Surviving SVB 😰😕😅
Surviving SVB 😰😕😅
An anxious-moment-by-anxious-moment account of the SVB chaos, being aware of what PLG can’t tell startups, and making recruiting less ambiguous.
Welcome to the 68th edition of The SaaS Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay (curated with 💛 at Chargebee) and the interwebz. So, stay tuned!
In this edition, you’ll find the following instructive and inspiring pickings:
#1: Hoop’s co-founder and CEO, Stella Garber, captures the punch-in-the-gut toll of collective helplessness, the reassurance of founder-to-founder solidarity, and the shared sighs that came to pass during the SVB crisis.
#2: Retool’s founder and CEO, David Hsu, cautions against a PLG-focused motion, especially on the pre-PMF path, and calls attention to the remarkable headway they made with outbound sales.
#3: Oso’s co-founder and CEO, Graham Neray, questions the default opacity of startup hiring processes and reasons for a more thoughtful approach.
🗞 Recently on Relay:
Heuristics and Hunches — “In B2B, Don’t Just Know Your TAM, Ask How Many Users Will Likely Become Experts” and Other Essential Reminders with Dragonboat’s Founder, Becky Flint:
— Solving the same problem across a career (and how PayPal was among the first SaaS firms)
— The 3 pre-PMF questions you ought to ask
— Why being customer-driven isn’t enough
#1: Surviving SVB
(From: Hoop’s Stella Garber) (Source: Jumping Through Hoops)
These last few days have been some of the most stressful in my professional life.
Why? My startup, Hoop, had all of our capital in a bank that represented a stable, solid choice in the tech community for years: SVB.
My co-founders Brian, Justin and I have had to make a series of business altering decisions in snap moments over the last few days.
…
Thursday Mar 9, 2023
At 11:52 AM CST, my cofounder Brian posted an article in Slack about an issue at SVB. My heart rate went up, but not too much…
I quickly pinged some other friends in the tech industry to see if they’d heard anything. Most hadn’t. One said “Move your money from SVB into treasury bills today.”
I went into our weekly team meeting at 12:30 PM CST with a sense of panic, and foreboding dread. We went through the meeting without showing emotion, but all around we started getting emails from others and seeing social media blow up: Something was happening at SVB, and we needed to get our money OUT.
But where to? Nobody tells you to open more than one business bank account when you launch a startup. Maybe this will be common wisdom moving forward, but it was not something we were told….
…
By 9 PM, we had initiated a wire to Mercury bank and all felt relieved.
Friday Mar 10, 2023
…we got a notification that SVB failed.
It felt like a punch to the gut. We could see that a wire was initiated out of SVB, we could not see any inflow into our new bank account. Our money, the lifeblood of our startup, was in some sort of banking purgatory between a newly failed bank, and a neobank that we were trusting with everything.
The next few hours were a blur. We began to send and receive frantic texts, and we were all glued to Twitter. We called every professional services provider we had access to. We got into a Zoom and decided two things:
1. We should email stakeholders and let them know what’s going on.
2. We should create a community for other founders to share information and experiences.
…
The positives were the way we were approaching this nightmare scenario. In times of trouble you find out the true character of people, and it was amazing to see all the support we got, not to mention the strengthening and testing of the cofounder bond. We remained as calm as we could, using strategies like:
1. Being solution oriented - Stopping any train of thought that was focused on the past, and instead focusing our energy on the present.
2. Generating as many outcomes as possible - We worked sync and async to come up with as many creative solutions as humanly possible.
3. Reaching out to others - We engaged a wide group of people to share knowledge and help us make the best decisions.
Saturday PM and Sunday AM
…
By Sunday morning, we decided to run some scenarios on what might happen and what we’d do in each situation. We tried to focus on what we could control.
In a Zoom call, we listed out every scenario, something like this:
1. SVB gets acquired tonight. Access FDIC insured funds tomorrow- What do we do?
2. No acquisition tonight. Can’t access funds Monday AM- What do we do?
3. Policy resolution tonight. Access all capital on Monday AM- What do we do?
Sunday Mar 12, 2023 at 5:16 PM CST
My phone blew up. My husband ran into the kitchen as I was making dinner for the family and read the news: All would be ok, the Fed was taking action to secure all deposits (insured and uninsured) for not only SVB customers, but all present and future depositors.
…
I can’t describe the feeling of relief and pure joy I felt in those moments. Being a founder is hard enough without taking into account all the things you can’t predict…like pandemics and bank runs.
Monday Mar 13, 2023
On Monday morning, there were butterflies as we all attempted to log into SVB and initiate a wire transfer. Turns out, the frantic wire we sent out on Thursday was never initiated.
…
We are the lucky ones. There are still founders who are having issues accessing their capital and trying to understand the status of loans and other venture debt.
There are international clients dealing with long delays and uncertainties about what to come. My heart goes out to these entrepreneurs, and I hope they are able to move forward quickly as we were.
Finding these hard-won founder takes valuable? Consider forwarding this edition to an ever-curious teammate or a much-cherished SaaS friend? :)) New readers can sign up here.
