According to some stats, founders on average will suffer 55% dilution from seed to Series D/Exit, mostly due to fund raising. Imagine if you — as a founder — could reduce by 5% such a dilution: for an exit at $500 [2] m it would mean ca. $25m more in your bank account at the end. Moreover, the less the need of raising money, the bigger the negotiation power founders could command when setting the valuation each funding round, further reducing their dilution.

Second is more capacity to make key hires

The lower the founders’ dilution, the more the equity that can be awarded to key hires the company will need to make down the road. This can have a positive effect on the capability to grow and to yield to a successful exit.

Third is value creation

If you are pretty sure about your product/market fit and you master your channel and your growth quite well, then probably this can apply less to you. But at the early stage, you don’t know how much value each dollar spent would turn in terms of margin or other relevant metrics of value creation. However, this is a metric that is key for an investor and would penalize the company that will fail to deliver that. A mastered burn rate will help you achieve that and will make it easier to raise at an up-round valuation next time.

Fourth is the capability to navigate risk

While in these days you see a lot of liquidity in the market and relative easiness to finance private early stage companies, a downturn, especially with global capital markets at all time high, can always be around the corner. And if the market dries up, then it will be much more complicated to raise the next planned fundraising. What a controlled burn rate would allow you to do is at least: 1/ extend your runaway to push further down the road your next capital increase and give you more time to demonstrate the worth of the company; 2/ demonstrate capacity of founders to care about money and hence to be able to navigate well into downturn times, 3/ it gives more flexibility and higher chances to be able to survive if things don’t go well in some periods, which is a risk any startup might face.

Your customers

Especially in the early days, you might be tempted to spend for engineering the product, build the sales team, create a smart marketing campaign and a distinguished positioning. These are all good things to think about, but you need to make sure that what you have already in hands really works. Before looking inside your company and look for the resources to make things happen, make sure you look outside your company first!


Clearly most of the burn rate of a startup will be dedicated to people, so as a founder you need to manage the evolution of your organization well. Some founders might be tempted to hire long time professional managers early on, but in reality, you don’t necessarily need managers until you reach a certain critical mass. Founders should manage people for as long as it is practical. Certainly, your employees will be continuously asking for more people, it is an instinct to pretend more people below. Yet keep firm and don’t give up on this until it becomes essential.

Therefore, make sure you start today to see every dollar going out of your organization as little as possible to prove that you are building something that has increasing chances to become a successful story.