The One Thing VCs Think Startups Need To Succeed (851 hits)

One principle startups and venture capitalists can agree on is that the people on your team will make or break your business. The common denominator for any successful company, regardless of industry or size, is that its leadership teams are able to attract and retain the best talent. While most CEOs and founders will tell you that people are their most important asset, a majority of them feel like they don’t have enough hours in their days to address the need in their organizations for talent development at scale. Traditionally, VCs and platform teams have helped their portfolio companies attract the best talent by providing recruiting and hiring support, but recently, some VCs have also started to help their companies on the development and retention front. Many are now offering ongoing training, coaching, and proactive solutions to address the common leadership and management challenges that occur frequently as startups scale.

Startups by definition tend to offer interesting on-the-job opportunities for leadership development, but they don’t often invest in more formal activities to provide real-time feedback, development opportunities, and training. This is especially true at the earliest stages of a company. Many startups begin to focus on talent development at some point of scale, but don’t make the time to address it in the earliest growth phases of the company.

It’s not unusual for competent people to get promoted quickly based on their ability to perform effectively as an individual contributor. Often, they’re given a team to lead and bigger goals to hit. But skill sets that the best managers and leaders possess – giving constructive feedback, having tough conversations, creating personalized development plans for their individual team members, creating psychologically safe environments where people feel empowered to do their best work - are very hard to acquire intuitively.


This helps us see the case for investing resources in existing talent rather than solely focusing on recruiting: it’s far more logical to keep and develop the talent you already have. Some studies suggest that replacing an employee costs about 15 times that employee’s base salary—so by holding onto their best employees, startups can avoid the cost of high turnover and funnel that capital elsewhere. Perhaps more importantly, it saves them a tremendous amount of time in hiring and onboarding new employees. Startups are running at such high growth velocities that finding ways to keep them from slowing down is one of the most valuable things investors can do.

This is not to say that helping portfolio companies hire the best talent is not valuable, but it can be difficult to scale across a large or wide portfolio since venture funds aren’t necessarily set up to recruit at scale any better than a great recruiting firm or the startup itself. The best approach for VCs to help with recruiting seems to be one where senior talent professionals on staff can spend meaningful time and embed themselves deeply with a few companies. This is the case at Lerer Hippeau, Primary Ventures, HomeBrew, Lightspeed Venture Partners, and others, where the firms typically help more by sharing best-practices on hiring and recruiting and helping portfolio companies refine their hiring strategy and processes. “We have a strong belief that founders who prioritize aligning people strategy with business strategy from the get-go increase their likelihood of success long-term. It’s never too early to invest in those behaviors and our job is to help you approach hiring with great care and intention,” says Cat Hernandez, Operating Partner at Primary Ventures.


Posted By: Carolyn Labat
Wednesday, May 1st 2019 at 2:40PM
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