It’s hard to ignore the flood of capital cascading into startups right now—especially in Silicon Valley, and especially in AI.
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We’ve seen this movie before. The dot-com boom had all the same ingredients: too much money chasing too few truly scalable opportunities, founders caught up in the frenzy of growth-at-all-costs, investors lashing them to go faster before the IPO window closes—and eventually, a spectacular bust.

In fact we watched this same movie even more recently during the spray-and-pray investments in software startups during the pandemic economy of 2020-2022 — and who couldn't predict the record number of startup bankruptcies in 2023?
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This time, the storyline has a culinary metaphor. Some investors I follow have started calling this the “Foie Gras approach” to investing: stuff as much cash as possible down a company’s throat, and hope you end up with something rare and exquisite. The problem, of course, is that forcing too much too fast often kills the goose.

I love this analogy not because I happen to be a gourmand who loves foie gras but have avoided it ever since I learned about the cruelty of how its made, but because it rings so true in my experience. Startups need to be highly maneuverable speedboats — especially considering the daily transformation cadence of the AI industry. Laden them with a $5M/mo burn rate and they quickly become supertankers that can only adjust their course very, very slowly.

When I had my full-ride dot-com in 1999 I watched my competitors in Silicon Valley who got $50M+ rounds all hit the wall, while my meagerly funded startup got acquired at a 25-100x ROI for my employees and angel investors, depending on when they sold. Yes, ASP pages, client-server, and eventually what we now call "cloud" were transforming how much capital a startup needed, and how fast it could deploy a complex website... but that PALES in comparison to the shifting sands of today's AI technology. You have to ride the sandworms like Paul Atreides to keep up. Too much cash spend pressure can kill a startup's nimbleness and pretty soon it an go down like a spice harvester, with all on board meeting their untimely demise (your employees, investors and customers).
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When Money Hurts More Than It Helps

Yes, capital is essential. A startup without capital is like a sports car without horsepower—you won’t get far down the racetrack. The problem is that too much horsepower, in the wrong hands, sends you straight off the road.
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Here’s why:
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• Product, team, and go-to-market evolve together. Scale before the product is ready, and churn spikes. Customers won’t stick with something half-baked just because you blitzed them with ads.
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• Talent quality matters. Scaling with a "B team" is a recipe for hitting a wall. Execution risk compounds when growth exceeds organizational maturity, and when desks are filled without sufficient vetting of candidates because of the pressure to built headcount at light speed.
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• Metrics warp under pressure. Pour cash into customer acquisition channels and even strong metrics degrade. What looks great at a natural pace looks merely mediocre when forced.
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Too much money too soon destroys signal. Real customer insight drowns under the noise of artificial growth.
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Why Investors Still Do It

Now, let’s be fair. For investors who play a portfolio-wide power law game, the foie gras model does work—sometimes. If just one out of fifty companies turns into a unicorn, they make their math work, even if most of the rest suffer indigestion.

But here’s the rub: what makes sense for a fund’s economics can be disastrous for the founders and employees inside a single company. The farmer may be fine when the goose dies—but it’s not so good for the goose.

From inside the company, the result is often disillusionment. Teams that could have created real long-term value instead collapse under impossible expectations, while once-promising products flame out before reaching their true potential. I've had more than a few front row seat views of this phenomenon.

I'll never forget my first board meeting as an investor in a dot-com in 2000, when their cosplay lead VC who rapidly assembled a $50M fund from some boom-chasing CVC, pounded the table yelling at the quivering founder "If you don't get the burn rate up to $1M a month we'll fire you and find another CEO who will!!!!" Yeah, I lost 100% of that 6-figure investment when dot-bomb hit us only a few months later. That VC? 100% portfolio loss and left the industry entirely. The founder went back to being a CTO and never built another startup of his own... the stress was too much.
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The Founder’s Choice

Ultimately, the decision to accept (or resist) excess capital sits with the founders. And it’s a choice worth weighing carefully:
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• Are you truly that rare unicorn that can absorb massive capital and convert it into exponential growth, and is your team experienced enough to handle the velocity?
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• Or would your company—and your sanity—be better served by a measured pace, where product, team, and customers mature in sync?
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Don’t let the capital markets set your agenda. Growth at all costs is not a strategy; it’s a gamble. For most startups, the smarter play is deliberate, sustainable scaling—enough capital to seize opportunity, but not so much that you choke on it.
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Because in the end, it’s your company, your team, and your vision on the line. A VC can write off a dead goose and move on. Founders rarely get that luxury.
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At Venture Mechanics, we believe the healthiest startups are the ones that grow in rhythm with their product, team, and customers—not just their investors’ ephemeral appetite.