“we don’t build services to make money; we make money to build better services.”

One of the interesting, and to me surprising nuggets, in the information from Silicon Valley Bank just before the bank run was that “client cash burn has remained elevated and increased further in February”. Given the environment since Q1 2022 it is surprising that the aggregate cash burn for startups had not come down significantly since last year.

Especially as the public technology companies has gotten religion about profit margins and lower costs, as exemplified by Meta’s second round of layoffs (10,000 more in addition to 13,000 in November) announced today in a letter from Mark Zuckerberg.

Zuckerberg’s letter is interesting read about higher efficiency and developer productivity, the value of less complex organisation on speed, being a technology company first, value of work relationships on performance and new hires in the office performing better than remote workers. Meta is better than most companies at making money, but I think the quote “we don’t build services to make money; we make money to build better services” is an idea fit for all companies.

The letter gives me the sense that founder-CEO Mark Zuckerberg is back and running the company more hands-on and shaping its future. If that is enough given all of Meta’s challenges remains to be seen. However, with both Facebook and Twitter (in a much more chaotic way) lowering costs significantly, I’d be surprised if “client cash burn remains elevated” by the end of the summer.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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