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One principle startups and venture capitalists can agree on is that the people on your team will make or break your business. The common denominator for any successful company, regardless of industry or size, is that its leadership teams are able to attract and retain the best talent. While most CEOs and founders will tell you that people are their most important asset, a majority of them feel like they don’t have enough hours in their days to address the need in their organizations for talent development at scale. Traditionally, VCs and platform teams have helped their portfolio companies attract the best talent by providing recruiting and hiring support, but recently, some VCs have also started to help their companies on the development and retention front. Many are now offering ongoing training, coaching, and proactive solutions to address the common leadership and management challenges that occur frequently as startups scale.
Startups by definition tend to offer interesting on-the-job opportunities for leadership development, but they don’t often invest in more formal activities to provide real-time feedback, development opportunities, and training. This is especially true at the earliest stages of a company. Many startups begin to focus on talent development at some point of scale, but don’t make the time to address it in the earliest growth phases of the company.
It’s not unusual for competent people to get promoted quickly based on their ability to perform effectively as an individual contributor. Often, they’re given a team to lead and bigger goals to hit. But skill sets that the best managers and leaders possess – giving constructive feedback, having tough conversations, creating personalized development plans for their individual team members, creating psychologically safe environments where people feel empowered to do their best work – are very hard to acquire intuitively.
This helps us see the case for investing resources in existing talent rather than solely focusing on recruiting: it’s far more logical to keep and develop the talent you already have. Some studies suggest that replacing an employee costs about 15 times that employee’s base salary—so by holding onto their best employees, startups can avoid the cost of high turnover and funnel that capital elsewhere. Perhaps more importantly, it saves them a tremendous amount of time in hiring and onboarding new employees. Startups are running at such high growth velocities that finding ways to keep them from slowing down is one of the most valuable things investors can do.
This is not to say that helping portfolio companies hire the best talent is not valuable, but it can be difficult to scale across a large or wide portfolio since venture funds aren’t necessarily set up to recruit at scale any better than a great recruiting firm or the startup itself. The best approach for VCs to help with recruiting seems to be one where senior talent professionals on staff can spend meaningful time and embed themselves deeply with a few companies. This is the case at Lerer Hippeau, Primary Ventures, HomeBrew, Lightspeed Venture Partners, and others, where the firms typically help more by sharing best-practices on hiring and recruiting and helping portfolio companies refine their hiring strategy and processes. “We have a strong belief that founders who prioritize aligning people strategy with business strategy from the get-go increase their likelihood of success long-term. It’s never too early to invest in those behaviors and our job is to help you approach hiring with great care and intention,” says Cat Hernandez, Operating Partner at Primary Ventures.
So how else can VCs help their portfolios engage in leadership development?
Executive coaching is gaining traction as a way that many of our CEOs and founders focus on bettering themselves, and VCs are starting to offer these resources directly to their portfolio. With an increasingly open culture around mental and emotional health and wellness, more funds are trying to address unsustainable founder burnout. Some funds, like Human Ventures or Primary Ventures, have dedicated leadership development coaches on staff.
Our approach at RRE has been to make sure access to leadership development doesn’t stop at the C-suite. So we created a program from scratch, using executive coaches to deliver material tailored to startup leadership challenges. One curriculum is for CEOs / Founders and another covers management best practices for the VP/Director level within startups. We make the content personally relevant and start with an intensive day-long experience, as it’s probably the only day out of the 365-day year that our teams get to invest in themselves and their leadership style. As our 150 participants have told us, for many it is their first time receiving formal management training. While the material itself is important, the value of sharing best practices among one’s peer group has proven to be particularly powerful.
Founders also welcome having the opportunity to offer development opportunities to their team. “As a small but growing company, we don’t always have a quorum to provide formal programming. I love that the people I send come back energized and inspired by their peers to be better leaders, and that I’m able to offer opportunities to keep my best talent engaged,” said Sean Black, CEO of RRE portfolio company Knock.
Others have taken the approach of offering regular leadership trainings for first-time managers specifically. Union Square Ventures began offering cross-company management training opportunities in partnership with LifeLabs Learning for new managers and in just two years trained more than 250 people in their “USV Manager Bootcamp” program. “The feedback from this program has been off the charts,” said USV Network GM, Bethany Crystal. “There’s something so special about the opportunity to not only level up your own skills but to simultaneously form a peer cohort among other companies in the portfolio. This is one of the ways that we hope to bring ‘big business benefits’ to the startup world.”
Regardless of the type of support VCs provide, hiring the right people and growing teams thoughtfully remains a top priority for any startup CEO you ask. Given that, we’ll see it continue to be a top priority for VCs as well.
May 1, 2019 at 11:19AM
Forbes – Entrepreneurs