A word from Equidam co-founder Daniel Faloppa

While much has been said about startup and company specific burn rates, no recent article has talked about aggregated industry or development stage data. As much as startups look alike, the industry they operate in or the stage of development they are facing are high influencers of the amount of money a company “burns” on a monthly basis. By harnessing Equidam data, we have been able to compile some insights into the average company burn rate by development stage and by industry that might be of interest to entrepreneurs, founders and employees thinking: “Is my company wasting money?” “Am I the only one spending this much?”

Stage of development and industry influence the company burn rate

By aggregating our data, we have been able to find consistent differences in the burn rate of companies. We categorized these rates by industry- 10 macro industries in which companies operate, and development stage- 6 development stages ranging from idea stage to expansion stage. Furthermore, we have investigated future expected burn rates, thus what the company estimates to spend in the future.

Hi-tech, transport & machinery

Considering companies across all stages of development, it turns out that Hi-tech, transport and machinery companies burned on average €181k (about $230K) per month last year. On the other side, entertainment media and marketing burned only €16K (about $20K). Interesting to notice that our findings are in line with past burn rate articles, like How Much Cash Should Your Startup Burn and What is the Right Burn Rate at a Startup Company.

Expension-stage companies

The average company in expansion-stage in our database forecasts a burn rate of €1.6M (!) per month three years from now. This implies that, if the expansion continues, these companies are on the highway to large revenues and larger costs. Younger and less established companies forecast of course less costs for the months coming three years from now. For example, idea- and MVP-stage companies forecast on average a burn rate of about €108K per month in three years. This lower burn rate is in line with the expectations of these companies and with the fact that growing a company takes time.

Real estate wins the highest cost forecast crown

Looking at the data by industry, three years from now the companies that will have the highest burn rate are the ones in the real estate and engineering industry, burning about €1.5M per month according to their forecasts. On the low side, we find the creative companies, that expect a stable burn rate of about €45K per month on average, which is probably due to the fact that these companies require less investments. All in all, the data we saw from specific companies and reported in How Much Cash Should Your Startup Burn and What is the Right Burn Rate at a Startup Company are in line with what we, at Equidam, found. It is interesting however to investigate forecasts of growth and I am really looking forward to bring this type of exploration and research on data to you in future posts!

Note: This information is calculated on European data. Different costs and growth potentials are expected from our counterparts situated on the other side of the ocean. Stay tuned as we’ll publish more on this soon.