What do these startups need so much money for?
justin: 1) Salaries. Many engineers, salesmen, etc who have been out of college for a year or two don't want to go back to making basically nothing. Yes, you can find talented people who will work for you for little, but it's going to take a long time to do so. It's lovely to think that every company should be able to bootstrap off ramen indefinitely, but it turns out that often times you find that in order to do all the things that need to be done you need to expand beyond the founding team, and, so sorry, those new mouths want to get fed.2) Capital expenditures. It's nice to run on EC2 for awhile, but it might not be the best hardware fit for your product. Similarly, it's nice to use Cisco switches and not crappy switches when you want your network to work at high volumes.3) Marginal costs. When you have millions of people using your site all the time, bandwidth, power, free tshirts you give new signups, etc all cost more and more money.For many companies that are pre-product/market fit, raising millions of VC might not make sense. But for many rapidly growing companies where there is a lag time between user acquisition and user monetization, something needs to fill in the gap. Guess what that is.