E8: When Your Biggest Competitor Crashes, with Mercury CEO Immad Akhund

If this was a normal industry, no one would stand for the solutions that existed before Mercury. Like it wouldn't be, it wouldn't even be a question mark, right? Like we look at like every other industry that like software innovates in. If you operated like most incumbent banks do, like they just wouldn't exist. Extremely customer unfriendly. The product hardly works. Fees for all sorts of things. It's like a very frustrating experience. From like a first principle perspective, it seemed obvious. obvious to me that someone was going to do this. And one thing that was coming up a lot is someone would say, okay, you know, SVB failed, why is Mercury safe? Which is a very reasonable thing to say. We should really extend the FDIC insurance and like we should give people dashboards so they can like understand where their money is. So this was kind of the inception of the Mercury Vault idea. You know, we just kind of put together like whoever was around was like, this is a new product we're building over the weekend. So we managed to increase it to $3 million by Monday morning and then $5 million by Friday. If you keep saying something, if either customer support or you, why not productize it, right? That's always been my mindset. It's like very much a startup mindset in my mind. It's like, hey, you have 5 people, brew some stuff out, launch this thing. If it seems to be working, let's scale it up to 10 people. And now you need to hit $200K ARR. And now we're going to give you 20 people do it, $1 million ARR.

Welcome to Turpentine Finance, a podcast where we talk with top founders and finance leaders about what it takes to architect success. Our guests speak candidly about big business inflections, market curveballs, and how they approach decision-making so that you have the tactics and mental models for when the pressure is on. I'm your host, Sasha Orloff, founder, CEO, and self-professed finance nerd. You ready? Let's dive in. I'm excited to welcome a guest that is probably not a stranger to most of you, Imad Akhund of Mercury. So we're going to do a quick intro to anyone that doesn't know Mercury, but really I want to get behind the scenes of 2 pivotal moments in Mercury's success. First, what must have been one of the most stressful, chaotic, and exciting times while building Mercury, the day Silicon Valley Bank gets taken over by the FDIC, and then the sudden shift from a zero interest rate environment to positive interest rates. And so all of a sudden, Mercury's business model goes from good to great in a matter of a few months, something fairly uncommon in the startup world. So I want to talk about how you decide to invest in new projects. It's like a masterclass in leadership. So with that, welcome, Imad. Thanks for coming on the show.

Thanks, Saisha. That's a very generous introduction.

So I want to start out with something really important. So I also went to Cambridge. semester at Pembroke, and I want to know, have you ever fallen in the River Cam? And if not, why don't you like beer?

I have deliberately jumped in much too many times. I don't know if I fell in without deliberately doing it because I have such great balance.

All right. So in order to really, I think, hopefully understand your mindset on this Friday, March 10th, 2023, the day Silicon Valley Bank goes into conservatorship, I want to go into a couple influential moments in your career. So first you start a company, ClickPass, and then HazeApp. So can you share a little bit more about some of the founding stories of these and specifically sort of how it shaped and influenced your leadership style?

Yeah, so Mercury is actually my 4th company. HazeApp went on for most of my entrepreneurial career pre-Mercury. We started HazeApp in the end of 2008 and we sold it in 2016, which felt like a very long time, especially since You know, we did 4 full pivots. I'd say one, yeah, every founding story is kind of different. I've always been like more of an entrepreneur because I love being an entrepreneur more than someone who liked a specific idea or liked a specific industry and wanted to build that. So every company I've done has been kind of a different idea, different industry. My Haze app was much more around kind of gaming. Yeah, we We were still young back then. We were like, oh, we like games. Let's try to do something in gaming. And we initially started in Flash games and that kind of died and we kind of pivoted to mobile games and built a social network there. And then eventually we ended up building a developer tool around ad tech that worked with mostly indie game publishers and developers. And that was like a pretty, pretty successful offering. And yeah, both with HazeApp and Mercury, we've, I've worked with people that I've known for a long time, I think. One learning from my previous 2 companies, so this is my 3rd company, is it's much harder to kind of meet someone and, you know, over a relatively short time period, like decide to work with them and that'd be a successful relationship. I think, you know, starting companies and being founding founders, and you've been through this, Asha, is just like such a long and intense journey. And it's, you know, you have doing it with people that like you culturally gel with and you can work with long periods of time. Yes. Similar and complementary skill sets is like super important.

So as you're going along, if we dive in, so a lot of founders struggle, I think, between sort of selling and then trying to go on. You've talked about sort of pivoting. You ended up in the sell. What drove conviction that selling like HazeApp was the right choice for you?

