It’s not. The biggest risk is running out of time while still having money.
I’ve invested in companies that burned through $5M before realizing the business model didn’t work. Not because they were stupid. Because having capital created the illusion of progress.
They kept hiring. Kept building. Kept spending. The bank account went down, so it felt like they were doing something. But activity isn’t progress.
Meanwhile, the scrappy competitor with $200K in the bank? They had to figure out product-market fit in 6 months or die. So they talked to customers relentlessly. Iterated daily. Killed features that didn’t work. Shipped only what mattered.
Guess which one found traction first?
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Here’s the pattern I’ve seen across 200+ investments: capital is a multiplier, not a solution. If you don’t know what works yet, more money just means you’ll fail at a larger scale.
The best entrepreneurs I know treat runway like oxygen. You don’t waste it. You use just enough to learn what you need to learn, then you act on it.
Raising a big round before you’ve proven the model? That’s not ambition. That’s risk. You’re trading urgency for comfort. And urgency is what finds product-market fit.
The companies that win aren’t the ones with the most capital. They’re the ones that learn the fastest.
Capital is abundant. Clarity is rare. Don’t confuse the two.
Very good insight on one of the many risks with early stage companies.
Similar to the wisdom in this article, a guy once said to me – ” The more money you have, it takes longer to go through it ” !
Hi Dave,
That’s why we’re still in business. All of our investment was our own personal money, and we didn’t have all that much of it.
We listened to our users, but the problem wasn’t them; it was our prospects. They would tell us they’d definitely buy if we just added one more feature. They lied. Sometimes, we had to rip out that new feature because it interfered with development or marketing. That was a tough lesson to learn.
If a business team can run its business without outside investment, they should do so. It can be painful, but it keeps you focused.
Harry, well said. Too many entrepreneur-developers add features beyond the need of their base and create more work for customers, more for their support staff, and a confusing solution for their sales reps. Simplicity, ease of use, and most of all best fit for the client base wins. – Dave
Yep.
Hello Mr. Dave, you have just touched on a very important human aspect, I would even say human psychology: the illusion of progress or the impression of doing well.
There is the famous ‘I’ that easily projects this unreal feeling of success, of valorization to which is added the Ego, so this feeling of believing that money can solve everything, even make you love a product. It’s a human psychological pattern and when it manifests itself in entrepreneurship, you are in a better position to predict what will happen next.
Bonjour Monsieur Dave, vous venez de toucher un aspect humain très important, je dirais même de la psychologie humaine: l’illusion du progrès ou l’impression de faire bien.
Il y a le fameux ‘Je’ qui projette facilement ce sentiment irréel de réussite, de valorisation auquel vient s’ajouter l’Ego, donc ce sentiment de croire que l’argent peut tout régler, même faire aimer un produit. C’est un schéma psychologique humain et quand il se manifeste dans l’entrepreneuriat, vous êtes mieux placé pour prédire la suite.