Startup
Handbook
Angela Tran
Boris Wertz
November 2019
Startup
andbook
Contents
Introduction
3
Building your Team
5
Four steps to successful hiring . . . . . . . . . . . . . . . . . . . . . . . . 5
Case study: the “Boom way of Hiring” . . . . . . . . . . . . . . . . . . . . . 13
Develop your hiring brand . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Hiring impacts your company culture . . . . . . . . . . . . . . . . . . . . . 17
Building distributed teams . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Determining compensation . . . . . . . . . . . . . . . . . . . . . . . . . 20
Building your Organization
22
Invest in yourself and your people . . . . . . . . . . . . . . . . . . . . . . 22
Running the organization . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Building your Investor Base
33
Fundraising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
What to do if you’re oversubscribed . . . . . . . . . . . . . . . . . . . . . . 35
To bridge or not to bridge . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Other financing options . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Investor communication . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Board Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
How to leverage your investor . . . . . . . . . . . . . . . . . . . . . . . . 43
Working with advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Resources
46
Do you want to create a startup? Are you in the midst of building one?

Over the past ten years, we have invested in and worked with close to 100 startups. Along
the way, we have seen teams, ideas, and practices work spectacularly well. We’ve also
witnessed others flame or fizzle out. After a decade in the trenches, we want to share some
best practices to help you make an impact and turn your vision into reality.

You might be thinking, “Aren’t there already a lot of startup guides out there?” It’s not our
intention to add more digital clutter to a crowded landscape. In this guide, we’re focusing
on a particular stage of the startup lifecycle—post-Seed to pre-Series B. Since we primarily
invest in seed stage companies with follow-ons to Series B, we’re going to share some of
the advice that we give our founding teams.

For this reason, we won’t focus on the logistics of company formation here. Likewise, you
won’t find any content on product-market-fit (PMF), although we recognize that PMF
isn’t always reached at the seed stage. If you’re looking for help on this stage, we strongly
recommend Sam Altman’s Startup Playbook.

You also won’t find much content for Series B and beyond. For help scaling, we
recommend Elad Gil’s High Growth Handbook.

This guide is broken into three sections:
• Chapter 1: Building your team (hiring, culture, compensation)
• Chapter 2: Building your organization (leveling up, running)
• Chapter 3: Building your investor base (fundraising, investor communication, advisors)

INTRODUCTION
We want to thank Andrew Sider, Sam Pillar, and Alex Kern for their invaluable feedback
during the creation of this book. It’s intended to be a living document and will be regularly
updated by our team, with help from our wise community. There’s nothing more valuable
than the insight that comes from real-world experiences, so we welcome you to share any
thoughts, lessons, and experiences.

We hope you’ll find the content useful for your own journey. Keep in mind that while
this guide is built around best practices and real world experiences, it doesn’t mean that
everything will fit your specific startup and situation. You may want to add your own twist
to some practices or ignore some advice altogether. As you’re building your business, never
forget that you’re in charge. It’s up to you to decide the best way to run it.
— Angela and Boris,
November 26, 2019
1
BUILDING YOUR TEAM
We often hear from founders that hiring is the most challenging thing to do right. It’s also the
most important. Hiring forms the foundation of your company. Good hires, which result from
a strong hiring process, will have an outsized effect on your startup’s success.

In this chapter, we’ll cover all the essentials of building your team—from growing your
candidate pipeline to cultivating your culture and building distributed teams. Many of you will
be interviewing and hiring during the early stages. And, hopefully those hires will result in a
better company than you have today.

Reminder: Since this book is focused on a startup’s early days, our hiring advice is primarily
geared toward your first 10 to 20 hires. If you’re beyond this stage and looking to scale your
recruiting function, we again recommend Elad Gil’s High Growth Handbook.
FOUR STEPS TO SUCCESSFUL HIRING
Everyone appreciates the importance of hiring. The challenge lies in translating this
appreciation into action. When a startup is scaling rapidly, process often gets left behind. In
our experience, successful hiring is a combination of process discipline and a proper system
of checks and balances.

We break down the hiring process into four basic steps:
1.
Understand your need.
2.
Create a candidate pipeline.
3.
Run an effective interview process.
4.
Close the candidate.


|
6
Building Your Team
Recommended reading: Kevin Morrill, co-founder of our former portfolio company
Mattermark, recently published the Interview Game Plan Template with very helpful
checklists, process ideas, and scripts.
Step One: Understand your need (define the candidate profile)
Before you start hiring, you should understand who you need. What will the person do? What
are the ideal backgrounds and qualities for the job?

Generally speaking, you are trying to hire athletes (i.e. high-performing generalists), not
specialists, during early-stage hiring. You should prioritize for smarts, work ethic, and
ambition over experience. First hires should be like “swiss army knives,” willing to take on
multiple tasks at any stage and able to figure out their own solutions. With that said, there
are certain situations where specialists will be key for early-stage companies—it’s usually
specialists, not generalists, who push toward more ambitious, visionary problem solving.

When it’s time to start hiring specialists, you will need to be very specific with the job
description. For example, let’s say you want to hire your first marketing person. You might
need a demand generation marketing rock star. Or, maybe you need someone who is really
good at product marketing and developing solutions for customer needs. Clearly, these two
marketing roles require different backgrounds.

The bottom line: take the time to develop the ideal profile of a position, so you can better
target your search and interview process.
Step Two: Build your pipeline
Throughout a startup’s lifecycle, the recruiting function should evolve from DIY recruiting
(seed stage) to hiring a recruiter or Head of People. No matter your stage or size, never wait
for candidates to come to you; you need to actively build a pipeline.


|
7
Building Your Team
Early-stage recruiting
During the early stages, we wouldn’t expect a startup to have a dedicated recruiting position,
but there’s still plenty you can do to build your pipeline and find the right candidates.

• Leverage your own network and your investors’ networks. Proactively reach out
to people through your own LinkedIn network and your investors’ LinkedIn networks.
Keep in mind that most people find outreach on LinkedIn noisy. It’s better to use
LinkedIn as a source for candidates, but when possible, send a short and personal
email to initiate contact. You can save time by using a service like Upwork to send
emails to candidates on your behalf, but make sure that all emails read as though they
come from you personally.
• Encourage internal referrals. Leads on strong candidates typically come from the
inside. For example, a current employee may have previously worked with a really
good database engineer or customer service manager. Incentives go a long way toward
encouraging referrals—either a cash bonus or other perk for a recommendation that
leads to a successful hire.

One of our founders suggests formalizing the process in order to best leverage your
team’s networks. Scan each team member’s network using LinkedIn Premium and
identify promising connections. Then set up a quick meeting with that team member
and let them know the specific connections you’d like to discuss. Ask them to come
ready with a few additional candidates, even if those candidates are currently employed.
In the meeting, you can discuss fit and the best way to reach out to a potential
candidate.
• Use all available channels that work for you. There are many, many services out
there, all promising to help you identify candidates. Use all of them, as long as they’re
working for you. Our portfolio companies have had good results from LinkedIn,
AngelList, Github, and Quora.
Hire a recruiter and/or Head of People
We recommend that companies build up their in-house recruiting function as soon as they’re
ready to hire at scale. This is usually after the A round, although we recognize that different
companies are ready to scale at different stages.


|
8
Building Your Team
Jeff Richards makes a strong case for hiring an internal recruiter or Head of People early: “If
you really believe people are going to differentiate your ability to win, then why wouldn’t you
invest in an expert in this area early—just as you are in Engineering, Sales, Marketing, etc.?”
One caveat: when candidates are looking to join a company during the early stages (i.e. under
10 employees), they are most likely looking to build a relationship with a founder. In this
case, founder-led recruiting (or at least founder-led outreach) can be most effective.
You might be wondering if you need to hire a Head of People or recruiter. These two
positions are quite different. A recruiter typically has one specific function: sourcing
candidates. A Head of People, typically brought in at around 50+ people, is responsible for
setting up an organization to do their best work in a way that scales. Someone hired as a Head
of People likely won’t want to do recruiting. Or if they do, it won’t be their primary focus.
When you need to quickly go from 25 to 50 employees, your biggest issue is typically
recruiting—and you may not have the budget to hire a Head of People. At this stage, bring
someone onboard who is great at recruiting.
After your headcount hits 50, it’s time to look beyond just the recruiting function and hire a
Head of People. Chelsea MacDonald, Head of People Operations at Ada Support, considers
this a renaissance role. “You’re looking for skills in: marketing & PR (employee branding,
communications, events), BDR and sales (recruiting), product (employee experience,
diversity, data), customer success (employee performance), and legal (HR law, terminations).
Throw in a bit of wellness coach, and you have yourself a role for a renaissance person (or
alternatively, someone who knows how to hire for their weaknesses).” You can learn more
about Chelsea’s thoughts on the Head of People role.
Engage an external recruiter
While internal recruiters should do the bulk of the pipeline work, it makes sense to leverage
external recruiters for VP-level positions and up. External recruiters are very expensive,
but are usually a worthwhile investment for key hires. As we’ve mentioned before, we
recommend Elad Gil’s High Growth Handbook for tips on scaling your recruiting function.


