If you don't take the money, they will go to your competitor, and give it to them instead.
If you're in a space where you can be killed by your competitor selling $1 for 90 cents, that will kill you just as dead.
It doesn't matter if Uber's popularity is a 'real' moat or not, as long as its a moat big enough to drown you.
Sure, a few years later, said competitor will make an announcement on their website about the conclusion of their 'magical journey', but that's not going to matter to you, is it?
Your competitor is getting funded whether you take the money or not. A failure to have planned for this is a de facto plan to drink the cool-aid.
My argument is that even as a vc with unlimited funds, overfunding a startup may be suboptimal. You paradoxically decrease its probability of success by misaligning the startup leadership’s incentives at a crucial pre product-market fit development stage.
His article is for 1% of entrepreneurs. For 99%, lean startups still works. And let's not act like investors spray and pray that they hit a unicorn. Of course it's good for their track record, but it's not like they don't ask questions before investing when you have the track record of Jeff Katzenberg.
There are a lot of MVPs out there to know the Netflix for mobile will work. Lean startup never said that the MVP had to be your own. Read my Medium article, I develop on the subject : https://bit.ly/2CxeT9z
Limiting and controlling growth seems like a difficult and dangerous proposition, particularly in an environment where there are competitors just waiting to perfect the idea and take it to market before you.
https://a16z.com/2017/02/18/12-things-about-product-market-f...
Instead of setting your best engineers to work creating the best product, they're busy recruiting and dealing with company growing pains from the get-go. The mythical man-month and scarcity of great people combine to diminish your returns on this hiring. Furthermore, battleships don't turn on a dime, and you may be hiring a lot of irrelevant expertise if you have to pivot later. This is why Stripe took 6 months to hire its first 2 people.
Furthermore, huge funding means investors are looking for a huge returns. A $1b sale is now failure?? My gut says this "go big or go bankrupt" pressure encourages tunnel vision among leadership rather than innovation.
Essential Products was overfunded in late 2015 and is already up for sale. I think Magic Leap and Desktop Metal will end up as similar cautionary tales.
I see good arguments for overfunding if (1) there's huge capital costs for development and high probability of large exit regardless of technology success (e.g. biotech) or (2) you're trying to capture a market with a strong network effect. The second case seems dangerous though, e.g. is Uber's popularity really a moat? What if they had spent their billions on developing a product with a real technological advantage instead of scaling to the world first?
As a huge fan of his book, I'm sad to see Steve Blank largely ignore these ideas in his article.