By Karsten Vagner
Startup leadership teams navigating our unpredictable economic landscape are more than feeling the pressure. Beyond guiding their company’s strategy and direction, they must also manage employee morale and confidence. This can feel like an overwhelming burden, especially when resources are stretched thin.
Even though the markets seem to be turning a corner, the traditional playbooks for growth and scale are outdated. Headcount is net negative at VC-backed startups for the first time in years, with the majority of companies in survival mode rather than on hiring sprees. Compensation and equity are relatively flat, while new managers and VPs saw their average salaries decline.
It’s clear the emphasis has shifted from growth at all costs to sustainability and strategic thinking.
Yet there’s an untapped resource at startups’ disposal — their investors and their platform teams. For years, VC firms have adhered to a traditional model centered around funding, growth and recruitment. Their focus was on filling their leadership teams with top-notch hires and helping their companies scale quickly. But the past few years have shifted, with a growing number of investors recognizing the need for deeper partnership. This includes hiring heads of people to help their founders build resilient teams and cultures to weather any climate.
I’ve spent my career as the head of people at several startups, scaling them from their early days to teams of several hundred employees. I know the pressures founders face as their companies grow, and how critical it is to have true partnership at each stage.
That’s what prompted me to join a VC firm a few years ago — I wanted to bring my firsthand experience and expertise to a wide variety of early-stage startups, helping them navigate the common challenges and pitfalls of scaling their companies.
Reality check
Anything founders and their leadership teams are experiencing, we’ve seen before. Whether it’s market shifts, leadership challenges or cultural changes, our exposure to a wide range of startups gives us a unique vantage point.
This is where pattern recognition comes into play. We’ve seen the pitfalls, the triumphs and the nuances that can make or break a company. The question founders should now be asking themselves is whether their investors are supporting them in building a high-performing culture.
For example, a founder recently came to us with an urgent need to help backfill a key leader at their company. To most investors, it would seem like a fairly straightforward request. But we knew the first step would be to dig deeper into the company’s organizational chart and the scale of challenges they were facing. Soon it became clear that they didn’t need a replacement. Instead, we recommended they bring on a consultant to address the immediate needs while allowing the existing team to grow around them. This not only helped save the company costs, but also empowered their internal team to become more agile and resilient.
More than money
VCs can also serve as powerful connectors by bringing together leaders across all of the companies we’ve invested in. Every quarter, I hold a call with our people leaders to share resources, recommendations, ideas and benchmarks with each other.
Most recently we focused our conversation on the importance of investing in the mid-level manager group, not only because this is the group that runs the day-to-day operations of a company, but because building and leveraging this group’s management skills keeps more senior executives from “working down.” One of our people leaders shared the blueprint for their 12-month “leadership academy,” a peer-to-peer program that is cost-effective and has driven strong results for their team.
When I was on the startup side, I also experienced firsthand the impact an investor can make on employee morale. After a tough quarter, our team was feeling uncertain about the direction of the company. One of our board members stepped in and shared their perspective in our all-hands meeting, emphasizing why they were so confident our company was on the right path. By the next quarter, we saw a significant impact on our employee survey.
Investors can be much more than financial backers. The role of venture investors is not just to fund the journey but provide insights, support and a wealth of experience to help steer founders through this climate. They should be seen as strategic partners that can help navigate complex challenges, understand how to invest in and improve company culture, and help make strategic decisions that meet short-term needs and long-term goals.
This market demands more than just growth — it demands resilience, adaptability and a keen understanding of how to leverage every resource available. And in this new landscape, VCs could be startup leadership teams’ most valuable, yet underutilized asset.
Karsten Vagner joined Define Ventures in 2022 as head of people. Prior to joining Define, Vagner led people teams at Maven Clinic, Hired, AppNexus and Zocdoc. He is a member of the Human Resources Council, and has been recognized by Crain’s New York, Business Insider and Employee Benefit News for his leadership in HR.
Illustration: Dom Guzman
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