In this vlog episode, we interview Vincent Hsieh, partner at Cypress Growth Capital, on the value of prioritizing people in fast-growth businesses. With over 25 years of relevant entrepreneurial and operating experience in the software and services sectors, Vince shares his insights on the essential qualities needed in employees to navigate a constantly evolving landscape, including soft-skills like agility, resourcefulness, flexibility, and adaptability.
We also discuss Vince's thoughts on what makes a great HR partner and how a CHRO can contribute effectively as a board member or advisor. This interview is a valuable opportunity for any HR leader seeking to improve their strategic impact.
As a CHRO, you may have reservations about taking a job with a PE or VC backed company, but this interview will give you insight into how good investment firm partners think about their portfolio companies. Plus, you can also send this vlog interview as a great resource to your CEO if you are having talent discussions or if your company is looking for funding.
Thank you for watching, and we hope you find this vlog episode valuable!
ps. We often have speakers like Vince join our membership for round-table discussions and Q&A and if you are interested in expanding your thinking and bringing new ideas back to your organization consider CHRO Partners Inner Circle. Apply here for consideration: https://www.chropartners.com/
Full machine generated transcript below:
Cindy Lu (00:02):
Hi there. This is Cindy Lu with CHRO Partners, and I'm joined with Vince Hsieh a partner at Cypress Capital. And today we're gonna talk a little bit about really the human capital side in venture capital firms. And really there's a lot of correlation to, uh, larger organizations. So welcome Vince and, uh, um, tell, give the audience a little bit about your background.
Vince Hsieh (00:25):
Yeah, thanks Cindy. Glad to be here today. Uh, looking forward to the conversation. Uh, so I'm Vince Shay. I'm, uh, one of the partners here at Cypress Growth Capital, an investment firm based here in Dallas, Texas. Uh, my quick background here, uh, started my career in management consulting, working with private equity back companies that were, uh, in distress doing corporate restructuring and turnaround work. Uh, started my career there and then spent the last 16 years after that as an entrepreneur operator, uh, launching, uh, building, scaling, and eventually exiting, uh, two different industrial iot SaaS startups, um, both of which exited to private equity and recap, uh, transactions. Uh, my second one was a company called Geo Force here in Dallas. Uh, our first institutional investor. Uh, at the time we were about maybe called 5 million or so in recurring revenue and have been bootstrapped to that point.
Our first institutional investor, I guess 10 plus years ago, uh, was Cyprus Growth Capital. So even though I'm, you know, only been at Cypress now for about six months, I've known the Cypress team for over a decade as a portfolio company. Uh, recently joined, uh, the investing side of the world. Um, looking at tech companies that are kind of, we call the emerging growth stage or tweener stage, if you're talking about ages of people, <laugh>, uh, companies are generally between like three to 15, three to 20 million in revenue at the time of investment. All tech companies mostly kind of bootstrapped or self-funded type companies have grown in that scale and are looking for growth capital to help accelerate things, uh, as they move into the next phase of their business.
Cindy Lu (01:54):
Thanks, Vince. Um, so I was just thinking about when we first met probably eight years ago now mm-hmm. <affirmative>, you had just won the c f O of the year award with the business journal. And um, I remember after getting to know you a little bit, just how focused you were on the human capital side of things. And, uh, I don't know if you know this, but a lot of CHROs are like, Hey, if the, if the job reports to the C F O, don't even take it. Right? Like, it's sort of like this. And, um, and so I was just really impressed with your focus on the people side of things and, um, it seems like, you know, an early stage company, there's nothing more important. Like, you, you won't make it right without that.
Vince Hsieh (02:35):
Yeah, for sure. The people side is what drives, uh, in this case I'm gonna talk about tech companies or software companies because at the end of the day, that's what's making everything work, especially at a scale of, you know, 10 people, 50 people, a hundred people at a much bigger company. If one person's not good, they're, you know, one-tenth of one-tenth of 1% of the output or the productivity of that company. But at a smaller company, if you have 50 people, one person's bad day is 2% of your productivity for the day <laugh> or major, major impact to the, you know, let's call it the value of your company is how good or how bad your people are. And so that's something that when I was an entrepreneur and operator, uh, we focused quite a bit on, is making sure that the talent we brought in, uh, was up to par for what we need to do.
