If companies are burning more money these days (expenses > revenues), is that forcing them to raise money more quickly?
We used CB Insights data to look at tech companies that raised back-to-back rounds less than 1 year apart. While the number of “quick hit” financings has grown slightly over the past three years, 2014 is seeing a noticeably larger uptick. Through the first 9 months of the year, there have already been more quick hit financings than the full year tallies of the last 3 years. If the run rate holds, this year will see over 100 more such financings than last year, a 35% increase YoY.
In much of the recent burn rate angst, the fact that investors are complicit in this funding frenzy is ignored. They’re funding companies at a higher rate (VC financing crossed $13B in Q2’14) so while these quick hit financings might be an indication of higher burn rates, it could also be companies just raising money while they can from investors who are playing fast & loose (often with other people’s money).
Burn, baby, burn.
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