Fred Wilson wrote a post yesterday on Peer-to-Peer revenue models which was quite informative and excellent. What was even more insightful however was his comment about hiring later on in the comments section.
I have spoken on the dangers of hiring too quickly. This is particularly evident in startups that get large infusions of VC capital. The default behavior of most founders is to hire like mad under the assumption that with more resources comes faster growth and better results.
Headcount is not analogous nor even necessary to scaling a business. This is the single biggest mistake made by venture-backed startups. They overload the inputs thinking this will exponentially increase the outputs. More salespeople will drive higher sales. More developers will generate better code. More product managers will create more product. However, this rarely is the case as Gilt Groupe, Lot18, ShoeDazzle, and other high flying startups are starting to realize.
I agree with Fred, “headcount for headcount sake is insanity”.