|
9
Building Your Team
Step Three: The interview process
It’s always astonishing to see how many good companies are unprepared for the interview
process. You’ll probably recognize many of these missteps: interviewers show up late for
meetings and haven’t been briefed on the candidate beforehand. They spend the first few
minutes of the interview fumbling through the CV, asking vague questions to gain context. Then
after each interview, they don’t properly collect feedback.
Whether you’re trying to grow from 10 to 25 employees, or from 25 to 50 employees, hiring is
one of the most important functions in your company. This is why we encourage every founder
to take the time to define a proper interview protocol that works for both the company and
candidate. You’ll want to document the process and be sure to explicitly assign each task
(recruiting, interview day, hiring decision, etc.) to an individual. Particularly during the early
stages, it’s all too easy for certain tasks to fall between the cracks when there’s no specific
ownership assigned.
• Prioritize the logistics. You want the interview to be a great experience for the
candidate and give a strong first impression of your organization. Candidates should
know beforehand how many meetings they have and who will be interviewing them. On
the interview day, candidates shouldn’t have to fend for themselves to find their next
interviewer or just wander out of the building after the last interview without a proper
send off. Sounds pretty basic, right? Unfortunately, little details like these are often
overlooked and can sour an otherwise good experience.
• Develop hiring skills throughout the company. Most people understand that it’s
important for founders and early leadership to be good at hiring, but you should
develop these skills in anyone involved in the hiring process. Once hiring scales beyond
the founders, everyone involved should have a clear understanding of the founders’
hiring philosophy so they can develop their own hiring instincts to be in strong
alignment.
• Give candidates a test. Have each candidate do something that is representative of
their future job, such as a coding challenge, short presentation or writing test. Many
people are great at talking about their CV, but not so great at their actual job. Be sure to
tailor the interview to the candidate’s level of experience—you don’t want to give the
same test to an entry-level and level 6+ engineer.



| 10
Building Your Team
One school of thought would get rid of the coding challenge or interview test
altogether, since these types of technical interview tests can bias your talent pool
toward people who are great at interviewing. Farhan Thawar wrote an interesting
piece on ditching the technical interview and instead hiring promising candidates for
a 90-day probationary period with check-ins at 30, 60, and 90 days. This method may
not work for every company, but it’s worth thinking about, as well as rethinking how
interview performance translates to job performance.
• Gather feedback from the interview group immediately after the interview.
Creating some kind of formal scoring will make the process as objective as possible.
Without a process, you’ll end up with a group discussion where the loudest, but not
necessarily right, voice might win.

–
Have each interviewer enter or write down their feedback. You can adopt a
numeric ranking (1 to 5), Likert scale (“strongly recommend” to “strongly
against”) or even binary (“hire” or “no hire”). The key is to create a system that
will prevent neutral stances.

– Make sure the interviewing team understands the weight of everyone’s feedback,
and consider that perhaps not all votes are weighted equally. For example, when
an engineering manager evaluates a marketing candidate or a VP of Marketing
evaluates an engineering candidate, they may be looking at different aspects of
a candidate. It’s up to you to figure out what is most important and if there are
any deal breakers. We’ve seen some organizations look for a majority vote; others
require unanimous approval; and many CEOs have veto power. All practices can
work—the key is to define the best process for your company culture beforehand
and make sure everyone is aligned.
• Build a correcting function into the process. A “correcting function” is often a final
interview with a founder. After your company has scaled and a founder can’t meet
with every candidate, you can create a function like Amazon’s bar raiser. Bar raisers
are Amazon employees who are skilled evaluators and interview job candidates. They
can veto any candidate, even for positions that are completely out of their area of
expertise. Bezos has said this program helps weed out the “cultural misfits” at Amazon
and makes sure the company makes good hiring choices by forcing several diverse
employees to sign off on a candidate.



| 11
Building Your Team
Why do you need to add a correcting function? Overloaded teams might be tempted
to hire as quickly as possible versus waiting for the best candidate. Or your interview
teams might not have the deepest interviewing experience yet.
• Always do your due diligence with reference checks. Ideally, you’ll want to talk
to a peer, a manager (or someone senior), as well as someone who reported to them, if
applicable. Generic questions like “What are this person’s strengths and weaknesses?”
often yield generic answers. And on a whole, references end up being too positive
and don’t necessarily provide the information needed for you to make the best hiring
decision. For these reasons, we like asking references two specific questions:

– What did this person do to make an immediate positive impact on your work/the
organization/your life?

– Where do you think the greatest area of improvement is for this candidate and how
do you think we can help/support this person at our company?
A16’s Andrew Chen also suggests some great questions to get more out of your
reference calls:


| 12
Building Your Team
Lastly, if possible, try to get backdoor references for the most honest feedback. These
are people that you trust and know the candidate, but weren’t given as a reference by the
candidate. The easiest way to find backdoor references is to look for mutual connections on
LinkedIn.
Step Four: Close the candidate
Once you decide to hire a candidate, try to do everything to close the deal. One of our
portfolio companies shared its hiring funnel for engineers. Their key finding: only 20% of
candidates accepted an offer. We wouldn’t be surprised if most startup funnels had a similar
number. The question is: what can you do to improve the acceptance rate?
Since October 2017
Total
% Moving on
to Next Round
Phone Screen
380
35%
Technical Screen
132
23%
Take-Home Project
29
47%
On-Site Interview
14
40%
Offer
5
20%
Hired
1
Sample hiring funnel for engineers


| 13
Building Your Team
Founders need to be the ones closing candidates early on, but investors and board members
can also help. Recommend that a candidate speak to one of your investors. Reassure the
candidate that the investor will not be evaluating his or her skill, but rather, is available to
answer any questions and address any concerns around you as a founder, the company, the
market, and the competitive landscape.

As for selecting an investor for this task, you obviously want a champion but also someone
who has a good pulse on your business and your team, and not just a 35,000 ft. view. A good
“closing” investor is one who knows the competition, sees the current challenges of your
startup, and more importantly, has a strong conviction about the opportunities ahead. He
or she can effectively pitch candidates on the impact they can make to align with the big
opportunities ahead.
CASE STUDY: THE “BOOM WAY OF HIRING”
Boom is one of the most ambitious startups we know—their mission is to develop supersonic
planes. As you can imagine, you need incredibly talented people to achieve this goal. So when
Blake Scholl, Boom’s founder and CEO, recently shared insights into the company’s hiring
playbook in an investor update, we asked him for permission to publish. The “Boom Way of
Hiring” is a great blueprint for startups to take their recruiting processes to the next level. As
you’ll see at the end, their acceptance rate is nearly 100%.


| 14
Building Your Team
The following insight is an extract from Boom’s investor update:

