When an entrepreneur calls our loan-brokerage looking for a loan, the first question we ask them is how much money they are looking for and for what purpose?
Sometimes the answer is clear and precise. And often it is grandiose and hard to understand.

Some entrepreneurs are growing their businesses in small bite-sized steps. And others are reaching for the stars and sky, and trying to grab as much capital as they can as fast as they can.

What is your style? And which approach is better for your business?

I was struck by a recent tweet from the Inc #vision2020 event when @RandyKomisar of Kleiner Perkins said "Many companies die from choking on too much capital vs. starve from lacking capital". I would take it one step further to say that companies can also die from searching for too much capital as well.

There is such a thing as looking for too much money. And if you get more money than you need, being overcapitalized can lead to fatal mistakes. Let's explore both scenarios.
If you are hunting for more money than you need, or for a long horizon, there are two possible scenarios. First of all, it's likely that you will give away equity instead of debt. And this will be more expensive in the long run.

And secondly, there is an opportunity cost in the time it will take to raise the money. If your capital raise is abstract, the hunt for it will probably take much more time and can freeze your company. Because you're trying to raise too much money, sometimes everything else will slip.

If you push through and do get more money than you need, you will have another worry. Your judgement and decision making can become misguided by the money. Imagine a scenario when you have $10,000 or $1,000,000 to test a hypothesis. You will approach the experiment in completely different ways--and sometimes you can learn just as much faster with less money.

With lots of money, you will shoot for the stars quickly, and hire the best and the most expensive resources to get you there. If your initial thesis works, this could be great--but usually there is a flaw, and then you've wasted a fortune and can't duck and dive.

If you're scrappy and starved for cash--you will try to find a quick and inexpensive way to learn. It will lack the grandeur--but it could get you to the finish line faster.

I don't know Randy Komisar, but I think his advice is wise.

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