Be Maniacal About Who You Bring on in the Early Days (and 9 More Tactics), A Playbook to Build a $12.3B Fintech Company in 6 Years - Tactician: #0090

"Being maniacal about who you bring on board in the early days is crucial. It's like throwing a dinner party. You don't want just anyone at the table. 'Sorry, Uncle Joe, you can't come. Last time, you scared everyone away with your conspiracy theories. We need positive vibes and people who actually believe in gravity.'"

02/04/24

Be Maniacal About Who You Bring on in the Early Days (and 9 More Tactics)

Why Read:

• Practical strategies for building a strong team, focusing on problem-solving, managing ego, and making informed decisions

Authors:

• First Round Capital, Venture Capital Investor

Link: 

• “Navigating New Waters: 10 Tips for First-Time Founder Success”

Key Concepts and Tactics:

1. Be maniacal about who you bring on in the early days: 

   1. Point: When building your early team, focus on hiring people who are a good fit for your company culture and work style, rather than solely prioritizing talent or skill.

   2. Quote: "When there's high fit on a team, there's high trust, and with that trust comes the ability to make decisions quickly. This is especially important in the early days, when the cultural tone is still being set. 'Building the culture starts with who you hire,' says Zappacosta. 'And if you hire the right ones — people who mesh with the work style and are attracted to the idea — you can have a really great culture start to grow around that. 'I didn't always appreciate the impact one person can have on the vibe of the place. Had I known that earlier I would have been more maniacal about who we brought on in the early days.'"

2. Choosing the Right Problem to Solve:

   1. Point: Start with a problem that pulls you in, has the potential to scale, and optimizes for learning.

   2. Quote: "To find a problem worth solving, go where you feel you're going to learn the most — even if that means diving into a completely unfamiliar space. Consumer demand and scalability are driven by solutions to complex problems — not easy ones that anyone with a computer and a few minutes could solve. 'It's okay if you do things wrong at first. You can learn a lot from that. Ask yourself, 'Where can I find an environment where I can work really hard and that challenges me to learn?''"

3. Letting Go of Entrepreneurial Ego:

   1. Point: Recognize when your ego is interfering with decision-making, company culture, and product development, and take steps to address it.

   2. Quote: "As a founder, your job is contingent upon your ability to improve at the pace that the company needs you to — ego is the only thing that can stand in the way of that. Executive coach and author Alisa Cohn has 20 years of experience teaming up with founders — and to help folks put their ego aside, she never strays too far from this question: 'What does the business need from you right now?'"

4. Prioritizing Fit Over Talent for Early Hires:

   1. Point: When building your early team, focus on hiring people who are a good fit for your company culture and work style, rather than solely prioritizing talent or skill.

   2. Quote: "'What causes relationships not to work isn't a lack of talent, it's a lack of fit,' he says. 'Interpersonal issues don't crop up because one person is smart and the other isn't. Folks just have different approaches. It's not right or wrong, it's just left or right.' When there's high fit on a team, there's high trust, and with that trust comes the ability to make decisions quickly."

5. Getting Specific on Your Target Customer:

   1. Point: Narrow down your target audience by identifying who to build for, where to play, and what specific needs you're addressing.

   2. Quote: "From day one, set out to build solutions that address a highly specific customer segment and meet very specific needs. That's how you build a differentiated product."

6. Balancing Inputs from Evangelists and Doubters:

   1. Point: When exploring a new idea, seek out perspectives from both strong believers and skeptics to avoid confirmation bias and gain a comprehensive understanding of the challenges ahead.

   2. Quote: "'You don't want to fall victim to confirmation bias,' he says. 'It's equally important to find people who don't believe in what you're doing to help you operate from that base level assumption that what you're doing shouldn't work and then trying to prove that wrong.'"

7. Focusing on Functional Benefits in Product Messaging:

   1. Point: Ensure that your product's messaging clearly communicates its functional benefits before emphasizing emotional benefits.

   2. Quote: "'You need to be really clear on what you do until people understand what you do,' she says. 'Yet so many founders skip straight to emotional benefits, skipping over the functional messaging entirely.' This can be particularly difficult for first-timers as they get caught up in their own excitement about what they've been working so hard to build. And while boiling your million-dollar idea down to a few bare-bones sentences might not sound the most exciting, it's a key step for finding early success."

8. Simplifying Early Sales Efforts:

   1. Point: Streamline your early sales process by condensing calls, selling to fellow founders, and seeking feedback from experienced salespeople.

   2. Quote: "An effective kick-start to sales doesn't require a robust background in pushing product. A tactical approach that leverages the founder network is more than enough to take your company from theoretical to money-making."

9. Obsessing About Cash Management:

   1. Point: Closely manage your company's cash flow, considering venture debt lines, avoiding reliance on assumed revenue, and sharing cash plans with investors.

   2. Quote: "'It's crazy how often people miss this,' says Hayes. 'In the early days, know that it's only about cash. That's all the money you have to spend and should be spending.'"

10. Fine-Tuning Your Competitor Radar:

    1. Point: Instead of focusing solely on existing competitors, consider what new products or companies could pose an existential threat to your business.

