Rules of Thumb

What the greatest technology investors say about Rules of Thumb

What's the "Right" Monthly Burn Rate

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“The number of people [is important in] getting the company building process right. Too many [slows] things down, burn[s] through too much cash, and increase[s] [overhead needlessly]. Too few and [you’ll] be resource constrained and unable to grow as [quickly].”

Wilson’s suggested fully-burdened monthly burn by stage for mainly consumer internet, software-based businesses (Fully-burdened includes salaries, rent, overhead, etc.):

“Building Product Stage – [] below $50k per month []

Building Usage Stage – [] below $100k per month []

Building The Business Stage – [] below $250k per month []

A good rule of thumb is to multiply the number of people [] by $10k to get the monthly [fully-burdened] burn. [] [Thus,] suggested team sizes are 5, 10, and 25 respectively for the [above three stages].” Fred Wilson  Optimal Headcount At Various Stages Jun 4, 2012;

Hire Slowly & Wisely, not Quickly

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“[Wilson’s] strong bias on [optimal headcount] [] is that  less is more.  [Repeatedly] [he’s] seen the entrepreneur who wants to hire quickly fail and [] the entrepreneur [who’s] [] slow to hire succeed.”

In his experience with software-based consumer internet businesses, “[] [success] might be most highly correlated with a slow hiring ramp [] [during a company’s early years.]  Being resource constrained can be [good] when [] getting started.  It forces [] [a] focus on what's working and get[ting] to the rest of the vision later on. []” His advice: “[] hire slowly and wisely instead of quickly.”   Fred Wilson MBA Mondays: Optimal Headcount At Various Stages, Jun 4 2012;