Think securing a boatload of venture capital guarantees a startup success? Obviously, some funding is essential; what may not be obvious is that too much cash can bury the company its supposed to buoy.

“Money rarely makes the company,” said Sunil Dhaliwal (pictured, right), general partner at Amplify Partners.

Generous early investments cannot shore up a company against the whims of the market. Taking the long view is essential for a company charting its business plan, according to Dhaliwal. “What does this market look like way down the road, and is that a thing that can stand alone?” he asked.

Dhaliwal joined Nick Sturiale (pictured, left), managing partner at Ignition Partners, during an interview at the AWS re:Invent event in Las Vegas, Nevada. They spoke with John Furrier (@furrier), host of theCUBE, SiliconANGLE Media’s mobile livestreaming studio. 

The notion that venture capitalists can predict which companies will blow up is also bunk, Sturiale stated. “That’s all BS,” he said. “If you knew that, that market would be gone already.”

The business models of most successful companies today barely resemble the ones their investors initially backed, according to Sturiale. What got these companies to where they are? A million good things that happened along the way, serendipity and the sweat and toil of management and employees, he explained.

“So this idea that things are preordained is just silly,” Sturiale added.

Too much of a good thing

There are also hidden dangers lurking in that pile of fat VC checks, Dhaliwal warned. “When you raise a ton of capital, your options start to shrink,” he said. Entrepreneurs can become slaves to investors who expect specific outcomes that may limit innovation and experimentation.

Capital efficiency is a hallmark trait of a lot of successful companies. One example is Datadog Inc., a monitoring service for cloud-scale applications. This startup has barely touched the last two rounds of capital it raised, Dhaliwal pointed out.

Big data analytics company Splunk Inc.’s capital efficiency led to its highly successful IPO. “If Splunk was started today, the investor community would have killed it,” Sturiale said. “Eighteen Brink’s trucks would have backed up and dumped a billion dollars on top of it and buried it in too much money without allowing the company to get the time to become a fully viable system.”

Watch the complete video interview below, and be sure to check out more of SiliconANGLE’s and theCUBE’s coverage of AWS re:Invent.

Photo: SiliconANGLE