A Conversation Sparks
VC Jenny Fielding, co-founder of Everywhere Ventures and former Techstars managing director, recently took to X (formerly Twitter) with a thought-provoking post that sparked a lively discussion among the startup community. Her question, "Y’all have strong opinions about pre-seed founders who have EAs [executive assistants] to help them schedule? Just checking," was not just a casual inquiry but rather a catalyst for a deeper exploration of cash management and the realities of early-stage funding.
A Snarky Post with a Serious Point
Fielding acknowledged that her post had a hint of snarkiness, but she emphasized that it highlighted an important issue. She expressed concerns about founders’ misconceptions regarding cash management, particularly during the early years of their companies when revenue is scarce. In this context, Fielding believes that founders should focus on building a product that people want to buy rather than splurging on executive assistants.
From Founder to VC: A Realistic Perspective
As someone who has walked in founders’ shoes, having co-founded two companies herself and spent seven and a half years at Techstars, Fielding understands the challenges of bootstrapping and managing cash flow. She believes that it’s essential for investors to provide founders with "real information" rather than sugarcoating the harsh realities of startup life.
Judging Cash Management
While most seed investors may take a hands-off approach, early-stage VCs like Fielding will still scrutinize how founders manage their raised capital. Even if the VC is not directly involved in the company’s operations, they will assess the founder’s cash management skills when it comes time for the next funding round.
The Silent Partner
Fielding explained that her firm invests at an early stage and doesn’t take board seats, which means that founders are entrusted with managing their raised capital. As a result, VCs like Fielding regularly review operating budgets and hold quarterly calls to discuss financial performance. These judgments will ultimately impact the next funding round, where seed/pre-seed VCs can provide valuable recommendations and introductions to subsequent investors.
Executive Assistants: Not for Early-Stage Startups
Fielding argued that executive assistants are operational overhead positions, not people who contribute to building or supporting the early product. At established companies, EAs can be invaluable; however, in the early stages of a startup, founders should prioritize developing their product and acquiring customers rather than investing in organizational structure.
Red Flags: COO and CFO
Fielding highlighted two titles that can raise red flags for VCs: Chief Operating Officer (COO) and Chief Financial Officer (CFO). These roles often indicate unnecessary operational overhead or a lack of focus on core business development. Third-wheel co-founders, who may not be contributing significantly to the company’s growth, can also be expensive in terms of stock and salaries.
Salaries: A Matter of Math
Fielding emphasized that early-stage investors, though they may not explicitly express their concerns, will review operating expenses closely. She shared an example where a founder was paying themselves $300,000, which was a significant portion of the raised capital. Fielding advised founders to be mindful of salaries, suggesting that reasonable compensation at the pre-seed level is between $85,000 and $125,000.
A Warning: Don’t Burn Through Cash
Fielding cautioned founders not to overspend on salaries or operational expenses, as this can quickly deplete their raised capital. She noted that even if a founder has secured a healthy $1 million pre-seed round, paying themselves $200,000 already represents a fifth of the money. This is a critical reminder for early-stage founders to prioritize cash management and focus on building a sustainable business model.
Conclusion
Jenny Fielding’s X post sparked a much-needed conversation about the realities of cash management in early-stage startups. As a seasoned VC and founder herself, she offers valuable insights into the challenges and pitfalls that entrepreneurs face when bootstrapping and managing their raised capital. By prioritizing cash management and focusing on core business development, founders can increase their chances of success and build sustainable companies.
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