We like to say that our vision is to remove the barriers to experiencing the planet,
but our mission is actually about company building: we aim to make Boom the
place where the best people on the planet can be inspired and enabled to do the
best and most meaningful work of their careers. If we succeed at our company-
building mission, we’ll realize our vision. But if we screw up the team, culture, or
management structure we most certainly won’t.
Recruiting is at the heart of what we do, and it’s everyone’s job.
This month was epic for recruiting. We extended 18 offers, of which 14 were
accepted, 3 are still pending and only one intern declined*. Including accepted
offers from folks not yet started, Boom is now 96 strong—and we expect to be
over 100 by the end of the year. We did this with a dedicated recruiting staff of
one (!), which is both a testament to how hard Tim (recruiter) is cranking as well
as the dedication of our hiring managers, who take direct responsibility for filling
their roles.
I’d like to highlight one of those hires: Chris “Duff” Guarente, who is joining as
our second test pilot, behind Bill “Doc” Shoemaker, our Chief Test Pilot. Duff
comes to us from Scaled Composites where he was Chief Test Pilot and has a
deep background in flight test of new-design aircraft. Duff flew 100% of missions
on Northrop’s T-X “Swift” and was the first test pilot to fire AIM9X guided
missiles from the F-22 Raptor.
In other words, we hired the #1 pilot from the #1 experimental aircraft company
in the world… to be the #2 pilot at Boom. Since the founding of the company,
we’ve said that we should be able to raise the talent bar as we go. How’s that? In
part, our access to talent improves over time: The number one thing great people
want is to work with other great people—and the more we attract, the more want
to be here. Additionally, as our success becomes more visible, more people are
willing to make the leap to a startup—broadening our access to talent.
The “Boom Way of Hiring”


| 15
Building Your Team
Success in recruiting requires process discipline and checks and balances as well.
We’ve learned from Amazon, SpaceX, and Google and developed a Boom Way of
hiring. Here are some of the pillars:
• Before we start recruiting, hiring managers write a formal job description.
These aren’t cookie-cutter HR speak but describe in plain English what
the person does, what success looks like, and what kind of background
we’re looking for. When roles are unusual, JDs include “exemplar
candidates”—real profiles of real people who would fit the role. This
prevents us from developing a “unicorn” profile that exists only on paper.
•
Job descriptions define the “competencies” for the role—the key skills
and aptitudes we’ll need to interview for. Competencies are assigned to
interviewers—so everyone knows what they’re assessing and we don’t
forget to probe something important.
• We filter for mission alignment early in the process. If you don’t share
our vision of mainstream supersonic flight you don’t make it past phone
interviews. Using this filter early results in a downstream lift in offer
accept rate, making the whole recruiting process more efficient and
preserving the bedrock of our culture—an intense passion for expanding
our world.
• Each candidate gives a presentation to the interview team. This gives the
whole team a common background on the candidate, saving what would
be repetitive background in 1:1 interviews. Additionally, the presentations
test the candidate’s ability to give (technical) presentations—and an
opportunity to see what it’s like to interact in a group setting.
• All interviewers write interview notes and evaluate the candidate on a
4-point scale (strong yes, yes, no, strong no—being on the fence isn’t
allowed). Written interview notes force interviewers to think objectively
about their interview experience and to provide evidence for their
conclusions. They also provide a mechanism for us to quality-control
interviews: one can tell from reading interview notes whether a high-
quality interview was conducted and lets us know who would benefit
from additional training or coaching.
The “Boom Way of Hiring”


| 16
Building Your Team
• We conduct reference checks—including backdoor reference checks—
before extending an offer. Recruiting supports scheduling of reference
checks but hiring managers are expected to conduct them themselves.
Reference checks never flip us from no to yes, but they can flip us from
yes to no—and can provide additional insight on concerns uncovered
during interviews.
Lastly, we have a Founder interview as the last check before a candidate gets
an offer, after the interview team has decided to move forward. Historically,
that’s been with me—now we’re transitioning to have my co-founders Josh and
Joe do Founder interviews as well. The Founder interview is a QA check on the
whole process—we read the interview notes, look for yellow flags and check
whether they were addressed in the debrief. We check culture fit and look for key
characteristics, like a history of being curious and being a self-starter. Additionally,
the Founder interview is a pre-close: we ask: “assuming the numbers work, what
are the barriers to accepting an offer?” and then sell until we’ve overcome all the
non-financial objections. Importantly, we help frame the candidate’s decision
process and work to focus them on making a decision based on fundamental
characteristics that will truly matter to their happiness: do you believe in the
mission? Do you believe you’ll be able to contribute meaningfully? Do you like and
respect the people you’re working for and with? We remind candidates: “You have
to love the vision. It’s really hard—and there are going to be ups and downs. If you
don’t love it—and you’re sane—you’re going to give up.”
The result is both a high offer acceptance rate (near 100%) as well as a low regretted
attrition rate (2 cases of regretted attrition over 4 years across ~100 hires).
Source: Blake Scholl, Boom investor letter
The “Boom Way of Hiring”


| 17
Building Your Team
DEVELOP YOUR HIRING BRAND
Your hiring brand has a big impact on each step of the hiring process and will ultimately
shape how successful you are in attracting and converting candidates. Here are a few tips on
developing your hiring brand:
•
Invest time in the career pages on your website in order to tell a compelling and
differentiated story for potential job candidates. Make sure your messaging is
consistent across every platform: LinkedIn, AngelList, Twitter, Facebook, Github, etc.
If you thoughtfully crafted every word in your bio from a recent event, don’t let those
efforts go to waste. Make sure all the latest and greatest messaging is incorporated into
every public profile.
• Glassdoor has become the go-to place for job seekers to check out the reputation of a
company; you definitely want to monitor your profile there.
•
Spend time building your hiring brand for key audiences, e.g., engineers from a certain
university. This is costly and time-consuming, but will ultimately be a very good
investment. Jobber CEO Sam Pillar noted they’ve had a lot of success with a strong
presence at meetups. “Donating time for presentations and sponsoring events with
food or drinks (if you can) is a positive signal to the community that your company is
engaged and committed. Don’t be too sales-y or company focused though—you need
to participate from a genuine place of interest.”
HIRING IMPACTS YOUR COMPANY CULTURE
Your company’s culture is not about perks and ping-pong tables. It’s about common values
and a shared passion for why the company exists. It’s also about how everyone can work
together to pursue your common goals.
Here’s Shopify’s definition of culture:
“We define culture as the sum of every single individual at Shopify. Every person
plays a part in creating it, and when someone leaves or joins, they have a direct
impact on the culture.”


| 18
Building Your Team
Culture is created by the people that you hire. This means that the way you set up your hiring
process has a huge impact on the culture you are creating.

Set clear values and live them. Practically every start-up has created a list of values that they care
about, but not every startup actually lives them. The consistency of your daily actions as a leader
and as an organization will make sure that your team remembers the values, believes in them,
and lives them. If you talk about a “no politics” rule, but then promote a person who is viewed
as being overly political, your words just lost all credibility. The founder and CEO needs to lead
by example.
On diversity and inclusion
There are countless studies showing that diverse teams are more successful. Josh Brewer,
CEO/Founder of Abstract (a V1 portfolio company) wrote a great post on the topic of how
inclusion is a choice. It’s recommended reading for all.

Josh writes:
“…we began recruiting people from underrepresented backgrounds. We brought in
people—from all backgrounds—who are genuinely passionate about inclusion. We
built a remote-friendly culture that allowed us to include people from across the
United States. We threw out the engineering white board interviews (that don’t work
anyway) and began to bring in diverse talent in every one of our departments.”
BUILDING DISTRIBUTED TEAMS
The predominant advice for startups has traditionally been don’t open a second office until
you reach 100+ employees. However, the pressure of sky-high housing costs, salaries, and
competition for suitable candidates is causing startups and investors to rethink their approach
to distributed teams. Among our Silicon Valley-based portfolio companies, every company
past Series A has a distributed team.


| 19
Building Your Team
In addition to cost concerns, your company’s location will also be driven by the location of the
specific talent you are looking for, as well as the location of your key customers.
When it comes to opening a second location, there are two common approaches:
• Open a location built around specific and well-defined tasks (e.g., platform
integration or customer service). We have portfolio companies that are building
teams in secondary cities in the U.S. for customer service and in Eastern Europe
and India for development. This approach is a great way to quickly scale non-core
activities at a much lower cost. As long as the task at hand and the interface to
headquarters are clearly defined, this approach is very effective. The biggest challenges
are typically: a) finding a local leader that can manage and scale the teams and
b) finding somebody in the company that can effectively manage the interface to HQ.
• Distribute team members across the board with a mix of headquarters and
distributed team members. Physically separating a team usually works best in
areas where a general playbook exists, such as sales and marketing, and where teams
don’t need to get together for frequent brainstorming sessions. For this method to be
successful, your company needs to have the structure and communication channels
of a distributed company. It’s not going to work if there are offline discussions
happening at headquarters and team members in the second location are left in the
dark or updated as an afterthought. Fortunately, the tools to set up communication for
distributed teams have never been better (e.g., Slack, Zoom).
Companies with distributed teams need to work harder to create a tight culture absent of
regular offline interactions. Bringing everyone together in person on a regular basis and using
online tools like Donut can help in this regard.




| 20
Building Your Team
DETERMINING COMPENSATION
Compensation typically includes both cash compensation and equity (options). During the
early stages of a startup, cash compensation is less of a factor. Early employees usually join for
reasons other than their take-home salary. They may be looking for a significant equity stake,
truly believe in the vision of the company, or probably both.

