After a startup raises venture capital, where does all that money go? What types of services do they purchase? Do burn rates differ depending on where a company is based?
Brex helps startup founders get corporate credit cards and counts PayPal founders as investors. It analyzed financial data from YC companies using Brex — Brex was a YC startup and has raised funding from YC — to learn more about how early-stage startups are spending cash. Here are the key takeaways:
- San Francisco-based startups have the highest burn rate at a whopping $369,000 per month. Bay Area (companies not in Silicon Valley or SF) ranked next, followed by Austin ($281,000), New York ($253,000), Silicon Valley ($241,000), Boston ($241,000), Los Angeles ($219,000), Seattle ($209,000), and San Diego ($207,000).
- The average monthly burn rate for pre-seed startup came in at just under $18,000; at $75,000 for seed round companies; at just under $400,000 for Series A; $500,000 for Series B; and $900,000 for “graduated” startups.
- Startups that burn through the most money do business with internet services; transportation; and data analytics. Those that spend the least are in consumer electronics; design; operating systems; and clothing.
- Startups rely on other startups for their tech stack needs. For example: 62 percent of companies use Gusto for payroll; 61 percent use Copper for CRM; 78 percent use Intercom for customer support. For cloud services, 54 percent use AWS, compared to 20 percent on Google. However, for productivity, 61 percent use Google Suite compared to 40 percent for Microsoft. “What we’ve learned is that startups are creating their own ecosystem,” the report notes. “They are investing in other startups that mirror their own goals of creating user-friendly, affordable, and innovative solutions for the market.”
See the full report here.