Why Less Is More for Startups

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Hard-Learned Lessons

Yes, sales folks should be hungry. But they should also take a long-term view on customer relationships and push for profits rather than top-line growth.

Third, outside money means that founders spend less time thinking about customers and more time thinking about keeping the board of directors happy. Founding management is invariably far closer to the customers than the board. And the more time and focus management can direct toward customers, the better. The outside money blurs the perception of who pays the bills. In the short run, it may actually be the VCs who just sunk a chunk into the company. But in the long run, it's always the customers.

I experienced much of the above as a startup CEO. As soon as the big venture money came in, I began spending way more time than I should have worrying about justifying my actions and focusing on the results I would report every quarter in our board meetings. That took away from my focus on making my customers successful. We had to accelerate our development plans and to diversify our product portfolio as we had promised we would do with the money we raised. Ultimately, the outside money made it harder for me to do my job.

Hungry Teams Get Results

None of this is to say that a board and talented VCs can't be a huge asset. And sometimes a big injection of capital is required for fast growth. Bringing in rock star management can give a company added boost and lift fundraising if, for example, the company is truly running on fumes and is almost out of options. Both helped me, to some extent.

But I will still take an inexperienced, hungry, cash-strapped startup team over a well-oiled team of Google (GOOG) or Microsoft (MSFT) veterans any day of the week. Hungry companies figure out ways to keep eating because they don't know whether there will ever be another meal. Industry veterans and serial entrepreneurs worry less about failure and are therefore more likely to fail. This, in a nutshell, is why it's so hard to find examples of people who have grown more than one company to considerable size.

And this is also why less money means more chances for success at most startups. So don't worry if you think you don't have enough capital. Instead, be grateful for the sense of urgency.

Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University. He is an entrepreneur who founded two technology companies. His research can be found at www.globalizationresearch.com. Follow him on Twitter "@vwadhwa".

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