

The ‘Too Rich to Succeed’ Challenge Facing Start-ups - r0h1n
http://knowledge.wharton.upenn.edu/article/what-happens-when-start-ups-raise-too-much-capital/

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softdev12
There's a clear difference between raising a lot of capital and spending money
foolishly. Just because a company finds it easy to raise large amounts of
capital, doesn't mean that it's necessarily a bubble-type phenomenon. It could
be the case, and probably is, that the company created a lot value and so was
able to raise the money easily because of said value creation.

Having a capital cushion is an effective strategy, especially if the market
does shift and the bubble becomes self-fulfilling.

The real issue is either around the need to quickly spend any raised capital
or a valuation problem created for the next round. These are the things that
management should focus on.

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jrometty
The only problem with early stage companies having a capitol cushion is the
decreased mandatory competitiveness.

It doesn't apply to everyone or even a majority, but some meaningful
percentage of young companies will lose focus when their runway is long enough
for them to slow down.

