In this interview, Hustle Fund partner Elizabeth Yin explains how her firm evaluates ultra‑early‑stage SaaS startups and why many pitches are rejected. She emphasizes that investing pre‑traction relies heavily on intuition about two pillars: the founding team’s scrappiness, tenacity and ability to do a lot with little, and the market pull of the idea, which is judged through factors like differentiation, competition, customer acquisition cost (CAC) versus lifetime value (LTV), and potential margins. Yin shares concrete growth benchmarks – 50‑60% month‑over‑month (MoM) sustained growth is considered fast, 30% MoM is very good, while lower rates make fundraising harder. The most common deal‑breaker is insufficient differentiation that drives CAC up. Hustle Fund typically writes $25K pre‑seed checks, rarely backs enterprise SaaS because the small check size forces founders to bootstrap for two years before landing a large client. When they do invest, they provide tactical support through an internal program called Redwood School, offering workshops on outbound sales, partnerships, paid acquisition, and mentorship. Yin also notes that success often hinges more on the idea’s market pull than on founder greatness, and she recommends proven SaaS growth playbooks such as Aaron Ross’s Predictable Revenue and HubSpot’s inbound model. Common early‑stage founder pain points include poorly set‑up analytics, lack of infrastructure for measuring growth, and the need for disciplined go‑to‑market execution.
Chapters
And, you know, some people mention as hilariously early-stage startups that you work with. How different is it to deal with these super early-stage startups, right? You don't have established revenue. They don't have accessible models, they don't have product-market fit. What's kind of the general investment strategy? How do you, how do you look at that? I mean, that's, that's tough even for me to look at it.
I would say that it's really fun, but I think it's an entrepreneur's game for sure. I think, I think for people who are VCs who have not been entrepreneurs before, this would not be a fun stage because it's like, oh my gosh, it's so chaotic, like nothing is working. But as an entrepreneur, you see the exact opposite. It's like so much hope and so much potential and so many different directions this can go in. But in terms of then, well, how do I vet companies? Because there really is nothing there and we invest pre-traction. So what exactly are we looking for? And I think the honest answer is there's just a lot of intuition and that intuition could, could be right or wrong, to be honest. And I think when it comes down to it, there's intuition around 2 main areas. One is team and the other is market pull. Around team, I think It's certainly subjective, but, you know, the kinds of things that we look for is probably no different from any other VC: scrappiness, hard work, tenacity, ability to learn, ability to, you know, to do a lot with little. So a lot of our founders tend to be more frugal at this stage as well.
Hmm.
On the other side, though, that's the harder side, I think, and I would even argue the more important side, more important actually than the founding team, which is, Potential for product market fit. So what do I mean by this? Well, when you think about business, actually conceptually, it's very simple. The hard part is the execution. And what do I mean by that? It's like, well, you have costs. The cost to acquire your customers is probably the big one to worry about. And then you have revenue, you have money you're bringing in. So money in and money out. And how do you get more money in with less money out is the name of the game. And And so there's a number of things that affect that. One is differentiation and competition. Like, you know, differentiation and competition affect your CAC, your cost— customer acquisition cost. If it's a really crowded channel, either as indirect competitors or direct competitors, your CAC is going to go up. And, uh, you know, so that's a factor. And then if you, um, if you don't have enough— I would call it margin, but I'm talking about like dollar margin between your lifetime value and your CAC, like, there's not a whole lot you can spend to keep pouring money back into the business, so that affects your growth. So there are all these different levers around that that we think about subjectively. Like, do we think that the CAC can be really low here? But more importantly, do we think the lifetime value can potentially be high here because of all these characteristics? And that is very subjective since there are no numbers.
That's what I was gonna say. What do you look at? Like, uh, just companies you've invested in the past, similar business models, and then just kind of make Kind of, you know, gauging comparisons in your mind, or just what you've seen over the last 20,000 pitches?
There's a, there's a lot of comparison. Like, I think if we're just talking about benchmarking growth, it's really hard to say in isolation whether a company is growing fast or slow. But what we really mean by that is, is a company growing fast or slow on average compared to all these other companies you see? And I would say fast growth in today's market is 50 to 60% month over month at a at a sustained rate for many months. I would say that very good growth is 30% month over month, which I think is, you know, if you can get 30% month over month growth, you know, sustainably for many months, everybody will want in.
Yes.
But anything below that, 20% month over month, 10% month over month, that's not bad. It will be harder to raise.
Um, come, that's when you come talk to us.
Yeah. So, I mean, and, and that's not bad. I mean, there are plenty of great companies that can be built on 10% month over month or 20% month over month. But this is why, going back to the point of like, you know, VCs have limited dollars, so where are they gonna put their dollars?
Yeah.
And what about everybody else? There's gotta be great alternatives for everybody else because those can be great businesses and you as the entrepreneur can make a lot of money. I have friends who have made, you know, tens of millions of dollars on those kinds of businesses. VCs didn't want to touch them.
Exactly. Yeah, different— they're just different investment thesis and model of what they're looking— the returns they're looking for. Um, what would you say is like the most common reason you would turn down an offer to invest in any SaaS company specifically? So you said team, you said product, and a lot of SaaS companies are pitching you. What's kind of the, the thing that you're seeing repeatedly that you're, you're, uh, turning down these deals?
