What is the Role of a VC When Hiring the ELT?

As a successful Toronto-based recruiting firm in business for 20+ years, we have worked with thousands of Founders and CEOs to help them make strategic hires across Product, Design, Marketing and Sales

Many companies don't realize that 80% of our clients are early-stage startups - typically with fewer than 50 employees, revenues less than $8M ARR, and a working MVP that needs to be made into a fully functional product with paying customers.

At this stage, our Founders typically involve their investors when making big decisions, including who will be selected for their executive leadership team. In fact, first-time Founders will often ask us, "what should I expect from my investor's involvement in the decision-making process?"

When it comes to hiring for the ELT, the role of a VC can vary greatly. Nevertheless, there are four common ways in which a VC may get involved in the process:

1. VCs may provide recommendations for third-party search firms they want the Founder to use to lead the search.

VCs understand the value that partnerships bring to building businesses; this includes search partners. When a search is very niche, a VC is more likely to want to bring in partners who have helped companies of a similar stage and who understand the nuances of the persona likely to be effective in the role. 

VCs also understand the challenges and limitations of first-time Founders who may struggle to hire more experienced and accomplished leaders than they are. VCs will leverage the knowledge and experience of a recruitment firm to help relieve that hiring pressure and refocus the Founder on the hiring task at hand.

2. VCs may provide advice and guidance during the interview process.

This is more common when the candidates the Founder is considering are referred by the investor. VC advice and guidance on candidates represented by a search firm are less common as the search partner usually fulfills that role; helping the Founder compare and contrast the variables of each candidate persona.

3. VCs may have input into the compensation structure of the new hire.

VCs often have input on compensation structures, but the degree of their involvement will be determined by whether a VP of People is in place or not. A VC may provide input in cases where they feel it’s essential to override previously discussed salary bands if they think it will attract a candidate persona whose hire would level up the entire organization or their functional department.

4. The VC will typically meet with the final shortlisted candidate the Founder wants to hire.

They are often the last meeting before an offer. If the relationship between Founder-investor is healthy and transparent, there will be no surprises. As in most cases, the Founder and investors will have reviewed the final candidate together and be aligned on the Founder's choice, making the "meet our investor" meeting more ceremonial than gatekeeping.

Founders need to understand the value VCs bring to the hiring process and to have open and transparent communication with their investors to ensure a smooth and successful search for the ELT. 

With the right approach and partnership, ELT hires can be a powerful way to level up your organization and bring in the top talent to take your company to the next level.

Are you poised for growth? Unlock the full potential of your startup by strategically identifying the types of hires to make at each investment round.