As a startup matures, cash compensation becomes more important and, as a founder, you
need to understand how your company’s compensation fits into the overall landscape of what
comparable startups are paying. This is where compensation surveys come into play.

There are many public and private compensation surveys available, but the best free data is
available from AngelList and PayScale:

• AngelList: they slice salary and equity data by roles (from programming to marketing),
location (all major startup ecosystems are covered) and market (i.e. enterprise versus
consumer).
• PayScale: the PayScale survey has broader coverage than just tech positions and can
also slice data by location, skill level, and specific company. Their survey is limited to
salary data and does not cover equity.

Other surveys include: Hired (for tech roles), Betts Recruiting (for sales, marketing, and ops
roles), and LTSE’s Hiringplan.

About equity
Equity is usually given to employees as option grants. Here are some common rules for
option programs:
• A typical options grant vests over four years with a one-year cliff (meaning that an
employee will not get any shares vested until the first anniversary of their start date).
• Once an employee is fully vested, they usually get a “top-up” which can be around
25% of the original grant. This assumes that the employee still has a similar position
to when he/she started and didn’t get promoted, which usually would have triggered a
new option grant.


| 21
Building Your Team
• The exercise price of the option should be determined on an annual basis by a
409a valuation. In the past, this was often done by specialized consultants for a
few thousand dollars, but now you can get it at a much lower cost by cap table
management software companies like Carta.
• The size of the option grant is very individualized in the early stages of a company and
becomes more standardized as the company matures. For example:

–
A key engineer that joins as the first employee might get 2-5%.

–
A VP of Sales that joins after the B might get 1-1.5%.
• Be wary of handing out large equity packages. Equity is hardest to price early on
(2% now could be a much bigger deal down the road).
Recommended reading: “A No B.S. Guide to Startup Stock Option Grants.” SkillShare’s
Matt Cooper sheds light on how they determine the size of option grants and how potential
and current employees can evaluate their option value—including links to calculators that
companies can use for new hires.
2
BUILDING YOUR ORGANIZATION
INVEST IN YOURSELF AND YOUR PEOPLE
Rapid growth is the defining element of a startup. It’s also the thing that makes scaling startups
incredibly hard. Many founders are first-time entrepreneurs and find themselves needing to scale
an organization without having seen or done anything like it before. Employees that joined as
individual contributors are often asked to become managers before they’ve acquired that skill set.
And an organization that was run by a small group of aligned people during the first few years now
has to think about org charts, scalable processes, budgets, and Objectives and Key Results (OKRs).

In this context, it is critical to invest in yourself and your people.

Invest in yourself
Great leaders are made, not born—although we tend to see just the end result and not the hard
work that led to the success. Scaling from founder to manager is going to take a whole village—
coaches, mentors, peers, feedback from your company and direct reports. Most importantly,
you need to look at feedback as an opportunity to grow, rather than as criticism.
We can all learn from what Stewart Butterfield has done, and continues to do, at Slack. In
conversations with Stewart, we are always impressed by how self-aware he is about his own
strengths and weaknesses. He actively seeks feedback on how he can further improve himself.
This has been critical because when a company scales as quickly as Slack scaled, its leaders
need to scale equally fast.


| 23
Building Your Organization
We cannot emphasize enough the importance of growing as a leader. When founders fail to
level up as a manager, or can’t recognize their own limitations to build an executive team
around those areas of weakness, the startup often fails (usually somewhere between 25 and
75 employees). Sometimes, the CEO is removed by the board, but this action is often too
little, too late to save the company.
With that in mind, here are some of the resources you can use to help you grow as a leader:
• Coaches: Most CEOs of Silicon Valley startups use coaches to develop their CEO
skills. The Information recently ran an article on some of the most popular coaches in
Silicon Valley.

Choosing a coach is a very personal experience. There is a full spectrum of coaching
styles—from emotional (“be in tune with your feelings” and “visualize what your
feelings look like”) to academic (“studies show that these inputs affect your output”
and “x% of individuals who have a certain experience are y% likely to behave in
a certain way”). On one end, the focus is more on acknowledging the underlying
emotions, while the other end focuses more on the action or behavior and how
to change it. Both approaches hopefully lead to greater self-awareness—it’s just a
matter of which end you start from.

When you’re looking into coaching, it’s important to understand the difference
between therapy and coaching. Therapy aims to address the root causes of your
issues (bringing you to your functional self ), while coaching takes you from your
functional self to optimal self.

It’s typically better to find a local coach, but great coaches are scarce in smaller
ecosystems so you may need to rely on remote coaching. As expected, there’s a range
in pricing, but we find that most coaches work on a retainer, ranging from $1,000 to
$10,000 a month.

And while it’s not a replacement for a coach, we highly recommend Eric Schmidt,
Jonathan Rosenberg and Alan Eagle’s book, Trillion Dollar Coach: The Leadership
Playbook of Silicon Valley’s Bill Campbell. There’s a ton of actionable advice and
great examples in the book that will help any CEO and entrepreneur become a better
leader. After it was published, we sent a copy to every founder in our portfolio.


| 24
Building Your Organization
• Mentors: Learning from a mentor is a very powerful thing. The challenge is that
there are usually way fewer mentors than there are mentees. One hack is to have
“informal” mentors—people you learn from without a formally established mentor-
mentee relationship. Boris has two to three people in his life that he considers
informal mentors. But this relationship works only if you also give back in some
way (e.g., introductions to people your mentor would like to connect with). If you
just take and take, these people won’t want to meet with you anymore.
• Peers: More and more VCs are making sure they build a community around their
founders. At Version One, we typically organize two founder dinners each year in
San Francisco, NYC, and Toronto to help foster community among our startups in
each location.
•
360° feedback: To learn how you’re doing as a manager, nothing beats feedback
from peers and the people that report to you. Ideally, this feedback should be
anonymous so it can be as frank as possible. At AbeBooks, Boris (the founder) had
a biannual 360° feedback process and while it sometimes hurt, the feedback helped
him identify his weaknesses to grow as a manager.
• Feedback from the whole company: At AbeBooks, Boris did an annual survey of
employees to understand things from where they were sitting: Is the vision of the
company clear? Does everybody understand the strategic priorities? Do employees
think that we are living up to the value we defined? Such feedback at scale can be
incredibly valuable and is the basis for measuring progress over the years.
Invest in your people
Leadership development is typically limited to executives, but employees at all levels can
benefit from some kind of coaching—particularly those who are promoted to first-time
management positions.
Newer generations of employees recognize coaching and development as an important
employee benefit—like health benefits or retirement savings matching. For some, employee
development is a table stakes responsibility of the company. As Jobber CEO Sam Pillar
explained, “Coaching and development is a significant competitive advantage for talent.
Since this aligns nicely with the imperative for the company to get the most out of its
people, I think it’s a no-brainer for companies to invest here.”


| 25
Building Your Organization
Shopify has done a great job in making sure their company leaders are nurtured and developed at
all levels of the organization. They brought on a part-time coach when the company had around
60 employees, and then a full-time coach when they reached 160 employees. They’ve been
offering one-on-one coaching for executives, ad hoc mentoring for first-level managers (who
supervise employees directly) and second-level managers (who manage supervisors), as well as
“at scale” leadership workshops for all company managers.

You don’t have to bring the coaching function in house. LifeLabs Learning offers a good series
of workshops and some of our portfolio companies have used Sounding Board and Prosper for
scalable and affordable 1:1 coaching.
Preventing marginalization as you scale
People often talk about the challenges associated with moving from individual contributor
to a leadership role. But we’ve noticed another challenge that isn’t as frequently discussed:
early employees who are generalists can feel marginalized out of their responsibilities as the
company matures and roles begin to narrow in focus.