Oh, to be clear, I said team and market pull. So market pull is like how easy it is to sell this at a low cost, and Uh, the biggest reason would be if I feel like there's too much competition or not enough differentiation, because that affects your CAC. Like, that's going to make your CAC go really high. And so it means you'll have to slow your growth to, to go after cheaper channels or free channels, which, which is kind of how we end up in this situation, right? But if you wait long enough, then, you know, 10% month-over-month growth actually can be phenomenal, right?
Yeah. And have you, have you seen across kind of your entire portfolio of Hustle Fund, or even the past, Have you seen any trends or maybe common traits among the more successful founders which you can pinpoint and have performed better versus the mediocre ones that failed?
So I actually think that success and failure is less to do about the founders and more to do actually with this market pull concept. So picking an idea that actually has really strong market pull is a lot of luck. But if you happen to land on it, you can do really well even if you are Quote, only okay. But I think if we're just talking strictly great founders, like, who would I want to place in a company that has great market pull? Like, I think, you know, sort of the usual things: scrappiness, um, ability to learn quickly, um, you know, tenacity, hard work.
Hustle, hustle. You should just be saying hustle, hustle, hustle.
Yeah, yeah. The ability to execute with velocity is what we consider hustle to be, and that is something that's very important to us in founders.
Love it. And what have you seen, let's say specifically in the SaaS space, you know, with your focus on investments, what are some of the growth strategies you found to be more effective over the past few years for those markets and segments that have done well?
You know, it's funny, actually within SaaS, the interesting thing is there are a lot of repeatable playbooks regardless of industry, you know, certainly Predictable Revenue by Aaron Ross is one of my favorite books, and I would encourage everyone to read it. And that process still works for many companies. The key thing, though, really is this differentiation and competition thing. If you are the, you know, 30th marketing automation platform that's competing against HubSpot, it's going to be really challenging to execute that playbook for your product. But I've seen it work really well for highly differentiated products. So I think it really is About that differentiation and, and, you know, how are you really different from all these other players? And then you can use a standard predictable revenue playbook to work, or the HubSpot playbook, which is more inbound— create content, gate it with a landing page, collect business email addresses, and then you can drive traffic to those landing pages either through paid acquisition or partnerships.
Hmm. Do you guys also invest on the enterprise B2B SaaS side as well?
We have a little bit, but it's very rare.
Okay.
And the reason is we're a small check, and enterprise companies have to be able to survive for about 2 years before they land a really large enterprise client. So, so when I do invest, I really have a heart-to-heart conversation with, with those founders. Like, you know that no other VC is going to give you money for the next 2 years. You're not going to be able to bring in revenue or big revenue except from these small pilots. So you really have to be willing to bootstrap and eat glass for the next 2 years, and your life will be absolutely miserable. But if you're willing to do that, I'm willing to invest.
Interesting. So if they're willing to stick it out for 2 years, I mean, that's a challenge, right? Starting off with enterprise, I mean, not recommended, highly, you know, patient testing. But if you can figure it out, you know, you've got some serious skills or patience behind you. What are your typical check sizes? You guys mentioned— are you guys doing the entire round, the entire financing of the pre-seed, or what's typical check sizes?
Oh, just $25K. And that's why it's even more important for enterprise companies to be aware of the situation, because there's not a whole lot you can do in 2 years with $25K. But we do often help actually our founders bring in more money from other investors. Like, I've done introductions for probably 80 to 90% of our portfolio. But I would say that for enterprise companies, unless you're particularly well-connected in a, in a particular domain, it is really challenging to get other investors to hop on board at pre-seed if you don't have a pilot, or even if you do have a pilot that's not paying very much in enterprise.
Right.
Unlike sort of more SMB SaaS, where you can kind of show consistent growth and you're bringing in revenue and that kind of thing.
Right.
So what I think is that enterprise— oh, sorry. The enterprise— the irony is enterprise companies actually can be way, way bigger. But anyway, this is kind of how the landscape is.
Yeah. Yeah. Patience is rewarding, I guess. Right. Um, so you guys are investing $25K, you know, pre-seed round. What's kind of the playbook? You know, usually you guys help them to grow, or what are some of the most common pain points you see, uh, these SaaS founders have at these early stages? Are they You know, just trying to build that product with that, with that money? Are they just trying to get out there and validate? What— how are you helping them?
We, we invest post-product. So because we only are investing $25K, we kind of need to be at the spot where founders can start running and getting sales right away to bring money in the door. And, and so as such, we actually have something called Redwood School, which is an internal program for our portfolio founders where we teach tactical growth. And it includes, it's basically a series of workshops that includes everything from outbound sales to partnerships, lead gen, you know, through paid acquisition around specific channels. And, you know, so, so we do try to help our founders with some of those things. We pair them up with mentors, people who are actually doing sales and marketing in, at fast growth startups. And that hopefully helps them get their, some of their questions answered or get some guidance on some of these things. I think that typically our founders already have a pretty strong understanding of their customer persona coming in, but I'd say that they're not typically well— I don't know what the right phrase is— tooled on the infrastructure side to be able to measure correctly. A lot of people set up Google Analytics, but as it would turn out, a lot of people also set up Google Analytics incorrectly.
Mm-hmm.
So that's something that actually somebody on our team goes around and checks with every team to make sure that even just like the goal tracking is right. Where applicable.
