Sadly it isn't an outlier for companies that get too much money. Under capitalized is an issue too though, companies that are too frugal can take too long to convert their idea to product and either miss a market window or allow a competitor to move in and dilute their market.
There is fundamental tension though between 'getting money' and 'getting things done' since nobody likes to go through the dance of raising money (it can be exhausting) the idea of getting enough that you don't have to do this for a while is quite seductive, but then seeing a big fat balance in the bank account can lead to lax decision making on purchases.
One of the most interesting things about the current crop of startup founders is that modest numbers in a seed round help them. They, like lottery winners, can become overwhelmed by the idea of having access to a lot of capital.
A funny (for me) anecdote, I was doing a financial transaction on a house and dealing with a banker who didn't know me nor I them. During the time I was moving funds around the computer system at the bank had a glitch and so part of it was done with a 'local validation' which meant I was signing a statement about the validity of part of the transaction without backup from the computer to confirm it [1]. I asked the banker if that was a problem and he thought for a moment and said "No, I can tell you've done this before." When I asked him how he pointed out that I was moving around six figure chunks of money and I wasn't nervous at all. Whereas people who weren't experienced were either hyper paranoid or excessively laid back in a sort of faux casualness. I remembered the first startup I did where I got to hold a million dollar check from our first investor and was incredibly nervous about it. I realized that seeing how people operated around big chunks of money was a great litmus test.
[1] Sorry about being so oblique, the transaction was complicated and not particularly germane to the story.
Comments
Sadly it isn't an outlier for companies that get too much money. Under capitalized is an issue too though, companies that are too frugal can take too long to convert their idea to product and either miss a market window or allow a competitor to move in and dilute their market.
There is fundamental tension though between 'getting money' and 'getting things done' since nobody likes to go through the dance of raising money (it can be exhausting) the idea of getting enough that you don't have to do this for a while is quite seductive, but then seeing a big fat balance in the bank account can lead to lax decision making on purchases.
One of the most interesting things about the current crop of startup founders is that modest numbers in a seed round help them. They, like lottery winners, can become overwhelmed by the idea of having access to a lot of capital.
A funny (for me) anecdote, I was doing a financial transaction on a house and dealing with a banker who didn't know me nor I them. During the time I was moving funds around the computer system at the bank had a glitch and so part of it was done with a 'local validation' which meant I was signing a statement about the validity of part of the transaction without backup from the computer to confirm it [1]. I asked the banker if that was a problem and he thought for a moment and said "No, I can tell you've done this before." When I asked him how he pointed out that I was moving around six figure chunks of money and I wasn't nervous at all. Whereas people who weren't experienced were either hyper paranoid or excessively laid back in a sort of faux casualness. I remembered the first startup I did where I got to hold a million dollar check from our first investor and was incredibly nervous about it. I realized that seeing how people operated around big chunks of money was a great litmus test.
[1] Sorry about being so oblique, the transaction was complicated and not particularly germane to the story.