Yeah, HazeApp was a long journey. It took about 8 years. I raised a Series A. In, trying to think of the year, I think it was 2011, end of '10. And this was a $3 million Series A, right? Like we raised $3 million, which back then was, you could call that a Series A. And, you know, that idea that we raised the Series A on basically didn't work. And we did 2 full pivots after that idea to eventually get to the idea that worked. So we were always, you know, at the edge and eventually got profitable with the with the eventual idea, but it was, it was a very hard time and we were, we pivoted enough times that we were like working in something that worked. You know, we were not like, oh my God, I love ad tech and I want to build something for the long term in ad tech. So actually many, many of the years at HazeApp, we tried to sell the company. We almost sold it to Zynga once. We almost sold it to another, another company once. And then finally, And this is somewhat ironic and maybe even the lesson there is like, we finally got product market fit, like true product market fit and a thing that worked. And it was scaling fast. Like we had 2 or 3 of the top 10 games on iOS and Android using Hey's app. And as soon as we got that, we suddenly started getting acquirers and we just sold to the first acquirer we got. And then like, yeah, whatever. There's no point in regretting it now. But like we basically grew by another 10x a year after the acquisition. Even though we were, you know, we'd stopped building really, like as soon as we acquired, like we were doing this kind of really long integration, but somehow we were still growing super fast and we had a bunch of acquirers kind of come to us while we were in the exclusivity period with this company. So in hindsight, like we probably should have waited one more year because getting product market fit is just so hard and so special, but we were really ready to sell that company. And it wasn't like a very long discussion. Whereas Mercury's actually exactly the opposite. We've always thought about it and built the company in terms of like, hey, I want to build a company for the long term. I'm not interested in acquisition. We've had acquirers approach us and we've never really engaged in any conversation.

So leading up to this, you get acquired, you know, fast forward, you're at Mercury and you're sort of building something for the long term. How do you balance sort of what you do after that, which I think is you go to YC as a part-time partner and you become an angel investor. How does that sort of evolve some of your mindset of the startup world between sort of the acquisition and maybe today?

Yeah, number one, I wasn't like 100% sure I wanted to go straight into a startup. Obviously I'd done 3 startups in a row basically with no gap for over 10 years. I was like, okay, maybe I want to be an investor. So And, you know, I tend to go really hard at whatever I want to do. So I actually did like 25 investments in the first year and deployed like maybe in the top $3 million. No, maybe not quite that much, $1.5 million between myself and like other people's money. So I was like, okay, you know, if I want to be an investor, let's just see what it feels like and really live it. And basically I decided I didn't want to be an investor. And then similarly with Y Combinator, I'd done YC a couple of times and I kind of wanted to see like, would I want to be a Y Combinator partner? So I decided to do that also. And it was nice to, you know, it's very much, especially that role, the part-time partner role, which actually doesn't exist anymore. It was all about like talking to YC batch companies and helping them. There wasn't any real responsibilities outside that. So it was a very, very mentorship-based role. And I really liked talking to entrepreneurs anyway. So I was like pretty happy to do that. So yeah, that time was really an exploration time for me. It's like, what do I want to do next? And I also started kind of researching my degree.

Before we move on, you're at YC, you have a broad spectrum of views of all sorts of different types of companies. You're actively angel investing yourself. What is it that gets you excited about it? There's idea, there's the founder, there's conviction. I mean, you mentioned yourself that one of the things was that you were sort of, you started a few companies and you didn't know if any of them were like your lifelong passion, but it was something you did. How do you think of it? What gets you excited about angel investing?

I mean, I would say, yeah, I've been angel investing since 2016. And what is it now? So 8 years in or something, 7 and a half years in. So the reasons I did it and the things that got me excited have changed over time. It's easier for me to just say what gets me excited now. Number one, I get really excited about learning things. And I think being an angel investor is this very unique position where Like you have people who are at the edge of doing something that are willing to sit with you and explain in detail of what they're doing and why they're doing it and how they're going to do it. It's like kind of, it's kind of special if you think about it in that sense. So I try to do mostly, I enjoy investing in things that are at the edge of my knowledge. Like if it's too far, like sometimes someone's like, I'm going to cure cancer. And I'm like, I have no idea what you're talking about, but sure. So that's like, you know, I mean, it's interesting, but it's not something I can add value and it's too far away from my knowledge. And then sometimes it's too close, like, I don't know, it's like someone building a neobank in the US or something where, yeah, sometimes if I feel like really into the market, I'll still talk to them, but it's not something I learned that much about. And I try to not do things that are too close to things I understand. So I end up being like slightly at the edge of that. Like I do like space tech and like, I'm like, okay, I kind of understand physics a little bit. So I could try to figure out like the space tech. Plus like, you know, we're in this interesting time with space tech where it's actually going from like a science problem to an engineering problem, which is fun.

How does this influence at all your decision to start another company?

