Just because venture capitalists are investing record amounts of money into startups doesn’t mean that it’s smooth sailing for the baby companies.
In fact, the rapid influx of cash is posing some significant challenges, as several startup founders and executives explained during a roundtable discussion on Wednesday during Coins2Day’s Brainstorm Tech conference in Half Moon Bay, Calif.
Tejas Konduru, the founder and CEO of mobile commerce startup Via, commented on how the speed of fundraising has increased so much that seed rounds (the preliminary investment rounds) now generally take only a month to finalize, series A rounds take about a week, and series B rounds take “two days now”—all much faster time frames than used to be common in the space. As such, it’s theoretically more possible now than ever for tiny startups with 4 employees to balloon in just a few months into companies that employ hundreds of people.
But as the money has come pouring in fast, noted Isabelle Kenyon, the founder and CEO of health care startup Calibrate, the “expectations have grown” among venture capitalists for their investments to pay off.
“The expectations for growth are higher, the expectations for performance is higher, the expectations to deliver a better product are higher, and then you have this entirely distributed team,” Kenyon explained, alluding to the challenge of running a fast-growing startup during the COVID-19 pandemic. Startups are also trying to hire quickly among the many workers now working remotely.
“You are trying to grow business at a pace that is not normal, and you’re trying to take advantage of this crazy market opportunity that didn’t exist before,” Kenyon added.
Christine Tao, the co-founder and CEO of coaching startup Sounding Board, announced for the first time during the roundtable that her company had just raised $30 million in funding. Tao explained that it can be a challenge for new recruits who may not be used to working at a startup experiencing “hyper-growth.”
She said her management team tries to explain to employees, “don’t expect that things will be the same as they are now.” If managers teach workers that “change is the norm,” Tao said, it helps them better adjust to what can often be a hectic environment.
One advantage startups might have over big companies is that they can “in some ways be more experimental” with how they create company culture, said Carolyn Witte, the co-founder and CEO of health care startup Tia. This company culture, she explained, needs to be aligned with the values that a company portrays regarding its core products. She said her startup, which provides virtual health care services for women, will open 15 retail clinics next year and is betting on a “hybrid care-delivery future.” This hybrid model is similar to the way people work remotely and in physical offices.
“That theme of aligning your product with your culture is the most important thing, to figure out what those key connection points should be,” Witte said.