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- ♞ Is too much money bad?
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Is too much money bad?
The idea of raising too much money is something that many founders laugh at. As someone who spent much of my early career as a startup founder, I always felt that anyone who advised against raising too much had never tried running a company with no money.
Despite this, as I’ve been around more companies and grown more as an individual, I’ve started to see the downsides and challenges that come with raising too much money, so let’s discuss these…
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Removed Pressure - When you are constantly fighting for your life you tend to produce incredible things. Many companies go through a lul after raising funding. It often feels like a massive achievement has been hit, and when that steam valve releases, it can deflate the company. It’s vital that when you raise, especially if it’s a large enough amount to truly take pressure off your need to perform, you need to find other ways to move yourself forward.
High Expectations - One of the biggest challenges when you raise too much is that if you need to raise more money in future, it will often need to be at a larger valuation and larger sum than your past round. Each round you raise creates a floor for the next, so the bigger you raise, the bigger the challenge will be the next time around.
Wasteful Spending - Lots of founders start to spend on things that don’t contribute to improving the company when they have the cash in the bank. It’s key that no matter how much you have, you continue to spend with a strong philosophy and strategy behind each dollar.
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