<story><title>A unified theory of VC suckage (2005)</title><url>http://www.paulgraham.com/venturecapital.html</url></story><parent_chain><item><author>yashap</author><text>&amp;gt; The huge investments themselves are something founders would dislike, if they realized how damaging they can be. VCs don&amp;#x27;t invest $x million because that&amp;#x27;s the amount you need, but because that&amp;#x27;s the amount the structure of their business requires them to invest. Like steroids, these sudden huge investments can do more harm than good. Google survived enormous VC funding because it could legitimately absorb large amounts of money. They had to buy a lot of servers and a lot of bandwidth to crawl the whole Web. Less fortunate startups just end up hiring armies of people to sit around having meetings.&lt;p&gt;I really saw this at the first startup I worked at. We did a massive VC round (I think the largest in Canadian tech history?), hired like absolute crazy after it. The company got bureaucratic and bloated, lost the ability to move quickly and efficiently, and never got it back.&lt;p&gt;I still loved working there for the coworkers, management and interesting problems, but I don’t think the investment was good for the company long term. A company of ~150 people grew to ~1000 in a year, but I think the 1000 people got less done, with a lot less agility, than the 150. Not out of laziness, just too many people for the size of the business problem, which led to a lot of unnecessary communication&amp;#x2F;coordination overhead. Even disregarding the salary costs, I think had we stayed a lot smaller&amp;#x2F;leaner, we would have been able to move a lot faster, be more innovative, and ultimately become a larger&amp;#x2F;more successful company.</text></item></parent_chain><comment><author>fossuser</author><text>Is it possible to take the money and just not do any of that?&lt;p&gt;Just increase your runway?&lt;p&gt;I’d guess it’s socially impossible even if it’d be legally allowed.&lt;p&gt;PG alludes to this idea with the treasury comment, but I really wonder about it. Maybe your investors would hate you, but it’d be a pretty comfortable move.</text></comment>
<story><title>A unified theory of VC suckage (2005)</title><url>http://www.paulgraham.com/venturecapital.html</url></story><parent_chain><item><author>yashap</author><text>&amp;gt; The huge investments themselves are something founders would dislike, if they realized how damaging they can be. VCs don&amp;#x27;t invest $x million because that&amp;#x27;s the amount you need, but because that&amp;#x27;s the amount the structure of their business requires them to invest. Like steroids, these sudden huge investments can do more harm than good. Google survived enormous VC funding because it could legitimately absorb large amounts of money. They had to buy a lot of servers and a lot of bandwidth to crawl the whole Web. Less fortunate startups just end up hiring armies of people to sit around having meetings.&lt;p&gt;I really saw this at the first startup I worked at. We did a massive VC round (I think the largest in Canadian tech history?), hired like absolute crazy after it. The company got bureaucratic and bloated, lost the ability to move quickly and efficiently, and never got it back.&lt;p&gt;I still loved working there for the coworkers, management and interesting problems, but I don’t think the investment was good for the company long term. A company of ~150 people grew to ~1000 in a year, but I think the 1000 people got less done, with a lot less agility, than the 150. Not out of laziness, just too many people for the size of the business problem, which led to a lot of unnecessary communication&amp;#x2F;coordination overhead. Even disregarding the salary costs, I think had we stayed a lot smaller&amp;#x2F;leaner, we would have been able to move a lot faster, be more innovative, and ultimately become a larger&amp;#x2F;more successful company.</text></item></parent_chain><comment><author>chii</author><text>&amp;gt; 1000 people got less done, with a lot less agility, than the 150.&lt;p&gt;too many chefs, not enough cooks.</text></comment>