A SaaS winter, as they say, is looming. The hauling of sleds, loaded with grim predictions, has begun. The air of growth has turned piercingly sharp. The geese of sudden reversals are flocking.
Yet as the greyest hour attests, there’s always the possibility (and hope!) of emerging clarity. A new knowledge of constraints that will never leave you; a snapping awareness of past mistakes, of unquestioned practices and playbooks, and of the business you really wanted to build.
To aid this moment of collective introspection, we’ve put together (from the Relay archives and the interwebz) a sobering compendium of entrepreneurial thought. Founders looking inward. Then turning their gazes right back to name — and pass on how they’ve dealt with — the many, visiting startup predicaments:
— Nira’s Hiten Shah: “Three things matter right now or during any crisis”
— Wistia’s Brendan Schwartz: “I’m not sure we had one secret for surviving the recession”
— ProdPad’s Janna Bastow: “Sustaining a business, through lean times, comes down to being able to be a cockroach”
— Wildbit’s Natalie Nagele: “These businesses we’re building have cycles”
— mmhmm’s Phil Libin: “You’re going to be the first person to know and you’re going to be the last person to admit it.”
— Mighty’s (formerly Mixpanel’s) Suhail Doshi: “Model unit economics early… It’ll keep you honest and let you test the accuracy of your intuition”
— Front’s Mathilde Collin: “Pick your battles and play to your strengths: accept that you’ll be slightly behind in some areas”
— Crossbeam’s Bob Moore: “I think it took me a long time to develop a true sense of intellectual honesty”
— Wildbit’s Natalie Nagele: “I’m not sure that our understanding of risk has changed”
— inDinero’s Jessica Mah: “It’s very easy for us to learn the wrong lessons”
— Tray’s Rich Waldron: “The conflicting scale of advice is one of the most paralysing things a founder faces”
— KnowYourTeam’s Claire Lew: “Sometimes you have to accept that the constraint just means something will take more time – and that’s okay”
— Chameleon’s Pulkit Agrawal:“I’m not ‘running a startup’ but ‘doing work’”
— Crossbeam’s Bob Moore: “You develop some combination of muscle memory and scar tissue over time”
— Geckoboard’s Paul Joyce: “One simple thing that we can all do when asked about how we’re doing by another founder is to present a balanced view”
— Flodesk’s Martha Bitar: “I would freak out less”
— Trello’s Michael Pryor: “…none of it is easy”
Nira’s co-founder and CEO, Hiten Shah, lists things that hold perennial importance when “the parameters of how to operate like you normally do are thrown out the door.” (Source: Relay)
Three things matter right now or during any crisis in no particular order:
- Your team
- Your customers
- Your cash flow
It’s more than likely your team is dealing with a lot right now with the uncertainty related to a pandemic. This impacts everyone. You need to make sure your team is OK and do whatever you can to help them get through these times. Which first and foremost means not pressuring them like you might normally to hit their targets or goals.
This is an unusual situation and the parameters of how to operate like you normally do are thrown out the door. Be compassionate and think about what each and every team member might be going through, ask them what their challenges are and help them the best you can. Being reassuring and supportive is the best way during this time.
Your customers are also going through the pandemic. Being customer-centric is really critical at this time. This means that whatever you do, make sure you find out what problems/challenges your customers are having right now and if those have changed from what they are normally dealing with.
A pandemic like this where everyone has to work from home and schools are also closed means that this isn’t your usual remote work situation. Day to day your customers’ needs might be different than normal and might even be changing on a regular basis. Staying close to your customers and figuring out how their mindset is changing can be helpful for you to figure out what to do for them.
This is how you’ll make sure you are aligned with customer needs. Whatever you thought you knew about your customers, you should be considering reevaluating it to ensure you really know what’s going on and how to support them best with your business.
Cash is king. Especially right now. My biggest piece of advice during this time is to spend energy to figure out what kind of cash position your business is in and do some scenario planning. To the point where you have a best case, moderate case and worst case scenario in mind.
The decisions you make should be based on the fact that a lot about the future is uncertain. Having enough cash in the bank for as long as possible is key. If you don’t have a lot of cash in the bank, you have to think about ways to increase your cash reserves so you have time. This might involve some really hard decisions that it’s likely during normal times you wouldn’t consider.
