If you spend much time reading about startup companies or you work for or own a startup you’ve heard the common refrain that a lack of cash is holding the company back. Blaming a lack of cash may be a problem for some companies, but many times it’s not the root of the problem and blaming money distracts entrepreneurs from facing real issues in their business. However, if your company is flush with cash then you can have the same problem as having too little funding and miss the forest for the trees and end up blowing through your early capital without facing down tough decisions about your product.
It isn’t hard to understand why new entrepreneurs, and even seasoned entrepreneurs focus on money early on in their venture’s lifetime. With so much money flying around from VC’s and angel investors seed funding is easier than ever to obtain. Many entrepreneurs want to grab cash when they can and figure out the details of the business later. This strategy often backfires because it’s important for entrepreneurs to know the strengths and weaknesses of their business and how to fix them on a shoestring budget instead of throwing money at the problem.
Another problem with chasing cash is that it takes valuable time away from the entrepreneurs to focus on their business. Raising money can be a full time job and if you aren’t paying attention to your business while you’re out looking for money things can get even more complicated. Angels and VC’s can demand a lot of your time in meetings and consulting sessions that again will pull an entrepreneur’s attention away from their business. Without having to explain your decisions to your investors you can stay nimble and make decisions quickly.
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