I had a meeting with a small company in Seattle yesterday. The company is going to remain nameless (to protect the innocent). I've known the entrepreneurs for a couple years and the company is now approximately 2 to 3 years old. Here are the facts:

They have just raised $1,000,000 and are a consumer ad supported web 2.0 company.
The team consists of 1 technical and 1 business entrepreneurs in their mid 30's with plenty of relevant experience but no start up experience. They are great committed guys.
They spend about 75K per month and thus have about 12 months of life before they run out of cash.
They invited me over to talk about what metrics they'd need to hit to raise their series B. The entrepreneurs don't think they want to boot strap the company. They're committed to raising venture capital and to use their words, "go big or go home"

My thoughts at the meeting were as follows:

Today they have a good product and a good team. They do not yet have a good business.
I told them that if they only focus on raising an institutional round that may (will) lead them astray. It'll put their destiny into the hands of institutional funders who may or may not have a penchant for funding a niche ad supported web 2.0 company in Q4 2008. To be successful in raising this venture round, they'll need to hit the cover off the ball in terms of customer acquisition and retention. Today, I give them a 50-50 chance of scoring that venture round in Q4. If they don't "go big", then I think one of the founders will quit, the founding team will deflate, and they'll end up selling a very nice online niche opportunity to someone with fresh legs or settling for a shut down. I told them that "going home' doesn't feel good.
An alternative might be to try to bootstrap the business. I asked them to question their assumptions about revenue generation and to see if there was someway to make money sooner. I also asked them to try to reveal the underlying personal motivations that were leading them to a get big or go home strategy. As entrepreneurs we all start out thinking we're going to strike it rich like the people we read about in the newspapers : Bill Gates, Jeff Bezos, etc. There's nothing wrong with taking a bit more time to get to a personal outcome that is just as good.

The good thing about these enterpreneurs was that they were having this conversation while they had money in the bank and 12 months of runway. And they seemed committed to staying aligned on an answer. This alignment is more critical than the strategy they choose.
I could write more on this situation. I see this pattern a lot -- and it's fun for me to be able to see a company and to attempt to identify what life stage it's in and what's likely to happen to it and the people.