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Transcript of our conversation with Hiten Shah:
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To get to the scale, we've got to like you needed an insane growth rate.
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Right. Like to grow to grow anything above like 10% a month is just really hard.
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Hi, everyone. Welcome to Founders In Arms with me Immad Akuhnd Co-founder and CEO of Mercury.
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And, Raj Suri Co-Founder of Lima and Tribe. And today we are welcoming back Hiten Shah of many startups, now working at Dropbox, having sold this company there. Welcome back, Hiten
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Thanks for having me. I'm really excited for this one.
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Yeah. So today we're going to be covering the news of the week. It seems like the biggest news on startup land, actually, apart from maybe some new AI models.
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With. Who cares about those, right?
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Gimli dropped. But, apart from that,
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Yeah. Ahmad and Mercury's big round, $300 million, led by Sequoia. Seriously? Valuation of what was it, 2.6 billion?
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3.5 billion. Yeah.
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3.50. Sorry. I could give you a little bit extra there. And, you know, it got a lot of coverage. Ahmad, your press team did a good job.
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Looks like.
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Yeah, it was fun. We were actually, like, a little worried because a ton of stuff had leaked, like, a month ago. It does,
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like, tech press is getting better
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at, like, getting getting access to this, like VC data. But it seemed like you, us actually telling the story, and we had done some new stuff as well.
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We added we added a couple of board members, actually the, the CEO of Fannie Mae, who ran the SVP bridge Bank briefly, joined as a board member. So that was exciting. And we announced that as well. But yeah, really, really fun day yesterday. And, you know, we also emailed the customers, and we also did this thing where we're basically like, we're spending like 50 K and paying for, like, people's like, coffees and teas for the week.
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As a celebration
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about that. Like, how did that. That was an interesting thing. I never seen that before.
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honestly, I only just found out about it after someone tweeted about it. I was like, they were like, oh, Mercury just paid. Paid for like coffee is part of the seriously? I was like, are we doing that? And I was like, oh, we do that. Someone was like, yeah, we do that.
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I was like, okay, that's like.
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That's the sign of a well-run company.
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So, you know. You know, like, you can
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raise all the money you want, but that. That's what got me. I'm like, oh, he didn't know that dope stuff was happening at his company. And he found out when everyone else did. Yeah, I
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yeah. I love it when that happens
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that like, the right thing happens. And like, I had no involvement in,
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a cool idea. I've never heard of anyone doing that before. Like,
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So we have this, like, actually ongoing thing where we, randomly we do pay for people's coffee. And so this is like a long running program
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for, like, a year plus. And
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normally the budget for is like pretty small. We just do it infrequently. And it's just like a fun thing to do. And we had this idea like several years ago.
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But this week we are running like a much more kind of,
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inflated
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version of that. But we've always had this like team at Mercury, like,
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since the start, like our top customers.
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We'll send them to. We've,
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we've just always done that. So
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it was just like a thing that's like, developed over years,
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Have you ever tried? Have you ever tried puberty?
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No, it's,
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that's what I'm drinking.
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It's fermented
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tea. Fermented green tea.
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Oh, is this,
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is is
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is a caffeinated.
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Yes, it is caffeinated. Yeah
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that maybe we should write.
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Part of the point. Yeah.
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Yeah.
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I normally just
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do like these basic British black teas, like PG tips.
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So, like, half the half the
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people in the UK have, I think.
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With milk
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and sugar or straight
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course. You gotta have milk
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This one is better straight. But it tastes a little bit like dirt, because it's
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I had a question,
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and and I haven't watched any of the interviews. It's kind of intentional.
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So I don't know what was asked or
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if you clarify this, but my understanding is the 300 million wasn't all equity and there was some debt related thing or something like that.
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Am I am I right or wrong? There's some
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No, no. So,
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make sure we talk about what does that 300 million actually mean
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Yeah. 300 million is a combination of primary and secondary. It's mostly primary. We just did a fairly significant chunk to do employee tend to offer,
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basically make it
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possible for kind of early employees. That all look, at my agree, to sell some shares up. We have a separate deadline that's like 100 million, but, yeah, I think that's always cheating when people are throwing the debt and the equity raise.
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calling it out to make sure that you know
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Yeah, yeah.
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know what it what it is, which is the equity round in all of the 300. Was that because I think that's like a fact I would attract, just to make sure. So.
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He says, for ten quarters. And so, like, given that, I mean, what was the impetus behind the raise at all? I mean, I'm you're doing so well anyways.
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Yeah, yeah. The biggest factor is, like, we hire a lot of people. Right. We're and go from like one thing we started the year at like 780 and we're going to ended at like 1000 ish. And we, we hire people. We, you know, part of the, the company's equity. And we try to give people like, fairly generous, equity options.
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But people are just stuck on this 2021 valuation that we did, which was a 1.6 billion valuation. And, you know, like we can say, oh, we're worth so much more and like, look at all of these metrics. But
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yeah, rightfully
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so. People
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are already
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skeptical of 2021 valuations. And then I feel like we're worth a lot more than that.
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It's like, you know, people just are like, yeah, they don't take us seriously. So that was the biggest factor. And actually, you know, for a startup at our scale, when you're hiring so many people, you know, we do about four ish percent and, yeah, stock based on dilution, basically. I mean, all companies, tech companies do it.
