Retaining Cash on Hand - A New Strategy for VC-Backed Startups

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VC-backed startups are increasingly retaining higher cash balances rather than rapidly burning through funds. This "cash is king" strategy is emerging as lessons from stumbles by companies like Uber and WeWork. For example, the health tech startup SonderMind raised $3 million in early 2019 but still has 80% of those funds in cash reserves. A consulting firm also found the average cash balance among startup clients rising from $3.5 million to $4.5 million in 2019, with lower monthly cash burn. Retaining more cash allows startups to better weather potential economic storms.

Retaining Cash on Hand - A New
Strategy for VC-Backed Startups
By: Colin Robertson Chicago

Retaining Cash on Hand - A New Strategy for VC-
Backed Startups
Colin Robertson is a respected Chicago banking executive who serves as a managing director of
fixed income at Northern Trust. Focused on markets in Chicago and beyond, Colin Robertson has
a strong interest in entrepreneurial trends impacting business performance.

Retaining Cash on Hand - A New Strategy for VC-
Backed Startups
A recent New York Times article highlighted an emerging “cash is king” ethos among startups, in
the wake of stumbles by Uber, Lyft, and WeWork. An example is the health technology venture
SonderMind, which raised $3 million in early 2019 and still retains 80 percent of that amount.

Retaining Cash on Hand - A New Strategy for VC-
Backed Startups
Rather than burning through resources as many startups do when gearing up for exits and go-to-
market outcomes, the SonderMind head has elected to keep higher amounts of cash on hand to
help weather potential storms in the market. In addition, he has initiated early informal talks with
investors on the next round of fundraising.

Retaining Cash on Hand - A New Strategy for VC-
Backed Startups
This trend is confirmed by Kruze Consulting in San Francisco, which reported an average $3.5
million cash balance among startup clients in the first three months 2019. This had risen to $4.5
million by September, with average monthly cash burn decreasing from $260,000 to $230,000.
With stockpiling cash not a traditional strategy of VC-backed startups, caution seems to be the
prevailing mood as global growth headwinds are assessed.

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Retaining Cash on Hand - A New Strategy for VC-Backed Startups

1. Retaining Cash on Hand - A New Strategy for VC-Backed Startups By: Colin Robertson Chicago

2. Retaining Cash on Hand - A New Strategy for VC- Backed Startups Colin Robertson is a respected Chicago banking executive who serves as a managing director of fixed income at Northern Trust. Focused on markets in Chicago and beyond, Colin Robertson has a strong interest in entrepreneurial trends impacting business performance.

3. Retaining Cash on Hand - A New Strategy for VC- Backed Startups A recent New York Times article highlighted an emerging “cash is king” ethos among startups, in the wake of stumbles by Uber, Lyft, and WeWork. An example is the health technology venture SonderMind, which raised $3 million in early 2019 and still retains 80 percent of that amount.

4. Retaining Cash on Hand - A New Strategy for VC- Backed Startups Rather than burning through resources as many startups do when gearing up for exits and go-to- market outcomes, the SonderMind head has elected to keep higher amounts of cash on hand to help weather potential storms in the market. In addition, he has initiated early informal talks with investors on the next round of fundraising.

5. Retaining Cash on Hand - A New Strategy for VC- Backed Startups This trend is confirmed by Kruze Consulting in San Francisco, which reported an average $3.5 million cash balance among startup clients in the first three months 2019. This had risen to $4.5 million by September, with average monthly cash burn decreasing from $260,000 to $230,000. With stockpiling cash not a traditional strategy of VC-backed startups, caution seems to be the prevailing mood as global growth headwinds are assessed.

Retaining Cash on Hand - A New Strategy for VC-Backed Startups

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