Raising millions of dollars from VCs is still the tech entrepreneurs’ dream. Entrepreneurs believe that a hoard of cash in the bank will give them the luxury of developing better products, marketing the heck out of them, and reaping the rewards with big sales and an eventual IPO. But more often than not, the money is a curse. When a company is running on a tight budget, it will usually perform far better than a company that is well capitalized. In my experience, having too much money always leads to bad habits.
First, the CEO will feel pressure from investors to upgrade the management team and bring in “grown up” supervision. This doesn’t always work out as planned. Seasoned managers want bigger salaries and larger chunks of equity. VCs usually expect a portfolio company to use a preferred headhunter to find the rockstar VP of sales. Naturally, the headhunter also wants an equity stake, on top of a finder’s fee in the neighborhood of six figures.
To read the full, original article click on this link: Startups: Poverty is Underrated. Be Glad That You’re Not Rich
Author: Vivek Wadhwa
