Jenny Fielding, co-founder of Everywhere Ventures and former Techstars managing director, recently sparked a heated conversation on X by asking if founders should hire executive assistants (EAs) at the pre-seed stage. While some argued that AI-powered EAs could suffice, others took umbrage with the suggestion that human EAs were unnecessary. Fielding’s point was not to dismiss the value of EAs but rather to highlight the misconceptions about cash management that founders may hold from the excess funding days of 2020-2021.
Founders still often believe that they can spend their raised funds "how they want to," without considering the scrutiny of early-stage VCs. Fielding emphasized that even as silent partners, VCs will judge a founder’s cash management when it comes time to raise the next round and secure warm introductions and recommendations from seed/pre-seed investors.
Executive Assistants: A Red Flag for VCs
Fielding noted that while EAs can be invaluable at established companies, they are often seen as operational overhead positions rather than people helping build and support the early product. Beyond an EA for the CEO, there are other titles at early-stage startups that can raise red flags for VCs: COO and CFO. Fielding explained that these roles can be a "third co-founder" issue, where someone doesn’t quite know how to fit in and can be both expensive (in terms of stock and salaries) and unnecessary.
The Salary Conundrum
Fielding also highlighted the issue of salaries at early-stage startups. While VCs might not directly address these concerns, they are indeed paying attention. One instance where Fielding ended a deal was when she analyzed the operating expenses of a startup and saw that the founder was paying themselves $300,000. She advised that a reasonable salary at the pre-seed level is between $85,000 and $125,000.
Fielding emphasized that it’s not about making $100,000 forever but rather about being mindful of the math: even if a founder has raised a healthy $1 million pre-seed but pays themselves $200,000, they’ve already spent a fifth of the money. At this stage, startups don’t have the luxury to "burn" cash.
The Consequences of Mismanaged Cash
Fielding’s comments come at a time when many startups are struggling with cash management due to factors like inflation, reduced funding rounds, and higher operating expenses. VCs will continue to scrutinize founders’ cash management decisions, making it crucial for founders to understand the implications of their choices. By being more mindful of how they manage their finances, early-stage startups can avoid common pitfalls and set themselves up for success in the long run.
A Word from Experienced VCs
Fielding’s advice is not unique among experienced VCs. Many investors agree that founders should prioritize building a product people want to buy over indulging in luxury items like EAs or high salaries. By keeping things simple and focused on growth, startups can increase their chances of success.
The Bottom Line
While the debate around cash management at early-stage startups will continue, one thing is clear: VCs are watching, and founders should be aware of the scrutiny they’ll face. By being more mindful of their financial decisions and adopting a more frugal approach, founders can avoid common pitfalls and set themselves up for long-term success.
Related Topics
- Cash Management: Understanding how to manage finances effectively is crucial for startups.
- Early-Stage Funding: VCs scrutinize cash management at early-stage startups.
- Pre-Seed Funding: Founders must be mindful of their financial decisions during this critical phase.
By being more informed about the implications of their choices, founders can navigate the challenges of early-stage startup life with greater confidence.