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So that's pretty significant. And if you know, if we can have a higher valuation, that makes a big difference to, to people, weirdly, and I think this is a little contradict. Right. Like, you would think employees would want to join companies with the lowest valuation possible because then they have the biggest upside possible. But the reality is, like your bigger valuations do attract more talent as well.
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People go like, oh wow, this company
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has made it. It's not a high growth company. You know, these kind of outside factors like do influence people's choices. So I think I'll also make it like a little easier for us to hire going forward. That was actually the biggest driver like talent and, done, things associated with that.
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I would also say it's not that higher dilution for us. Like it's way less than 10% dilution.
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So yeah,
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and we do get 200 plus million, which is, you know,
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although we do have a big
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balance sheet, it's always nice to have more money in terms of acquisitions. You know, crazy stuff happens every year or so.
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And in the macro world
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and geopolitics and all of this, having, having a bigger kind of war chest for whatever happens is also useful.
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And it's a top investor. Sequoia to,
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you know. Yeah.
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So it's a good partner. One of the good, you know, one of the few I would say, you know, great investors in the, in
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We did we did an analysis a while ago. And like the percentage of portfolio companies that use Mercury is way, way higher if the VC is an investor.
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So like for in Greece and Horowitz
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and CRV it's like above 50% because they were like a seed and series investors. Which is weird because like I don't think those VCs do that much to encourage Mercury among their customers, but there's some sort of like thing that happens where, like
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if you invested in Mercury,
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it's much, much higher chance that like your portfolio companies might agree.
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So I think having we actually both got, Sequoia in this round and also spark, so having like two more kind of top tier, VCs as investors is definitely, hopefully directly help their.
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I wanted to give a statement that I try to give founders a lot when they're raising, that you reminded me of, which is basically this idea that there's massive incentive alignment when the investors can get you customers. Because.
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And and I'm not saying you're
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doing that deliberately, but it just reminded me that, like, when you can find that alignment, it's like they bring you customers, your revenue goes up, the valuation of the company goes up.
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As long as it's all real and it's on actual value in the company. I think that there's a massive win win win
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Yeah. I'm 100% aligned with that. I mean, we had 60 seed stage investors. Because I was like, I want to get. And I deliberately targeted people with the have like 100 plus portfolio companies. So like we had SV Angels and Liquid Dew and all these people because I was like, I want to get as many of their portfolio companies as possible.
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Especially when you're in a business like yours. Right. Like I think one of the most impressive things about your business to me is that you have such a massive market and are attacking it from a like the ground,
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right? Startups are the ground. There's
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a high volume of startups and I know SMEs as well, but startups is just a good starting point considering all the things, that are happening in the ecosystem and, have happened.
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I'm sure you've, you know, not deliberately taken advantage of some of the pitfalls of the banking system, but definitely are attacking it. I mean, I would just say that I don't think any of this would be possible if you actually didn't care about doing a great job for your customers. So to me, when I look at in your specific case in this business, especially as I use the product or talk to people that use the product, no one can say anything bad about the product.
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That's like very rare.
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And I have to give you the I care about product probably more than I care about anything else when it comes to business. And like I can't find anyone saying anything critical enough about the product where like it would dissuade someone from using it. And then on top of that, you're dealing with low NPS, you know, crazy fragmented industry and ones where, like, everyone has a complaint about their bank, right?
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Well, as a as a CEO, I deal with a lot of people complaining about Mercury. It's, I wish there was absolutely zero problems there, but, you know, one of my thesis is that, like, if it's, if it's a bug fixes straight away, like, it's not a it's not on the backlog. It's like you get a done kind of thing.
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And, and actually the scope of things you consider bugs, should be pretty broad. Like, if it's, you know, if the button says something incorrect and it's confusing, that's a bug. It's not like, it's not like a badly done feature. I think that actually helps keep, like, a much higher kind of quality standard when you have those standards for yourself.
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See, these are the topics I
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We we got to two people. We got two people who who don't believe in VC fundraising. It's,
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it's a
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difficult audience.
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Joke.
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the right business to do it for it. So just,
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I would say, like, I have a bunch of, like, philosophical differences in the way I fundraise that are probably, like, pretty different from, like, most people, like number one, I do a very relatively infrequent, infrequently, like we did 1 in 2017. One 2019 121 and then one now. So we, you know, for the scale the companies are we've only done like for real fundraisers.
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So I think if you do it infrequently, like you're diluting yourself less, you're wasting less time. And you're just making more progress between the rounds as well. Like, I don't, I don't I mean, I kind of vaguely get it, but I think it's generally a bad idea for these companies. I raise every like 6 to 9 months.
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Like, I don't think that's like a great move. So part of that is like, we tend to over raise a little bit, I mean, it's helped. America is always been a hot ish company, but every time we've gone to raise, you know, this whole idea the VCs try to sell you is like, you know, only raise for one and a half years and, like, you know, have this plan to justify this raise, like, it's actually all kind of B.S..
