When VCs push aggressive hiring: 66% of the time it's bad advice
Your VC wants you to hire faster and burn more cash. Should you listen?
No, says Jason Lemkin, SaaStr founder. In 66-70% of cases, this advice is bad. Especially from large VCs.
Founders figure out burn rate naturally
By $6M to $10M ARR, most B2B founders understand the math: spend $X to get $Y out. First-time founders might be slow to invest early on, particularly those who bootstrapped before raising capital. They need time to extend their ROI time horizon.
But they figure it out. Pushing them to learn faster does not help.
Why VCs push anyway
Large funds want to deploy more capital into winners. Higher burn means bigger rounds, which means larger ownership stakes. Your zero cash date matters more to you than it does to them.
This creates misaligned incentives. The VC wants deployment velocity. You need runway.
The better version of this conversation
Point to specific hires with clear ROI: a VP of Marketing who can build pipeline, Customer Success expansion that drives NRR, AEs for a proven segment.
Don't just say "spend more." Show where the math works.
What this means for sales hiring
Before you staff up that SDR team or add three enterprise AEs because your Series B lead said so, run the numbers:
- Monthly burn rate: total cash out minus cash in
- Runway: cash on hand divided by monthly burn
- Cost per hire: not just salary, but ramp time to productivity
- Your actual close rates and average deal size, not projections
A common formula: Net Burn Rate = Revenue - Operating Expenses. Track it monthly. Know your number before your investor does.
If you are hiring AEs at $150K OTE and they take six months to ramp, that is $75K in cash before they close their first deal. Can your burn rate handle three of those at once?
Founders who bootstrapped often underspend. VC-backed founders who listen to large fund advice often overspend. The right number sits somewhere in between, and only you can find it.
The bottom line
Manage your own burn rate budget. VCs have different incentives than you do. By the time you are doing real ARR, you know how to deploy capital better than anyone sitting across the table at a board meeting.
Hire where the ROI is clear. Ignore pressure to burn for burning's sake.