Do you think overfunding can be a detriment to a startup?

6 points by aabreu 5 years ago | 6 comments

If a startup has very little money, they are forced to laser-focus on one thing and to make things simple. An overfunded startup may lose focus and overcomplicate, over-hire, and end up delivering later than if they had been underfunded.

What do you think?

codingdave 5 years ago |

It is even more dangerous than that - the more that gets invested, the more return is expected. You lose the luxury of staying small and simple because the investors will push you for a bigger exit, not a "lifestyle" company. Being a solidly profitable company is no longer good enough.

codegeek 5 years ago |

You can overfund but if you use it wisely, you may be ok. Just don't spend it too casually. But yea, the more funding you take, the more your investor are pushing for a high valuation and sometimes it gets crazy. I saw someone pitch a product on SharkTank with a $11 Million valuation and the product is still in research/pre-production. The argument was that they had already raised tons of money pushing the valuation to some crazy number.

hansor 5 years ago |

All depends on money management IMO.

For me its hilarious how come some companies are able to burn 100M$ and not deliver anything.

Small surgical teams with strict money management will never burn such amount of money - so they survive and deliver the product.

IMO 90% of startups fail because of irresponsible money management and bad contracts(delayed payments, extreme penalties for being late etc.)

rajacombinator 5 years ago |

Absolutely, but it’s one of those first world problems that I wouldn’t mind having!

cosmodisk 5 years ago |

Absolutely. When you run on 'just about' money, people get creative,they come up with novel ideas( tech, marketing,etc). When you get tons and tons of money and most of it is not yet needed,quite often it gets spent on absolutely stupid things+ the mentality changes too,as you no longer care about any costs

PaulHoule 5 years ago |

Yes. So is underfunding.