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6 Key Questions For Founders Seeking And Absorbing Capital

By Jonathan Heiliger

Today’s startups are raising record amounts of money, and faster than ever. Yesterday’s $4 million seed round is today’s $20 million series A, and that’s not reverting anytime soon.

Raising huge amounts of capital sounds great, and it seems like everyone is doing it. But headline-making windfalls like these aren’t true indicators of success. In fact, a fat bank account can often become problematic, giving startups forward credit for a vision they haven’t figured out how to execute. Large rounds easily disguise lackluster growth, poor hiring decisions and uncontrolled customer acquisition costs.

The problem isn’t knowing when to raise funds. Instead, startup founders should consider a less sexy but far more meaningful topic: How efficiently and responsibly the company absorbs that capital.

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With that in mind, here are six important questions to think through when raising money. While the questions might seem obvious, take yourself back to basics and see if you really know the answers.

Who is the right investment partner for us?

Financial resources aren’t a standalone solution. Most startups need more than just financial backing, which is why investors that offer well-rounded support will outshine those with the deepest pockets.

Find trustworthy investors who have domain experience and who will invest their time, prioritize coaching and help with customer introductions and employee recruiting. These early relationships built with your investors will create a force multiplier for your business.

How much runway do I maintain?

Jonathan Heiliger of Vertex Ventures US

Once the financing closes, you need to invest in the right places in an optimal sequence. Investing in product and product development is critical, but it’s also important to experiment with your customer acquisition strategy.

Dedicating funds to brand-building and customer experience can help ensure you’re reaching and delighting customers. For example, an open-source startup should prioritize funds for community management and developer relations early on.

What should my hiring priorities be?

Team up with your investors to identify the specific roles you’ll need, and when. If you play your cards right, your investors have been in the same shoes and bring decades of experience building and running startups.

Rely on that experience and don’t be shy asking for intros. In general, start by bringing in people who excel at hands-on work now, have demonstrated leadership ability, and can grow into management roles later. Executive leadership roles can be filled later.

How do I ensure hiring is equitable and transparent?

Women and people from underrepresented backgrounds are widely and inexcusably underrepresented in tech, but they don’t have to be.

Evaluate your hiring criteria and practices to make sure they’re not only rigorous but equitable. Require transparency at all stages of your hiring process. Know exactly what interview questions will be asked during the recruiting process, and make sure they’re free of affinity bias that might favor candidates.

Use data to determine the criteria for each position and how to evaluate candidates for them. Leverage tools like Metaview, Karat, CoderPad and, which can help measure relevant skills and qualities.

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How do I sell candidates on my vision?

The hiring market is the hottest it’s been since the 1990s. Candidates now have the upper hand—especially senior developers and product managers.

The increase in remote work has also neutralized salary arbitrage in many mid-cost markets.

Competition today knows no bounds, so play to your strengths as an early-stage company: Meet prospective talent with a compelling and inspiring vision. Highlight how a candidate will wear multiple hats, have outsized impact and have opportunities to grow their career. Invite candidates to shape a set of shared values and purpose.

And seal the deal by offering appropriate levels of equity.

What key metrics are critical for my startup?

Don’t be fooled by today’s VC meme-scape. Startup success hinges on more than just funding. No matter the size of your investment, it’s easy to pour money into the wrong places.

Apply your funding wisely: Crisply define the customer pain your business solves, build your brand, optimize acquisition costs and hire product strategy and development teams—and implement appropriate metrics to measure your level of success with all these activities.

Look to your investors for guidance, and ask them to help you prepare for your next financing round. While money may be easier to come by today, you still must prove yourself with strong metrics to get it.

Jonathan Heiliger is a general partner at Vertex Ventures US, a boutique venture capital firm that invests early (and often the first) in enterprising founders. Prior to starting Vertex US in 2015, he was general partner at North Bridge Venture Partners and has held roles at Facebook, now Meta, as the VP of infrastructure when the user population scaled from 35 million to 900 million users, was COO of early cloud computing company Opsware, and founded his first successful company before age 20.

Illustration: Dom Guzman

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