Startup general interest

The dangers of raising too much money

By October 6, 2014 4 Comments

Last week Marc Andreessen fired off one of his now famous Tweetstorms about the problems that having too high a cash burn can bring. These are the money tweets (if that’s a thing..):

Screen Shot 2014-10-02 at 20.42.12

Marc was talking about large companies with huge burn rates, but they also apply at the earlier stages. I regularly get asked about the dangers of raising too much money, and these tweets nail it. Investors will only invest a lot of money if they’ve been sold a plan that needs it. Hence once the money is raised the burn will go up, and if that’s premature then the problems above ensue.

Mark Suster recently wrote a good post on this subject. His advice to startups is to raise at the upper end of normal. That’s good advice.