To keep these early generalists motivated, invest in their depth. Start developing specific
“technical” skills in engineering, product, marketing, sales, and design—wherever an employee
shows interest and aptitude. Having a VP/Head of People in your organization is a great way
to address this issue, since you have someone who is dedicated to thinking about your people
and their growth.
As Ada’s Head of People Chelsea MacDonald explained to us, “The question that keeps me up at
night is: ‘Is everyone at Ada working on the most important things, at the edge of their abilities?’…
I still worry about [getting sued], but the cost of a lawsuit is drastically less than the cost of our
entire team working on the wrong things, or not working to the best of their abilities.”
We’ve also seen marginalization become an issue for co-founders who are not CEOs. As the
company grows, it may turn out that the technical co-founder isn’t right for a CTO or CPO
role. Now what? If keeping the co-founding team is important, you need to find ways to
keep the non-CEO co-founder engaged. You can make them responsible for running special
initiatives or projects. He or she knows the long-term vision of the company and can help give
the company a head start on that path.


| 26
Building Your Organization
RUNNING THE ORGANIZATION
Operations are very ad hoc when you’re a small team working hard to get to product-market-fit.
Once you start scaling, people may no longer be as aligned. Decisions aren’t made as quickly.
And, the whole pace of execution starts to slow down. The problem is you’re still a startup—
being an aggressive and fast-moving entity is usually the only fighting chance you have against
incumbents.

Amazon’s magic is that it’s a behemoth of a company that still operates like a founder-driven
startup in several key areas. This is partly because Bezos has a strong cultural influence
throughout the company. But, he also developed some unique tools to institutionalize his core
values in the company.

Here are a few best practices that can keep a startup executing fast while scaling up the size of
the organization:

• Align the whole organization: In the early days, the first handful of employees likely
formed a single tight-knit group and the management structure was pretty flat. As you
cross 100 employees, different groups will evolve and layers will be added—and it
becomes all the more important to keep everyone aligned to the central mission.

One of the most important things a leader can do is to make sure the whole
organization understands the company’s vision, priorities, and goals. We’ve found that
most CEOs underestimate just how often the vision needs to be repeated. Stewart
Butterfield advised, “Repeat the message until you are sick of hearing yourself talking
about it.” Some of our founders make a point to share the vision at least once a week
to the whole company (for example, at weekly town halls). And Andrew Sider, a former
portfolio CEO (VarageSale) and current investor, recommends enlisting team managers
to fortify the message by repeating it in smaller settings with their own teams.

Fred Wilson has spoken about the heartbeat of a company; effective companies operate
on a cadence that is perceptible to everyone in and around the company. There are
many ways to get this heartbeat going—from agile product development to regular
OKRs and weekly show-and-tells at the all-hands meeting.


| 27
Building Your Organization

According to Fred, “What it comes down to in my view is a mindset around getting
stuff done on a regular cadence and then letting that rhythm become a wave and
riding that wave. And it starts with the CEO. They are the drummer in the band. They
set the beat and keep the beat. And everyone plays around it.”
• Not every decision needs to take long! At Version One, we usually know within a
few days whether we should invest in a company or not. After we get this initial feeling,
we can spend several weeks doing more due diligence, but that added work will only
bring incremental benefits. If we know the company isn’t a good fit for us, delaying the
decision with added research and deliberation just eats up everyone’s time.

It’s the same for entrepreneurs. It’s usually better to make a decision quickly (even if
it’s the wrong decision) rather than sit too long. When you try to reach 100% certainty
before acting, you slow everything and everyone down. And most likely, your decision
won’t be any different or better than the action you would have taken at 80%.

Bezos refer to two types of decisions. Type 1 decisions are consequential and
irreversible, or nearly irreversible. Type 2 decisions can be easily reversed; they’re
like walking through a door—if you don’t like the other side, you can always go back.
Bezos’s message is that business leaders often use the heavy-weight Type 1 decision-
making process on too many decisions, including those that could be easily changed.
As a result, organizations are too slow and risk averse to truly innovate. Not every
decision should take weeks of deliberation. Be decisive and quick when you can.
• Develop agile teams: Amazon’s Two-Pizza rule is pretty widely known. If a project
team can eat more than two pizzas, then it’s too large. This means they break up a big
project into smaller projects, where the smaller project teams can stay nimble and be
less subject to complex governance.

The supporting piece is that every product at Amazon should have an API, just as if
it were developed for an external client. This decouples the speed of development
between different product teams, and offers a clean hand-off between the two. The
more that individual teams can execute independently and interaction is standardized,
the more your company will be a fleet of fast boats, rather than a large tanker.


| 28
Building Your Organization
• Run efficient meetings: We’ve all heard stories about or sat through meetings that
are mind numbingly boring and a colossal waste of everyone’s time. The answer isn’t
necessarily eliminating all meetings, but running more productive, focused meetings.
Bezos is famous for banning PowerPoint from meetings and instituting the six-page
memo. Meeting organizers prepare six-page memos that everyone needs to read silently
at the beginning of the meeting. This approach ensures that everyone is on the same page
as the meeting begins. And the process of writing a detailed memo forces organizers to
better crystallize their thinking upfront, so the heavy lifting is done beforehand.

You don’t necessarily need to implement Amazon’s six-page memo, but at a minimum,
a detailed agenda should be included with every meeting invite. Assign a meeting
facilitator to keep the meeting on track and follow up with the action items.

Lastly, not everyone needs to be included in every meeting—we find this to be a big
early-stage issue when roles aren’t as clearly defined. As a founder, dismiss yourself
from meetings that you don’t need to be at. And all meeting organizers should think
thoughtfully about their attendee list. More participants isn’t always better.
• Align your budget with your goals: Budgeting for pre-seed and seed-stage companies
is mostly about managing your burn relative to the milestones that you need to achieve
for your next round. From Series A onward, the yearly budgeting process becomes a
central element for managing your company’s performance. Budgeting should go hand-
in-hand with the goals and priorities for the upcoming year. A budget without such
context is meaningless. Start by defining next year’s goals and then use the budgeting
process to assign resources to these goals.

In the first few years, budgets tend to be way off. It’s hard to predict the performance
of early-stage companies, since you don’t fully understand your sales and marketing
engine yet. The goal is to continually improve your forecasting model over time.
While it makes sense to re-forecast every quarter based on actual performance, you
should still measure yourself against the original budget. If you start using new budget
numbers mid-stream, you’ll never get any insight as to where you were off in your
initial planning.

Try to get input from your board members and investors before you fully bake the
budget. Once everybody is aligned around the high-level numbers (top line growth,
total burn, etc.), you can work out the details.


| 29
Building Your Organization

Lastly, when you are busy running a startup, making time for a budgeting process may
not feel like the most crucial thing to spend your time on. Be assured that this isn’t a silly
formality. Budgeting will turn out to be one of the key tools for bringing clarity to your
business and aligning the organization.
• Set goals with OKRs: OKR is a goal system used by Google and others to create
alignment and engagement around measurable goals. A proper goal describes both what
you will achieve and how you are going to measure its achievement. Long-time Kleiner
Perkins partner John Doerr (who introduced Google to OKR) explains it as:


I will (Objective) as measured by (this set of Key Results).

If you want to know more about the OKR system, there are numerous books on the
topic, with the most recent being Doerr’s Measure What Matters.
METRICS
Running a successful business means that you have to know when you are actually successful, not
just in a qualitative way, but in a quantitative way. This requires that you come up with a set of
metrics or KPIs that best reflect your company’s health.

Start collecting data on your product, sales funnel, etc. as soon as you can. There are many tools
to help you do this, such as Mixpanel, Amplitude, Heap, and Salesforce.

We recognize that every startup is different and different business models have different
indicators of success. There’s no one-size-fits-all metric when it comes to quantifying your
startup’s health. With that said, we’ve put together KPI dashboards for marketplaces and social
networks. You can access our KPI templates via Google Docs (links provided on the following
pages). Make a copy of the one you need and then you can edit away to customize it for
your business.



| 30
Building Your Organization
Marketplace metrics
Access our marketplace KPI dashboard on Google Docs here.



| 31
Building Your Organization
Social platform metrics
Access our social platform KPI dashboard on Google Docs here.