Wistia’s co-founder and CTO, Brendan Schwartz, revisits yet another year (’08) of far-reaching setbacks and recounts what helped them get through it. (Source: Relay)
I’m not sure we had one secret for surviving the recession and in building our business there was certainly a lot of luck and good fortune, but here’s what I know helped us:
Keep burn low — this is an obvious one. We were incredibly thrifty from the start. It takes time to build a product and get fit with the market. You want to give yourself as much time to experiment and try things.
Stay super close to customers — in 2008 we only had a handful of customers. We talked to them weekly and made sure we knew what they wanted and were happy. Many of these conversations led to core innovations in our product that powered the business for years and years (e.g. video heatmaps came out of a conversation with an early customer that was doing sales training and asked us how she could know if people really watched the videos).
Do things that don’t scale — in good times it’s easy to spend a lot of thought and energy preparing for success and you’re often asking the question “will this scale?”. I’d argue you should never ask that question in an early-stage startup, but you definitely shouldn’t ask it at a startup during a recession. Before we had video embedding in our product, Ben (our first teammate) would generate embed codes for videos by hand and email them to customers. We weren’t sure if we should add it to the product, but we wanted to make customers happy and see if it was something they’d use. Needless to say, it was a hit, and we later figured out a way to scale that once the demand was there.
Recognize your advantages — many of the things about your startup that are valuable to customers are even more valuable during a recession:
- Better support and help — your customers talk directly to founders/team building the product.
- Flexible — you can solve adjacent problems for customers. You can be flexible while bigger companies cannot.
- Likely cheaper than more established competitors because you have lower overhead. But DO NOT undercharge! Your prices are probably too low.
ProdPad’s co-founder and CEO, Janna Bastow, drops a resounding reminder on perhaps the only way to grow sustainably. (Source: Relay)
I admit that I’m not expert at running a business in Covid-19 times. Frankly, no one is! These are incredibly tough and bizarre times, and sometimes there are no easy answers.
Sustaining a business, through lean times, comes down to being able to be a cockroach. It sounds gross, but cockroaches are able to live on very little and are hardy as anything.
In business terms, this means operating with minimum excess overhead, and without running a month-on-month cash deficit. During this coronavirus crisis, it’s the businesses that are able to hunker down and not run out of runway that will see it through to the other side.
If you’re not making money now, move your focus on to ways you can charge for your product or services, even if it’s different from what you would have done pre-Covid-19. After all, there are a lot of new problems to go solve for the world now, so perhaps there’s value to be added and money to be made there.
If you are making money now, look to keep your costs below your revenues. We don’t know how long this will last, and every month you can buy yourself gives your team that much more of a chance to survive and come out the other side.
Wildbit’s co-founder and CEO, Natalie Nagele, proposes a new understanding of the ever-divisive idea of founder hustle. (Source: Wildbit)
These businesses we’re building have cycles when they need us to hustle, and when they can afford for us to live a more peaceful existence. Even in a stable, successful business like ours, we have times where we have to give up more of our time away from work to get something out, to get ourselves out of a jam, or to support our team in the work that they’re doing.
Just like when you have to jump in and help a grown kid, sometimes the business needs more from you. But the badge of honor is not on working long hours, it’s instead accepting that you’re available when it’s necessary, but fighting for those times to be exceptions and not rules.
I want new entrepreneurs to not feel guilty or wrong for working hard at something they are crazy passionate about. Your business will pull you in and occupy your every brain cell. You will be excited about it, worried about it, passionate about it. Channel that towards getting to a better place. Find the important things to work on.
Remember to find time for your health, mental, and physical. Make some friends with founders who have been there before and see the other side. Maybe they can suggest a workaround or just trigger a gentle reminder to get outside. But don’t feel guilty about it. We’ve all been there and are only so dogmatic because we’ve seen the other side.
mmhmm’s (formerly Evernote’s) co-founder and CEO, Phil Libin, on an essential method of truth-telling he has long adhered to. (Source: The Accidental Creative)
I got this advice as a CEO at Evernote. A while ago. And this was from one of our investors. I think it was from Henry Ellenbogen… This is amazing. I’ve given this advice a lot and I follow it all the time.
