@Emily — in my experience, too much funding can be a detriment because it’s hard to be disciplined. Entrepreneurs with lots of capital tend to be inefficient with how they spend it in ways that preclude progress that are hard to recognize from the inside. Limited funding, however, forces people to make swift, logical, practical decisions focused on showing measurable progress (e.g., revenue, growth) quickly — because without that progress you’re done. Now, having not enough funding is also a big limitation, since it can prevent you from going anywhere. I’ve seen plenty of examples of startups who don’t raise enough funds and/or are too hesitant to invest it the right way, and that’s just as bad. Some businesses have to invest heavily before they ever make a dime (e.g., pharmaceuticals). In these cases, my description of “make more money than you spend” doesn’t make any sense.

Would I take funding if I were building a web product? Yes. Provided the terms were fair and the relationship with the investors was right (i.e., they’re very patient, as Seth notes), I’d probably take as much as I think I need to last a year or two, then double that. Of course, like any good entrepreneur I’m confident that I’ll be different — that I’ll be able to be smart about how I spend that funding and get the benefit of both worlds (long-term financial stability along with the ability to invest in progress). The problem is that most investors aren’t that patient — they want to see a return on their investment (the nerve!) sooner rather than later. In the case of VCs, they want the multiple on that return to be significant. That inspires people to push for rapid growth. Sometimes it works, sometimes it doesn’t.

Every startup is different, so is every entrepreneur and every investor. I just think that ever entrepreneur — particularly during tough times — benefits from stepping back now and then and thinking practically about the fundamentals of how money flows through (hopefully more in than out) their business.