Instead of setting your best engineers to work creating the best product, they're busy recruiting and dealing with company growing pains from the get-go. The mythical man-month and scarcity of great people combine to diminish your returns on this hiring. Furthermore, battleships don't turn on a dime, and you may be hiring a lot of irrelevant expertise if you have to pivot later. This is why Stripe took 6 months to hire its first 2 people.
Furthermore, huge funding means investors are looking for a huge returns. A $1b sale is now failure?? My gut says this "go big or go bankrupt" pressure encourages tunnel vision among leadership rather than innovation.
Essential Products was overfunded in late 2015 and is already up for sale. I think Magic Leap and Desktop Metal will end up as similar cautionary tales.
I see good arguments for overfunding if (1) there's huge capital costs for development and high probability of large exit regardless of technology success (e.g. biotech) or (2) you're trying to capture a market with a strong network effect. The second case seems dangerous though, e.g. is Uber's popularity really a moat? What if they had spent their billions on developing a product with a real technological advantage instead of scaling to the world first?
As a huge fan of his book, I'm sad to see Steve Blank largely ignore these ideas in his article.