After years of free-flowing capital, Silicon Valley startups and VCs have a newfound obsession with cash
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Venture capitalists and their portfolio companies have placed a newfound premium on cash in the wake of the coronavirus crisis. Prior to the COVID-related downturn, money was free-flowing in Silicon Valley; now, though, not so much. Venture investors have pushed their portfolio companies to cut expenses and find alternative sources of money to extend their so-called runways to as much as two years worth of cash burn. Thus far, the focus on cash has worked; the investors who spoke to Business Insider said they hadn’t yet had to shut down any of their portfolio companies. Click here for more BI Prime stories. Until about three months ago, startups in Silicon Valley gave little thought to a seemingly important business detail: cash. Money flowed freely in the valley before the coronavirus, and founders and venture capitalists didn’t much worry about how much cash companies had on hand. “In the pre-COVID environment … if you don’t get a [funding] term sheet in a month, there’s probably something wrong with the company,” Matt Murphy, a partner with Menlo Ventures, told Business Insider. Things were so good for startups that investors often sought out founders before the latter was even looking to raise capital, …
A startup or start-up is a company or project initiated by an entrepreneur to seek, effectively develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend to become registered, startups refer to the new businesses that intend to grow large beyond the solo founder. Startups face high uncertainty and have high rates of failure, but a minority of them do go on to be successful and influential. Some startups become unicorns, i.e. privately held startup companies valued at over US$1 billion.
ATTRIBUTION: Wikipedia contributors. “Startup company.” Wikipedia, The Free Encyclopedia. Wikipedia, The Free Encyclopedia, 13 May. 2020. Web. 23 May. 2020.
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