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Like, I think it's much better to like the valuation as a valuation, which is based on like, progress and market dynamics. It's not based on, like, how much you should be raising. Right. So you try to maximize the valuation and then you raise like a big chunk, and don't spend it like we don't, you know, when we, when we raised, we raise 120,000,000 in 2021, I was like, I don't know how I'm going to spend this, right?
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Like, like we made money as a company and we've always had like pretty good economics. So it was very much like, hey, it's 2021. Like it's time to do a, you know, reasonable fund raise that because this market is not going to exist forever. And yeah, we've grown into the valuation, of course, but but it wasn't like, you know, we deliberately over raised, so that we had that extended capital, and then lastly, I only try to raise when it's not when I need it.
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It's when, like, things are sufficiently de-risked that I think I get and the market is in a good position and I think I can get a good run done. So yeah, all the, I think all the points we've raised, we either haven't needed the money or we had another like several years of runway. And it, it just makes the whole thing, like, way less stressful.
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The, in my previous companies,
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I was just so many times where I was, like, always close to the wire and running out of money and like, just, like, stressing out about it, whereas a mercury, I mean, we're like 7 or 8 years and, like, there's never been a point where we've been at all stressed about running out of money.
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Which has been like, obviously the some privilege here. So, like, I, you know, it's not always achievable, but it has been like partly a deliberate plan.
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parallel that I think about. So I sold my company when we had 18 months of runway.
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And the parallel
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I think about is like. Can you grow into your valuation? When should you raise based on being able to grow into the valuation and the milestones should be more about the company, not about the fundraising
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and company as in customer
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validation.
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But the one question I had for you, which I always like to ask in this scenario, because you're a multi-time founder, how conscious were you of those gaps in not gaps, but other people would perceive those gaps in the fundraising. So how conscious were you when you raised the first round as to that being your approach, or is that something you kind of evolved into as you realize what business you were in, or some other factor?
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So
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you're saying basically you had a nonstandard fundraising process. Many would say it's gaps, right? Like six, nine months. That's a little aggressive. I think most people are like within a year or 18 months of the last round, you should raise the next round, right, to keep
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showing the thing. So.
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So how conscious were you? Is all I'm asking about that because like you pointed out, it's nonstandard.
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Most people don't do it like that.
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I don't think square like, I don't like. Well, they care about like, what's your scale. What's your growth rate. Like, what are the margins like. They care about like the actual things and like obviously how good is a product and customer. Like whether you raise after three years or two years, I don't think they actually care about that.
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I think the reason that it's sometimes seen as like a gap or failures is because that like maybe showed some weakness or something like that, but if you're coming in with like a strong company with like strong metrics, like, VCs are not like, wow, you haven't raised for three years. We're not touching this.
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So you just busted one myth. So love
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it. That's great.
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I really don't think anyone cares about that one. But I do think growth rate is really important. I mean, I think like sometimes founders underestimate how important growth rate is. Like a VC, you know, I mean, also like actually it's I look at like every, you know, back in the last seven years, right. To get to the scale, we've got to like you needed an insane growth rate.
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Right. Like to grow to grow anything above like 10% a month is just really hard. And to do that for like 24 months or something is like almost impossible. But that's like kind of the numbers you need to go from. Like, you know, if you're starting at 100 K and you want to end
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up in revenue and you want to
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end up at like 10 million in revenue, like that's not going to happen at 5%, right?
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That leads like an insane
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compounding growth rate.
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And services are like very
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sensitive to that. And like I
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think as a founder you have to be very sensitive to it. If like if you want to reach this kind of huge scale, it's very hard to like an Olympian. Olympian way to that scale. Like you need to have like a pretty insane growth rate.
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So, this is a very sensitive to that. I think that that is like by far the biggest factors. And people, I think, often underestimate it. I think VC sometimes overestimate it. Like they, you know, at these AI companies, they're like, oh my God. They just grew from like 1 to 10 million in like three months. Look at this insane growth rate.
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But like, you know, sometimes that's not like sustainable necessarily. But it is like, yeah. The whole ecosystem is built on growth rates.
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I'm gonna ask it almost the same thing I did before, which is how conscious were you of that when you started the business, and how did you think about it in the early days, this growth rate thing, if you did?
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Mainly because I think like you're sharing something that is often just completely misunderstood as to why the investors want that growth rate and what they're doing in their heads when they see those numbers or don't see those numbers.
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I was conscious in the sense that, like, I think it's I think sometimes founders don't do this. It's like, I think you should just open up a spreadsheet and just go, like, every month. Like, what am I going to do? And what does it take to do it? Right. Like, and we did that like every round I've ever done, like I've gone and written something and like, okay, I'm going to try to get this many customers in month one and month two and like, what does it look like a month in?
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And like, what am I assumptions on, like deposits and spend and revenue and like sales costs and all of these things. And if you mapped that out, you know, often it looks kind of insane to like to keep that exponential going. But it makes it, like, very tangible. You have to say, okay, you know, I have to go get, like, whatever, 50 customers this month.
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Otherwise, like, I'm behind, and I, you know, I tend to do this before the fundraise, and then I do it again after the fundraise. And you know, for me, like, a fundraise by itself is like, it's not like a relaxing congratulatory time for me. It's I mean, actually, yesterday was pretty fun on, like,
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Twitter and, and just having fun, like, talking about it, but but in general, it's like a pretty stressful moment because it's like, now you're like, committed to, like, you know, you made all these promises, right?
