How much funding does a startup need?

Great post from Marc Andreesen's blog: How much funding is too little? Too much?

Key take-aways:

How much money do you need in theory?

• Need enough money to get to PMF (product-market fit)
• Once you're past PMF, then you need enough money to fully exploit the opportunity

Risks of taking too little money

• May have unexpected setbacks (product release slips, competitor emerges, major customer loss, etc.)
• Funding window may not be open when you need money (startups from late '90s who raised money--like TellMe and OpenTable--are still around today, while their competitors ran out of cash)
  
• Global shock (e.g. terrorist attack)
  

Risks of taking too much money

• Dilution, loss of control
• Liquidation preference--raises the bar for how successful the company has to be
• Cultural corrosion

Cultural corrosion:

• Hiring too many people--slows everything down, makes it much harder to react and change
• Lazy mgmt culture
• Engineering team bloat
• Lack of focus on customers and products--easier to be completely focused on customers and products when you don't have a lot of money in the bank and you worry about the doors closing imminently
  
• Too many salespeople too soon--outselling a product that isn't quite ready yet, that hasn't achieved PMF--alienating early adopters and making it much harder to win them back when product is ready
• Product schedule slippage--what's the urgency? We have all this cash! Creating a golden opportunity for a smaller, scrappier competitor to emerge