[PaulHoule]

Another harmful effect is that overfunded startups are "zombie companies"; the traditional zombie is an old-school business propped up by a government:

https://en.wikipedia.org/wiki/Zombie_company

However, an overfunded company that is propped up by investors can make competitors unprofitable. For instance, Uber giving out half-price taxi rides has been harmful to everyone in that business. (Of course Uber made a deal to only offer service in the NYC area in NY and ban ride sharing in upstate because Uber wouldn't want to waste half-price rides on people in Albany, Syracuse and Buffalo who won't help them IPO -- and they don't want competitors to emerge there.)