Venture capitalist Marc Andressen has been one of the greatest advocates of the soundness of the current crop of startups. Now Marc is sounding the warning bell that startups may be burning cash to fast. Marc recently tweeted:
“When the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co’s will VAPORIZE”
First, Landlords should be concerned because the companies that will vaporize will be their tenants. If company burns go back down to six months and the music stops, that is it for their rent.
Second, venture capitalists are pushing back against higher rents and longer term leases. And they are especially opposed to big security deposits. That is why it is hard to get more than six months security or out of pocket costs covered.
Venture Capitalist Fred Wilson recently wrote:
“I’ve been grumpy for months, possibly for longer than that, about this. I’ve pushed back on long term leases that I thought were outrageous, I’ve pushed back on spending plans that I thought were too aggressive and too risky, I’ve made myself a pain in the ass to more than a few CEOs.”
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