In this episode we talk about venture capital (VC) firms. Many startups want to raise funding from VCs, but how do VC fund make decisions? How do they think about companies? What goes on behind the scenes after you pitch at VC? We are here to help! In this episode we answer questions including:

• What steps do VC firms follow to make an investment?
• What happens when VC partners disagree on an investment?
• What exactly are VC firms looking for?
• What are VCs measured by?

All of these questions were submitted by listeners just like you. You can submit questions for us to answer on our website TheStartupHelpdesk.com or on X/Twitter @thestartuphd - we'd love to hear from you!

Your hosts:

• Sean Byrnes: General Partner, Near Horizon www.nearhorizon.vc
• Ash Rust: Managing Partner, Sterling Road www.sterlingroad.com
• Nic Meliones: CEO, Navi www.heynavi.com

Reminder: this is not legal advice or investment advice.

Q1: What steps do VC firms follow to make an investment?

The top of the funnel is massive. It includes founders reaching out cold via email, warm intros from fellow founders, and meetings at conferences. The "email filter" is usually the first point of contact.

From there, the process typically looks like this:

• First Meeting
• Meet the Team
• Team Decision
• Diligence

The funnel narrows at every stage, filtering out 99% of companies. The "golden ticket" is a warm intro from a proven founder. That being said, if you lack a network, you must not shy away from cold outreach – but your pitch must be exceptional to survive the filter.

Q2: What happens when VC partners disagree on an investment?

Understanding the decision process is key. Do they need consensus, or can a single partner push a deal through? During your first meetings, do your own diligence to ask how the firm makes decisions.

You need at least one partner who is obsessed with what you are doing. Treat your lead partner as your internal co-conspirator. Once you leave the room, they have to go to bat for you against skeptics. Don't just pitch your product; pitch the arguments they will need to use to convince their partners to say "yes."

Q3: What exactly are VC firms looking for?

VCs work on behalf of Limited Partners (LPs) to produce returns that beat the market. Because of the Power Law, one win must pay for all the losses in the portfolio.

Therefore, VCs want companies that can grow fast for a long time. They are looking for:

• A Massive Market
• Competitive Advantage (Defensibility/Tech)
• High Velocity

In short, they need proof that the startup has the capacity to achieve escape velocity. This includes a stellar team, strong product engagement, and an acceleration of product adoption.

Q4: What are VCs measured by?

Ultimately, it comes down to DPI (Distributed to Paid-In Capital). This is actual cash returned to investors. When a VC has good numbers on this, it’s all they talk about.

Before DPI, LPs look at interim metrics:

• MOIC (Multiple on Invested Capital): Paper gains on the money invested.
• IRR (Internal Rate of Return): A measure of the speed of growth of investments.

However, for a VC to actually get paid, they need DPI. They need to return the fund multiple times over. Liquidity matters.

In this episode we talk about growth. Every startup wants to grow faster, but how do you do it? What channels are better than others? Are there secrets to growth? We are here to help! In this episode we answer questions including:

• Are paid ads a good idea?
• How do we scale inbound traffic?
• What drives customer referrals?

All of these questions were submitted by listeners just like you. You can submit questions for us to answer on our website TheStartupHelpdesk.com or on X/Twitter @thestartuphd - we'd love to hear from you!

Your hosts:

• Sean Byrnes: General Partner, Near Horizon www.nearhorizon.vc
• Ash Rust: Managing Partner, Sterling Road www.sterlingroad.com
• Nic Meliones: CEO, Navi www.heynavi.com

Reminder: this is not legal advice or investment advice.

In this episode we talk about team structures. As soon as you have employees, you need to decide how to organize them. What are the best organization structures? What are the trade offs? We are here to help! In this episode we answer questions including:

• How many people should you have reporting to you?
• When should you hire leaders like a VP of Sales?
• Do you need product managers?

All of these questions were submitted by listeners just like you. You can submit questions for us to answer on our website TheStartupHelpdesk.com or on X/Twitter @thestartuphd - we'd love to hear from you!

Your hosts:

• Sean Byrnes: General Partner, Near Horizon www.nearhorizon.vc
• Ash Rust: Managing Partner, Sterling Road www.sterlingroad.com
• Nic Meliones: CEO, Navi www.heynavi.com

Reminder: this is not legal advice or investment advice.

Q1: How many people should you have reporting to you?

As a startup CEO, you have to delegate management to avoid becoming a bottleneck. The absolute maximum number of people that should report to you at the early stage is 10. A good rule of thumb is to consider how many one-on-one meetings you can realistically handle every two weeks.

Your first hires should be leaders who can build and own major functions of the company, such as product, engineering, or sales/marketing. These leaders provide leverage, freeing you up to focus on other critical areas of the business. Managing too many people or managing people who are not leaders of their own functions can prevent you from executing on your core responsibilities. Remember, you want to hire exceptional people to do important work in areas you can't or don't want to do alone.

Q2: When should you hire leaders like a VP of Sales?

Hire a leader before your time becomes a bottleneck, but be careful to hire the right person at the right time. A "VP of Sales" is typically a scaler, not a builder. They will likely burn out or fail if your company's sales playbook isn't already baked.

Founders should own the sales process until it's proven and repeatable. Bring in a VP of Sales when you have a clear Ideal Customer Profile (ICP), have closed multiple deals beyond the initial founder hustle, and can hand them a clear playbook instead of a puzzle to solve.

For a sales team of 5-10 people, a Director of Sales with 3+ years of experience is often sufficient. For a team of 10+, you'll likely want a VP with 5+ years of experience. Find someone who can run the sales team better than you can, allowing you to focus on other aspects of the business.

Q3: Do you need product managers?

There is a lot of debate on this! Don't hire a product manager too early. The CEO is the de facto Product Manager (PM) until you achieve product-market fit (PMF). The learning loop is too critical to delegate at this stage.

You know it's time to hire a PM when:

• Customers love your product and keep using it.
• You're seeing organic growth or referrals.
• Engineers are spending too much time in product discussions instead of building.

A PM's role is to be the voice of the customer and ensure engineering time is used effectively. The need for an early PM can also depend on your product. For example, a consumer product may need a PM earlier than a developer-focused tool.