Entrepreneur

Can having too much capital be a problem?

Have less funding than your competitors? Good!

I often talk with young entrepreneurs who are struggling to raise money to keep their startup going. They are typically high achievers who have never failed at anything in their life. I often joke that running out of money isn’t failing: Failing is raising $100 million and turning it into $0. The funny part about capital is that having too much can be a problem just like not having enough, as Seth Levine says in this blog post. There is an optimum amount of capital for pursuing a given market opportunity. If the market is still developing, then additional capital is often wasted – or even worse: It causes the company to lose focus and pursue many different markets. The CEO’s job is to provide the right amount of capital at the right time.  

Engineers as Founders and CEOs?

“Building and running a business is very hard, and doing it well is an act of craftsmanship no less sophisticated than engineering.”

Image courtesy of Flickr user Victor1558
Image courtesy of Flickr user Victor1558

PandoDaily contributor Bryan Goldberg said this recently in a post about engineers who want to start their own companies but often underestimate the expertise and skills needed to succeed: Your 2013 resolution: Come to terms with being “only” an engineer. I often meet really talented and smart engineers who have become frustrated with the way their companies are managed. They feel that they can’t accomplish anything significant within the current management environment. They complain about meetings and bureaucracy getting in the way of their real work. They make the decision to take an idea they have and strike out on their own. They are convinced they won’t make the same mistakes their previous employer made.

All of this is great, and I encourage entrepreneurship in all its forms (I am an engineer by trade). The one problem these engineers often run into is this: Knowing what NOT to do is not the same thing as knowing what to do. There are a million different individual ways to fail, but true success requires that you do many things consecutively right. The vast majority of the time, successful startups have two founders: Typically, one is technically focused and one is more business oriented. If these engineers don’t find a business partner, they often micro-manage every decision in order to avoid making the mistakes of their past employer. Unfortunately, most of these decisions are in areas where they have absolutely no experience or expertise.

Companies that are run in this manner – even if they get off the ground – never reach their full potential, because the founding engineer thinks he has to fully understand every issue to make a decision. As Bryan’s article points out, engineers can be CEOs just like anyone else, but just because you are smart, don’t think being a CEO is easy. I encourage you to read his full article here.