It's obvious how too little money could kill you, but is there such a thing as having too much?

Yes and no. The problem is not so much the money itself as what comes with it. As one VC who spoke at Y Combinator said, "Once you take several million dollars of my money, the clock is ticking." If VCs fund you, they're not going to let you just put the money in the bank and keep operating as two guys living on ramen. They want that money to go to work. [6] At the very least you'll move into proper office space and hire more people. That will change the atmosphere, and not entirely for the better. Now most of your people will be employees rather than founders. They won't be as committed; they'll need to be told what to do; they'll start to engage in office politics.

When you raise a lot of money, your company moves to the suburbs and has kids.

Perhaps more dangerously, once you take a lot of money it gets harder to change direction. Suppose your initial plan was to sell something to companies. After taking VC money you hire a sales force to do that. What happens now if you realize you should be making this for consumers instead of businesses? That's a completely different kind of selling. What happens, in practice, is that you don't realize that. The more people you have, the more you stay pointed in the same direction.

Another drawback of large investments is the time they take. The time required to raise money grows with the amount. [7] When the amount rises into the millions, investors get very cautious. VCs never quite say yes or no; they just engage you in an apparently endless conversation. Raising VC scale investments is thus a huge time sink—more work, probably, than the startup itself. And you don't want to be spending all your time talking to investors while your competitors are spending theirs building things.

We advise founders who go on to seek VC money to take the first reasonable deal they get. If you get an offer from a reputable firm at a reasonable valuation with no unusually onerous terms, just take it and get on with building the company. [8] Who cares if you could get a 30% better deal elsewhere? Economically, startups are an all-or-nothing game. Bargain-hunting among investors is a waste of time.

As a founder, you have to manage your investors. You shouldn't ignore them, because they may have useful insights. But neither should you let them run the company. That's supposed to be your job. If investors had sufficient vision to run the companies they fund, why didn't they start them?

Pissing off investors by ignoring them is probably less dangerous than caving in to them. In our startup, we erred on the ignoring side. A lot of our energy got drained away in disputes with investors instead of going into the product. But this was less costly than giving in, which would probably have destroyed the company. If the founders know what they're doing, it's better to have half their attention focused on the product than the full attention of investors who don't.

How hard you have to work on managing investors usually depends on how much money you've taken. When you raise VC-scale money, the investors get a great deal of control. If they have a board majority, they're literally your bosses. In the more common case, where founders and investors are equally represented and the deciding vote is cast by neutral outside directors, all the investors have to do is convince the outside directors and they control the company.

If things go well, this shouldn't matter. So long as you seem to be advancing rapidly, most investors will leave you alone. But things don't always go smoothly in startups. Investors have made trouble even for the most successful companies. One of the most famous examples is Apple, whose board made a nearly fatal blunder in firing Steve Jobs. Apparently even Google got a lot of grief from their investors early on.

When I said at the beginning that if you make something users want, you'll be fine, you may have noticed I didn't mention anything about having the right business model. That's not because making money is unimportant. I'm not suggesting that founders start companies with no chance of making money in the hope of unloading them before they tank. The reason we tell founders not to worry about the business model initially is that making something people want is so much harder.

I don't know why it's so hard to make something people want. It seems like it should be straightforward. But you can tell it must be hard by how few startups do it.

Because making something people want is so much harder than making money from it, you should leave business models for later, just as you'd leave some trivial but messy feature for version 2. In version 1, solve the core problem. And the core problem in a startup is how to create wealth (= how much people want something x the number who want it), not how to convert that wealth into money.

The companies that win are the ones that put users first. Google, for example. They made search work, then worried about how to make money from it. And yet some startup founders still think it's irresponsible not to focus on the business model from the beginning. They're often encouraged in this by investors whose experience comes from less malleable industries.

It is irresponsible not to think about business models. It's just ten times more irresponsible not to think about the product.

Nearly all programmers would rather spend their time writing code and have someone else handle the messy business of extracting money from it. And not just the lazy ones. Larry and Sergey apparently felt this way too at first. After developing their new search algorithm, the first thing they tried was to get some other company to buy it.

Start a company? Yech. Most hackers would rather just have ideas. But as Larry and Sergey found, there's not much of a market for ideas. No one trusts an idea till you embody it in a product and use that to grow a user base. Then they'll pay big time.

Maybe this will change, but I doubt it will change much. There's nothing like users for convincing acquirers. It's not just that the risk is decreased. The acquirers are human, and they have a hard time paying a bunch of young guys millions of dollars just for being clever. When the idea is embodied in a company with a lot of users, they can tell themselves they're buying the users rather than the cleverness, and this is easier for them to swallow. [9]

If you're going to attract users, you'll probably have to get up from your computer and go find some. It's unpleasant work, but if you can make yourself do it you have a much greater chance of succeeding. In the first batch of startups we funded, in the summer of 2005, most of the founders spent all their time building their applications. But there was one who was away half the time talking to executives at cell phone companies, trying to arrange deals. Can you imagine anything more painful for a hacker? [10] But it paid off, because this startup seems the most successful of that group by an order of magnitude.

If you want to start a startup, you have to face the fact that you can't just hack. At least one hacker will have to spend some of the time doing business stuff.

Fights between founders are surprisingly common. About 20% of the startups we've funded have had a founder leave. It happens so often that we've reversed our attitude to vesting. We still don't require it, but now we advise founders to vest so there will be an orderly way for people to quit.