Does Big Funding Slow down Start-up's Pace of Innovation?

Bangalore: “Why can’t we build it faster?!” This is a question which almost every entrepreneur asks himself daily. The constraint of capital can serve as an excuse for slow growth until his company raises funds. But it is found that after getting funded, for one year at least, the growth further slows down. This can be very frustrating for the founders who raised the money.

Let us explain this slowing down process using a real life example.  Those who have ever noticed the construction of a building would have seen that for the ¾th of the construction period, there is nothing to be seen above the ground level. There is just a big hole with hundreds of yellow-capped guys working in it. Then in the next few months out of nowhere a tall building emerges out. Actually they had been investing their time and efforts to make the foundation strong. And from the outside it seems that nothing is being developed.

The same thing happens with start-ups. For first few months after getting capital, the foundation is being strengthened. This makes the way to a successful enterprise in the future. But what actually happens in that period of time? Co-founder of SEOmoz and Inbound.org, Rand Fishkin explains:

1. Doubling the Team Halves the Speed (temporarily)

Growing the team in the initial stage seems like more great stuff will be developed, but the reality’s more complex. Each new member on the team takes up significant time from current members in hiring loops, training, and the creation of documentation. This gives an initial decrease in the production speed.