He said, being the founder and CEO, you’re going to be the first person to know when something is really wrong. You’re going to be the first person to sense, ‘look, this isn’t going right.’ Something bad is happening. Company isn’t doing what I think it should be doing.
You’re going to be the first person to know and you’re going to be the last person to admit it. Which is a brilliant formulation, right? You have your fingers everywhere. You have more information than anyone else.
You just need to have a feel for it. You’re going to be the first person to know when something is wrong. But as you also have the most invested, you’re going to be the last person to actually admit it.
So what you have to do is, be aware of that and then try to defeat it. How do you use the superpower, being the first person to know and mitigate the fact that you’re not going to admit it to yourself because you have so much at stake.
He suggested a process which I still do with every project. Which is:
- Find a time when you’re in a pretty good mood. You don’t want to do this when you’re frustrated.
- Just write down and you don’t have to share it with anyone, just write it down for yourself.
- What do you want to accomplish in the next six months or twelve months, whatever time frame, you want, that if you accomplish it in that time period, you’re going to be like, ‘yup, we’re doing great, things are going according to plan.’
- And if you don’t accomplish it, you’re going to be like, ‘oh something is seriously wrong’ Decide that, write it down, you can share it if you want. I usually don’t…
- And then just put it aside. Then, look at it, when times are tough in six months.
Both ways work really well. Sometimes, six months go by and you actually feel like crap. And you look at this thing and you’re like, ‘oh, wow, we did all of that stuff.’ It’s hard to acknowledge because in the day-to-day, you focus so much on what’s going wrong.
But actually, look, six months ago, I said that I’d be super happy if we accomplished these things and we’ve done it.’ You need to be super happy.
That’s actually really useful.
Or sometimes you’re pretending that things are great. But you look at this and see, well, six months ago, you said, we’ll have to do these things but we’ve not done any of them. Why do I still feel good? Am I just lying to myself?
That kind of conversation. Overcoming the founder dynamic of, doubling down on being the first person to know when something is wrong but defeating the ‘being the last person to admit it’ has been super powerful.
Mighty’s founder, Suhail Doshi, endorses a simple model’s ability to help you “buffer for the unknown.” (Source: Twitter)
I cannot urge early stage startups enough to make a model of their unit economics. It is so telling what will likely cause great, early pain in your startup in the first 5 years. It’ll keep you honest & let you test the accuracy of your intuition. Buffer for the unknown.
For some it may be depressing but for others it’ll make you feel a stronger sense of conviction about clever ways you can improve things. That will help you focus more clearly on what’s important.
When constructing your unit economics model I highly recommend being conservative: assume churn is higher, estimated costs will be greater, improvements will have a reduced impact, average sales prices will be lower. Use similar companies as a benchmark.
When you make your spreadsheet use granular units (hours, GB, users) when calculating costs/revenue. Then adjust those knobs & play around. It helps build your intuition quickly to see what’s most impactful & what has diminishing returns. And, yet again, greatly clarifies focus.
You can spend many months living in this spreadsheet while in the midst of operating a company. It can feel like the only way to control something you don’t directly contribute to as CEO. So, don’t! Pick an area to improve & help fix it with the team. Get out of the spreadsheet!
When you’re done, find someone who will lend a critical eye & understands a business like yours to help you diagnose if you’re either missing something or a number is way off. This will help you build conviction that you’re not ignorant about something or extremely biased.
Don’t forget that even after you make this model you still need to turn enough of a profit to pay many employees not factored in, facilities, food, etc. If you raised money, you may need to consider how fast you’re allowed to grow if you’re losing money due to runway constraints.
Death by poor unit economics is common. Often the founders will have wished they had that extra 6-9 mo of runway to run the experiments that could’ve turned it around. You may as well know now & start immediately once you’ve proved there’s demand.
Front App’s co-founder and CEO, Mathilde Collin, grapples with the convention of benchmarking and realizes what tends to blur in such comparisons. (Source: Medium)
As a founder, I wanted to make sure my company wasn’t falling behind, so I always kept a close watch on these benchmarks and how we were doing against them. If we happened to fall far from the norm, I’d worry, and if we were right on it, I’d make sure we didn’t deviate.
