So Today’s announcement that Veoh had raised another $26MM in funding reminded me of a blog post Kevin Burton made a year and a half back, titled “Venture Capital as a Bell Curve,” that had a ton of very dead-on, insightful points, such as:
Take a small hyped company and give them $50M and they’ll almost certainly blow it. Take a small team, ramp them up slowly, give them the right amount of money at the RIGHT time and they’ll be the next Delicious or Flickr.
Which is dead on, and for the most part (the small and hyped) is right. So here’s my question, does Veoh still qualify as “small” and “hyped”? I can look at Brightcove and the overwhelming amount they brought in, funding-wise, but look at where they want to go and who’s stuck to that company, and I can nod my head and agree with the path they’re on. But Veoh? Eisner’s there, Dmitri is a smart guy, but I just really wonder if this is a strategic investment (It’s Goldman Sachs leading, though…) or if they’ve actually managed to spend through $15MM in a year and a half. If that’s the case, on what?!
Now, the opposite of this point of view is true, too. If you underfund, and take so little that founders can’t pull paychecks (if they need them, obviously), you have to cut corners on hiring superstars, make poor choices on infrastructure and marketing due to resources, you’re inevitably setting yourself up for failure.
My comment previously was this:
Small startups biggest fear when looking into funding should *definitely* be getting overfunded. Not only does it make you fat/lazy, but it puts WAY more pressure on the team, especially the folks at the top — which in a smaller startup should be the ones really driving innovation. Having that much overhead to deal with can really kill the productivity and differentiation that put them in the place to get funding. The funding round is not the payoff, and folks need to stop looking at it as that. It should be the enabler towards the payoff.
Which still holds true today. I think funding should enable the business plan and allow the founders to focus on that. Not force them to eat Ramen and drink tap water, but not let them buy the mansion and Porsche (although, I’d take one, truth be told)
Now, what is that fine line? Ah, if only I had that answer. =)