Oh, so when I started investing, it was, I'll tell you what, there was one moment that I thought was like a little depressing because when I started investing, I had all these ideas going like, oh, I have all this entrepreneurial experience. I'm gonna be so useful, right? I'm gonna be such a useful person. And then The company that did like, you know, super well straight away was this company called Rappi. It was basically like a DoorDash for LATAM. And I invested in them before Demo Day and they basically just never talked to me again. And I was like, you know, I don't want to be annoying, but I emailed them like once saying like, hey, you know, let me know if I can be helpful, that kind of thing. And then they just did so well, right? Like numbers were crazy. They kept raising rounds. Like it was like a unicorn within like 2 years or something from my investment. But even before then, like the trajectory was obvious. And I was like, wow, I'm just completely useless. Like, yeah, fine. They made me money, right? Like I made more money from that than like most of my other investments in that year, maybe all of them. But I was just like, and then the ones that I was helpful to, and there was ones I was helpful to, it was kind of, it was just frustrating. It's like they were, they didn't know what they were doing. They weren't really listening to my advice. And that was like such a contrast. I was like, okay, the only people I can be helpful with are people who You know, can't use my help or like my help does not change the trajectory. And the people that really, I mean, I think it's maybe different for Series A investors or something, but at seed stage, I feel like it's often like that. I'm sure there's some places where I have been helpful, but it's very rare that like an angel investor is transformative. And not that I need to be transformative, but like, I don't, you know, I don't want to just do something to make money. Like I want to have an impact. And I've, it was very obvious to me that I would have to be a seed stage investor. That was the only stage I cared about that much, but I would have the least impact doing it. So that like completely changed my view very quickly. Like within a year I was like, okay, it's just like, I mean, it's fun. I still do it. I learned a lot, but it was, I could not imagine that being like a full-time role for me.

All right. So then you decide to take the plunge into founder life again. What gets you excited about building the 4,918th banking solution in the United States?

I mean, we're clearly a banking solution, but I don't think we're in the same market as like incumbent bank or regional bank. Like, I just think the world, you know, if this wasn't a regulated industry, right? Like if this was a normal industry, like no one would stand for the solutions that existed before Mercury. Like it wouldn't be, it wouldn't even be a question mark, right? Like, I mean, we look at like every other industry that like software innovates in.

Yeah.

If you operated like most incumbent banks do, like they just wouldn't exist. Extremely customer unfriendly. The product hardly works. Fees for all sorts of things. It's like a very frustrating experience. From like a first principle perspective, it seemed obvious to me that someone was going to do this. And I actually had this idea in 2013. So I'd been sitting on this for a few years for various reasons. I mean, mostly because I was doing another startup, but it just, I was like, okay, someone's going to do this. And I was mostly just surprised by 2017 that I still had the opportunity. You know, I was at 2013, I had every year I was like, oh, someone's going to do this. And I've had lots of, lots of other startup ideas and, and the good ones people generally do. But I do think that, yeah, it is hard to do it. Like, and now that we do it, it's definitely hard. Like, it's not, it's, it's not a, you know, software company you can like just build it and launch it and it's done.

Whereas— What's the moment? Is there, is there a, a moment that you decide this is the right thing? I'm sure you're thinking about multiple ideas. You've said you've been thinking about this for a long time, but what's the moment that you decide Mercury is the thing that I'm going to do?

Yeah, it's a good question. I would say like I progressively got more confidence in it. 2013, there was a moment where I was like, oh, someone should do this. And like, this seems like a good idea. And then over time I was like, okay, you know, Various things got me going. The why now question. Why was 2017 a good time to do it, for example? And to me it was, hey, bank partners are like only just getting sophisticated and interested and have enough features and there's banking as a service providers. And so like the ability to even do this as a fintech was just about happening.

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Number 2, you just needed to raise a bunch of money, right? Like we raised $6 million upfront. I think it would have been hard to raise, do it without raising at least $5 million in 2017. was pretty much the first year, maybe the second or third year where someone could have mostly just an idea and raise $5 million to do it. So you had to have the capital markets kind of interested in it. So hey, those two, I guess, are the biggest winos. But there's like, I approached this very systematically because I'd done startups for so long and I'd been an investor for so long at that point that I had a pretty good idea of like, here's all the things I need answered. And it was hard to get conviction. It wasn't like, oh, the idea sounds cool, so I'm convicted kind of thing. Like, yes, that was true a long time ago, but I had to really go like tick a bunch of boxes in my head before I could go, okay, you know, we're going to do this. Often in startups, like very few things are like this kind of moment in time, right? They're like this gradual thing. It's actually kind of annoying because you can never celebrate anything. Like even when you're fundraising, you're like, you signed that term sheet and you're like, nope, I can't celebrate it. Then by the time you get the money in the bank, you're like, I did this 4 months ago. Why should I celebrate now?

It's a constant battle. We have nice bottles of wine that we usually do to celebrate big moments, but then you don't want to jinx something the moment it happens and then it becomes a mess. I think you mentioned you've been thinking about this for a while. You clearly have seen a bunch of startups who need something like Mercury between your angel investing and YC. The interest rate environment becomes low, meaning there's a lot more capital for at least seasoned entrepreneurs like you to take bigger bets on things that do require upfront capital. Before we dive into some of this, can you just talk a little bit about how interest rates affect a business like Mercury?

