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Paul Buchheit: Too Much Funding Before PMF Kills Startups

By Paul Buchheit · Fundraising · 2 min read

They gave Juicero $120 million before they ever talked to a customer. If Juicero had gone through YC and we gave them $120,000, they would have had to go talk to a customer and say — hey, we want to sell you this $700 juice bag squeezer.

Key Points

The cause of death for many startups is too much money — some could have succeeded if they weren't so well funded
Juicero got $120M before talking to a single customer — the fruit was already juiced, you were just straining it
Too much funding lets you live in a bubble of delusion — hiring, cool offices, conferences, up on stage like Thanos

If they get a huge round of funding before they have product-market fit, it kills the company. Going out and dealing with the fact that you don't have product-market fit is really painful.

The Cause of Death Is Too Much Money

Buchheit: One of the most surprising things I've learned working with so many startups is how often the cause of death is too much money. I think there are companies that if they had not been so well funded, could have been successful.

You don't want to spend too much time or too much money. You want to get it out there as quickly as possible and at as little cost. You don't want to spend too much time and money on the wrong thing — and you just don't know enough.

The most surprising thing: how often the cause of death is too much money.

Juicero: $120 Million and No Customers

Buchheit: The company I like to make fun of is Juicero — the $700 juice bag squeezing machine. They gave them $120 million before they ever talked to any customer.

If Juicero had gone through YC and we gave them $120,000, they would have had to go talk to a customer and say — hey, we want to sell you this $700 juice bag squeezer. We push so hard on startups: you have to go talk to your customers.

I cut open one of the bags. The fruit was already juiced. It was really just separating the pulp from the juice. You weren't even juicing it. The whole thing was built on a number of flawed premises.

If Juicero had $120K instead of $120M, they would have had to talk to a customer first.

The Bubble of Delusion

Buchheit: The problem with lots of funding before you're ready is you can sell yourself on an idea — oh yeah, once we build the perfect juice bag squeezer, we're going to take over the world. And you live in that delusion for years because you never had to go out and talk to customers.

Actually going out and dealing with the fact that you don't have product-market fit is really painful. It's easier to tell yourself stories — I'm hiring, I just hired a whole new team, we've got this cool office, we're working on cool technologies, I'm in the press, I go to conferences, I'm up on stage like Thanos. It's easy to be completely detached from reality because you're not out there selling.

Cool office, press, conferences, up on stage like Thanos — completely detached from reality.