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I'm a CTO. We took PE money 6 months ago. AMA

3 points by scottndecker ↗ HN
Career developer turned CTO at a healthcare startup. We're two years in, profitable, and took a PE investment 6 months ago. Happy to answer any questions on that journey, startup life, how we're using AI, the PE investment, etc.

On an airplane and sounded like a fun way to pass the time if anyone has questions :)

17 comments

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paulcole
Did PE come to you or did you go looking for the investment?
scottndecker
Came to us. Some of our founders had previous success and were funding out of their own pocket. We had just turned profitable, but PE money allows a different velocity which we wanted. So when they approached us looking for a solution in our space, we took the meeting. One thing led to another.
stuxnet79
Is the ownership structure of the company a mix of PE, VC and bootstrap? How does that work? Speaking for myself, "taking" any kind of money or getting outright acquired by PE is a huge red flag for a startup and I wouldn't work at such a place unless I was completely out of options.
pighive
Why/how is PE money bad?
stuxnet79
Well, it's not that PE money is bad, it's that PE participating in a round is a sign that the startup has maxed out its potential and has weak prospects. PE goes for semi-sure bets that can be goosed for short term profits. Layoffs and other cost-cutting measures are the name of the game up until your husk of a startup has good enough financials to dump on the next sucker downstream.
scottndecker
Interesting. Pretty much none of that is true for us. We had achieved strong enough success that were past the stage VCs want to participate in a first round. Partnering with the PE firm gives us a war chest to land grab while the turf is being claimed in our space.
rrr_oh_man
What’s the company? How did you start? Are you a co-founder?
scottndecker
Started by a team of 3 three years ago. I knew one of them from my time spent in grad school and living in NH. I joined a year after it formed but before it really took off. Founder #5 type of situation. Significant equity but can't claim I was there from day 0.
harryquach
Did your employees have equity? If so how did this process work, with the PE firm?
4d4m
How are you preserving the culture and keeping your best teammates? Usually the pressure to stop R&D and focus only on margin expansion makes this hard to do - that your experience yet or things still good?
scottndecker
Great question. That's not been our experience. Right now, we're in growth mode. Hire hire hire. Go faster.

Are we watching product margin and taking action to maximize it? Absolutely. But that's all revolved around technical steps (LLM token caching for example). Our current Product and Engineering headcount is only around 15 so we're already lean. We need to hire more, but we're keeping the bar high. I have no goal for bloating an engineering team just to make it look like we're doing the right thing (hiring). Every hire has to add immense value.

We're living in a time where success as a small team doesn't have to mean the team growing to be so big it's not fun anymore. The best cultures I've been a part of have always revolved around highly skilled small team of people that work their tails off and depend on each other.

philipbjorge
That's how it started for us. Make sure you achieve and maintain great profitability, PE operates very differently from VC.
gabosarmiento
How do you prioritize what to focus on and what to reject? I mean what does your prioritization framework look like? what's your margin of decision? And 2nd or 3rd question if I may, how do you stay up to date? Like what sources do you use or do you mostly rely on AI?
scottndecker
Eisenhower box is immensely helpful. Some amount of intuition. Unblocking the team is always important and urgent.

Staying up to date is hard. HN, LI, the Rundown email, and a private tech execs group on WhatsApp are primary sources.

slipwalker
How did the AI/agentic-engineering/LLMs changed your engineering and operations ( maybe product management ) teams and activities over these last 2 years ? How did it affected your cost structure ?
scottndecker
SDLC is totally different than even 12 months ago. AI reading meeting transcripts, generating user stories/requirements, generating questions, generating engineering/architecture solutions, writing code and creating PRs.

Those changes have allowed us to operate with a team of about 6-9 engineers producing like a team of twice that 5 years ago.