SaaS metrics and cohort analyses
For SaaS startups, we recommend Mamoon Hamid’s “Numbers that Actually Matter:
Finding your North Star.”
For cohort analyses for early-stage startups, we recommend Christoph Janz’
spreadsheet.


| 32
Building Your Organization
Early stage benchmarking
It’s imperative to understand the dynamics of your business—which knobs you can turn and
which levers you can pull to really grow your company. When it comes time to raise your next
round, future investors will want to know how the infusion of capital will help you scale. To this
extent, you should be able to differentiate between vanity and actionable metrics.

Internally, having a metrics dashboard and a North Star metric will help align the entire
organization around a common goal. And these metrics should be connected to your OKRs as
we discussed in the previous section.
Metrics can also give you an opportunity to benchmark yourself against others so you know
what your milestones should be. Point Nine Capital put together a helpful chart linking
important milestones and fundraising stages for SaaS companies. And we collaborated with
them to create a similar framework for marketplace startups, which you can access as a Google
Sheet or in stylized marketplace napkin form. Point Nine updated the marketplace napkin for
2018 (note that the currency is in Euros).
For additional resources:

–
Benchmarking for marketplaces

–
Benchmarking for SaaS: Examples from Point Nine Capital and Tomasz Tunguz at
Redpoint Ventures.
Keep in mind that metrics are only as good as the underlying infrastructure for collecting and
processing data. This can be challenging in the early stages, as your ecosystem of tools and
processes are quickly evolving. The way you measure something can change over time. For
example, one of our portfolio CEOs reported a net negative churn for about six months. As it
turns out, the churn was not negative; there was an error in how they pulled a particular metric
out of one of their systems. The bottom line is that good metrics require an ongoing investment
and focus on the underlying data infrastructure.
We love data-driven startups. Data gives you the capacity to improve your product (through
personalization, recommendations, etc.), which leads to greater data network effects and
greater defensibility over time.
3
BUILDING YOUR INVESTOR BASE
FUNDRAISING
Fundraising is a big part of every startup. Like it or not, you’ll have to get really good at it.

Our first piece of advice: only raise when you’re ready. Our definition of “ready” is when you
have achieved the milestones that you set out for this fundraise and you have all your ducks in
a row (e.g., a deck and data room, if applicable).

We are not going to cover “how to pitch,” as there are countless good resources on the topic
already. Instead, we’ll focus on the process so you’re better prepared on what to expect during
your fundraising journey.

When you’re fundraising for the next round, you want to leverage your current investors.
Here’s how:
• Come up with a list of target funds and ask your existing investors for warm
introductions. When thinking about your target list, consider which firms will be the
best partner for your current stage. A good investor can provide much more value than
just signing a check. Consider the specific areas where you need help scaling to the
next stage—which firms can best fill these needs?



| 34
Building Your Investor Base
• Prepare a teaser deck that can be shared with the warm introduction. The teaser deck
should be approximately 7-8 slides, just long enough to tell the key points of the story
including:

–
The problem you’re solving, why you care about it, and why now is the right time
to solve it

–
How you are solving it

–
How your solution is better than existing solutions (competitive landscape)

–
How the MVP is working (one or two high level metrics)

– Market size

– What’s next for you (product roadmap, building the organization)

–
Your bigger vision

–
Your ask for this round
•
Prepare a full deck that you can present at partner meetings, as well as share AFTER
you have met investors who are serious about doing due diligence.
• Create a simple fundraising tracking sheet in Google spreadsheets that can be shared
with your investors so that everybody is informed on the status of each investor
conversation.

• We encourage our portfolio companies to practice their pitch with us before they
go out to market. You always want to start with friendly faces. If possible, begin the
process by pitching investors that are lower down on your priority list. This will
enable you to refine your pitch, so you’re at your best by the time you talk to your
high-priority investors.

• Raise enough to get to your next target milestone, with a couple of months buffer. You
will need to go out again six months before the cash out date and you will need at
least twelve months to show any progress. This means you should raise for at least 18
(but ideally 24) months of runway.
•
Set your initial communicated fundraising target at the lower end of your
expectations. It is always easier to increase the target amount as you get traction in
the round rather than lowering the amount if you don’t see traction.
• Consider using Carta to manage the cap table.


| 35
Building Your Investor Base
WHAT TO DO IF YOU’RE OVERSUBSCRIBED
If you find yourself in the fortunate position of being oversubscribed, you’ll need to figure out
who you should have in your cap table and who will be the best partner for your journey. As
a founder, you have control of allocation and it’s in your best interest to fill your round with
people who are valuable to you. If your lead investor wants the full round, you do have several
levers to pull to bring others in the round if you’d like.
Here are some considerations for choosing your investors:
• What is important to you? Are you looking for help and expertise in hiring, product
strategy, customer development, fundraising, coaching, therapy, etc.? Ask for specific
examples of how the prospective investor has delivered in the areas where you need
support. Another interesting consideration is to ask yourself “Do I want to make this
investor rich?” That question can help shed light on your gut feelings toward an investor.
• How accessible is the investor? Outside of formal check-ins (e.g. board meetings),
is the investor easy to reach when you need them? At Version One, we try to act as
a hotline: we strive to be the first investor that our founders call. On the flip side,
you should find out what expectations an investor has for their involvement. On the
spectrum between helicopter parent and uninvolved check writer, what will work best
for you?
• How do all fund partners feel? Every fund has its own investment decision-making
process. Some just need a single champion, while other funds require all partners
or a certain number to be on board. We encourage founders to ask the partner they
are talking to about how decisions are made at their fund. If you sense the entire
partnership hasn’t reached consensus, speak to everyone in the firm to understand
why people are on board or not on board.
• What’s the investor’s thesis? How well are you aligned with the potential investor? If
the VC were to build your company, what would they do? What is their vision for your
future? How well do they understand your challenges? By asking them to pitch your
idea back to you, you will get a better sense of their conviction and passion for your
business. This is a great way to see how strong of an advocate they will be for you.


| 36
Building Your Investor Base
• What are the experiences of other founders in the investor’s portfolio? You’ll
probably hear all about the investor’s big successes, but it’s just as important to
learn about their failures. What did that investor do for a founder when times were
really tough (e.g., co-founder problems, personnel issues, company pivots, customer
fall outs)? You need validation that an investor will actually be there for you in the
capacity that you need them.
TO BRIDGE OR NOT TO BRIDGE
A growing number of companies are raising bridge rounds in order to extend their runway.
It’s a tempting offer (who doesn’t want easy money?) and can work for certain situations.
We think a bridge round can be smart when you’ve reached your milestones, but want to
build an even stronger case for your next round. In this situation, it’s common for existing
investors to put together an internal round, as they preempt their pro rata.

However, bridge notes can be problematic at times. Be wary of using a bridge round when
you fall short of your original milestones. Some investors may see this as an inefficient use
of capital. If you do decide to take a bridge round in this situation, make sure you have a
strong narrative to counter any concerns.

Be aware that bridges usually take the form of a note that converts in the subsequent round.
You need to understand how this will affect your cap table. Taking a note in between rounds
can make it hard to create enough allocation in the next round to attract a high quality lead.
Fred Wilson has written several good posts on the pitfalls of convertible and SAFE notes:
Convertible and SAFE Notes and Raising a SAFE or Convertible Note in Between Rounds.


| 37
Building Your Investor Base
OTHER FINANCING OPTIONS
After fundraising, there might be other sources of non-dilutive capital that you can use to
extend your startup’s runway. Venture debts are loans that are tailored to fast-growth startups
(defined as companies that have raised money from venture capital firms or other institutional
sources). You can learn more about venture debt from Silicon Valley Bank.