Well, I don't know if you can put yourself back in your 2017 mindset, but this was a rising interest rate environment, actually. Roughly speaking, we went from like 1% to 2.5% between 2016 and 2019. Don't hold me to that. That's like my memory. Yeah, the way we had modeled it upfront is This is like probably my 2017 business model projection thing if you bring it up. But like, I didn't expect anyone to spend any money on our card because we didn't, we weren't expecting to do a corporate credit card. We were doing a debit card. I figured everyone would spend money on a corporate credit card and we were really focused on startups. So we expected at day zero to make all of our money on interest rates. So we were like, hey, we're gonna you know, work with a deposit-rich set of customers. So startups raise $1 million, $5 million, whatever, and we'll give them some yield with a savings account or something else, a treasury account, which is what we do now. But in, you know, in the checking account and with the, with the, even the yield-bearing account, we'll, we'll make some spread on the rate. And so that was always the model. And actually that was one of the reasons we, we did have, it was a relatively successful seed fundraise, but we did have a bunch of like fintech PE investors say no because they were like, you're crazy. You're not going to make money on interest rates. So that was always part of the model. It was actually 60% of our revenue before COVID And then COVID happened and interest rates went to zero.

But just generally, is for a business like Mercury, is a higher interest rate better for the business or is a lower interest rate better for your business?

We can operate and actually it was slightly healthy. Like the worst possible rate is zero, right? There's nothing, there's just no spread there to work with. What's 0% of zero is zero. So That's the worst possible environment. And we still built like a successful business there, partly because you grow much faster in that environment. But there are other ways, you know, we, between interchange and other things, we have a diversified kind of revenue set. I think the ideal rate, if I was to pick it, is like 2, maybe 3%, between 2 and 3%. Because I think, A, there's enough spread there that we can make money on it. B, startups and other, yeah, there's more capital available for us when rates are high and there's less like entrepreneurial activity. It's not that great for us. I guess most businesses have to do this, but my mindset is like, whatever it is, you need to build a good business underneath it. Like if it falls to zero, it goes up to 10, it's on us to like build something valuable. Like you can't kind of predict that part. All right.

So now let's get into some of these sort of moments, these, these 2 moments and behind the scenes, how do you react and what do you do as a leader? So moment number one, SVB, Silicon Valley Bank, um, gets taken in conservatorship. And so behind the scenes at Mercury, obviously rumors are going around ahead of time. This isn't just like a one moment in the time, but they become more serious over time. Could you put your brain on speakerphone and just like walk through what, what are you thinking over this like week or 2 before?

You know, they'd been like off and on, like, oh, is SVB underwater because of these things? Like since December, basically like December 2020, 2021, I have a friend who was like, you know, sharing these posts and like, and I was like, what the hell are you talking about? Like, they're fine, right? I just, it was like almost a conspiracy theory at one point. But then I would say it like really spiked up suddenly on that Wednesday, right? Like where— People started pulling money and like initially Wednesday and Thursday, I mean, for us it was mostly just inbound customers, right? It's like, hey, can you give me a bank account? Like I need to move money quickly. And yeah, I thought they'd be fine, but at the same time they were our main competitor. So there was definitely an element of like, oh wow, like we're getting a lot of customers from our main competitor and let's get them signed up, you know, and give them a great experience. So that was like the kind of end of Wednesday, Thursday, we really focused on like going through the KYC, KYB, getting them onboarded, giving them a good experience. And yeah, our view generally is, you know, we're not here to beat competitors. We're here to provide a great customer experience. So yeah, I was, I didn't make any mention of it online. I wasn't going to say like, oh, you know, get out of SVB now. Like I was much more like, hey, we're here to support you and let me know if I can help kind of thing. And I felt bad for SVB. I think these situations, you know, people are panicking, there's rumors. I don't think it's like fair to companies and it's not fair to take advantage of that. And then, yeah, basically mid, mid Thursday onwards, like SVB stopped pushing wires, right? Like everything kind of froze. So then Friday came along and there was just like this kind of freak out moment where, you know, FDIC came in, everyone's freaking out, our customers are freaking out, the whole market's freaking out. Everyone's asking us, yeah, what's going to happen? We still have tons of signups coming in, but no one can move money. So it's like a, it was a weirdish, like, you know, time where like, yeah, banks were open, but SVB wasn't open and everyone was like, okay, what's going to happen kind of thing.

So as this is happening, are you like, do you have like a special Slack channel? Do you have like a SWAT team that is just taking press? Like, yes, you don't have to say anything bad, but you have at least, it sounds like, 2 key themes. You have a bigger demand for signups in Mercury. And then secondly, you have to project confidence to your existing customers that this is not a contagion that's gonna spread. Is this going on by yourself? Are you mobilizing a team? What are you specifically doing behind the scenes to take advantage of this situation?

