Raising a pile of cash is a huge blessing for entrepreneurs. But it can also be a serious curse.
When entrepreneurs suddenly have a wealth of capital to grow their business, the decisions about how to invest that capital become difficult. As an entrepreneur, it’s often hard to know whether you’re building value or just burning cash with your “investments.” The line between burning and building becomes blurry because the success of those investments plays out over many months or years. In the meantime, you’ve got to hit numbers and keep your investors happy.
A very interesting place where this burn vs. build dichotomy plays out is in the fast-growth, land-grab mode of customer acquisition.
VCs invest because the company has fast-growth potential. In hot markets and a hot economy, the game accelerates and investors want to scoop up customers as fast as possible. And, of course, management wants to grow, too. But frequently, aggressive growth brings fulfillment problems and a host of management nightmares. All too often, the result of aggressive customer acquisition is a cash bonfire.
To read the full, original article click on this link: Burn vs. build: Putting your VC money to work | VentureBeat
Author:Clate Mask
