I think the root of overcapitalization is fear. People who can't face their fears, will look for ways to run away from their fears.
For a founder, that way is runway. The founder who is terrified about the company's future, will raise a lot of money to not think about that future. Money buys them time and time buys them distance. A clean, safe separation from reality where unpleasant voices like "do we have product market fit?" or "is our moat large enough?" can be ignored or saved for "later". A "later" that seems further and further away depending on the money raised.
Overcapitalization, in that sense, is meant as a security blanket, not a safety net. In that sense, the complacency and eventual corruption of the organization derives from the need for safety that executives and their managers subconsciously & naturally prioritize above all else.
On that note, I'm curious how Slack will fare over the next few years.
I don’t think it’s (generally) a question of “product-market fit” when raising $100M. It’s a question of “product-market domination”.
It’s not a bet that the product will be profitable and successful—that should be a given. It’s a bet on the company becoming the leader in a huge market.
That said, your larger point still holds :) And of course raising the stakes this way can also increase the risk of ruin.
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I think the root of overcapitalization is fear. People who can't face their fears, will look for ways to run away from their fears.
For a founder, that way is runway. The founder who is terrified about the company's future, will raise a lot of money to not think about that future. Money buys them time and time buys them distance. A clean, safe separation from reality where unpleasant voices like "do we have product market fit?" or "is our moat large enough?" can be ignored or saved for "later". A "later" that seems further and further away depending on the money raised.
Overcapitalization, in that sense, is meant as a security blanket, not a safety net. In that sense, the complacency and eventual corruption of the organization derives from the need for safety that executives and their managers subconsciously & naturally prioritize above all else.
On that note, I'm curious how Slack will fare over the next few years.
I don’t think it’s (generally) a question of “product-market fit” when raising $100M. It’s a question of “product-market domination”.
It’s not a bet that the product will be profitable and successful—that should be a given. It’s a bet on the company becoming the leader in a huge market.
That said, your larger point still holds :) And of course raising the stakes this way can also increase the risk of ruin.
You are correct. I've adjusted my comment to not confuse my point.