I guess at that point we had like 400-ish employees. This was all hands on deck kind of situation. This was not a, let's have a small team think about this. I mean, we probably had like 2 or 3 different like high-level like tracks we were running down. Yeah, there's definitely like onboarding, like how do we speed that up? We have like a Plaid connection thing and we moved that to the top and said, hey, if you're an SVB customer, do this first and we'll prioritize your account. Yeah, I remember what the wording was in the product, but there was something. And then onboarding, we had like, you know, them working both evenings and weekends. And we also tried to like staff it a little bit more. And then sales and RM team, you know, talking to our kind of VC partners and, you know, helping people kind of expedite things and things like that. So there was that push around like onboarding. And then mostly I would say marketing team. And really this was a great time for the marketing team to shine because it's all about communication and making sure like, hey, we do project confidence and like, what do we say? How do we say it? How do we blog about it? And I like to be out there and talk to customers a lot. I think that's part of the reason Mercury's successful, that they feel like they, that I'm authentic and they can connect with me. And one thing that was coming up a lot is someone would say, okay, you know, SVB failed, why is Mercury safe? Which is a very reasonable thing to say. And I would say to them at that point, hey, we have extended FDIC insurance. At that point we had $1 million and you can put your money in our Mercury treasury product where you can access US government T-bills through a money market fund. And I would say this over and over because people would be, because yeah, I can say we're safe, we're profitable, et cetera. But like, obviously that's what people would expect me to say. So I wanted to give them like more assurance through like, this is the actual products you get. And then yeah, we had this exec meeting on that Friday. It was kind of a frustrating meeting because we were all like, oh, you know, I wish we could do more to give people confidence about Mercury and like, what could we do? And we just didn't have like a good idea. And then Saturday morning came along and I was like, you know what, like we should, we should really extend the FDIC insurance and like we should give people dashboards so they can like understand where their money is. So this was kind of the inception of the Mercury Vault idea. So we just, yeah, all the people, I mean, there was obviously a lot of people around Slack anyway because everyone was like wanting to keep up with what was happening and this was a busy time. But, you know, we just kind of put together like whoever was around was like, This is a new product we're building over the weekend. And then I was mostly just on the call with our bank partners, CEOs, like all weekend going like, hey, how can we increase this FDIC insurance when it can go in? Blah, blah, blah. So we managed to increase it to $3 million by Monday morning and then $5 million by Friday. And so that was step one. And then step two was like launching this product around and giving people kind of confidence around where their money is. I think people really appreciated that because You know, my view with Mercury has always been like, if you keep saying something, either customer support or you or the BD team, whatever, why not productize it, right? Like, I think that's like, that's always been my mindset. So the fact that we could productize it and like really bring something, like, I mean, obviously the pieces were kind of in place. We already had extended FDIC insurance. We already had the Mercury Treasury product. There's only so much you can do in 2 days, but just like the fact that we kind of spoke to the exact thing that people were worrying about in the product and people could understand it and we tried to make it easy enough to understand. Like that really gave people a lot of confidence and I think really changed people's perceptions. So that week ended up, even though SVB was kind of saved by the FDIC, actually we ended up getting a ton of deposits and customers in that next week because people were looking for an answer because like, yeah, they don't want to be stuck with SVB. I mean, it was a big unknown about what would happen there.

If you had to go back afterwards today and like, you know, it's Wednesday, the day before, the Wednesday before the Friday, what's the piece of advice that you give yourself? And is there anything that you wish you would've done slightly differently?

I mean, I feel like this is like very non-introspective. I don't know if we could have done anything differently or if there's like any piece of advice I would give myself. I mean, I think one thing to put in context here is like, I mean, A, startups are just crazy, but like every year at Mercury, we've grown really fast and a lot of things have happened, right? Like in 2019, we launched, 2020 was COVID. And then yeah, we lost 60% of our revenue, right? Like that's it. Yeah. Imagine being in a startup where you lose 60% of your revenue. We literally lost 60% of our revenue in March and then we doubled our revenue in April because of Growth in like other revenue streams. So like it was a crazy time. And then 2021, we had this like big, big kind of bubble. And 2022, there was this bust. So, you know, by the time 2023 comes along and SVB is happening, you know, it's sure, it was like a particularly shocking time and it was particularly big, but it wasn't like we were used to be, you know, being quite Yeah, responding quickly to extreme situations, let's say. And yeah, yeah, I don't, I think overall we, we did a very good job in like talking to customers and like being very open.

And you definitely seemed calmer from the outside and even now reflecting and talking about it now than I think most people would have been sitting on the inside. I'm sure it was potentially more chaotic behind the scenes. but in a good way. But you definitely projected, I think, a calm, collected, fast reaction to the situation. How does that, does that happen by you just have, you've built a good team and they are empowered to do this, or are you guys just in sync? How do you solve this? How do you adapt so fast and calmly?

