The #Startup J Curve
Today’s blog post comes to us from pseudonym, Old Fart, long time listener…first time caller to the Mr Cranky Show. Old Fart or OF as I’ll call him, replied to yesterday’s post, regarding the idiot revelation from Pando daily that the main reason startups fail is they run out of cash. In a way, OF defended Pando with the following comment:
Sad to say, this is new to some (especially University related) startups. In my short angel career, I always reminded these folks “as long as you have money, you are in business. When you are out of money, you are out of business.” I even made a hand drawn “J curve” that showed how this worked.
He followed up with the attached diagram and details in an email and gave me permission to post it here.
The J Curve shows the cash balance a startup needs to survive to get through the bottom of the J Curve and looks like this according to the drawing forwarded to me by OF.
- From the bottom of the J curve on revenues grow faster than expense
- You need enough invested cash to survive to that bottom of the curve
- Delayed product launch results compressed and a sharper drop in the curve. You’re going to need more money.
Thanks Old Fart! Good stuff!