Venture debt can be helpful to get the capital you need to grow without adding to dilution. To
consider venture debt, you should have found product-market-fit and are in a growth phase.
Venture debt can be useful to fund the purchase of equipment, inventory, or advertising to spur
additional growth. In other words, venture debt is a short term financing instrument—it should
not be considered a way to extend the runway.
Don’t raise money through venture debt if you don’t already have access to capital. According
to Fred Wilson writes: “I encourage our portfolio companies to take the Venture Debt markets
all the time once they have become credit worthy on their own. It is smart to use debt vs.
equity when you can absolutely pay the debt back.” On the flipside, he also advised, “financing
companies with debt when the company has no obvious means other than their VC investors to
pay the loan back is bad financial management.”
Venture debt can be problematic in later equity rounds. If you enter an equity round with
venture debt, the new investors will have to agree to either repay the debt or invest below the
debt in order of preference. If you’re interested in learning more about when to use (and when
not to use) venture debt, we recommend Howard Marks’ article, What to Know Before Going
into Venture Debt.



| 38
Building Your Investor Base
INVESTOR COMMUNICATION
After the fundraising is over, it’s critical to build a strong communication channel with
your investors. Most investors are not just looking to write a check and go away. The more
engaged your investors are in your startup, the stronger and more beneficial the relationship
can be. Keep your investors up to date and they can better identify opportunities to help you.
Keep your investors engaged and they’ll be more effective cheerleaders for your company.
If you communicate well in the good times, you will create the trust and alignment that’s
essential to navigate the bad times.
Monthly reports
You can’t go wrong with formal communications like written monthly reports. These can be
short, but should contain three things:

• Key metrics: how did you do last month, year-over-year?
• The good, the bad, and the ugly: what are the key things that happened in the month?
• Your asks: what specific things can your investor do to help?

Andrew Sider, a former portfolio CEO (VarageSale) and current investor, summed up his
advice for these monthly updates: “A common trap is to make these updates too long and
fluffy (everything is amazing!). I prefer a quick metrics recap, small story narrative update,
and your asks of the group. But realistically, you don’t get many responses to these emails
(ever). You’re better off making asks in 1-on-1 emails outside of these update emails.”



| 39
Building Your Investor Base
Monthly communication example: ADA
The following is an example of a monthly email, from Ada’s
Mike Murchison:
Hi team,
We recently launched our new website, closed our debt facility, and have been
pushing our [xxx] deal along.
We’re now shifting our focus towards Series A fundraise. I’m planning on being in
the Bay Area Sept 26 - Oct 6.
Please see more detailed update below, and looking forward to catching up tonight.
Mike
Product
•
[customer] Tier 2 sales transaction “recipes” on track to do more than
[$xxxK] in sales transactions before year-end. Highlights value of Tier 2
and provides clear example of Ada as a creation platform. Strong early
indication of value of “recipes ecosystem.”
• Demo’d Ada Apple Business Chat integration to [customer] team to much
excitement. ABC could be material business driver for Ada in 2019.
• Ada Proactive Chat (“Ada Intros”) launching this month. Expected to
increase bot usage and drive more savings for customers.
Sales
Revenue
• Total MRR: [$xxxK]
• New MRR Q3: [$xxK (xx% of xxK target)]
Efficiency
• MidMarket ACV has increased [xx%] in last 6 months from [$xxK to $xxK].
• MidMarket avg sales cycle is xx months.
Pipeline: [$x.xM]
•
[customer]: [$xx]
•
[customer]: [$xx]


| 40
Building Your Investor Base
New Accounts
•
[customer]: [$xxK]; 1 year contract
•
[customer]: [$xxK]; 1 year contract
Finances
Closed [$x.xM] venture debt facility from SVB
• CoH: [$xx (+$xxK facility)]
• Burn: [$xx] (August est.)
• Model available here
Fundraise
• Planning Bay Area trip September 26 to October 6
• Goal of closing Series A by year-end
Team
FTE: [xx]
• Fired Senior Web Developer
Recently hired
• ML Engineer (NLP Masters)
• Director of Demand Gen
• Paid Acquisition manager
•
2 Senior Designers
Hiring: [xx] FTE by early Q4
• Head of People & Operations
•
5 x FS Developers
•
Solutions Architect
•
Sales Ops Manager
• Enterprise AM
Help
• What valuation range is realistic for us to expect?
• What traps are unique to the Series A process (relative to Seed) that are
key to avoid?
• Which Series A investors that we have yet to speak with are you confident
would considerably raise the caliber of our team?
Monthly communication example: ADA


| 41
Building Your Investor Base
BOARD MEETINGS
Most boards meet on a quarterly basis, but we’ve seen companies ramp up this cadence
(typically meeting every 6-8 weeks) during crucial periods. Many companies also schedule
monthly board calls in between the quarterly meetings and this is an efficient way to keep
everybody informed.

It goes without saying that the quality of a board meeting can have a big impact on the value
that the board brings to your company. With proper preparation, board meetings can be
useful and productive sessions. But meetings that are poorly organized, go on too long, and
stray off on tangents can weaken the commitment of your biggest supporters.
During pre-seed and seed stages, we recommend getting into the practice of having quarterly
board meetings. They can be informal (legal representation or official minutes aren’t
required), but still follow the general structure and tips outlined below to make the best use
of everyone’s time.

Here are our best practice tips for successful board meetings:

•
Include a board letter. A few years ago a board deck was the standard documentation
provided to the board. More recently, many founders have opted to include a board
letter. It’s a great way to provide more colour around the company’s progress and the
state of the team.
• Send out all board materials at least 24 hours before the meeting, ideally 48
to 72 hours beforehand. When your board reads all of the materials before the
meeting, you can spend more time discussing strategy and getting input on your most
pressing questions. This is only possible when you give board members enough time
to properly review everything.
• Start with your vision. When you only meet once a quarter as a board, we find that
it’s really productive to start the meeting by reminding everybody of the company’s
mission and the strategic goals for the year. This makes sure everybody is aligned
before diving into the details.


| 42
Building Your Investor Base
• Don’t downplay the importance of these meetings. A company’s board plays a big
role in fundraising and the makeup of the leadership team. The more confidence they
have in your performance as a CEO, the more supportive they’ll be in your endeavors.
In many cases, your performance in board meetings is the main, if not only, window
that the board has into your work and your thinking.
• Reserve time for discussion. A common trap is for board meetings to become
reporting meetings. At least half of the meeting time should be reserved for strategic
discussions, not just reviewing past results or spending time on administrative
matters. The best way to achieve this is to send out the status report/metrics in
advance and then pick one or two strategic topics that you want to discuss during the
meeting. For example, “How do we take our go-to-market strategy to the next level?
How do we elevate the hiring brand of our company? How do we think about long-
term growth (single versus multiple products, geographical expansion, etc.)?” Try to
spend as much of the board meeting discussing higher level strategy matters—that’s
where your board can have the most impact.
• Manage your board. Boards can be hard to manage, which is not surprising given
the fact there are many participants who want to share their many perspectives. Make
sure you are getting input from every board member (not just the loudest) and try to
steer the board away from tactical decisions. Your board should help you figure out
what to do, not tell you how to do it.
• Bring in key team members. We really like when our founders bring in key
employees to present on their area of expertise for part of the board meeting. This
gives board members direct exposure to senior managers, and senior managers get
a better understanding of how the board works and functions. You can take this
approach a step farther with skip level conversations where board members meet
with senior managers without the CEO.
• Schedule board only and executive sessions at the end. Give board members a
chance to debrief and get on the same page with a “board only” session. Then the CEO
should be called in to get feedback from the group about any issues that were identified.
This process prevents any misalignment between the CEO and the board. Fred Wilson
wrote a great post on the importance of executive sessions and continuous feedback.


| 43
Building Your Investor Base
• Ask for feedback. Some of our founders have made it a practice to formally ask
board members for feedback on the board meeting itself, including the process and
logistics. What can be improved to make the next meeting even more productive?
HOW TO LEVERAGE YOUR INVESTOR
We hope that your investor is an enthusiastic and steady supporter of both you and your
startup. Starting, building, and scaling a company is challenging enough; you don’t need your
investors to add drama to the mix. So, assuming you have (or will have) great investors on
your side, what are the best ways to leverage them?