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And like, and you've got to plan and you got to execute on the plan. Yeah. And it's a difficult plan normally. So yeah, I do this like upfront thing and then I normally even I mean, we don't have to do it anymore since we're profitable but before we're profitable. I used to like map it all the way out and say, okay, you know, this is the point where I'm going to raise and like even the last two years away or something like that, I map that out and I'm like, okay, this is the revenue I need to hit.
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This is the growth rate I need to hit. This is how I'm going to get. I mean, it's definitely tricky when you're when you have nothing. Right? Like when you have launched you, you're making a ton of assumptions, right? Like, I mean, even now we just launch, like, mercari personal last year and like, all of our assumptions are wrong, right?
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Like, it's like the amount of, like, money in those accounts is like three x bigger than we expected. And, yeah, that's just like, it's very hard to predict, like, real, real behavior. But you do your best job and then hopefully you underestimate, but it also helps you set like realize like, oh, actually, like, you know, I'm behind on something like, if you're a sales driven kind of company, you know, you have to say, okay, I need to go hire like five sales before it, like hit these objectives if you're like, yeah, whatever.
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However, whatever the levels of your business, it's like makes them very real. When you have that like mapped up.
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Yeah. I think it's a really important discipline. It's really important. Like operational discipline to, like, have numbers against everything. You do. And I've seen great operators, do that really? Well, but so. And I, you know, I might, as an early investor your thing. I saw your updates every month. Right. And, I was really impressed, actually, by how well you structured your updates, like how quantitative they were, like, you had a lot of charts, a lot of graphs.
00:19:48:20 - 00:20:10:18
It made it made me very confident that you knew your business inside out and that you were instrumenting a business. Right. And and you know, it's a mark of a really well run company when they have, like, very detailed charts. You do it. I think also, Mateo, we introduced me to from me also, does this ride and, you know, they, you know, but many founder of don't I, I would say most of I would even see myself.
00:20:10:18 - 00:20:12:11
I'm not like that, you know, I'm not as
00:20:12:11 - 00:20:32:10
I feel like actually, like, sometimes, founders don't understand the point of investor updates. Like, they think it's the investors, which I think is, like, actually missing the point. Like, to me, the biggest value, number one was like, you know, back then I used to do every two months, just like every two months, just like stepping back from a business and saying, like, here's all the things I said I was going to do.
00:20:32:10 - 00:20:48:13
Did I do them? Has all the things that we said we were, yeah, like, what is going wrong? Like what are the metrics? Like what really matters? So like just stepping back and doing that every two months, like there was no, you know, when you're small company and you don't have a board, there's not there's no real forcing function to, like, force you to think long term.
00:20:48:15 - 00:20:53:04
So I found it valuable for that. And the number two I showed it was shared it with the whole team. So
00:20:53:04 - 00:20:54:16
I was like, yeah. And it's not
00:20:54:16 - 00:21:01:06
something that I just wrote for myself. Like I was like, hey, this is going out to all of my investors, like, this is what you're going to be held accountable to.
00:21:01:06 - 00:21:33:10
And I was like, you know, here's the ten things we want to do in the next two months, right? Like this was like very, very specific. And people were signing up for that, but they were also seeing like, what what was the most important thing to the company. And then lastly, I did send it to the investors and it was I think it is nice for people to see it because then like, yeah, I think people underestimate like how much relationships and that kind of like information matters when like things are not going well like every now and then, like I have like a invest I invest at a company I invested in that's
00:21:33:10 - 00:21:50:05
like, hey, we need more money. I'm like, I invested like two years ago. I have no idea what you've done. You've never sent me an investor update. I'm like, I'm like, okay, you need money, but like, you're here, you're like a stranger to me because you've never kept me up to date. Versus, like, another company that's like, you know, maybe struggled.
00:21:50:05 - 00:22:03:23
But I've seen, like, what they've tried to do and what their thinking has been during that struggle. And I, you know, sometimes I'm really impressed by entrepreneurs that I've, like, completely failed. Right. Like I'm like, I'm left with going like, wow. They like tried everything and like they just hit a brick wall and, you know, they power through the brick wall.
00:22:03:23 - 00:22:20:04
But it still didn't work out. And that's like so impressive. So so yeah, I think I don't know why everyone doesn't do great. And updates like I really think people like under leverage that as a tool for a seed stage company. I mean, obviously when you're like series B in class, you've got a board and it's a different situation.
00:22:20:05 - 00:22:29:20
I would just recommend that you kind of, You know, I think your investor peers are probably best in class. I mean, from all the companies I've seen, you might want to open source some of them redacting some numbers
00:22:30:17 - 00:22:38:04
Yeah, I did I do share share them quite often with people. So maybe I should just, try to open source a little, as you say.
00:22:38:08 - 00:22:44:16
We actually, sent investor updates, three months before we raised any money.
00:22:44:16 - 00:22:46:04
And we believe in the same thing you
00:22:46:04 - 00:22:56:04
did, which is like the the team should see the same updates. Pretty much exactly the same. We actually even made our all hands a quick review of the updates.
