PracticeConsultingCash burn rate for internet companies down to 18 months

Cash burn rate for internet companies down to 18 months

The cash burn rate, the length of time a company can survive before needing additional cash, now stands at 18 months according to PricewaterhouseCoopers, which has published its latest Internet 150 quarterly survey.

The figure for the previous survey, carried out three months earlier, stood at 20 months.

The news was particularly bad for business to consumer companies, who had a burn rate of just 16 months. The high cash burn rate is mostly blamed on companies still spending large amounts on marketing and advertising.

The Internet 150 also dropped over 60 points on the stock markets, underperforming the FTSE100, NASDAQ and TechMARK.

Business-to-business companies, often seen as the most successful area for dotcoms, lost over 50% of their value over the quarter.

Kevin Ellis, a partner in Pricewaterhouse-Coopers Business Recovery Services, said: ‘Given some of the high profile dotcom insolvencies last year, we might have expected belt-tightening from companies in the sector. Instead, the typical internet company increased spending on marketing and overheads by 11% in the third quarter, bringing the total spend to more than 150% of gross profits.’

More on the survey can be found on the PwC website.

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