Yeah, I think as a CEO, it's really important to, you know, when things are good, it's important to kind of underplay them. When things are bad, it's important to like, Yeah, you like the roller coasters like that and you gotta be like a straight line through it as much as possible. Like maybe a slight upwardly facing straight line, if that makes sense. So I think to some extent, like it's something I try to be and live. It's like, you know, don't get too excited and don't get too sad, right? Like you gotta, you gotta, you gotta really do that. And like once you do that, like you do projected outputs as well. Yeah. In general. I want to be authentic and be transparent with my team, but at the same time, like, I can't be emotional with them, right? Like, I need to, I need to be a steady hand. And I think people really appreciate that. They're like, people panic way more than I do, right? Like, I don't know if that's true for every company, but for me, like, I have a lot of context. I've seen a lot of like crazy things, right? Like, you know, my previous companies, we've got like, we're like running out of money and facing a wall, right? I feel like a lot of gratitude for like the success we've had at Mercury is that But I feel like I've seen so much worse that like, I'm just like, okay, you know, we'll deal with it. It won't be as great as we think. It won't necessarily be as bad as we think. And we'll try to do the best we can.

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I really appreciate how sort of calm and even keel I think you've been through this. As you go through, you know, things that come top of mind, you talk about there's a moment in the business where you lose a large percentage of your revenue due to like COVID and zero interest rates, and then interest rates go up and you start making more money. At this point, you have your core product and Mercury has grown to checking and savings and treasury and credit cards and bill pay and a safe generator, venture debt. How do you think about launching new products? Do you think about that? Are they like a small startup within the startup? Do you literally fund them separately? Do you have milestones? How do you decide what to do?

I mean, I think firstly, I like new things. Like I'm an entrepreneur. I like doing new things. I also think it's important to have that muscle in the company and invest in new things. And one thing that actually got me excited about Mercury is like, I was like, oh, banking is this kind of foundational platform thing. And then you can build a lot of pieces on top of it. So that, yeah, that just gets me excited. So that's one element. I think I kind of look at it as like, there's kind of 2 pieces to it, right? There's the incremental thing, right? Like, how do we make new things that are incrementally improving our product, listening to customers, like iterating on the product? And I think that's really That's really important, actually. Like a lot of our focus is that, like, even if you're doing some new flashy thing, I think it's really important to be always improving the product, especially these little things. I think little things. So there's something coming out like next week where, you know, it's, I guess it's like kind of a complicated feature at this point, but it started off really small. It's like, hey, lots of customers have multiple bank accounts on Mercury. Let's make a view to let them like see all their bank accounts. And actually, you guys might like it because it's particularly useful for bookkeepers and third parties to some services that have like maybe 100 accounts on Mercury that are linked to them, being able to see all of them and flip between them easily. We're calling it Panorama. But, you know, it's somewhat incremental. We already had this concept of like multiple accounts. We're just making like an overview page, which we're calling Panorama. And yeah, it's not my idea. So like enabling the teams to go like, you know, what are the new things you can do? Go talk to customers, think about them, et cetera. I think that's like a big part of— new things one should be doing and making sure people are thinking in that mindset. And then the truly new product areas, I have found they only get done if it's like you make a small team and you're like, this is the only thing you do. We've in the past tried to do truly new big things as like part of other teams' remit. It's like, yeah, spend 50% of your time doing like maintenance and incremental stuff and like 50% doing completely new thing. And generally speaking, the complete new thing just doesn't get enough focus. And it's hard to do new things. Like you need to really devote a lot of time to it and be willing to like, yeah, the mindset's very different, right? Like when you're doing something new, you have to experiment and do something small and iterate and you don't have all the answers. You don't know who's going to use it, P&Ls, et cetera. So anyway, so for truly new things, we try to do like new, new teams. And my rough mindset is it depends on like where you are, but I want to have minimum 10% of the kind of EPD, engineering product design resources focused on completely new things. Sometimes we'll spike up to more than that and sometimes it'll be less than that, but that's what I try to aim for. My, you know, my thinking is like 10% doesn't sound like a lot. Like we should be doing something completely new with 10% of our resources. It is difficult though, because right, like It's generally speaking easier to get a 2% improvement in like a big thing that you already have, right? So if you're making $100 million in revenue or something, a 2% improvement in a year, that's $2 million extra. That's a lot. Whereas like going from zero to one, it's very hard to come up with a product that's going to make $2 million in a year or even 2 years or 3 years, right? Like, I mean, we've done startups where it's to get to $2 million has taken like 5 years or something. So you have to have a much more longer-term mindset about payback and also like a reasonable, a mindset about like failure, right? Like you, like the 2% you can get on the $100 million is like, I mean, you should almost be certain that like you do enough things, you can move that $100 million. Whereas like you do 5 truly new startup-y experiments and like maybe 4 of them are going to yield you basically zero. And the one that's going to be like— Maybe $100 million, right? Like it's a, it's a very spiky, different mindset, but I'm very committed to like devoting at least 10% of our resources to it.