00:22:56:04 - 00:22:57:16
So we kind of scheduled things
00:22:57:16 - 00:22:59:21
like that.
00:22:59:23 - 00:23:03:16
I think you gave away the two secrets to venture capital as a founder,
00:23:03:16 - 00:23:05:04
though, and
00:23:05:04 - 00:23:14:04
I just want to double click on both of them. So one is, the way I referred to this is a startup is a race to actuals in a spreadsheet.
00:23:14:04 - 00:23:15:16
And you basically just kind of
00:23:15:16 - 00:23:24:11
prove that point with your whole journey and how you would describing it as like, hey, we don't know what's going on, but we're going to go mark it up and figure out like how to get that.
00:23:24:17 - 00:23:51:01
And you also gave a good example of like how to work backward from something. So if 10% is the growth rate that you're aiming for, if you don't do what you did, you're probably not going to get there. Someone has to. And it's better if you're doing it early on. And I think the second secret is what you just talked about that like, you know, we sent an investor update every month on the first Monday of the month, even if it was a holiday at 8 a.m. Pacific.
00:23:51:03 - 00:24:08:17
And they got it, and there was just a process from like Thursday or Friday all the way to Monday to just get that done. Well, with the intention of informing everyone about the business. That became a religion and then you just got better at it. Just like everything else, you get better at it as you do it too.
00:24:08:19 - 00:24:29:04
But between those two things, you can successfully at least do everything that you should be doing as a founder that I consider requirements. If you're taking venture capital. That's why I think you gave away the secrets. And there's no secret there, except that most people just don't do the rigor around both of those things. But I think they're very interconnected and related.
00:24:30:20 - 00:24:49:03
I might have a, a question about market. Right. So, like, when I'm investing in, like, public companies, low in tech, you know, or maybe smaller scale, I'm. I'm looking at the market and how much room they have to grow. Right. And that's like a big thesis of mine is like good founders. You know, you want that in a tech company, of course, you know, good product.
00:24:49:03 - 00:25:00:16
You want that, you know, you take all these boxes. But room to grow is actually a really important thing. Right. And, how do you think about your room to grow from here, like, based on your current penetration and how big the market is?
00:25:01:04 - 00:25:21:10
Yeah. I mean, we're in, like, almost infinite market. Like banks in the US make $2 trillion. And I don't think of ourselves in, like. Yeah, due to the revenue, and I don't think of ourselves in, like, a particular box. I mean, we obviously, expanding both our customer segments. So we do startups, e-commerce and professional services.
00:25:21:10 - 00:25:42:17
We're starting to personal banking as well. And then we're also expanding the product base. So, you know, last year we did like invoicing and, bill pay and reimbursements. We've got some other stuff coming up. Credit card has like two and a half years old and it's growing, like, super fast. So, I think the important thing for like, earlier founders is like, what's your landing market?
00:25:42:17 - 00:25:57:12
Right. Like, I think, like you need to be in a space where you have that expanding market as well. And like, obviously banking is like especially like we don't do, like some niche banking. We just give you an operational bank account for your business. So it's like a pretty broad, product. But there was like a landing, right.
00:25:57:12 - 00:26:26:11
Like we were like, hey, we're going to first nail early stage startups. And actually, it's like relatively rare that, like, early stage startups by itself is like $1 billion market, right? Like for most companies, if you like, I'm going to go stay at nail early stage startups for X. I don't know what's like a good ex example, like a developer tool that like helps you manage your database or something like, I don't know, like most companies, when they go after early stage startups, it's just not that big a market.
00:26:26:11 - 00:26:49:04
But but in banking, you know, that was like SVB was like 16 billion when like I initiated a seed round. Yeah. There were 40 billion at peak. So already a pretty big market just for at least eight startups. I think, I think it is important to have like, your initial landing market to be big enough that you can hit a critical mass, enough that you can have a chance to go off to like, the next thing, like whether that's
00:26:49:04 - 00:26:50:21
next part, aka a next customer.
00:26:50:21 - 00:26:53:04
So yeah. Yeah,
00:26:53:04 - 00:26:58:04
sometimes I like, talk to a company and they're like, you know, we're going to go to Y later.
00:26:58:04 - 00:26:59:16
But like we're going to start at
00:26:59:16 - 00:27:09:08
X. And X is like this. You know, you do the math with them and you're like okay, let's discount that etc. and like it turns out like it's like a $10 million like revenue opportunity.
00:27:09:08 - 00:27:29:12
And I'm like, all right. So like a lot of things have to go right. And then you will get $10 million and then you can do your other thing and it's just like I'm like, I don't think this like makes sense. And so actually fintech companies are also like often bad because they'll, they'll come up, come up with their first wedge as something that's like just massively underwater, like the uni economics don't make sense.
00:27:29:12 - 00:27:47:04
They're they're like selling like, you know, they're selling $100 and it's costing them like $105 to sell that kind of thing. I also think that doesn't work like, I think that first market actually has to be like a pretty nice, healthy market. And then then, you know, once you when that that gives you like the, that gives you the right to go try to win something else.
00:27:47:04 - 00:27:49:16
Yeah. That should be a sustaining market by itself.
