Having as large a pile of cash as possible might sound like a dream for any early-stage company. But the reality is that too much cash, too quickly, could be just as dangerous as too little, too late. The We Company, as everyone knows by now, has crashed (and partially burned) because of disastrous management decisions brought on in part from letting SoftBank pump billions upon billions into the company

Turbo-charged by SoftBank's investment, the We Company went from a groovy co-working chain with an untested but charismatic CEO to the largest office tenant in New York City, with a presence in 33 countries, in just over five years. Along the way its business crept into co-living, education, fitness, software, and, for some reason, wave pools. Once the We Company achieved global ubiquity, the thinking seemed to go, then it could figure out what sort of business it wanted to be. No wonder the company burned a reported $700 million per quarter

All of this meteoric--and chaotic--growth was overseen by Adam Neumann, who dreamed of becoming the first trillionaire, putting WeWorks on Mars, and serving as "president of the world." But it was enabled by SoftBank's Masayoshi Son, who apparently encouraged Neumann and his handpicked board to think bigger and bigger and grow ever more quickly, bottomline or business plan be damned. As one anonymous We exec told The New York Times, "You've got a guy who meets Adam for 10 minutes and cuts him a check for $4.4 billion, and it's just insane... And he's not told, 'I need you to be the most careful steward of this capital.' It's like, 'I need you to go crazier, faster, bigger and more.'" 

Meanwhile, Wag, a dog-walking startup also funded in part by SoftBank, has severed ties with the Japanese telecom and investment firm. Wag's founders had sought a $75 million round of funding back in January 2018 to grow their little company into a leader of a pack of dog-care companies that included Rover and Barkly. SoftBank decided to give them $300 million instead, along with a curse: Take this money, but then grow into a company worth $650 million--and fast. That meant Wag had to quickly expand overseas and move into grooming, food, veterinary care, and other lines of business that fell outside of simple on-demand dog-walking.

This month, Wag bought back 50 percent of itself from SoftBank and was forced to lay off many of its employees as it figures out its next move. Wag CEO Garrett Smallwood called the split amicable and told employees, "Both our management and our investors see an amazing future ahead for Wag as we refocus on delivering sustainable growth." 

Focusing on sustainable growth--what a concept! What's remarkable about Smallwood's statement is the tacit admission that his company's previous path was unsustainable. Like their SoftBank stablemates at We, Wag's founders got the Masa nudge, which probably felt less like a helpful turbo boost than like having someone smash your foot on the gas pedal as you drive. On a narrow and curvy mountain pass with other fast cars around you.  

Extreme though these two companies' experiences may be, they are in many ways just an exaggerated version of what goes on with venture-capital-backed companies all the time. Since VCs spread their own risk across so many startups, they can encourage each one to shoot for the moon (hence the beloved term of art) while still recouping their money if all but one or two of the rockets explode on the launch pad or crash into the sea. 

Venture capital is a hits business. One spectacular success in a VC firm's portfolio can pay for all the spectacular flameouts. This means the investors have every incentive to push their portfolio companies to grow to 10 or 100 times their size before being acquired or taken public. And the faster this can happen, the better--for the VCs, at least. They encourage founders to spend the money they raise quickly--often on expensive customer-acquisition efforts or aggressive expansions--without enough regard for unit economics. Founders and employees, meanwhile, risk mistaking their piles of venture cash for success.  

So, when someone backs a Brink's truck up to your office, should you take the money? It's not that venture capital is inherently bad, or that outside funding isn't often necessary to vault a business to the next level. The moonshot model can even work. But understanding the pitfalls is key.   

Founders, of course, have some thoughts on the matter.

"It's less about too much cash or too little cash--it's about the right amount of cash," says David Karandish, founder of Capacity, an A.I. company based in St. Louis. "Companies can get tripped up if they don't have enough capital, but if raising too much capital causes you to not focus, that's a problem. I don't think too much cash in and of itself is the problem--it's what you're gonna do with it." 

Karandish didn't seek venture backing for his company. Instead, he raised a $13.2 million round of funding from 70 investors, more than half of whom are based in Missouri, develop software that can help companies make a smarter knowledge base for employees. "The path that we went down allowed us to stay true to our vision," he says. "It also allowed us to bring on incremental capital to get to our next milestone." 

"It also gave us the options and flexibility to execute without having a potential misalignment between investor outcomes and operators. You have to get the right capital structure for the right stage of your business. There's no one size fits all."

Knowing what you want your company to be and how big a company you intend to be in a certain time frame is also essential. "If you lock down the long-term strategy first, it's better," says James Sagill, a co-founder of OpenPath, a Los Angeles-based office-access company. Sagill, a serial entrepreneur with several successful exits behind him, suggests asking yourself, "How quickly do I need to achieve this growth?" Then seek investors comfortable with your time horizon.

"If you want to build a war chest and sock away money, you know you're going to have to grow into that valuation," Sagill says. "If you can't grow into that valuation, don't take that money." Openpath currently has $27 million in funding for its Series B.

As another founder explained to me, it's like the old story of Goldilocks: Some funding is too big; some is too small; what a company really needs is to get it just right. Sure, getting the money is important, but that doesn't always mean getting the most money.