NEW YORK — On stage at the Silicon Alley Insider Startup 2011 event Fred Wilson revisited his debate about the “lean” startup versus the “fat” startup.
A “lean” startup raises the bare minimum of cash needed to get by, whereas a “fat” startup raises as much as possible to have a security blanket as it develops its business.
Wilson is a big supporter of the lean style and cited Union Square Ventures investment in Foursquare as proof that it’s the way to go.
Speaking with Henry Blodget, Wilson said “Gowalla raised $8 million and it didn’t do shit for them. They still got their arse kicked” by Foursquare, which only raised $1 million in its first round.
Gowalla and Foursquare were locked in a heated battle to win the war of check-ins a year ago. Today, Foursquare is the clear leader between the two. Wilson attributes Foursquare’s success to co-founder Dennis Crowley’s obssession with the location based space.
Foursquare is now out there looking for a much bigger round to accelerate growth.
This is the right strategy, says Wilson. Startups should be lean in financing as long as they’re lean in their userbase. Once a startup has 1 million or more users and it needs the cash to support that base, then it should be looking for more funding.