My First 16: Competing in a Crowd of Incumbents with Mercury's Immad Akhund

Hi, I'm Seema Ambal, a SaaS and fintech investor at Andreessen Horowitz. The number one question I get asked by early B2B fintech founders is, how do I acquire my first set of customers? As well as, how do I get my customers to trust me with their money? In my First 16, I chat with the founders of several prominent fintech companies and ask them about how they targeted their initial customers, what they did to win their business, and their hardest learned lessons. Today, my guest is Immad Akhund. He's the co-founder and CEO of Mercury, which offers fintech and banking products for startups. Like some of my other guests, Immad is also a multi-time founder and has seen customer acquisition across B2B and consumer. In our conversation, in addition to discussing Mercury's first customers, We talk about the idea of a minimum delightful product in fintech versus a typical MVP, doing the spreadsheet math on unit economics early on, and how to compete in a category already filled with incumbents. Let's dive in. As a reminder, the content here is for informational purposes only. It should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any a16z fund. For more details, please see a16z.com/disclosures.

Thank you so much for joining me, Imad.

Yeah, thanks for having me.

It'd be great if you could just walk us through how did you, you know, found Mercury and what was the background to starting the company?

Sure. So I had this idea for Mercury in 2013, but I didn't start it until 2017. So it was kind of in the back of my mind for a long time. All of these tools that we use for as startups for running your business had improved a lot. You know, before, when I first started in 2006, everything was really bad. Like there was no Stripe, there was no Gusto, there was no Rippling, there was no, there's no, it wasn't Slack. You know, everything was quite painful as an entrepreneur. And then there was this kind of, you know, 10-year period where things had generally improved. Every one of these categories had a really strong product, but banking was still exactly as it had been forever. And it just seemed obvious to me that someone would make a better bank product for startups and for entrepreneurs. And yeah, it wasn't until 2017 that I could do it myself since no one else had. And we, that's kind of, you know, where the idea came from.

Awesome. Yeah. So like so many of our founders, you had the pain point yourself and decided to go tackle it head on. So, you know, when you got started, how did you think about what the MVP product that you would go to market with? And how would you start?

Banking is a utility, right? So, and there is a pretty high bar of existing players there. And I always had it in my mind that I wanted to be your primary bank account. So, you know, it's, we slightly simplified it by focusing on a very specific ICP, you know, ideal customer profile, which was an early stage startup. So, We didn't need to go build all the things that a public IPO company would need from their banking product. We needed it for a smaller set, but it was still a fairly high bar. But I felt like I very deeply understood what that bar was. It's like it's multiple users, wires. I was very stubborn about a certain set of features that like no other bank had done before. Like I felt we needed both domestic and international wires where, you know, now there are other newer banks that have done that. But back in 2017, no one had done that. And I was also fairly stubborn about wanting to have immigrant founder support because I was an immigrant to the US and I wanted to be able to support people like me. And I always felt, you know, immigrant founders are pretty pretty large kind of set of founders. And I didn't want to like disqualify that segment. So I had a very specific kind of feature set and spec in mind. And we, you know, it took us a year and a half to launch because we were quite stubborn about hitting all of those features, which were not all trivial to get.

Got it. So your MVP was actually fairly robust in terms of feature set. It sounds like that was pretty intentional. And part of it was you had a very specific vision in mind for what product you wanted to put in the market. But was that also because this was what you were hearing from potential customers that they needed a whole set of features additionally on top of the card? Or how did you end up making that decision?

I think it's important to understand like what you're trying to achieve. I think there's a set of companies that are trying to do something new in a new market that like, there isn't an alternative product. Oh, there is an alternative, but it's super different. Like this is just a, yeah, like Airbnb, for example. There wasn't really a thing that they were competing against. It was trying to create like a new idea. And then there's a set of things like Mercury where There are lots of incumbents, and it's not like we were serving a set of customers that didn't have bank accounts. We were very deliberately serving a set of people that had alternatives. And then the bar is just much higher. You have to catch up with everything that exists, and you have to be 10x better than that, which is very different from like a kind of new market, new idea. Then, you know, what you're really testing is like, does this idea have any legs at all? And does anyone care? And then you can have a simplified version of that idea. And there isn't anyone, uh, there isn't anyone you're competing with. So I think as long as you understand who you are, you can kind of decide what, what makes sense. So, you know, if you take Mercury or Figma or, you know, those types of things where there are incumbents, it's a complicated-ish problem. You just have to spend a reasonable number of times, sometimes years, Developing a, I mean, it kind of still is an MVP or like, you know, I prefer minimum delightful product. Like it is still that, but that minimum is just way higher than in, in like a new market that doesn't exist.

