To Launch or Not to Launch (Garret Dimon)
nextupdate.com
nextupdate.com
Press.
Get in the press for your 1.0? Response sucks and people don't like the product? You won't get much notice for 1.1 since some people already have the stigma that your product sucks.
Same thing with Google and Yahoo!: Google does better than Yahoo!. Google gets press. Yahoo! tries to do better (and arguably does), and they are slowly gaining more respect after years.
A big problem always - and I'll say this: launch later with a refined product.
The VCs claim they fund people. So you have to ask why? The best developers know what features are necessary for 1.0, and know how to prioritize changes.
Why release early?. The advantage a small startup over big companies, is its ability to release early, and then quickly refine the product, based on the feedback of its users.