The story of Color Labs shows how receiving too much money too soon can harm a startup. The company raised $41 million before launching its app in 2011 but quickly failed after focusing on growth instead of fixing product issues. Research from UT Austin and Harvard Business School, based on more than 11,800 U.S. tech startups, found that the timing and size of first investments strongly shape innovation.
Key findings include:
- Later funding encourages more experimentation.
- Larger investments lead to broader tech use but less originality.
- The track record of investors influences how flexible and innovative startups remain.
Professor María Roche advises founders to carefully consider investors’ tolerance for risk, preferred exit strategy, and history of supporting innovative firms. The case of Sports Innovation Lab highlights that having patient, trusted investors can give startups the freedom to pivot and survive challenges.
In short, taking big investments too early can limit innovation, while the right investors can help startups grow more organically and remain adaptable.
Source:
HBR. (2025, septiembre 1). Why startups benefit when big investments come later. Harvard Business Review. https://hbr.org/2025/09/why-startups-benefit-when-big-investments-come-later