On Thursday, January 18th 2007, the Wall Street Journal paper edition published an insightful article (“US tech start-ups don’t flaunt their cash” by Pui-Wing Tam and Rebecca Buckman) on cash, fundraising and tech start-ups. Since I try to use this blog as a way for me to keep track of interesting stuff that I could use later on in my professional life, here’s in a nutshell what you take away from the column:

• Median amounts invested in round of financing (source: VentureOne): about 8 million USD, stable since 2004, up from 7m$ in 2003 and down from 2000 (11m$).
• Median time between venture rounds (source: VentureOne): 17 months, stable since 2004, down from 19 months in 2003 and up from 10 months (!) back in 2000 and 14 months in 2001.

Cash burn rate in 2006/2007, competitive figures:

• Music website Lala.com (20 employees, mostly engineers) founded by serial entrepreneur Bill Nguyen: 200,000$/month
• Web-based instant messaging Meebo (12 employees), founded by Seth Sternberg: 160,000$/month
• Software start-up Sharpcast (45 employees, down from 60) founded by Thomas Gibu: 500,000$/month

So, more or less, a relatively accurate figure could be 10K$ / employee / month today vs. 50K$ / employee / month during the hype (the article mentions Paypal: 10m$ a month back in 2000 (headcount: 200)).

Conclusion: there’s NO Web 2.0 bubble. Entrepreneurs have learnt their stripes the hard way and start-up founders, even when trained as engineers, train themselves to become true managers (I remember talking with my pizza delivery guy back in 2000, he was telling me he was planning to quit his job to start an Internet start-up – actually a job board for temporary workers if my memory’s correct, and raise 20 million euros). Actually, valuations are high because VCs have too much free cash to invest so they compete for the best projects – so prices go up; or put it that way, there aren’t enough people with good projects willing to start up a company. The solution: ease, foster, promote entrepreneurship and self initiative.

Related posts:

1. Peter's Principle applied to software start ups
2. 2 IDEAS start ups in opaque alarm:clock French Top 10
3. Entrepreneurial finance for fast-growing start-ups: bootstrap & secure bridge financing. Venture Capitalists may help.
4. 10 reasons you should start a startup before turning 25
5. The Euro vs. Dollar double gambetto for high tech corporations