Venture capitalist says start-ups are ‘burning through cash’

Marc Andreessen said Silicon Valley start-ups are burning through cash at an alarmingly rapid rate and may be putting themselves at risk of failing when the market shifts.

"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 vaporise," Mr Andreessen, co-founder of venture capital firm Andreessen Horowitz, said in a Twitter post yesterday.

Mr Andreessen joins a growing chorus of investors warning of a looming bubble in Silicon Valley, where venture capitalists are competing to find and fund start-ups.

In the first half of the year, 14 US technology companies were valued at $1 billion or more, more than double the total for 2013, according to researcher CB Insights.

Mr Andreessen said startups can get caught up in a false sense of security when they start to hire staff and move into better offices. “Lots of people, big shiny office, high expense base = Fake ‘we’ve made it!’ feeling. Removes pressure to deliver real results,” Mr Andreessen tweeted.

“More people multiplies communication overhead exponentially, slows everything down. Company bogs down, becomes bad place to work.”

Bloomberg