Why Starting Your Investor Updates With “Cash on Hand” Information is a Major Red Flag Right Now. It’s Maybe the Only Thing Worse Than Not Sending Updates at All.

What’s the most important goal for the money a startup spends? If I asked this question to a bunch of different founders and investors I bet the answers would vary. Some would shout one word like “revenue,” “customers,” “team” or even “profitability.” Others might give me formulas like, “LTV:CAC ratio” or “burn multiple of 1.0 or better.” That’s not what I’m hoping to hear. My point of view isn’t that any of these are wrong per se, and certainly there’s nuance based on type of company, stage of growth and so on, but we often forget one very specific outcome that umbrellas some of these other responses: to increase enterprise value. Startups spend a $1 to ultimately try and create more than $1 of company. If you do that repeatedly and efficiently we will all make money together. If you fail to do this reliably then any positive outcomes are more about luck and timing than durability.

Once the markets started crashing in 2022 there was a swift swerve towards “just stay alive” and having enough capital on hand to make it through a downturn. Cutting burn, topping off funding rounds, optimizing pricing — there were many levers to pull. Now a year later, still in a lull but I believe with more evidence that macro economy has stabilized (although there’s the lagging indicator of startup closures), there’s less generalized advice and more company-specific work to be done. Picture an armada of ships that went through a storm and evaluating which need repairs, which should be scuttled, and which have gained momentum, versus making broad statements about the condition of the entire fleet.

A year ago I emphasized that David Sacks was correct about ‘default alive’ being a terrible true north to maintain. Now, in 2023, I’m coming for startups where that is still the overarching strategy; ones who have more capital than hope. What’s a major indication that a company is still operating with simply a ‘default alive’ mindset? Their investor updates lead with cash on hand and months until cash out as the top line KPI.

If you interpret that last sentence as “Hunter doesn’t care about burn rate” or “VC thinks founders should…