Save Your Startup During an Economic Downturn

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Dalton Caldwell and Michael Seibel discuss Paul Graham’s essay “Default Alive or Default Dead.” They share strategies to cut your company’s burn rate and keep your startup alive to see another day.

Paul Graham’s essay: http://www.paulgraham.com/aord.html
Trevor Blackwell’s startup growth calculator: http://growth.tlb.org

Apply to Y Combinator: https://yc.link/DandM-apply
Work at a Startup: https://yc.link/DandM-jobs

Chapters (Powered by https://bit.ly/chapterme-yc) –
00:00 – Introduction
00:23 – Default alive or default dead
02:14 – The calculator
02:59 – Founder’s distraction – Fundraising game
07:32 – Fundraising leverage
09:57 – Math are different
11:29 – Kill or cure
15:37 – The fatal pinch
19:22 – Tough decisions when default dead
19:40 – Headcount
20:46 – Ad Spend
22:50 – Raising prices
25:16 – Personal bankruptcy – Taking a big hit to growth rate
26:28 – Twitch’s pirate ship
32:22 – Takeaways
32:27 – Survive to thrive
33:15 – To burn or not burn
34:06 – 10x better if operationally intensive business

#ycombinator #startups #burnrate

From: Y Combinator

Date: May 6, 2022

41 thoughts on “Save Your Startup During an Economic Downturn”

The Killer or Cure part was eye opening

Loved this – and super useful BEFORE we raise money! Thanks guys 🙏🏻

founders are so out of their mind these guys have to remember them a company needs to be financially stable to be good. basic corporate finance from centuries ago.

Where was this about two years ago?!
This advice is gold!

I turned down 20 million dollars and still didn’t take a cent from a VC. I’ll be fund raising soon when I’m ready and I’m not worried about all those things because I solved a problem in FinTech and filed for the patent not just in the US but also around the world. I’m taking an honest approach and no need to BS needing more money.

BTW I’m going to fundraise way less than 20 Million because I don’t need that much in order to move forward and I’m confident in the equity.

When the startup is just 1 or 3 people working together and bootstrapping, how do you calculate default alive vs default dead?

There is no issue or complexity for great teams who extremely believe in success. As always. It just needs to work with more details and think more about the future needs to survive efficiently.

Listening to this is a master class in why modern business is screwed when based on the consumer-capitalist paradigm. When a investor has 'leverage' at the cost of the founder, this is not good business, it is being an exploitative douchebag. Plain and simple. I graduated #YCStartupSchool a number of years. Was not funded. In fact, I only got funded once I left and completely changed my approach and at this time we are about to enter our next funding cycle, which does not involve conventional VC's whatsoever. Because with VCs really, you cannot run a truly ethical company as VCs are only interested in a profit return – which of course they would be as that is their purpose. Nothing to get mad about – just don't be surprised if you can't run a company the way you want to when you're only focused on profit over literally everything else. Profit without true value or utility behind it is unsustainable. Hence the market right now. Speaks for itself.