00:27:49:16 - 00:27:50:16
Like you could have a
00:27:50:16 - 00:27:51:16
successful company just in that
00:27:51:16 - 00:27:53:04
market.
00:27:53:18 - 00:27:56:04
How did you choose?
00:27:56:04 - 00:27:59:20
The market. The market.
00:27:59:20 - 00:28:12:16
You know, it's a combination of things like, I would say the biggest one. And everything else is almost like a post-hoc, justification. The biggest one is like, I really, really wanted this,
00:28:12:16 - 00:28:14:04
like, I was, I was running
00:28:14:04 - 00:28:18:09
my company, and it was just so painful to do banking. Like, I hate calling people.
00:28:18:11 - 00:28:35:05
And like, we literally had, you know, in that company, we used to do payouts to like, publishers. So the way it monetized was an ad network. So we used to do like 300 payouts and like, you know, we had like three people who'd log in to this banking interface, spend like, three days, like, making one payout at a time.
00:28:35:05 - 00:28:50:17
It was just ridiculous, like, like, you know, I asked, like, you know, someone fairly senior that was like, hey, why can't we just get an API and they were like, what's an API? Let's, you know, it's like that kind of thing. So I think that was like my big thing that was like, okay, like, this thing needs to exist.
00:28:50:17 - 00:29:09:09
I would use it, and that was an issue. But like, obviously I needed to have like all the post hoc, parts of where there was like, you know, a I thought there was a big trend in fintech, and, you know, this is happening in Europe where there was more and more companies that were doing neo banking, and doing it successfully.
00:29:09:09 - 00:29:29:01
So I didn't see why you can do it in the US. And then be, you know, when you look at that top down market size, like, I like things that, like, are measured as a percentage of GDP, right? It's like and there's not that many of them. It's like it's like finance, healthcare, education, military, transportation and like two other things or something.
00:29:29:03 - 00:29:39:04
So this those kind of markets are like huge and like particularly exciting. But it definitely came from this like initial like pain point for as a, as a customer.
00:29:39:17 - 00:29:58:03
I read a stat that, like, you have about 200,000 customers today, but the market is tens of millions, including, like, every small business in America. But like the. You know, that's a huge. I mean, you're less than 2% penetrated, you know, in the market. So there's a lot of room to grow. Do you anticipate that?
00:29:58:03 - 00:30:04:04
Like, you know, a restaurant operator, you know, in Kansas City or something? There's going to be using Mercury one day.
00:30:05:02 - 00:30:23:21
You know, I think it's especially when you look at these, like, huge markets, I think it's like, important to go one by one rather than going like, you know, go to a restaurant. And actually, probably a lot of restaurants do use mercury. But, you know, we don't deal with cash right now. Yeah, I guess that's going away in a lot of restaurants.
00:30:23:21 - 00:30:36:04
But there's still a lot of cash happening at restaurants. So, that's a factor. We haven't, you know, in the startup space, for example, we built a lot of tools that are very startup centric. So we have like a safe thing where you can, like send someone to safe,
00:30:36:04 - 00:30:37:16
it generates an
00:30:37:16 - 00:30:40:16
account number that's just for that safe so that when someone pays off, the safe
00:30:40:16 - 00:30:41:16
that we can market is
00:30:41:16 - 00:30:43:04
like investment made, right?
00:30:44:08 - 00:30:44:16
And
00:30:44:16 - 00:31:08:17
similarly with e-commerce, we've done a, yeah, we have, a credit line of credit product that's like just for e-commerce. Rather than, like, trying to do everyone straight away and like, being like, just mediocre for everyone. I really want to go like, market by markets. The three we're really focused on as professionals over e-commerce and, and startups and, I mean, all three of them are huge.
00:31:08:19 - 00:31:23:16
So yeah, restaurants maybe eventually. And yeah, I do want to get to a pretty broad set of businesses, but even those three, like, I think we could be happy servicing them. And we would grow very fast if we do, if we nail those three for the next, like 3 to 4 years.
00:31:25:04 - 00:31:41:16
Maybe the switch to product. You know, it's a, hit and fear area. But we'd love to hear from you. Or, like, what are you most proud of in the product? So far? Like when you're, like, looking back at what you've done so far, but, what features are you most proud of having built?
00:31:41:16 - 00:32:01:23
Yeah, that's a good question. You know, often it's like the little things that, like, actually make me happy. Especially like when I'm using it as a customer. I have like, one, two. Like, I have like seven entities on, on mercari. So I'm like a super power user, you know, like, you can create a virtual cloud so easily.
00:32:01:23 - 00:32:22:09
It's like I literally every single time, like I use my personal and every single time I sign up for anything now and I'm like, yeah, I don't want to go through, like, figuring out how to cancel with this random service. And like nowadays, more and more services require like a subscription just to get the thing. So I'm just like, okay, let me just create a card and like, do this and like, it takes like 2 or 3 clicks.
00:32:22:09 - 00:32:26:16
It's just so easy to do that. That's the other things like searching
00:32:26:16 - 00:32:29:04
you create cards for every subscription there, right? Like
00:32:29:04 - 00:32:41:21
basically. I mean, like, if I really know I'm going to keep it forever. One, I won't necessarily create a new card for it, but if if it's at all like questionable whether I'm going to keep it for the rest of my life, I'm not going to go create a new card for it.
