I was imagining a combination of metrics (and a heavy use of the Crunchbase API) that would allow you to guess their burn rate and cash remaining. Could be pretty cool. Maybe someone wants to build it?
What are the implications of Techstars under-reporting the deaths of their startups? Not to knock 100K in notes (and the other benefits of being in a reputable accelerator) but these statistics vastly overstate the positive impact of Techstars.
As for Crunchbase, they could do a reasonably good job of catching the death of startups by running a check every six months for basic social media updates. While it might be premature to call a quiet startup dead, they could include a line to call a startup "inactive."
I think the issue is that the cheap cost of operating infrastructure for most small tech startups means a lot of deadpool candidates continue to live on longer than they should. The duration of existence might expand courtesy of how far $100k (etc) goes, but the number of failures will trend toward the average given enough startups.
IMO it's pretty easy to keep most startups going in a low-burn mode. The hard part is scaling back from high-burn to low burn, but assuming you can do that, you can probably find a way to keep the domain registered, minimal service operating, etc. -- assuming whatever you're selling is at marginal profit instead of a loss.
Worst case, do consulting or get a day job.
It gets complicated when you've taken outside investment, but I suspect any rational investor will convert to equity rather than liquidate. The real cost is opportunity cost for the people who remain involved (usually founders, although sometimes employees switch from salary with small equity to a much larger equity stake).
This is what I like about old-fashioned business. You can tell when the business is a failure: you are no longer able to meet your obligations to creditors.
Usually this happens when you run out of cash. It's one thing to have a solvent balance sheet where assets handily outweigh liabilities. It's another entirely when bills fall due and you have no cash to pay them.
The classic example, to me, was SiCortex. They had a fantastic future A/R on sales pipeline in a growing segment. But they were also slowly moving from cashflow negative to cashflow positive, which meant they needed regular injections of cash to execute their plan. The GFC struck and cash stopped being invested; and that was that.
This particular example sticks in my mind for two reasons. The first was because it was such a vivid illustration of income vs cashflow. The second because of the amount of beard-stroking BS about how they were a victim of x86 blah blah blah. Seriously, no. They ran out of cash.
And generally that's what happens. The difference now is that lots of startups have short cashflow cycles. If they bill, they bill monthly. If they're on advertising, it's probably paid monthly. They frequently use Pay-As-You-Go services to run their business, and most PAYG providers bill ... monthly.
So when the cash runs down to zero, there's really only a month of obligations to meet. In fact you can bail out a month earlier and never have to go through the very unpleasant and often very public insolvency dance.
Meanwhile, most conventional businesses have lots of long term A/R and long term A/P. Cashflow is locked in months in advance, so if and when a crunch arrives there's very little to be done about it except to go to a bank or investor with a cap in hand. Sometimes they say "no", or worse, "we've already given you $X, and now we want it back no matter what". Boom, you're insolvent and people can see it because your creditors took you to court.
