Burn rate

Burn rate is a measure for how fast a company will use up its shareholder capital; it is negative cash flow. If shareholder capital is exhausted, the enterprise will either have to find additional funding, close down or generate a profit from internal cash flows.

I purchased this hard cover book in the Latin Quarter in Paris for 1 euro and although a very old publication, it provides a fairly good history of the internet. I found it in the business section of a second hand bookshop with it providing a compelling read on buses, trains and planes throughout the next stage of the trip through the United States.

With an increasing number of investors and entrepreneurs blaming the dot-com bust not only on unsound management practices but also financial management to maintain the burn rate, it was accepted as the proxy measurement of how fast the start-up company was acquiring a customer base.

Does the book adequately describe the principles behind the current raft of technology companies heading to the market for funding? I am not sure but I will certainly treat with suspicion estimated revenues promoted by underwriters on the unsuspecting public.