Editor’s note: Vivek Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University and a serial entrepreneur. This article excerpt is reprinted with permission.

(A personal note from Wadhaw: “This is a ‘must-read’ for my entrepreneur friends. When I look back at my days as a tech executive, I realize that our companies performed the best when we were undercapitalized. The entire team worked together with a single goal – survival. That left little room for politics and internal battles. Our only focus was on making our customers successful. We celebrated every little success. With the recession, every company seems undercapitalized now and many are getting discouraged. They shouldn’t be.”)

DURHAM, N.C. – If I only had another few million dollars to spend on…

That’s the refrain I grew accustomed to rattling off when I was getting my tech startups off the ground. I now hear it with increasing frequency from nervous entrepreneurs who can’t find capital and want my thoughts on what to do. I always respond with the same three-word phrase: Less is more.

Yes; it’s a cliché. But it’s the best piece of survival advice for young companies, bar none. When a company is running on a tight budget, it will perform far better than a company that has gotten a chunk of cash from VCs. While this seems like common sense, it’s actually news to many entrepreneurs (and aspiring entrepreneurs) who learned that raising venture capital is essential for high-growth companies.

Seasoned Pros Want Perks

A growing body of research implies that the correlation between raising money and success of startups has been exaggerated. In a study released this month of 79 tech companies funded over a 10-year period, David Townsend, an assistant professor of entrepreneurship at North Carolina State University, along with a co-author, professor Lowell Busenitz at the University of Oklahoma, found that a venture’s success isn’t necessarily dependent on funding. "Contrary to conventional wisdom, undercapitalization is not a death sentence. We found that moderate levels of undercapitalization—even capitalization ratios as low as 20% of the venture’s initial goals—are not statistically related to a venture’s probability of surviving. What appears likely to matter more for these ventures is the creative transformation and use of resources at hand and a disciplined approach to cash management," says Townsend.

And in my own experience, landing equity money early on quickly leads to bad habits.

For the remainder of Wadhwa’s column,

About the author: Vivek Wadhwa is senior research associate at the Labor & Worklife Program at Harvard Law School and executive in residence at Duke University. He is an entrepreneur who founded two technology companies. His research can be found