I love this 2010 piece from Ben Horowitz, titled “The Case for the Fat Startup.” It gets into the nitty gritty of strategic decision-making in the face of competition and changing capital market dynamics during the time period that spanned the dot-com bubble through the GFC.
We’re seeing these dynamics play out again today. While capital isn’t the ends, it is increasingly becoming the means. After two decades of venture being (mostly) about being lean and high growth, we’re pretty clearly headed towards a market where startups need to be well-funded and strategic in the pursuit of that same high growth.
Two gems from the piece:
“There are only two priorities for a start-up: Winning the market and not running out of cash. Running lean is not an end. For that matter, neither is running fat. Both are tactics that you use to win the market and not run out of cash before you do so.”
“In an economic boom, cash is great, but not necessarily a meaningful competitive advantage. If every company is well funded, being super-well funded doesn’t help you win. In fact, being super-well funded can actually screw you. But in a bust (like the one we were in), having a lot of cash can be a huge competitive advantage because you can use that cash to put enormous pressure on your underfunded competitors.
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