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1/Cash burn rates at startups: Recently @bgurley and @fredwilson have sounded a vivid alarm -- http://online.wsj.com/articles/venture-capitalist-sounds-alarm-on-silicon-valley-risk-1410740054 … http://avc.com/2014/09/burn-baby-burn/ …
2/I said at the time that I agree with much of what Bill says (https://twitter.com/pmarca/status/511617992757506048 …), and I want to expand on the topic further:
@pmarca 1/ And I heard, as it were, the noise of thunder.
3/New founders in last 10 years have ONLY been in environment where money is always easy to raise at higher valuations. THAT WILL NOT LAST.
@pmarca this speaks to the bigger problem that silicon valley is in a rut...no innovation, just same old biz plans playing around edges
4/When the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co's will VAPORIZE.
@pmarca @bgurley @fredwilson > Muscles of Arnold & Mind of Albert but w/o bloodflow, death. Cash is the blood of biz pic.twitter.com/NfU926fEda
@pmarca and you all, the VC community, perpetuate this problem by constantly funding downright imbecilic companies and models...
@pmarca When do you suspect that will occur?
@pmarca this is the main issue people miss in this discussion. A lot of “salad days” entrepreneurs out there. 2008 experience was key for me
@pmarca you talk like you've seen this happen before :-P
@pmarca btw, im a veteran of dot com boom, with two pre-ipo-ipo startups, and recently ran the gamut again this past 3 years. Same feel.
@pmarca Where does the fault lie? With the entrepreneurs, the investors, or something else?
@pmarca feels like 1999 late - too many http://pets.com small cap tech wannabes
@pmarca But they always do. The bigger question is how much will the crash be limited to VCs, or will the public get sucked in?
@pmarca amen. and interest rates seem to be key sensitivity.
5/High cash burn rates are dangerous in several ways beyond the obvious increased risk of running out of cash. Important to understand why:
@pmarca to be fair, capital went away completely for a 6-9 month period of Sept 08 - Summer '09
@pmarca compared to http://dot.com days, where would you say we are before market turns? 1998? Based on current burns, I'd say 2000
@pmarca as will VCs who have reckless exposure to them - but all venture capital will not evaporate
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