However, I’ve recently come to the realization that this approach can be flat out dangerous for a growing company. It’s not that the ratios are wrong, but blindly comparing yourself against a pool of kind-of-similar companies completely fails to capture the specific nuances and unique traits that have allowed your company to grow and thrive up to this point.
At Front we had a lot of unusual ratios. We’d look at the benchmarks and it was clear that we were off, and for the longest time, I saw these as inefficiencies that we were getting away with for some reason, but would have to fix eventually.
For the longest time we had 1 PM for about 20 engineers. Everyone kept raising their eyebrows when they’d hear of this ratio, so I naturally started to worry about it myself. Much later, it occurred to me that we could afford such a low ratio, because everyone at Front uses the product daily, which creates a lot of alignment internally: the specs don’t write themselves, but we’re all generally aware of what our users want, which makes the entire product process much more efficient.
It’s said that for Account Executives in SaaS to be profitable, they should bring in 5x what they’re paid, yet at Front the ratio has always been closer to 4x. However, Front has a “land and expand” model, that leans more towards expand than land: the size of the initial deal doesn’t predict well the value of the account 12 months in; and of course, with no initial deal the value at 12 months is zero. Knowing that, it’s OK for us to pay more than usual for new business, because we’ll realize most of the value later on.
In retrospect, I should have been more thoughtful about what part of the business was doing fine and what actually needed to be fixed, in the specific context of Front. The same holds true for other companies: the unique ways in which they should deviate from the “norm” are endless.
And I don’t mean “beating” the norm: even though, as a startup, you’re trying hard to beat the average, it wouldn’t be reasonable to hope to beat all the averages. You cannot have the best user engagement and the highest LTV and the most efficient sales force and the lowest CAC, all at once. It’s just not realistic.
Pick your battles and play to your strengths: accept that you’ll be slightly behind in some areas, and make sure you’re top of the class in at least one dimension.
Crossbeam’s co-founder and CEO, Bob Moore, reckons with the tricky balance between being risk-taking and being risk-averse. (Source: Relay)
I think it took me a long time to develop a true sense of intellectual honesty and to be risk-seeking rather than risk-averse while operating an early-stage company.
Both are core requirements in a startup entrepreneur, as you have to chase down the high-risk, high-upside chess moves and then be honest with yourself quickly when you screw them up and need to pivot. This was a mental journey more than anything. I’ll talk more about other frameworks in another question.
Wildbit’s co-founder and CEO, Natalie Nagele, on how shutting down a product may have seemed "risky on the outside as we spent over $3m on it…but in reality we never risked the house.” (Source: Relay)
We were building Conveyor with a proven and talented team, along with a profitable business and confidence that we could solve any problem. That led us to push forward by eating the elephant all at once instead of one bite at a time.
In hindsight, and going forward, we should have defined what failure looks like ahead of time in addition to what success looks like. Had we done that, I hope we would have seen that we were taking on more than we should have a lot sooner. We shared more of those lessons learned and takeaways on our blog.
Enabling the team to get back on track was the immediate priority once we made the decision to stop working on the product. In Wildbit’s world, where people come first, back on track means enabling the team toward a motivated, happy state.
We knew that every person on that team needed to work on something that would make a meaningful impact to customers. Working on something for so long without it reaching customers’ hands can be extremely demoralizing.
We wanted to be sure they were able to work on a project that directly impacted customers immediately afterwards, to help them remember what that feels like and reiterate what incredibly talented folks they really are.
To solve for those goals, we opted for some projects that would be finished within 3 months. The Conveyor folks formed new teams and worked on two of our big releases this year: DMARC Digests and People-First Jobs .
I’m not sure that our understanding of risk has changed. What changed was the desire to build something small again, instead of jumping into a complex product.
