In the season 1 finale of Controllers Classified, host Erik Zhou is joined by Sarah Hinkfuss from Bain Capital Ventures for an overview of the VC investment landscape and a deep dive into her investment due diligence approach for growth stage companies. 

The episode begins with Sarah highlighting milestones from her career, including her time conducting water pricing research in the Middle East, her transition into tech, and her pivot from tech into investing. Underlying everything is her passion for empirical based decision making and a belief that complex problems require a multidisciplinary approach. 

The conversation then pivots to the investment landscape. Sarah explains the relationship between companies, VCs, and LPs, and how the macroeconomic environment is driving a “flight to quality”. The result is companies are being asked to balance growth and profitability, and increasingly making hard decisions around what to keep and what to cut. 

Sarah then gives listeners an insider's look at her investment due diligence approach for growth stage companies, underscoring the importance of a company’s financials in this process. She spends some time explaining why unit economics and a business model are so important  and notes that it’s not just about seeing the numbers. A founder must have a clear narrative about what drives their business and where they see things going in the future. Sarah also touches on the transition from Series A to Series B, and the nuances in the fundraising process for early vs. growth stage companies. 

This episode is a must-listen for founders & finance leaders aiming to navigate the complexities of fundraising in today’s macroeconomic environment. 

Key Quotes

• I have deep empathy for founders at the growth stage. I know how hard it is to create culture and to bring people along when you’re going from knowing everyone at the company to creating a system and process that keeps everyone on the same page. There are a lot of growing pains that are a privilege to go through but I know how hard they are.
• Where I would say we are now is a flight to quality. Companies have had to realize that the way they create value is by creating cash flow.
• For anyone who is thinking about raising a round, I would strongly encourage you to do market checks ahead of time.
• A founder needs to have a unique insight on the market. We look at how effective a founder is at telling their story and articulating that unique insight.
• Three things that are important to share with investors: your unit economics (how you think about your business drivers), business model (how you think about your future), and your memo (what’s your narrative)
• Even if you don’t have a finance background, a model at its core is logic. What are your inputs and what are your outputs?
• The investors that you want on your cap table are ones that really understand your business and the drivers of your business.

Time Stamps

• (2:03) Sarah's journey to Bain Capital Ventures
• (7:15) The investment landscape
• (12:22) An investor’s due diligence
• (21:55) What investors want to see from your financials
• (40:45) Sarah's son goes looking for EBITDA

Links

• Connect with Sarah
• Visit Bain Capital Ventures
• Connect with Erik
• Visit Brex