#2: The dangers of PLG in the early days
(From: Retool’s David Hsu) (Source: Web Summit)
PLG causes people to optimize for really weird things and probably kills the company. Today, when I talk to founders for example. A lot of them tell me, “oh, we don’t have much revenue yet but it’s PLG…the revenue is going to come, we just have to build a great product, it’ll all work eventually.”
That very rarely works.
…
One funny anecdote was, when we first started Retool, one idea we had was “oh, a pretty good market for Retool might be FileMaker developers.”
Retool is kind of like FileMaker. It’s FileMaker 2.0 basically to some extent. FileMaker in the cloud if you will. FileMaker is a sort of Apple product from 20-30 years ago.
So what happened is, I ended up joining a FileMaker user group on LinkedIn and I was like “this is going to be huge, we’re going to sell all these FileMaker people on Retool and find so many customers here.”
And what ended up happening was, I think got a list of 200-300 emails from that group. I emailed all of them and I think I got 3 replies out of 300 or something. And they were all like, “no, no, no.”
But one guy was like, “I’m actually happy to get on a call with you and tell you why this is such a bad idea…”
We took the call and he was like, “well, it’s a terrible idea because FileMaker is good for A,B,C reasons and you’re bad for X, Y, Z reasons, therefore FileMaker is great and Retool sucks.”
…
That’s an example of something that if we had done the PLG way, in a more marketing driven way, we would have been like, “it’s pretty weird, a lot of sign-ups but no one is using the product, no one is paying for it, why is that?”
You don’t really know actually. But when we did that in a sort of outbound sales way; people maybe feel more okay to be mean when you’re doing outbound sales. They tell you the truth more.
That helped us iterate a lot.
In the early days, the core messaging that we had was almost entirely driven by the outbound sales that we did… We would test pricing, for example…”Hey, we charge $5 a seat, we charge $10, what about a $100?”
If we say $100, what’s the facial expression, are they happy/sad? If they’re happy, now we’ve learned, we can charge a $100 per seat and it still works.
That is the kind of learning you can have only via sales. For that reason PLG is a very dangerous path to go down or a trap to fall into when you believe that if I build people will come. In reality, that’s very rarely the case.
…
We experimented a lot with the messaging, but the core product was always the same. One mistake early stage founders make is that they have no core idea at all….
They’re usually like, “I don’t have an idea, let me just test various Google Adwords and see…” Or they’ll pitch all their ideas via outbound emails. That, I think, very rarely works.
A sort of philosophy, if you will, that I have is that you have to have some strong differentiating opinions about the world. That you then go and test. But you can’t just say “I have no opinions, let’s see what happens.”
…
We had a core idea and a core value prop. We continuously tested messaging on that value prop. Found the messaging which was resonating which was “Build internal tools fast” and then work with the customer to build the product.
That is the formula for finding product-market fit.
#3: Why it’s silly to be afraid of transparency in recruiting
(From: Oso’s Graham Neray) (Source: Graham Neray)
A friend who’s the founder of another company added: “Frankly most hiring managers don’t actually know exactly what they want. Even I’m guilty of this still sometimes. For sure it reflects badly on the hiring manager and the org. But it’s just a fact.”
He’s right, and I too may need to do have some exploratory conversations early on in a recruiting process before I have a clear vision of what I’m looking for.
But why should I be embarrassed about this? What’s more, why should I or anyone else hide it? If I’m not sure what I’m looking for, I engage in a conversation with candidates about what the role could be, and ask for their input.
Transparency is even more useful in the context of something like an engineering interview. For example, we do a debugging interview at Oso. In advance, we tell the candidate exactly what we’re looking to assess — e.g., ability to understand a new codebase in a language you’re familiar with, ability to understand a system with different components communicating over a network, and so on.
Why would we would hold this information back? It helps the candidate know what to think about and what to deprioritize, and it also gives her insight into what we care about and whether that aligns with how she likes to work.
Similarly, most companies make their interview processes relatively opaque. It’s become a bit more common to share at a high level what happens at each step, e.g., a systems interview, a behavioral interview. But still most companies save their interview questions as a surprise for interview day.
Why?
This doesn’t mirror the experience of working on the job. In how many jobs do you expect to start the day and have your boss pull you into a Zoom and ask you to solve a systems problems ASAP? Not many.
…
Transparency post-interview is especially rare. Feedback to candidates is usually light, because the incentive for the company is low — it takes time to give feedback in a way that’s constructive and sensitive, but still substantive. It also runs the risk of upsetting the candidate.
But it is overwhelmingly valuable to them, plus it’s an opportunity to find out if any of your assumptions as a hiring manager or interview designer were wrong.
On multiple occasions I’ve given feedback to a candidate and they, in turn, gave me deeper color into how they experienced the process which surfaced a flaw in my thinking or process. On one occasion this turned a ‘no’ from me into a ‘yes,’ someone who has gone on to be one of the best hires I’ve ever made.
🤝 Founder social:
Until next time,