And even better than that, we're always looking for people who can be adaptable, resourceful, could really roll up their sleeves and do the right thing. We also have the ability to, what I call helicopter up to kind of think strategically or think like an owner, uh, about how to help grow the business or evolve the business over time. And, uh, I agree with you for sure. It's by far the most important thing. You know, for instance now as an investor that we look for in companies is not only as the founder and c e o high quality, but has he or she surrounded him or herself with a quality leadership team and a quality bench around them. Cuz ultimately we're investing not necessarily in the software code or the product or the, the addressable market that they're, they're playing in, but ultimately investing in this team of people, uh, to take our investment and, and grow it substantially over time. And that takes just, you know, the right types of people doing the right type of work every day.
Cindy Lu (04:06):
Yeah. And I would argue that, um, every company, no matter the size right, it should be this hyper, uh, focused on, you know, getting the right people in place and the right processes and systems. Um, be curious, your advice that you'd give to typical, you know, founders that you guys invest in on, on the people side or in business in general, right? Like just in in general.
Vince Hsieh (04:30):
Yeah, so I think I mentioned earlier, we tend to invest in companies that are kind of three to 20 in revenue. So most of them are led by, especially as a tech company, an engineer, c e o if you will, who's done a great job building the product, building the initial product market fit, and getting traction with a good number of customers to get to, you know, five, 10 million of revenue or so. But what they usually lack on their team is, uh, you know, a middle management or a senior leadership team to help guide certain functions like sales, like operations, like engineering. They tend to have, you know, a few salespeople who go out there doing a few engineers who write the code or do whatever they're doing. Uh, and we advise them usually when we bring in our growth capital, uh, it's to help them grow the company subs, you know, at a faster rate than they're already growing, uh, by laying them, you know, extend a little bit past their skis a little bit on investing in marketing or sales or product or infrastructure.
Things like human resources or talent development or operations or accounting and things like that. Mm-hmm. <affirmative>. And so usually we advise them the very beginning to let's plan out the org chart, not just for now, uh, but for the next, you know, five years, 10 years, and we don't need to name names yet, but let's start filling in like kind of the functions and the boxes. And then we kind of strategize with them about how we're gonna fill those boxes in over time, uh, using some of our growth capital, but also of course the profits and the, the money they're generating from selling to customers, which is ultimately the best way to raise money is to sell stuff <laugh>. And so we need help them with things like looking at a job description and then ultimately to help through our network or through, you know, potentially helping them interview people, people like VPs of sales, VPs of finance, or CFOs, uh, you know, heads of engineering or operations.
Those are typically the roles that we don't usually see at our companies when we invest, but we can come in and either help them hire that role initially or top grade the talent they already have, uh, in there, uh, help them kind of give a, you know, third party assessment of whether or not this person's up to snuff to be the VP of sales or the VP of whatever, uh, is something we do. And we think that's kind of a day one thing with our investments even ahead of some of things we might do around sales and marketing or product related things, because you gotta get the people right first before you can, you know, execute on the other plans.
Cindy Lu (06:37):
Right. You're speaking my language here. Um, I love what you said earlier about, uh, buying two sh two shoe sizes mm-hmm. <affirmative> larger. So explain that concept. I've heard this for years and years having been in startups and fast growth companies. Uh, the venture capital firms that we talk to are all always concerned about that. Sure. Explain that concept.
Vince Hsieh (06:57):
Yeah, so in a rapidly growing and evolving company where the company's not just growing like revenue or headcount or numbers, but also evolving into let's say new products, new markets, new types of things that they're selling in a company that's growing and evolving every day, you're changing at a fast pace. So if you fast forward like three months, six months a year, the company's a totally different company than it was three months ago, six months ago, a year ago. And the company's gonna be different than the mindset and the skill sets and the kind of, you know, attitudes if you will, or the, the way that people work of the company to change as well. And so if you hire people that are good for you on day zero and you grow in three months, six months, nine months into a different company like I was describing, then those people are gonna either have to grow with it, which is hard for people to grow that fast, or you're gonna hire someone who's already grown to that level and can sort of do both <laugh>, both the day zero and you know, day later type work.
And so that's why we always advise people to hire, you know, roles for certain roles, of course, uh, two shoe sizes bigger or I think in HR world, sometimes people call it plus two hiring. You know, someone could be promoted twice in the role, uh, because if you don't do that, then they're not gonna grow or evolve as, as humans or as professionals as fast as your company's growing and you're gonna fall behind and have to rehire or fire someone in a few months anyway, or a few quarters. Right.
