| > Most of them force it actually This is my experience. I literally watched the VC board at a previous company get mad at my then CEO for not spending their cash quickly enough. Moreover - he was hardly the most fiscally responsible to begin with - exorbitant class A office space, expensive contractors, fully stocked kitchen and snacks, game systems and bean bag chairs in break rooms. Paying customers? Nah - not so much. But they wanted him to spend FASTER. "you need to adjust spending to be at around a 6 month runway - currently you're at 18. That's too high - spend more!" My thoughts on the process are two-fold 1. A short runway and high expenses offer opportunities for those VCs to double down in the inevitable next round sooner, at rates more favorable to them 2. They are gambling - they want to either hit the jackpot or bust. They do not want to sit at the table all day (for example, by running slow growing self-sustaining company) |
1. Spending more is easy, and it doesn't require exorbitant parties or perks. You tell marketing to increase their spend by sponsoring high-end conferences and buying out street-level ad space along major thoroughfares and transit. It gets quite easy to burn seven, even eight figures this way.
2. Of course the investors want the company to have a shorter runway, and it's not even about reinvesting in the next round. It's about control. The lower the financial pressure on the company, the less power the financiers have. The higher the financial pressure on the company, the more the financiers are needed to help ensure continuity.