Between 2011 and 2021, approximately 8,000 startups were established in Israel. This is a very impressive number for a small country like ours and further proof of our well-earned title as the “Startup Nation.” However, the reality is that not every startup succeeds. Out of the 8,000 startups founded in the past decade, around 4,000 had closed by 2021. In other words, approximately 50% of the startups established in Israel in the previous decade had already shut down.

What’s interesting is the main reason behind the closure of these startups. Surprisingly, it’s not necessarily the quality of the product or its fit for the target audience. Product quality and fit are responsible for only about 35% of closures. It’s not even competition (20%), regulation (18%), or team-building issues (10%). The primary reason for startup closures is a problem with cash flow, leading to the closure of around 38% of startups. This means that the company runs out of cash, and it cannot continue funding its operations.

So, what can startups do to minimize the risk of burning through cash too quickly (Burn Rate)? We recommend that every startup (and indeed every company) starts managing a cash flow report. This report requires the finance department to input all expected and unexpected expenses of the company, including salaries, supplier costs, rent, travel, and more. The report should also include income from sales or fundraising, and constantly assess the balance against the company’s operational costs. Diligent completion of a cash flow report is expected to help the company’s management understand how much cash remains for continuing operations, and accordingly plan for fundraising, sales promotion, and other measures to increase the company’s cash flow.

As part of our work as an external finance department for many startups, we have acquired extensive experience in managing cash flow reports and developing financial strategies based on the insights provided by the reports. If you also want professional finance personnel to manage your company’s cash flow report, contact us.