Cindy Lu (08:16):
Well, you know, I think what's interesting about the way you look at this versus like, when I was in executive search, we used to do a lot of search work for VC firms and um, it was always like the resume. Like we need somebody who's already, you know, grown it to 20 or 30 million mm-hmm. <affirmative>, they were very focused on the resume. You're not just focused on the resume, but also on the, the agility of the person. Talk to me about that. Yeah,
Vince Hsieh (08:37):
So certainly the resume, you look at a, you know, most people when they look at a resume, like a hiring manager, I, I've, I dunno how many people hired before, but lots of people I've looked at resumes for, you might look at the headlines of, okay, they worked at IBM or Google or, you know, whatever company or whatever industry you might look at a couple of the bullet points that have verbs in them and you know, results and actions, the typical stuff that people are consulting to do, but you don't really get a feel for the person to actually talk to them. And the things that we really are looking for, again, going back to the, the, the foundation we're talking about here is like a tech company that's growing or has venture capital investment in it or whatever the, you know, evolving and things like that.
The things we're really looking for in those are, and this is sound very generic, but soft skills that you don't necessarily see in a resume or if they say it in their resume, they're not, they're saying they are, but they can't actually prove it till you literally talk to them or maybe talk to their references or actually honestly work with them. And those things we're looking for are things like the agility you just mentioned, resourcefulness, the ability to adapt pretty quickly and bounce with things. Because the one constant in the company like this is that nothing's constant. You, we go back to what we said a few minutes ago about growth and evolution with that kind of stuff comes a lot of change, both with like what you're offering customers, what you can do, what your competition's doing, what your employees need, that you know, evolves and, you know, sudden impacts like covid or sudden impacts that can happen in, in, in industry.
And so you need people who are resourceful enough to kind of figure things out. Cuz you're generally gonna be resource limited at a, you know, smaller scale company that's growing and also have that agility you mentioned the flexibility, the adaptability to sort of roll with the punches and, and adapt to what's happening on the scene and not be, you know, handheld throughout the process. And then the last thing I'll say on this point is that without that kind of mindset, those people are gonna get really frustrated really quickly. And then if the worst thing you can have an a as an employer is a frustrated employee, especially if they hide that frustration and then you just, it's a downward spiral for everybody and, and you don't want that. So you wanna have people come in and be energized by the change, energized by what everything you just described not turned off by that kind of stuff.
Cindy Lu (10:40):
Right, right. Yeah, it's, um, it's a pretty unique skillset, right? Like you're kind of jack of all, but you have to also be master of all <laugh> everything at that stage. Um, or you're just dead in the water from a business perspective. Um, you, you also referenced, um, a very famous quote, what got you here won't get you there. Yes. Talk to me a little bit about that guidance that you provide to founders and founding teams.
Vince Hsieh (11:08):
Yeah. And that's something that we try to suss out with our, uh, portfolio companies before we invest in them as part of the discovery process. And then if we get that far the diligence process with companies, we kind of test with the C E O and the leadership team. Are they open to change? Are they open to advice? Do they have a growth mindset versus a, you know, know or a fixed mindset? Uh, are, are they the kind of people who, you know, learn like, and this is gonna sound terrible, but the age of Zoom, sort of looking at their bookshelf and see like what kind of books are they reading, honestly mm-hmm <affirmative> and what kinda organizations or associations or or types of things are they liking on LinkedIn that indicate that they got that mindset of growth mm-hmm. <affirmative>, because that's ultimately what they need.
Everything we talked about a few minutes ago about change and evolution and growth and wrap rapid this and evolution and adaptability. We need that it starts at the top of the leadership team. Uh, do they have that, that in them to accept that that statement just that you repeated back to me about what got you here won't get you there. That's obviously not a unique, you know, thing that people have been saying that for years. But something that everyone truly appreciates or understands is this concept that you sometimes have to let go of the past, even if there's some loyalty to the employees who got you from here to there. Um, and sometimes for the best for the employee to go work somewhere else too. So I've had a lot of growth at both my startups and in every case we had to go through these different stepping stones of change and had to at times fire people who were, I'm gonna use an example since you talked about a a, a finance earlier.
