Silicon Valley's biggest problem is that there's 'too much money,' says former Facebook executive

miley cyrus throwing money

It's easy for Silicon Valley startups to find money, which is causing problems of its own, say former Facebook and Foursquare execs.
Startups who take venture capital. often find that their investors don't have time to help them grow their companies in a meaningful way.
And even when investors do give advice, it might be colored by the fact that they have a financial interest in the startup.

Silicon Valley's growing wealth might not always be a good thing for startups.

In an interview with Business Insider, Josh Rahn, an early Facebook employee who helped the company hire nearly 200 people, said that the tech industry's increasing affluence might actually be quashing innovation.

"Cash is the commodity," said Rahn. "There's too much money."

Rahn has joined with other former Silicon Valley executives to form Oceans, a mentorship program for fledgling entrepreneurs.

If nothing else, says Rahn, it's stretching the venture capitalists of the world very thin: They're involved with so many companies, that they don't have much time or attention to lend their expertise and advice to any particular one in a meaningful way.

"Investors are too short on resources to be helpful to portfolios," said Rahn.

Steven Rosenblatt, the former president of Foursquare and an Oceans cofounder, agreed and called the abundance of money a "glaring" problem in Silicon Valley. Rosenblatt said that several founders had told him that their investors would try to solve their company's problems by simply applying another cash infusion.

"The reality is that money isn't the hard part anymore," said Rosenblatt. "Now it's harder to find skilled people to help founders solve big business problems."

One early-stage startup founder who asked not to be identified told Business Insider that this sentiment resonated with him as well. "Too many investors have too much money," he said. The founder said that in the past, he had advised other early-stage founders to seek out smaller firms for their first rounds of investment.

"There's so many people trying to invest in seed stage companies, and investors don't have enough time to spend with their portfolio companies," he said.

Whereas entrepreneurs may have looked to their investors or board members in the past for guidance, founders are discovering that their investors are increasingly strapped for time, which leaves them with nowhere to turn when making tough business decisions.

"It's so hard to build a company," the founder said. "There's so much responsibility. People want to turn to their investors because it makes sense, but they can't."

But even when those larger-scale investors do work with startups, Rahn said that money can complicate the relationship between investor and founder.

"The flipside is that when investors give money, they don't necessarily want to give honest feedback to the founder about issues or problems within the company," said Rahn.

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