Money Problems
Cash is an fuel, but too much of it used poorly can blow you up
If you’ve run a startup before, you know 90% of the alpha is in correctly identifying the type of problem you face. There’s people problems. Customer problems. Regulatory problems. The list goes on.
One of the most common are money problems.
There’s two types of money problems:
“We don’t have enough money”; and
Problems you can throw money at to make go away.
Number 1 is a separate blog post. Today I’m focused on number two. Call them “Type 2” Money Problems. Here’s some examples:
Your supplier can’t ship for 4 weeks, but your customer needs the product in 3. Solution? Pay 2x to expedite it.
An engineer you needed yesterday doesn’t want to leave their stock options on the table? Give them a signing bonus to exercise.
Going to be late to a key meeting? Take an Uber. Unless you’re in NYC, then always just take the subway. It’s faster.
For startups that raise large rounds, it’s almost implied that an increasing proportion of the problems they face are Type 2 Money Problems. The assumption is that speed to scale and market position win, and that money solves that.
The challenge is being sure that’s the case and you’re not papering over another core deficiency of the company. No amount of money can paper over bad culture or leadership. No amount of money will fix hiring if the mission is uninspiring. And no amount of money can will materially accelerate the delivery of truly innovative technical solutions. Only talent and a culture of high iteration speed can do that.