[potatolicious]

IMO there are a vast number of problems caused by overfunding that can compromise a company. Other users have already brought up some.

But the one most salient in my mind is that overfunding removes the pressure to ship.

I've seen this often from repeat entrepreneurs who are able to secure a large amount of financing for their new ventures, and wind up bikeshedding over the perfect product.

Instead of releasing quickly and iterating quickly, the immense amount of cash causes the company to move more slowly than they otherwise would.

Overfunding also bypasses some of the sanity checks that are supposed to exist in the VC system - that a company receives enough funding to get to some future milestone that demonstrates success. A bank account flush with cash removes the need to justify your own existence to investors on a regular basis, and causes companies to not realize strategic errors until it may be too late.