    2. Quote: "Resilient founders don't ask 'Which competitor are we scared of?' Instead, it's 'What fully-formed company would be an existential threat to us, whether it exists or not? And if it doesn't exist, why aren't we building it?'"

11. Listening Closely to Your Power Users:

    1. Point: Pay attention to feedback from your most engaged users and be willing to adapt your product based on their insights.

    2. Quote: "'A lot of people that design products are in the mindset of, 'I will magically imagine some perfect product and I will pass it down as a gift to my users.' But it's usually the other way around — existing users talk about what they wish brands would do, but that feedback isn't incorporated into the product.'"

A Playbook to Build a $12.3B Fintech Company in 6 Years

• Why Read:

  • Learn how Brex rapidly scaled by identifying a problem, building an MVP, iterating based on customer feedback, leveraging multiple acquisition channels, focusing on retention, making tough strategic decisions, and evolving from a single product to a platform.

• Author:

  • Shounak Banerjee, Founder at MarketCurve

• Link: 

  • “How Brex went from zero to a $12.3B company in 6 years.”

• Key Concepts and Tactics:

  • Identifying a Problem and Building an MVP:

  • Point: Identify a problem you've experienced firsthand and build a focused MVP to address it.

  • "The problem was something they faced first hand. Despite receiving investment, startups struggled to get a corporate credit card. Traditional banks were slow, manual, with archaic digital interfaces. Worst of all, they didn't know how to underwrite early-stage businesses with no credit history. [...] The founders scoped out their MVP - Build a corporate credit card for startups. They chose to build the full credit card processing stack from scratch instead of relying on third party processors. This gave them flexibility & prepared them for scale from day one. For the MVP, they focused on just a few features like fast sign up, higher limits without personal guarantees, and automated receipt capture."

  • Engaging with Pilot Customers for Feedback and Iteration:

    • Point: Engage directly with pilot customers to gather feedback and iterate on your product based on their pain points.

    • "The founders focused on friends and family that were either founders or finance people at small companies. They also scraped LinkedIn for contacts of thousands of foreign founders (who typically lack FICO scores and struggle to get credit cards) & emailed them if they would be interested in the product. They had 85 pilot customers doing this. The founders engaged directly with these pilot customers & interviewed them about their biggest pain points to refine the features. When talking to users, the founders discovered that not having a personal guarantee was something people cared about. Having higher limits was something people cared about. So was fast onboarding - users wanted to get a card in 5 minutes. They iterated based on feedback from these users & Brex delivered its first cards to the pilot customers in four months."

  • Leveraging Multiple Channels for User Acquisition:

    • Point: Use a combination of outbound sales, billboard advertisements, referrals, and brand awareness to drive customer acquisition.

    • "Brex used a combination of outbound sales, billboard advertisements, referrals & brand awareness to get the all rolling on the customer acquisition side. They bought billboards across San Francisco spending $300k. They then cold emailed founders in the area. Almost everyone replied back because they saw the billboard already. [...] They also sent champagnes to founders offices & cold emailed them a few days after. This campaign got them 75% demo bookings. They also did podcasts. Their online content strategy was to create a 'loop' by targeting what their demographic is searching for, serving them content to bring them to the site and then retargeting them with paid ads."

  • Focusing on Retention and Expansion Revenue:

    • Point: Prioritize retention from day one and optimize for user engagement to reduce churn and increase expansion revenue.

    • "The founders also realized that they needed to focus on retention from day one. Their rationale was that a customer churning today is bad for the business because the value of that customer in the future is greater than their value in the present-day. To optimize for retention, Brex improved conversions by building feedback workflows around critical product flows like onboarding & checkout. Brex focused heavily on NPS (Net promoter score). [...] The retention & churn data also showed that customers more likely to churn were using other products instead of relying entirely on Brex. That's when revenue expansion came to the picture. It contributed to the company's expansion revenue and reduced churn. Brex made the product more sticky optimizing for user engagement. This reduced churn and increased expansion revenue from the customer. This strategy worked successfully, as 50% of the company's revenue was from upsells and cross-sells from existing customers."

  • Making Tough Strategic Decisions:

    • Point: Be willing to make difficult strategic decisions to focus on your core customer base and product offerings.

    • "In early 2022, Brex was being pulled in two different directions & the leadership was faced with an existential question - Would they be mediocre for everyone? Or be the best quality service for venture-backed startups and enterprises? They chose the latter & went all in on startups and Venture-backed businesses & offloaded SMBs from their customer base. Shortly after the SMB offboard, Brex created an official 'startup' division. Via this division, Brex offered every client a dedicated support person to reach over email or text."

  • Evolving from a Single Product to a Platform:

    • Point: Evolve your product offerings to meet the changing needs of your customers and expand your market reach.

    • "From starting out as a corporate credit card company, they added other features to their product & became a full-fledged platform. [...] In 2022, Brex released 'Empower,' to its product suite in its product evolution from a one-touch solution to a platform. Empower was a software platform to help larger companies better manage their finances. By focusing on this platform and the startup user base, Brex grew it to $100 million in ARR in little more than a year, with Doordash, Classpass, and Scale as its customers."

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