And when you think about that from, you know, working with a finance leader, how do you guys, do you just allocate, do you allocate budget towards this? Is it a time-based thing? Because like you said, when you first started Mercury, you were like, we raised what you said, $5 or $6 million right up front because you knew that a lot of financial services and regulated stuff is It's just more complicated to build. It has a longer lead time. Do you think about that separately, like an internal venture and allocation, or do you just build conviction and just kind of, it's just a thing that you do?

Yeah, I mean, we do think about it separately. So we have like 2 teams going on right now. I can't tell you what they're doing, but we think fairly startupy. We're like, hey, you allocated, you know, one is 5 people. I think the other one's 7. And actually the other one's 5 right now as well, but it'll be 7 soon. So like, we're like, you allocated this many people, this is your milestone you have to reach with that. Like, yeah, initially, like, you know, with like 5, 7 people, you're probably not gonna have a true understanding of product market fit, but you can probably get to a level where you launch something, you get a feeling for it. And then once you reach that milestone, then we're gonna scale this up to the next level. And like, yeah, you can be a lot more granular. Like, you know, I put my investor mindset on. I'm like, okay, what metrics does this company, does this team need to hit? order to be able to get a Series A, right? And then I'm like, okay, that's a Series A. Now we're going to scale it up to 20 people, et cetera. But obviously if it's internal, you don't need to have this like be so, you know, it's annoying. Like Series As, you only get them after 18 months, right? Like we can be like much more incremental about it. We can be like, okay, you know, now we unlock the next stage gate. But I'm really thinking about it like that. It's like very much a startup mindset in my mind. It's like, hey, you have 5 people, prove some stuff out. launch this thing. If it seems to be working, let's scale it up to 10 people. And now you need to hit like $200K ARR. And now we're gonna give you 20 people to hit $1 million ARR or whatever. We actually had another team like a few months ago where I guess we only had 3 people like really fleshing it. No, 4 people working on it. Actually, no, it was fuller. There was 7 people and it was, it was gonna be quite a big project. And we did the investigation, we even built like a mini product. And then at the end we were like, hey, Yes, it might be interesting in a few years to do this, but it doesn't make sense for Mercury to do it today. And we basically disbanded the team. And actually the team really liked it because they got to explore this thing and they kind of agreed with the end decision that like, hey, it wasn't the right time for us to do it. And now they're doing other projects that they're excited about. So that's our mindset. It's like very much like these kind of mini startup experiments that we want to scale them up. So like the credit card We have an IO called ProCreditcard. We launched that a year and a half ago, but we probably started it 2 years and a bit ago. And it's a similar-ish mindset. It was like a smallish kind of dedicated team, but now that's like fully integrated into kind of Mercury. And it's like a pretty big, one of our bigger teams.

One of the things that you talked about in the early days was one of the really fun parts about banking as an idea for somebody that is very entrepreneurial is there's so many things you can build on top of it along the way. So one of the challenges I imagine you have is, you can go sort of horizontal and you can build other types of products, or you can maybe go vertical and sort of continue to expand because banking is something that is something that you need at the formation stage, but you also need as you grow and scale. How do you think about sort of breadth versus depth or going upmarket?

Yeah, I don't necessarily think of those as like purely contradictory because I mean, take that corporate credit card. It is upmarket, like a lot of the features we're building there, like, You know, receipt management, accounting integration, categorization, et cetera, are like things that a tiny 3-person company doesn't need, but a later size company needs. So it's both horizontal and vertical in there. I'm not actually sure exactly how the horizontal and vertical you're doing in your definition because there's like other ways to cut it as well. So I think it's like actually better to not think about it in this mindset. Like sometimes you end up in a business thinking about things in terms of like, Ooh, this is very strategic. Now we're going upmarket. It's very self-centric. It's probably a bad analogy, but it's narcissistic. If you start thinking about your product strategy or business strategy as a narcissistic thing, like what's useful to me as a company, no one cares what's useful to you as a company. It's like what is useful to customers is way more important. So my mindset is much more like, okay, what are the truly useful things we can build for customers that makes sense? or what are the types of new customers we could get with this, you know, something similar to what we have? And like, why does it make sense for them? And often, yeah, when you've got nothing, like you have no customers, you don't have any data, and that's kind of different, and you have to make it up. And like, yeah, you can get some conviction, but it's very hard. But when you have a lot of customers, they're kind of giving you the answers, right? If you're going to expand to a new customer base, you probably already have some customers in that base, right? Like, if you have zero, then you're probably going to have a hard time expanding. So like, we've done a reasonable amount of stuff in the last year with VCs and investors, but, you know, even before SVB's failure and FRB troubles, 5% of our customers were VCs and investors. So like, we knew who they were and we already knew the things that they needed building, right? Like, maybe we didn't know fully, but like, we could ask them, right? And a lot of the last Yeah, we built quite a few of them, like obviously missing pieces there. But yeah, so there's definitely like a strategy component of like which customers do you listen to and how does that tie into your long-term strategy and all of that. But you shouldn't be like inventing things to do both horizontal or vertical just based on like your business needs. So yeah, as we think about going upmarket, a lot of it is like, oh, our customers are growing. What are the features they need? Yeah, we don't want our customers to leave us because we suck at something that they really need just because they're a slightly bigger company, right? And I mean, that's been a lot of what we've built anyway at Mercury in the last 5 years or 6 years since we launched, which is just a customer going like, hey, I really need X. Like, you know, a recent one was like, I really need a deeper NetSuite integration. We did a bunch of work to enable that. That wasn't interesting to people 3 years ago because everything was like a seed stage company and now it's obviously useful. So, so I think that's like a pretty good way to do it.

