Recruiter's Glossary

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Burn Rate

Term from Venture Capital industry explained for recruiters

Burn Rate is a common term in the startup and venture capital world that measures how quickly a company spends its money, usually monthly. Think of it like a company's monthly spending speed. It's important because it helps determine how long a company can operate before needing more funding (called 'runway'). For example, if a company has $1 million and spends $100,000 per month, they have a 10-month runway. Investors and financial professionals watch this number closely because it shows how efficiently a company uses its money and when it might need more investment.

Examples in Resumes

Reduced company Burn Rate by 40% through strategic cost-cutting initiatives

Managed and monitored Monthly Burn for a portfolio of 12 startup companies

Developed financial models to optimize Cash Burn Rate and extend runway

Advised startups on controlling their Burn Rate to maintain 18+ months of runway

Typical job title: "Venture Capital Analysts"

Also try searching for:

Investment Analyst Portfolio Manager Startup Financial Analyst VC Associate Financial Planning Manager Startup CFO Investment Manager

Where to Find Venture Capital Analysts

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Example Interview Questions

Senior Level Questions

Q: How would you evaluate if a company's burn rate is appropriate for their stage and market?

Expected Answer: A senior professional should discuss comparing burn rate to industry standards, growth metrics, market opportunity, and funding environment. They should mention analyzing both gross and net burn rates, and how different business models affect acceptable burn rates.

Q: What strategies would you recommend to a portfolio company that needs to extend their runway?

Expected Answer: Should discuss both revenue-increasing and cost-cutting strategies, including optimization of sales processes, reducing non-essential expenses, restructuring teams, and exploring alternative revenue streams or funding options.

Mid Level Questions

Q: How do you calculate burn rate and runway?

Expected Answer: Should explain that monthly burn rate is calculated by measuring how much cash a company spends each month, and runway is calculated by dividing remaining cash by monthly burn rate. Should mention the difference between gross and net burn.

Q: What are the warning signs that a company's burn rate is too high?

Expected Answer: Should discuss signs like rapid staff growth without revenue growth, high customer acquisition costs, low capital efficiency, and burn rate being significantly higher than industry averages.

Junior Level Questions

Q: What is burn rate and why is it important?

Expected Answer: Should explain that burn rate is how quickly a company spends money, usually measured monthly, and its importance in determining how long a company can operate before needing additional funding.

Q: What's the difference between gross burn and net burn?

Expected Answer: Should explain that gross burn is total monthly spending, while net burn is spending minus revenue. For example, if a company spends $100k and makes $30k, gross burn is $100k and net burn is $70k.