We still love taking calculated risks, as long as they don’t risk the entire business. On the outside it may look like Conveyor was risky because we spent over $3M on it over time. In reality we never risked the house. What we learned was how to notice failures earlier.
inDinero’s founder, Jessica Mah, emphasizes the necessity of seeking outside perspectives especially when processing failures. (Source: Relay)
I think having an objective third party to assess helps a lot. It’s very easy for us to learn the wrong lessons or just not learn any lessons from mistakes, given how crazy workload in a startup can be.
As of right now I am leveraging two executive coaches, my therapist, and two more business consultants to help me figure out how I’ve screwed up and how I can improve and how we can improve the business.
I also have my former COO now as a board member who I trust to be objective in telling me what he thinks the mistakes have been and where we may be repeating mistakes because we didn’t post-mortem properly.
Tray’s founder and CEO, Rich Waldron, on making decisions when advice, as it so often does, points everywhere. (Source: Relay)
The conflicting scale of advice is one of the most paralysing things a founder faces, handled well it’s a rich source of information, handled poorly it’s a major timesuck.
I try to take everything as its own data point and ultimately process and come to a decision that is in the best interests of our overall vision, and the path to getting there.
An example I can think of (in early 2012) was the misrepresentation of the lean startup approach, as with anything it’s best consumed as a guide to support decision making but the emphasis at the time was essentially to create extremely lightweight prototypes of products.
This didn’t sit well with me at the time as I feel there is a balance between setting out your experiments correctly and having the conviction to commit to an idea that you believe it.
“Sometimes you have to accept that the constraint just means something will take more time – and that’s okay”
KnowYourTeam’s co-founder and CEO, Claire Lew, cautions founders against paretofying ("what’s the least I can do?”) everything. (Source: Relay)
Constraints have become something that I’ve changed my reception of, I think, slowly over time. Previously, I think I’d always been searching for the “judo solution” amidst constraints. That is, how can you get the maximum outcome by doing the least?
And while that’s a useful frame for some problems, I think other times, in the face of certain constraints, it’s frustrating. For example, when you’re faced with certain constraints in your business (e.g., capital, people, time), yes, you can totally seek out the minimum thing to do that gets you the maximum effort.
But also, I think if you want to create something special or meaningful, sometimes you have to accept that the constraint just means something will take more time – and that’s okay.
I think as entrepreneurs, when we’re faced with constraints, self-imposed or not, we can be hungry for the “hack” or elevator that zooms us up to the top. But when we don’t find that, it haunts or burdens us. Instead, I think realizing that amidst constraints, something will just take longer, is an important truth to accept.
A perfect example of this I think is the writing we do on our blog . I could’ve looked for the judo solution for creating organic traffic (e.g., hire content writers + editors) – but I had a specific vision for what I wanted the content to be.
And I knew that we had the constraint of cash. As a result, I’ve chosen over the past 6 years to write every single one of our 100s of blog posts myself (with maybe ~4 exceptions). And we’ve gotten incredible traffic because of it + built a loyal audience.
But it also took 6 years. And I wrote everything. There was no “judo solution” because of the constraint, and I chose to be okay with that because of the vision I had in mind.
Chameleon’s co-founder and CEO, Pulkit Agarwal, shares how a first-principles reframing of a founder’s work changed him for the better . (Source: Relay)
In the early days I assumed the startup was a sprint and I had to sink all my energy into it. After a few years I realized that I had a similar state-of-mind, regardless of progress and problems. I felt hurried and assumed at any step the whole thing could come crashing down.
Over time I’m not “running a startup” but “doing work”. And with “doing work” comes a different perspective:
- Work is not the only thing in my life; I have other key priorities
- Work is meant to be fulfilling and rewards
- I should enjoy my work each day and each week and each month
If I was in a job and work took over my life and I was unhappy then I’d quit. So why do I need to create an environment where work isn’t the things above.
Some specific things that have worked for me:
- Confiding anxieties in a partner or co-founder or mentor. Having someone listen that can reassure you that things are okay
- Making physical health a priority; exercising every day / regularly
- Celebrating all the small wins in a big way
Crossbeam’s co-founder and CEO, Bob Moore, reflects on how he has learned to deal with the disarray and stasis that often accompany starting up. (Source: Relay)
You develop some combination of muscle memory and scar tissue over time that makes it easier and easier, but it’s really a lifestyle choice. I think it took me at least five years to take a frequent, holistic view of “how things are going” that wasn’t subject to the recency bias of the good thing that happened yesterday or the bad thing that happened five minutes ago.
