Capital intensity measures how much capital a business needs to establish or operate relative to its activity or output. It helps investors compare the resources required to reach scale and profitability. section 12.3.3
Assess capital intensity alongside the cash demands and risks that shape a start-up:
- High capital intensity can require facilities, minimum staffing, specialized equipment, legal support, and regulatory work before the business can operate effectively. section 12.3.3
- Lower-capital businesses may begin with laptops, cloud services, and software licenses, reducing the initial funding required. section 12.3.3
- Pair the metric with burn rate and the path to profitability: high recurring spending combined with a long path to profitability increases risk. section 12.3.3
Biotech versus IT
A biotech start-up developing a vaccine may need a laboratory, staff, equipment, patent specialists, and regulatory expertise. An IT start-up building a messaging platform may begin with notebooks, cloud services, and mostly open-source tools. The comparison indicates different funding needs and risk profiles, not guaranteed investment outcomes. section 12.3.3