Like the bookkeeper who got you from zero to 2 million is not the person who should be your accounting manager, your controller, or you're a lot, much bigger company. And in some cases, like I can still remember a few of these people, you know, we let them go, you know, in a generous, you know, generous severance in a nice way and with, you know, help with the references to other companies and things like that. And they went back to work at a smaller company and they thrived there. You know, they, they actually were more energized working at that scale of company, uh, than worked at a much bigger company where there was different levels of accountability, different levels of detail that were needed or whatever. And I can't even speak to just meet myself personally. You know, the, the growth of my companies to a certain stage was fun for me from the kind of the starting and building and you know, and and iterating process of building a company from literally nothing to something that was fun for me. But when the companies got a lot bigger and it became a little bit more, I mean call it administrative and more, you know, uh, uh, outward focused with the investors and things of that, the owners of the company eventually and not focus on, you know, building product or building the customer base or building the company itself. It wasn't as fun for me either. It was better for me to go do something else as well versus being in something and, you know, not, not, not, not, not appreciating, wanting to do it.
Cindy Lu (13:48):
Yeah. You know, the counter to that is, I remember uh, a company I was with in oh 8, 0 9 when we had to do a recap and uh, the board didn't wanna go back and raise additional enough capital cuz they didn't wanna get too diluted, right? Yeah. And um, the challenge with that is that if you don't have that growth capital and you have to, all you're doing is just sort of, you know, standing still, you have this team of people who are, you know, used to that fast growth, right? Like the hooked, it's like drugs mm-hmm. <affirmative> and suddenly if you flatten out, you don't have the right financing to grow, you're gonna lose those people because That's right. They, the, the personalities are like, Hey, you brought me in here to grow and to, they're so used to that, you know, hockey stick that if you don't have the right kind of financing and advice to help you grow the company, it it's trouble too.
Vince Hsieh (14:36):
Yeah. You're totally right. You, I was talking about a few minutes ago, the, the, the, let's say the bottom side of it, you're talking about the top side here is very true mm-hmm. <affirmative> and I think the biggest risk we have in today is kind of fundraising environment where not only are interest rates, let say generically higher, so it's harder to get let's whole debt, but also valuations on the equity side are substantially down from kind of the 2021 almost, uh, you know, exaggerated highs. I would say. I mean, to be fair, not to sidetrack us too much here, we're still kind of above, we were before the, you know, the, the highs of 21 just way down from where 21 was in terms of valuations. But my point is that valuations are down so it's harder to get equity or people aren't trying to do equities, they're not raising enough money cause they want it, they wanna delay that and interest rates are higher on the dead side. So people are delaying cap raises or not doing cap raises or raising less than they probably should to your point. And then growth is stalling out, uh, or, you know, change is stalling out and to your point, the high performers who who thrive in that environment, uh, are looking for something else, then something they'll give them that adrenaline rush or the drug high you, you described earlier,
Cindy Lu (15:36):
<laugh>. That's right. The consequences are, are very real. Um, okay. I have a question that we really didn't discuss, but, um, I think this is, you're living it at the moment. We have a lot of CHROs in our audience who are very interested in getting onto boards and in some cases it may not be a Fortune 500 board, but might be a smaller company board. And, um, there's a real difference, right, in being an operator in a company versus being on a board. Now you're at, on the board of one of your portfolio companies and many of them, right? Um, so describe to me the, the kind of mindset shift you needed to make to go from operator to board member.
Vince Hsieh (16:15):
So I would say this, I'll answer two ways. One is the, your, your exact question of operator versus board member or operator versus an advisor or, you know, tactical operator versus strategic board member. I'll answer that, but also sort of maybe part of the question might be like, how does A C H R O get onto boards? And I would say that, uh, the exposure I've had to, you know, heads of HR at, at both my my tech company startups and everything, and also just other ones I've encountered throughout my life, the best HR people are the ones who truly understand the actual business and how it makes money, understands the customer value proposition, understands how the product helps solve the customer's needs that understands how like everything functions and then offers HR as a strategic partnership to those other functions to help them grow the business.
Right. And the, the people who just sort of are in their focus lane are never gonna be able to expand to leadership within their company, much less leadership on other boards, but the ones who truly understand the, the, the, the rest of the business, let's call it, are the best HR partners you could have. Uh, one of my best friends from business school, uh, he used to work for the railroads here in Dallas. Like I remember his kids used to say that my daddy plays with trains at work every day or something when they were a lot younger. He was a purebred operations guy. And I, I, I'll say this kind of unpleasantly crushed, but he wasn't the most HR friendly person I would say. Just, you know, he was just a guy who, you know, enjoyed his, you know, enjoyed his f free time and fun time and you know, just as a friend, you know, said things that maybe weren't always appropriate. <laugh>,
Sometimes <laugh>, but he got hired as the head of HR at a huge Canadian railroad company. I probably shouldn't have said that, but a Canadian railroad company as the head of HR with no HR experience. What they wanted from him was that he had run operations for 25 years and knew the customers, knew the, you know, value prop of the company, knew what made the people inspired at his company to do good work. And they made, you know, hired him straight into this other company as the head of HR from the very beginning. This is probably five plus years ago. And he kind of always is a good, I think, story for me for like how you, you become a successful HR person. So having gone through the rotations of the business, if you could at a bigger company or just if you're not in a bigger company, just sort of really invest in the time and know the rest of the company, right?
