Talent Magnets, Slope, and Hustle: A Conversation with J.P. Sanday of Menlo Ventures
Learn why talent density, founder potential, and venture-scale markets matter in early-stage investing as JP Sanday of Menlo Ventures shares his insights.
Building a startup in today’s market is anything but straightforward. On this week’s episode, I had the pleasure of sitting down with JP Sanday, a partner at Menlo Ventures, who dives deep into the nuanced world of early-stage investing, the evolving role of founders, and how the AI boom is reshaping venture capital.
It’s a conversation layered with insight on what it takes to move from founder to CEO and why talent density in startups can be a game changer—or a death sentence.
You can also listen to/share the episode directly from any of these channels: Apple Podcasts | Spotify | YouTube Music | Amazon Music
Finding the Right Slope: Investing in High-Potential Founders
One of the key challenges JP shared about early-stage investing is that, at that stage, you’re investing in potential as much as in product. In JP’s words, “These founders are not finished products…they’re high potential.”
The real art of investing, he says, is gauging what he calls the “slope” of a founder. It’s about understanding their ability to grow and evolve as the company scales.
In JP’s view, you need founders who are ready to put on multiple hats—and even switch out their headwear when things go awry. A founder’s ability to attract top talent, evolve with their team, and remain flexible is critical.
He describes four must-haves in his “4-H” model:
Horsepower: clock speed and ability to learn fast.
Hunger: the drive to think big and the appetite to go bigger.
Hustle: the hands-on readiness to jump in and solve problems firsthand.
Humility: the openness to learn and the ability to see beyond oneself.
“I’d say humility is the hardest to find,” JP notes. “If founders think they don’t need to grow, they’ll never grow until it’s too late.”
Talent Density: The Venture X-Factor
We all know talent matters. But in venture-backed startups, talent density—the quality and drive of every single person on the team—can make or break a company.
JP shared his strategy for ensuring talent density is more than just a line on the pitch deck. Menlo Ventures looks for what he calls “talent magnets” in founders, people who can attract, hire, and keep top talent.
As he puts it, “The founder may be the person at the top, but it’s the team they bring in who shape the DNA of the organization.”
And when founders hire right, they create a “talent magnet” effect, attracting more top-performers who elevate the company as it grows.
JP stresses the importance of setting this tone early, especially around culture: “You can’t claim to have a ‘no-asshole rule’ if you hire one top performer who doesn’t meet that bar.”
Once the culture begins to shift, it’s nearly impossible to undo the damage.
From Product to Market Fit and Beyond: Understanding Venture-Backable Businesses
One area JP didn’t shy away from was the inherent risk and pressure in building a venture-backable business.
He points out that not all businesses should be venture-backed, even if they have a solid product and an experienced team. Venture backable, as he defines it, means not just achieving product-market fit but doing it at a speed that can reach $100 million+ ARR (annual recurring revenue) and still growing.
To raise VC money, “You’ve got to be ready for the venture ride,” JP adds.
This all boils down to the market itself. JP emphasized that not all markets allow for this kind of rapid growth, and founders need to be realistic about market demand: “The market doesn’t change; it has certain demand patterns.”
Instead, founders have to assess where there’s a disruptive force and a clear need, and then decide if their startup can scale to meet it.
In his words, “You’re not generating demand; you’re capturing it.” Some founders run into a rude awakening when they realize that they’re fighting for a limited share of a market that can’t expand at the rate they need to achieve venture-scale success.
The AI Boom: Smart Investments in a Hype Cycle
Another hot topic in our discussion was AI, which has been upending venture capital with sky-high valuations and record-setting funding rounds.
Menlo Ventures was early in backing companies like Anthropic, an AI infrastructure giant, but JP also draws a clear line between genuine innovation and market hype. The trick, he says, is in assessing where real demand lies amid the AI hype.
When it comes to AI, JP differentiates between the infrastructure and application layers, explaining that the former—where Anthropic sits—requires massive early investments.
In the application layer, however, there’s a different challenge: “Where there’s no daylight between a model and the product, it’s hard to justify the business.” To stand out, startups need architecture that makes AI work cost-effectively and adds meaningful value.
JP’s approach emphasizes looking for teams that can scale intelligently, staying a step ahead in the face of accelerating model improvements.
“It’s all about assessing if the team has the edge to innovate and stay relevant in this fast-paced tech environment,” he says.
Key Takeaways
Invest in Slope, Not Just Position: Founders who can evolve as CEOs are critical to success. As JP puts it, “high slope” is just as important as high performance.
Talent Density is Non-Negotiable: Talent magnets attract more A-players, creating an organization that can weather growth and change.
Make Sure It’s a Venture-Scale Market: Not all businesses should be venture-backed, and not all markets can support venture-scale growth.
Look Past AI Hype: The most promising AI companies bring scalability, infrastructure, and differentiated value to their applications, making them more than just hype-driven plays.
Wrapping Up
From first-time founders to seasoned operators considering a jump to the venture-backed track, there’s a ton of wisdom here. As JP reminds us, success in venture isn’t just about building a product; it’s about building a market-scaling organization. And while the AI gold rush is in full swing, staying level-headed and focusing on the basics of people, product, and market fit is what will ultimately create lasting impact.
This conversation with JP was a timely reminder of how even in a fast-changing world, the fundamentals still matter.