Venture Capitalist Ignites Debate: Prioritizing Product Over Roles in Pre-Seed Startups

Venture Capitalist Sparks Debate on Pre-Seed Startup Spending

Jenny Fielding, co-founder of Everywhere Ventures and former Techstars managing director, has ignited a discussion on social media platform X about the financial practices of pre-seed startups. Fielding’s comments, aimed at addressing misconceptions about cash management among early-stage companies, come in the wake of the funding boom experienced in 2020-2021.

The venture capitalist emphasized the critical importance of product development in a startup’s formative years. “The focus should be on building a product that people want to buy,” Fielding stated, highlighting the need for startups to prioritize their core business objectives.

While Fielding acknowledged that founders have the autonomy to allocate raised funds as they see fit, she cautioned that early-stage investors closely monitor cash management practices. “VCs, even as silent partners, keep a watchful eye on operating budgets and regularly engage with founders,” she explained. This oversight, Fielding noted, plays a crucial role in securing future funding and garnering positive recommendations from initial investors.

The conversation also touched upon the appropriateness of certain roles within early-stage startups. Fielding pointed out that positions such as executive assistants, while valuable in established companies, are often viewed as unnecessary overhead in fledgling enterprises. Similarly, the presence of COOs and CFOs in pre-seed startups can raise red flags for investors, potentially signaling premature organizational complexity and excessive expenses.

Founder salaries emerged as another area of investor scrutiny. Fielding shared an anecdote where she withdrew from a deal due to a founder’s $300,000 salary, which she deemed exorbitant for a pre-seed stage company. She advised that reasonable pre-seed salaries typically range between $85,000 and $125,000, emphasizing the importance of conserving cash during early stages.

As the startup ecosystem continues to evolve, Fielding’s insights underscore the delicate balance founders must strike between growth ambitions and financial prudence. Her comments serve as a reminder that in the competitive world of venture capital, every financial decision can impact a startup’s future funding prospects and overall success.