Venture capitalists are often associated with pouring money into AI startups, but according to Ryan Hinkle, managing director at Insight Partners, the reality is more nuanced. In a recent Equity podcast, Hinkle revealed that while AI is still a hot area, VCs are increasingly prioritizing financial infrastructure in their investment decisions.

Insight Partners, with $90 billion in assets under management, invests at all stages and has a track record of writing large checks. Hinkle explained that the firm's check-writing pace has grown significantly, with over $1 billion invested per quarter today, compared to $750 million invested in the first 10 years of the company's existence.

However, Hinkle emphasized that good, growing companies that aren't selling AI as their core technology can still raise healthy checks, but the multiples they can expect won't be as high. He attributed this to the current "great reset" in the industry, where funding rounds are still 30% lower on a multiple of ARR basis than in 2019.

So, what can founders do to maximize the deal that growth VCs will offer? According to Hinkle, it's not about stamping AI all over the company's marketing materials, but rather about having a solid financial infrastructure in place. This means having systems that can provide detailed financial information, such as customer retention rates, influences on margin, and the entire "quote to cash" process.

Hinkle stressed that founders need to be able to answer questions about their business with the same level of detail as they can about their product. This includes being able to produce anonymized customer records of all transactions, including invoices and contract details. If this information is scattered across different systems, it can raise red flags during the VC's diligence process, potentially impacting check size or valuation.

Hinkle acknowledged that some VCs might overlook this level of diligence and invest anyway, but warned that the problem won't go away as the company grows and accrues more customers with more transactions. He emphasized that founders who prioritize financial governance early on will be better positioned for success in the long run.

In addition to financial infrastructure, Hinkle also discussed other topics, including the importance of access to skilled, loyal, and affordable talent in startup success, the challenges of employee retention in Silicon Valley's "mercenary" hiring culture, and the key differences between building in New York versus Silicon Valley.

The full interview provides valuable insights into the current state of venture capital and startup investments, and serves as a reminder that while AI may be a hot area, it's not the only factor that VCs consider when making investment decisions.