I have been in and out of therapy at various points in the journey. I have had amazing co-founders that I deeply trusted and could confide in. I also try to prioritize hobbies – especially ones I’m bad at (so I feel like I’m always learning and growing) and that I can do anywhere (so that no matter what city I’m in I can find a way to experience them). Good examples are like running and improv comedy.
I don’t have some magic formula, and I certainly still have bad days. But learning to zoom out is definitely the most important piece.
“One simple thing that we can all do when asked about how we’re doing by another founder is to present a balanced view”
Geckoboard’s founder and CEO, Paul Joyce, implores founders to exchange sincere realities, the feats and foibles of their respective journeys. (Source: Relay)
As founders our job is to manifest something that exists only as an idea, into something real.
This is no mean feat and can be incredibly challenging.
Part of this is necessarily convincing yourself that it is possible…
That requires inspiration, research and just a sprinkle of delusional thinking
The problem comes when we do this without sensitivity and project it outward.
In particular, when we layer in lies of omission (crowing about the good stuff but leaving out the stuff that makes us feel like crap).
This is damaging to ourselves and our business when it’s an internal dialogue.
But has collateral damage on other founders who hear that one-sided story from their peers and are left feeling like they’re the only ones suffering.
That’s why communities like this, be they virtual or face-to-face, that allow founders to drop the filter and talk about some of the pain are really important.
One simple thing that we can all do when asked about how we’re doing by another founder is to present a balanced view.
Instead of saying: ‘We’re doing great! Just launched a new feature and closed a Series A with investors x.’
You could try: ‘We just closed a large series A which I’m delighted about. But I’m struggling with how I’m going to meet the expectations of our team and investors.’
Or: ‘We landed marquee client y but lost a couple of valuable customers that has caused me some concern.’
I’ve found this opens up conversations, is a great way of building mutual trust which can even lead you to a discussion that can help with those pressing concerns (there are always pressing concerns).
Flodesk’s co-founder and CEO, Martha Bitar, describes how running a startup can seem like an ever-flaming world and how she learned to see through it. (Source: Relay)
I remember the first time our system crashed. It was a few months after launching and I thought that would be the end of our journey. We were down for about 4 hours and those were the longest.
The next morning, I woke up to about 12 customers telling their audience on IG stories that we broke the internet and that they had to join now. I was so focused on making sure that everything was perfect and would be so deflated every time we’d have one issue, one bug, one upset customer.
I would fundamentally change that approach.
I now know that sometimes things are going to happen, often things that are out of our control (like that time AWS was down) and what matters most is how we handle those incidents: did we communicate promptly and transparently internally and with our customers? Did we create a plan to get better in the future? Did we do a guilt-free and hyper objective retro?
That’s my big one. Would love to hear yours.
Trello’s co-founder, Michael Pryor, humbly sums up two decades of industry-defining building. (Source: Relay)
What seems consistent to you though was far from consistent. Some times we built the right product at the wrong time (ten years ago we worked on remote work audio software that made virtual rooms for people and I think there are 4 startups I know of working on this today), other times it was the wrong product at the right time, or we got everything right but failed to market it correctly (we built screensharing tools before logmein/gotomypc but pitched them as tools for customer support agents limiting our total addressable market).
Additionally, you wrote “first decade” but most of the “hits” you know about today were created after 2010 (whereas we founded Fog Creek in 2000).
Stackoverflow was a great idea that Joel had and an amazing product that Jeff Atwood built - but the reason it worked so well in ADDITION to the product was that both of them had spent a decade building up a reputation with developers through blogging. If that hadn’t existed, I don’t know if that product would have succeeded so well.
We also struggled sometimes trying to figure out how much longer to work on something before calling it quits (I get domain name renewals still for projects that we eventually stopped working on).
I know none of that is really an answer - but it’s just to say, none of it is easy.
To conclude, here’s a heartening note from Pipedrive’s co-founder, Timo Rein:
Stay curious, naive, and persistent while looking for your light