A New Section: VC Insider Minute.... Don't overhire, and building independence

Portfolio Update:

This past month has brought a few legitimate financings.   All valuations and terms are reasonable.  Growth is here in some cases (from a hibernation phase) and entrepreneurs getting mojo back.   I also had a venture fund I am an investor in send over a distribution- one of my first LP distributions since I starting investing in funds back in 2019/2020.  It was a 2X on a seed investment from a few years ago.   Not a bad return but in seed you need 50X for it to work.   Investing in the S&P 500 in early 2020 would get you a 2.5X return by now with no illiquidity and no fees.   

VC insider minute:  The Partner meeting/Decision meeting

This is a new section where I give you some insight, having been a VC at a top firm, into whats really going on.  Unfiltered.  

So what does it mean when you come in for the partner meeting?  I might be old school but you should already know exactly what's going to happen.  If you go in for a so-called partner or decision meeting and don't know, it means whoever you are working with has limited credibility within that firm.  

VC firms are political, unless they are small partnerships with distinguished and obvious leaders.  What's happening is the partner you are working with is typically "selling" your deal in the background.  If it's sticking they bring you in.  If it isn't, they cut bait.  They will not bring anything in if there is any chance of dissent. Some weak ones just go silent on you-- a pet peeve of many but happens frequently as some young VC's especially aren't trained properly to say no (incidentally that was one of the first trainings I ever got in vc).  

There are different kinds of partner meetings.  Sometimes they invite you in to talk to a few people.   We used to do that at KPCB years ago- it was a "subcommittee" or a pre-screen.   That was a place you could get rejected.   But if you didn't, and the further diligence was positive, the answer was likely going to be yes.  

How do you know if the partner you are working with has credibility?  Sometimes you can't if they are younger or new to that firm.  But if they have been there a while, look at whats next to their name online.  

VC's don't really do any work so they need to "affiliate" with their good investments.  Do they shamelessly talk about winners and brag?  That is actually probably a good sign for their credibility in the world of VC politics, as annoying as it is. It means they have "marked up" some investments and probably have a lot of rope and won't get rejected. 

I will keep writing this section but I can tell you I have seen it all from all sides.  Please ask anytime as I know many of you are constantly engaging investors or going through fundraising yourself!

Entrepreneurs Corner:  Slow to hire, quick to fire?  Just remember slow to hire

The first instinct of most people when they have a windfall of riches is to buy a house or expensive car.  Bad idea.  The first instinct of an entrepreneur when they complete a significant fundraise is to hire.  

You do need to hire and its the most important thing you do.  But overdoing it is death for a company and it happens all the time.   Why?  Because the minute you have a nickel your team will know and often they will start complaining about not having enough bandwidth.   This is a broken record I see everywhere. 

Then when you let people hire who they want, they get frustrated when there are layoffs a few years later.   

As an entrepreneur you need to be tough but reasonable.   Your first instinct should not be to hire-  it should be to bring in high ROI talent and fill critical gaps in the company.  My experience is that a company can go much longer without hiring than one would think without having much impact.   

What about the other side of it?  Quick to fire?  Well let me tell you, the minute you have a shadow of a doubt about someone, odds are you will fire them.  So might as well get it done.  It rarely gets better.  In your org it is important people are leveled up and performing to their positions.  If they don't, you need to act. 

So the old adage is probably right.  Just remember if you do the slow to hire part, you won't need to be quick to fire.  

Some tips:

1) If you get a significant fundraise done, literally have a 4 week "cooling off period".  Everyone will come hit you up for things.  Just shut it down for a while and don't respond.

2) Focus on critical operational needs or high ROI positions first like engineering (for a tech company) or sales.  Don't fill easy to find overhead positions.  Definitely do not hire admins for everyone. 

3) After a fundraise, often you feel you can relax from tough decisions.  Do the opposite.  Force yourself to clean up messes or make some tough decisions you may have put off.  Don't "take a break".

Ultimately a lot of this is about fighting human nature.  That is not easy.  And sadly your first instincts on things may be wrong.   But if your first instinct can be contrarian that may be healthy, especially when you are seeing success whether through hard work or luck or both.  

Parents Corner:  Independence.  Don't prompt, expect. 

Ok now that my kids are 13 and almost 11, I think often about what they will be like as adults.  My first and foremost goal is complete and total independence as soon as humanly possible.  The key to this in my view is not prompting.  When my kid gets up in the morning and doesn't brush his teeth or finish breakfast or pack his bag for school, my first move was often to prompt him to get those things done.   

But that approach builds dependence versus independence.   Consider the opposite- just sit there and wait.  When I started doing that, I was surprised how quickly they got it.  And I realized I may have been getting in the way of building independence.  

Make them aware, once, of the consequences of not getting their stuff done.   Eventually, they get it.  Too often as aware and present parents we compensate for our kids.  It's subconscious and instinctive.  But much like before, I would recommend fighting the natural instinct on this one.