Right. That makes you better leader within the company. That will then translate into the, you know, the opportunity boards. Your other question on, or your actual question, I should say <laugh> around, you know, uh, how to make that pivot or whatever from let's say an operating role to a more of a board or advisory role. I think, like for me personally in the last six months, making that transition to an investor role and advisor role, it's been sort of pivoting to, you know, thinking only about strategic topics at a much higher level and across a broader spectrum versus thinking about strategic and mostly tactical type things within one company or my company, let's call it mm-hmm. <affirmative>. Uh, so that's a big mindset shift that helps, uh, I think the ability to, um, be a little bit more pointed or pointed in some ways, so you can get to the point quicker, but also broader, certain ways to ask more open-ended questions.
We're in an operator role, you have the luxury of a little bit more time to be able to, you know, work with the same team and, and, and drill in on things and maybe not be as efficient in your questioning, let's call it at a board level, when you have much shorter attention, spans a much shorter amount of time than to do things. You have to be more thoughtful and say in your line of questioning, in your, in your thought processes and what you actually, you know, rise to the topic of a board discussion or advisory discussion. Mm-hmm. <affirmative>, uh, because time is more limited and you know, you really gotta learn how to focus on generically speaking, let's call it the forest and not every little tree. Uh, and, and you know, being able to zoom out like that, uh, I think it's valuable to companies and what H R P O can bring to the table in these types of settings, I think is what Cindy, I know you believe, and I think everyone on the, who's listening to this probably already believes this, but that people are by far the most important thing in a company.
Mm-hmm. <affirmative>, uh, I don't care if you're a technical company or have, you know, product and all, you still need to have people writing the code, designing the product, you know, product managing, all that stuff. And so, uh, I think that's the perspective that often has been lost in boards in the past with a focus maybe on, let's call it generically corporate strategy, not HR strategy or people strategy and, you know, heavy focus on like, let's say the financial side of things and share price and, and that type of stuff. And, you know, lost in some of that conversation has been the people side of that that ultimately makes for better financials and better corporate strategy anyway. Uh, so sort of says constantly, and this is why it's great that you have this group to constantly remind people, uh, in the greater, you know, ecosystem, uh, about that fact, uh, and proving it through either data or just anecdotes or, or by doing it in the field.
Cindy Lu (20:44):
Right. Well, I can tell you I've done a lot of startups and, um, it's all about the people. Mm-hmm. <affirmative>, because like, I didn't have that MBA and I didn't have any of the methodologies or framework. It was just all about can I hire the best people? Uh, luckily I came from executive search, so I knew how to do that. I didn't know how to do anything else.
Vince Hsieh (21:02):
The the best people can configure anything out, honestly. But like, if you put a, the great people together, like, and here's the thing you said people, plural, not person, it still takes a team like the Yeah. The team that's cohesive has worked together before, especially would that be in a academic setting, but even better professional setting. I'll always bet on a good team over a good product or a good market or a good whatever because they, they'll figure it out. <laugh>, they'll be yeah, resourceful, they'll be smart. They'll, you know, figure it out and, and they'll work their ass off to make it work versus just a bunch of individuals who, you know, are tooling their thumbs or don't need direction for someone all the time, you know, so
Cindy Lu (21:37):
Yeah. It, uh, my analogy is a great sitcom, right? Like friends, like every single character on that show was awesome. You know, modern family, N C I S when you've got everybody who's rocking that way, you've got a, a winning, uh, a home run portfolio. Great. Yeah. All right. Well Vince, thank you so much for your insights. Um, it's fantastic hearing what you're up to. We may have to do a follow up and, and just see how things are going, uh, in a little bit. But, um, really appreciate it if, uh, you are a founder at a tech company and interested in, um, you know, growing your business, money's money, you can get money anywhere, right? But to get the right kind of guidance and advice, I'm telling you, um, Vince is just really one of the smartest guys I know. So make sure you connect with him on LinkedIn. Right. Thanks.
Vince Hsieh (22:27):
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