• Pattern matching and best practices: Most VCs have been around startups for a
long time and have seen many things. They’re a great knowledgebase of best practices
and how to solve specific problems—that’s why we’re writing this guide!! Whenever
you see an opportunity to shortcut a decision by getting solid advice from your VC,
go ask him or her.
• Extend your network: Most investors have an extensive Rolodex, so try to leverage
it as much as possible, whether it’s for senior hires, customer introductions, or media
contacts. Be as precise as possible in your ask. If you’re trying to find the first five
pilot customers after your seed round to figure out product-market-fit, don’t turn to
your investor and say: “Please help with customer introductions.” Instead, specify
what you need: “I am looking for five pilot customers. These customers should
ideally be mid-sized SaaS companies between 50 and 200 employees where the CTO
is generally excited about new products and is willing to work with us to figure out
product-market-fit.”
• Help your entire team: One of the best ways that an investor can support you
is by supporting your team and developing direct relationships with executives
and employees. For example, investors can host lunch & learns so that every team
member has an opportunity to understand what it means to be a VC-fundable
business and hear why the investor invested in their startup. Have your investors
meet with select employees and executives. This way, they’ll be in a better position to
provide direct support as needed.


| 44
Building Your Investor Base
• Volume discounts: As a startup, you probably aren’t getting the volume discounts
that larger companies can get, but your investors often have access to cloud provider
startup programs by large tech companies that can give you discounts or credits for
infrastructure (e.g., AWS, GCP, Digital Ocean) or tools.
• Platform services: More and more VCs are offering platform services. They have
operating partners on staff whose specific responsibilities are to help CEOs, other
c-level execs, and employees with company-building, from recruiting to marketing
strategy, budgeting and M&A. Many also have platform or community managers who
host CEO/CTO summits annually, as well as weekly events and workshops for their
portfolio companies (e.g., intern day, mid-management training, HR best practices,
etc.). This post from Mathilde Collin, founder of Front, details the help they received
from Sequoia following their Series B. Keep in mind that this kind of help isn’t
limited to large firms either.
And lastly, your ability to leverage your investor depends on the strength of the relationship.
A great relationship typically starts with regular and open communication. If you haven’t read
it already, go back in this chapter and see our section on investor communication.
WORKING WITH ADVISORS
Advisors can be instrumental in providing additional knowledge and connections, but you
should be aware of some potential pitfalls when bringing advisors on board. There are too
many people out there who love to be associated with startups. They want the financial
upside, but never deliver as expected.

Here’s our advice for working with advisors:
• Look for advisors who have deep operational expertise in areas of your business that
aren’t likely to change over the next 12 months.
• Clearly define your expectations of the relationship—including expected time
commitment and deliverables (e.g., introductions to certain companies or CEOs,
advice on specific initiatives). Be as specific as possible.


| 45
Building Your Investor Base
• We suggest limiting the engagement to one year—your set of problems and realities
are always changing. And, if an advisor doesn’t produce, you don’t need to terminate
them. Simply let the agreement run out.
• Generally speaking, we’re not fans of cash compensation for advisors. Startups
usually don’t have enough cash, so ideally you can pay advisors in equity options.
•
In the best case scenario, the advisor invests a bit of their own money into your
startup so you are fully aligned and they are fully engaged. This gives you a little more
upside from the relationship beyond their time investment.
Introduction
Altman, Sam. Startup Playbook. https://playbook.samaltman.com
Gil, Elad. High Growth Handbook Scaling Startup from 10 to 10,000 People. Stripe Press,
2018.
Chapter 1
Gil, Elad. High Growth Handbook Scaling Startup from 10 to 10,000 People. Stripe Press,
2018.
Morrill, Kevin. Example: Interview Game Plan. https://docs.google.com/document/d/1NFD
IGw0Gww67NXe5rr83lJHB8VW1l1QD90exTeL_ulE/edit#
Richards, Jeff. The People Conundrum. LinkedIn, June 8, 2017. https://www.linkedin.com/
pulse/people-conundrum-jeff-richards/
Tran, Angela. What does a Head of People do? Learning from Ada’s Chelsea Macdonald.
Version One Blog, May 23, 2019. https://versionone.vc/chelsea-ada-headofpeople/
Thawar, Farhan. Technical Interviews are Garbage. Here’s what we do instead. Medium,
October 20, 2017. https://medium.com/helpful-com/https-medium-com-fnthawar-helpful-
technical-interviews-are-garbage-dc5d9aee5acd
Bensinger, Greg. Amazon’s Current Employees Raise the Bar for New Hires. The Wall Street
Journal. January 7, 2014. https://www.wsj.com/articles/amazon8217s-current-employees-
raise-the-bar-for-new-hires-1389124745
Tran, Angela. The importance of consistent messaging. Version One Blog, November 17,
2014. https://versionone.vc/consistent-messaging/
RESOURCES


| 47
Resources
Brewer, Josh. Inclusion is a Choice. Inside Abstract. https://www.goabstract.com/blog/
inclusion-is-a-choice
Cooper, Matt. A No B.S. Guide to Startup Stock Option Grants. Medium, July 31, 2019.
https://medium.com/swlh/a-no-b-s-guide-to-startup-stock-option-grants-526a8bc33c2b
Chapter 2
Wertz, Boris. Three leadership lessons from Slack’s Stewart Butterfield. Version One Blog,
August 8, 2018. https://versionone.vc/three-leadership-lessons-from-slacks-stewart-
butterfield/
Weinberg, Cory. The Coaches Behind Startup Founders. The Information, March 20, 2018.
https://www.theinformation.com/articles/the-coaches-behind-startup-founders
Schmidt, Eric, Jonathan Rosenberg, Alan Eagle. Trillion Dollar Coach: The Leadership
Playbook of Silicon Valley’s Bill Campbell. HarperBusiness, April 16, 2019.
Wertz, Boris. Shopify’s big people investment: how a startup scaled coaching beyond its
executives. Version One Blog, December 7, 2015. https://versionone.vc/shopifys-big-people-
investment-how-a-startup-scaled-coaching-beyond-its-executives/
Wilson, Fred. The Heartbeat. AVC.com, June 27, 2018. https://avc.com/2018/06/the-heartbeat/
Rosoff, Matt. Jeff Bezos: There are two types of decisions to make, and don’t confuse them. The
Business Insider, April 5, 2016. https://www.businessinsider.com/jeff-bezos-on-type-1-and-
type-2-decisions-2016-4
Deutschman, Alan. Inside the Mind of Jeff Bezos. Fast Company, August 1, 2004. https://www.
fastcompany.com/50106/inside-mind-jeff-bezos-5
Doerr, John. Measure What Matters. Portfolio, April 2018.


| 48
Resources
Hamid, Mamoon. Numbers that Actually Matter. SlideShare, February 9, 2017. https://www.
slideshare.net/03133938319/numbers-that-actually-matter-finding-your-north-star
Janz, Christoph. Point Nine Capital Cohort Analysis Spreadsheet. @AndrewChen.
https://andrewchen.co/the-easiest-spreadsheet-for-churn-mrr-and-cohort-analysis-guest-post/
Morrongiello, Julia. The Markeplace Funding Napking 2018. Medium, November 27, 2018.
https://medium.com/point-nine-news/the-marketplace-funding-napkin-2018-847d775a0a55
Janz, Christoph. What does it take to raise capital, in SaaS, in 2016? The Angel VC, May 31,
2016. http://christophjanz.blogspot.com/2016/05/what-does-it-take-to-raise-capital-in.html
Tunguz, Tomasz. Series A SaaS Startup Benchmarks for 2018. TomTunguz.com, January 4,
2018. https://tomtunguz.com/series-a-saas-startup-benchmarks-for-2018/
Chapter 3
Wilson, Fred. Convertible and SAFE Notes. AVC.com, March 2017. https://avc.com/2017/03/
convertible-and-safe-notes/
Wilson, Fred. Raising a SAFE or convertible note in between rounds. AVC.com, February 2019.
https://avc.com/2019/02/raising-a-safe-or-convertible-note-in-between-rounds/
Wilson, Fred. Financing Options: Venture Debt. AVC.com, July 2011. https://avc.com/2011/07/
financings-options-venture-debt/
Marks, Howard. What to Know Before Going into Venture Debt. Forbes, May 13, 2018. https://
www.forbes.com/sites/howardmarks/2018/05/13/what-to-know-before-going-into-venture-
debt/#4a60664578b2
Wilson, Fred. Executive Sessions and Continuous Feedback. AVC.com, January 2019. https://avc.
com/2019/01/executive-sessions-and-continuous-feedback
Collin, Mathilde. What it’s like working in Sequoia. Medium, April 3, 2018. https://medium.
com/@collinmathilde/what-its-like-working-with-sequoia-2a46ebdb069
Pub Date: November 2019 ©2019 Version One Ventures. All rights reserved. All trademarks are the
property of their respective owners.
Angela Tran
angela@versionone.vc
@angelatytran
Boris Wertz
boris@versionone.vc
@bwertz