00:32:41:23 - 00:32:54:16
And that saved me like a ton of time. Like, it's like, yeah, I'm like, random service, like, how am I going to cancel it? I don't even have to think about that anymore. Yeah. Just being able to search through transactions are super nice. Like, you know, I'm
00:32:54:16 - 00:32:56:04
like, what did I like, have I
00:32:56:04 - 00:32:57:03
paid this person?
00:32:57:03 - 00:33:11:21
Like, you know, I think that's like some of the basic stuff. The other thing that's really nice is the new ish features, like being able to just, like, actually use this for personal as well the business as well, like being able to just drag in that PDF and it just like scans it all, saves it for the future.
00:33:11:23 - 00:33:37:14
That's just been like so nice to like, make it make like those bill payments like super simple. So probably those three features, like I use a lot personally and I'm proud of but yeah, in general, just like, you know, having having a product that's like, you know, it's actually quite a complicated product. I think that's the thing about Mercury that's like kind of deceptive, like it's simple to do things, but it's like a very complicated product.
00:33:37:14 - 00:33:54:04
Like we have like, yeah, five different user permissions. And then you can also have a custom user permission that has like 15 different toggles because like, you know, when it comes to banking, people are not like, oh yeah, it doesn't matter. Yeah. It doesn't matter that like I can't set this kind of permission. They're like, hey, I can't use you unless I,
00:33:54:04 - 00:33:55:16
I have a, my finance
00:33:55:16 - 00:33:57:04
team has like,
00:33:57:04 - 00:33:58:16
00:33:58:16 - 00:34:01:14
you know, accounts receivable manager.
00:34:01:14 - 00:34:09:04
And for that person, they only need these three permissions. And I do not want to give them any other permissions. I'm like, oh, well, that's pretty specific, but I
00:34:09:04 - 00:34:10:16
like it. Kind of makes sense.
00:34:10:16 - 00:34:18:13
So you have to have, like, a lot of, a lot of power user features, but like you of have to hide that complexity behind like intuitive interfaces.
00:34:18:13 - 00:34:27:04
And it's actually kind of tricky to do that. I'm proud that we've like, added all of that complexity over time but not made it like, kind of like a weird product to use.
00:34:27:04 - 00:34:40:04
Yeah. I mean, it's one of the most successful user experiences for a fintech product that I've seen. And I think, you know, it's funny, like, you didn't mention a big feature you mentioned, like
00:34:40:04 - 00:34:41:16
like you didn't when he asked
00:34:41:16 - 00:34:53:05
you, you didn't mention a big feature. You mentioned the little nice, not even nice to have, but the the types of things that I would expect a true product person to mention, which is like, hey, these little things are so annoying.
00:34:53:05 - 00:35:11:18
Not just for me, but for everyone. And we fix those, I thought even the the safe thing in the bank account, separate bank, you know, numbers and all that. And you folks being able to verify, like, one of the most impressive things I know, I tweeted a little bit about this and didn't get to share more, but and didn't need to.
00:35:11:18 - 00:35:37:10
But is this idea that you folks have somehow internally, I'm assuming this created an organization that cares so much to fix the little things, and those little things are actually what add up. But the irony is, the big thing you've done of just making banking easier is how I'd describe it is really what supports your ability to do all those other things.
00:35:37:10 - 00:35:58:01
If you didn't get the foundational thing right, you wouldn't be able to do all those small things. And, I just find that fascinating that your answer was the little stuff, not the bigger stuff. And there's no right or wrong answer to that question, but it also means you're using your products all the time, right? Nothing better than that feeling, for building, not for yourself, but essentially being a user of the product.
00:35:58:01 - 00:36:12:04
So that I'm sure that helps with the system. And I'm assuming most people at Mercury, if not everyone, is also a user of the product, especially now with the personal. So that's a super cool. Like, I've always found that hack, so to speak, to be really valuable where you can
00:36:12:04 - 00:36:13:16
use it. I know a lot of people
00:36:13:16 - 00:36:21:16
pay lip service to that concept, but I think you're kind of embodying it in a bunch of meta ways that I think is really helpful for a product development.
00:36:21:17 - 00:36:38:22
Yeah. I think dog food is essential. I also think another thing. I mean, I think you have to kind of decide, like, what is your differentiator as a company and if you think, like, the product experience is a differentiator as a company, which, like I think it should be for a lot of software companies, but it definitely is for Mercury.
00:36:38:23 - 00:36:56:14
I think people under estimate how important designers, like, you know, and I did this as well, like, I'm an engineer, and I used to think of design as, like, okay, you know, you like you write the spec, you have the idea, and, like, you give it to them and they'll give you, like, some pixels and like, you then will do the work, like.
00:36:56:16 - 00:37:15:04
Yeah. I used to think, like having the idea and the engineering was the most important thing. And the design was just like a little thing you did in between. But at Mercury, you know, we were lucky to, hire, like, as our first employee, like an amazing designer. And she really like, reset my whole expectation of, like, what design is,
00:37:15:04 - 00:37:16:16
and it really does a
00:37:16:16 - 00:37:20:09
bulk of the heavy lifting when it comes to all of this stuff.