Is there anything surprising? One of the things that I think is, is potentially lesser well known about Mercury is how much infrastructure you build to connect to accounting and actually make this very automated. And one of the biggest sort of general concerns for finance teams around the world is how often an API, a bank connection to accounting stays up. And I think Mercury is, if not one of the highest, the highest in sort of most stable connections along the way, which Is incredible. Is there anything else that you, is maybe a misconception or something new that you're really proud about as Mercury sort of has evolved from 2017 to today?

Yeah, I think a lot of people don't even know we have a corporate credit card. So one thing that's kind of funny and like, yeah, it's both a good thing and a bad thing is like, you kind of end up being like one box into people's heads and like the box that Mercury mostly fills is like where we give startups bank accounts. But, you know, as we've expanded the box of things we do, we don't, it's hard to change people's perception of what we do. So I think that's kind of funny and something we're kind of learning from, but it's also, it's also nice. Like I want to be known as like, you know, a banking provider to startups. Banking for startups has always been kind of like our pitch, but like you, then you become beholden to the, to the, to the tagline, which I think is like an interesting thing. The things that I've learned about banking is You know, it's really integration and collaboration are like way more important than like, you know, when I thought like, hey, I'm going to, you know, build a better bank account for startups. I didn't think like, wow, integration and collaboration will be like the 2 things that I'll be able to spend a ton of time on. But, you know, bank accounts are these kind of fundamental things in the middle of money flowing and being very nice and playing very nice with other services. Via the API, like we have a custom Plaid connection, like doing all these things and going above and beyond there, you know, really makes it like a much more seamless experience. And then the collaboration things like we have, we spent so much time on like, we have like 5 different types of user accounts. We have so many controls, like multi-admin controls, per payment controls, per card controls. It is so much deeper than I would have ever expected when I started Workery. I was just like, yeah, we'll have like admins and like maybe employees. You know, it wasn't like, oh, actually it's going to be super deep. Like we have every type of like variation possible. Like you can have one email connected to multiple orgs. You can have an org with lots of emails. Like there's just so many different ways to cut the user organization, like paradigm and withdraw on permissioning that like it is a ton of work and we're not even done, right? Like we have a, we actually have a dedicated team now that's like user permissions. Like that's—

Yeah.

Oh, what is it called? Like, I think it's called users, but then all they do is like permissions and controls and these kinds of features around like collaboration.

I love it. All right. I want to end on something fun. Something you sort of talked about before. One of the things that got excited to you about angel investing and working at YC was wanting to give advice and help early stage founders. So what is the number one thing that founders ask you when they mob you at whatever event? And what's the number one piece of advice that you give that you just wish they would actually listen to that they just don't?

Yeah, most people who talk to me mostly want money. So I think, and like maybe this somewhat relates to it. Like I actually think maybe you'll get lucky and like go talk to an investor at an event and get money. But I think the thing that has been most useful to me, and I wish no one asked me this, but I wish people did this, is like you just have to invest in real deep entrepreneurial relationships and connections. And that's where you're going to get your investor intros and actually get like most of your success. Like it's not through like, oh, like I'm at a conference or whatever. It's like, okay, who are your, like, you know, if you can't name like 10 entrepreneurs that are your friends that are like at a similar stage that you're like doing this thing together, I mean, A, I don't know how you're learning and how you're like growing as an entrepreneur, but B, like it's just so essential to have like that entrepreneurial circle. And like, I think more people could do with investing in that more. And yeah, that's why I moved to San Francisco. And you don't have to be in San Francisco anymore, I think, but you really do have to invest in that kind of entrepreneurial network. And I think that's the biggest thing I would advise people. Awesome.

Thank you, Imad, so much. Any closing thoughts?

No, this was great. I'm excited to see this podcast launch and be an avid listener. Usually, Sasha, you go tell people to subscribe.

Oh yeah, smash that subscribe button.

Go ahead. There you go.

Thank you everybody. Thank you, Ahmad. Thanks for tuning in to Turpentine Finance. Share with your executive team, direct reports, friends, and family. And if you want to support the show, the best ways are to leave a review wherever you're listening and subscribe. Turpentine Finance is part of Turpentine, the podcast network behind Moment of Zen, Turpentine DC, Age of Miracles, and more shows for experts by experts in tech.