This is true. I've seen startups spend huge amounts of money on things like lavish game-rooms, lavish-company-outings, lavish-xyz.... It really is because they have to spend the money. It sounds crazy (and maybe it is), but a company doesn't always raise money because they need it. They often sell stock at price $Y so they can say X shares at $Y price means that we are valued at $Z - wanna buy us out? They have to spend money that they brought in selling pre-ipo stock at price $Y so that they can show (on paper) that they're worth $Z for buyout (or maybe more stock splits). But when they raise the money and they want to raise more (to raise their company value), then they have to demonstrate that they need it; you don't need money if you already have some in the bank. Gotta get rid of that money first, then show why you need it and how much you'll be worth some day. Source: Done-it (to a small degree).
You don’t have to be out of money to raise funds, so I question that you have to spend the money. You can raise with years of runway, provided that you have a compelling story about how you’re going to put the additional funds to use creating value.
I agree that you don't have to be out of money, and some companies do take the approach that you describe. Honestly, I wish that the world worked more like that...I really do. In my experience, though, that's not how the majority of the dot-com startup-world works. Maybe it was just the decade and location in which I had my run at it (this past decade 2010-2020, SoCal) that's left me jaded. That said, I don't think that a compelling story about how you're going to add value is always enough - in a lot of competitive spaces, in order to be compelling you must have either (a) existing Intellectual Property (IP, aka Patents) that will keep competitors out of market or (b) enough "might-makes-right momentum" (aka money) to keep competitors out of the market. But... in scenario (b), you can't really get money unless you ask for it (or earn it the old fashioned way by having a profitable business model), and you can't ask for money unless you can demonstrate a need.... and you don't need it if you already have some money... It easily and quickly becomes a Catch-22 where you are spending money so that you can show that you don't have any; simultaneously, you can base your company value (and how much investors can should give) on how much you've earned (i.e. your stock price).
I'm not refuting your point so much as I'm suggesting that there's a darker underside to how things often work. You're right -- you don't have to be out of money to raise funds; but smoke and mirrors is a lot easier than hard work...and many people/companies choose the latter path.