00:37:20:09 - 00:37:53:21
It's like, hey, you know how does all of this fit together? It's not just like the one screen. It's like all the screens. And then it's also just like we relitigating like, is it even the right thing to be doing in the right way? And like, do customers actually care about it in this way? And like a designer's lead, a ton of our customer interviews, you know, like, we deliberately have this thing where we try to give, like, very light product specs because, like, we want design to do almost all of the thinking, like the product spec is this, like, you know, make X kind of work or fix X and like the
00:37:53:21 - 00:38:09:06
design is like, well, actually like most of it's thought out. And then we make the design step like a collaborative thing. So like we have, you know, other designers help. I mean obviously if it's very trivial, it's trivial. But we have designers collaborate on designs and then we also have like engineers and PMS also work with the designers.
00:38:09:08 - 00:38:20:16
It's like actually like I think the most important step in like a product process. And I've, I've spoken to lots of people that like have like pretty big companies with like no designers on this staff. And I'm like, how can you make a good product in that position?
00:38:20:21 - 00:38:39:04
I think that's really profound thing. I'm not sure if you've talked about that publicly, yet, but that, I find the same thing. And, like, you know, companies really need a design. First approach, especially your company, which is, you know, it's, started off as a B2B company, but it's almost like a consumer level design, consumer level, like polish on it.
00:38:39:04 - 00:38:41:04
Right? And,
00:38:41:04 - 00:39:02:14
I mean, I think that's you need that in like a lot of B2B companies now because like the decisions are being made by like the people using it, it's no longer like some CEO somewhere making a decision and they don't care about the the design. Like I think even to like if you're selling like maybe if you are selling to like some 100,000 person enterprise, like it's still like the top down SEO kind of thing.
00:39:02:14 - 00:39:09:04
But I think for like mid-market companies, it's like people are going to use the product, are making those decisions, and they want to use great products.
00:39:09:06 - 00:39:15:16
I mean, even the CIO needs great products we've sold to CIOs, and they need great products. And they know it when they see it. I mean,
00:39:15:16 - 00:39:17:04
Yeah.
00:39:17:04 - 00:39:25:22
at our business, we spend a lot of time making sure that the engineering team could build the user experience we needed to build. And they spent a lot of time making sure that those things mapped out super well.
00:39:25:22 - 00:39:59:17
So we had things that no product, even today, still has for those CIOs and those IT and security teams. And I think like the way you describe it, like it reminds me of something from back in the day, that I really try to embody on the teams is actually from Eric Reese from Lean Startup. And I know you're super familiar, but like, he would, he would recommend dividing the team up into problem team and solution T what it sounded like when you started talking about your specs was like, they seem very problem centric and customer centric, and then the product design and then also the folks getting roped in are more on the solution
00:39:59:17 - 00:40:19:20
team. So what we've done is like when we generally structured teams is we'll have a problem team, solution team, not necessarily explicit, but the way they'll work is being divided is based on that. That way what happens is if you come up with a solution, you can go back to the problem side problem team and be like, did it solve the problem?
00:40:19:22 - 00:40:39:16
Can you verify that based on what you know about the problem? Things like that are kind of, I think, counterintuitive, for a lot of folks. But what ends up happening is you can't help so in someone's head, the problem and the solution at the same time, to effectively evaluate both of those things is what I've sort of come to the conclusion of.
00:40:40:05 - 00:40:43:04
Then you want, like, customers to tell you if you solve a problem rather
00:40:43:04 - 00:40:46:16
And that's where the problem teams signals are coming from.
00:40:46:16 - 00:40:47:16
That's kind of the
00:40:47:16 - 00:40:48:16
idea of
00:40:48:16 - 00:40:49:16
that whole concept, which
00:40:49:16 - 00:40:51:04
team represents the customer.
00:40:51:04 - 00:40:59:16
exactly. And they stay on the problem side. They don't go into the solution side until the solution exists, that they can evaluate against the problems.
00:40:59:16 - 00:41:11:04
Yeah. I mean, in a small company, sometimes the CEO or someone in the product team can represent that as well. Like, you know, is like the unbiased customer and, like, evaluating the product against that.
00:41:11:04 - 00:41:17:04
It's just super hard to be that honest unless you're actually very conscious of am I talking about the solution or am I talking about the problem.
00:41:17:04 - 00:41:18:16
And so just finding a mental way
00:41:18:16 - 00:41:25:04
to divide it up or whatever processes you need, I think is, is really critical to ensure that you're honest
00:41:25:04 - 00:41:26:16
about what you're solving for and
00:41:26:16 - 00:41:28:12
why and for whom.
00:41:28:14 - 00:41:52:19
I think that's where over time, especially at 700 and 800,000, whatever, you'll hit 2000. Obviously at some point you start seeing a lot of that erode. And so even just you speaking of it the way you are and even talking about the minutia of the product gives me more confidence that even as it scales, hey, this this stuff will be preserved of how you operate, because in certain markets and I think this was your point to like you need to do that.
00:41:52:21 - 00:42:05:16
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