Annanth Aravinthan wrote a Twitter thread about starting UBER Eats. “Reflecting at my time at UBER, I do think it’s possible for start ups to have “too much capital”. I personally fell into two traps in retrospect…”
2/ When I first started Uber Eats didn’t have much of a budget. When faced with challenges (i.e. growth), the default question was, “how do we do this for free?”. The constraints forced creativity and capital efficiency. i.e. where would Zillow be without Zestimates?
3/ Over time this question turned into “how do we X with an unlimited budget?”. There *are* advantages to this question but you end up with an entirely different set of answers.
4/ i.e. one of our competitors which wasn’t as well funded but had to compete against our heavy price discounting figured out some very clever product hacks to get restaurants to pay for them. Their dollar went a lot further than ours (which became an issue once they got funding).
4/ The other issue is strategic planning. Strategy is about making trade offs in a world of finite resourcing (capital, time, etc). Due to constraints, you pick a user segment and develop a unique way of serving them. You then monopolize that segment and ladder up to a new one.
5/ But with too much capital startups regress to being everything to everyone everywhere. The result is a “peanut buttering” of strategy and execution and there’s the risk you lose to a more focused set of competitors who better serve their segments.
6/ So if your a startup I think there’s a real tension between raising large rounds vs keeping alive a spirit of ingenuity and strategic discipline. And what’s really helpful is setting the foundations of the latter while treating capital as “adding gasoline to the fire”.
PS. Since capital is commoditized, buying growth leads to obvious and easy to copy strategies and tactics. Ideas that are less capital intensive tend to more trivial and more likely to be dismissed and under appreciated by the competition = more dura low growth.”