Got it. Okay. So maybe just to like set the context for the listeners, what exactly you had the card and what else did you offer? And you were, and you're talking about sort of the context, it would be a bank that a startup would be banking with alternatively.

Yeah. So it's, you know, if you start a new business and you need a bank account, what are the expectations you have? So there's a set of, obviously it needs to hold the money. That's base one. Then there's a set of incoming payment types, which, you know, wires, check, ACH, international wire. And then there's a set of outgoing payment types, which we had debit card, wires, ACH, check. And all of those actually Yeah, every one of those is non-trivial, right? You have to build up all the connections and make a great user experience around it and things like that. And then the last piece is, you know, all the administrative layers around it. So, you know, all the different users you can have and the onboarding and all of that. So yeah, everything in fintech and obviously, I guess you're fintech. I don't know if most of the audience is fintech, but yeah, everything just takes longer in fintech, right? Because you—

Totally.

You need all the backend fintech connections and then you need all the compliance and risk side of things. So you add that all together and it's a pretty complicated kind of set of things that you need to build for the MVP.

Totally. Yeah, no, it's very, it's not uncommon for, as you know, in fintech, the MVP is quite robust, unlike, you know, in SaaS where you may be able to start with like a Chrome extension. Here you need multiple products to all sort of work in concert together. to actually, to your point, get something off the ground and make it compelling enough to be— I love the minimum delightful product. You know, you— I love that phrase. I think that's— that really speaks to it. So you, you were working on this for a year and a half, and during that one year and a half of building, what did, what did the company look like? And just in terms of it was you and who else working with you?

Yeah, so we kept it pretty small. There was 8 of us altogether for most of that. Eventually we got a 9th person. It was mostly engineers. I was actually mostly engineering myself. So I guess from the 9, 7 engineers, if you include me, 1 designer and 1 kind of product slash everything else, who's my co-founder. So there's 3 co-founders and everyone else. I'm a big fan of keeping teams like fairly lean at the start. We actually raised $6 million upfront. So we had a lot more money, but I don't— I think pre-product market fit, it's better to be sub-10 people.

Okay, so we've got the context on what Mercury looked like in the early days. Let's shift gears a little bit into how you found your initial customers and who you decided to target.

So during that year and a half, I talked to about 100 startup founders. And just because part of it was like, do people actually want this? It was actually kind of funny. It was a little disheartening. Like I talked to 100 and a lot of them were like, oh yeah, this sounds cool. But they weren't that excited about it. I was like, oh, am I? Especially when you're almost a year and a quarter in, you're like, wow, am I doing the right thing here? But a few were really, really into it. And I think actually, that's one of the slightly funny things about talking to customers before you have something live that It's actually hard to really learn because, you know, if you have a big enough market, actually, if 2% really, really love it, that's actually big enough to have like this kind of early adopter thing, even though you might be wondering whether you're even doing the right thing at that point. And we really, you know, I really focused on kind of the startup community. It's like, obviously the people I understand and they tend to care about product. Obviously, in the startup space, if you want a new product, you want to initially focus on the earliest startups just because they're the easiest to win. A lot of the, you know, we did a beta before we launched. A lot of the time during that beta, it just basically didn't work. But we were kind of testing it with some real customers. And they were, you know, they weren't like putting all their money into it or anything, but it was useful. A lot of those people were people that I had invested in. So I had a little bit of an unusual thing where I'd invested in, I guess by that point, about 90 startups. And, you know, just by the fact that I'd done it fairly recently, I only started investing in 2016. They were all like perfectly in the ICP. They were all early stage, seed stage companies. And obviously they, you know, to some extent they liked me. So they were willing to kind of try out the product.

It's really interesting that you said you weren't necessarily getting super strong feedback from a lot of the initial customer conversations. What really empowered you to push through? Was it just you knew from your own experience, I know this is a pain point, or you just also knew, hey, like a lot of, to your point around category creation, like a lot of times customers don't know what they want. They don't know what that delightful product looks like yet. And so you had that insight and you're like, okay, I know that As long as like, you know, the 2% thinks this is great. And I know from my own intuition, like this is there and people will only realize it once I can actually put a product in front of their hands.

Yeah, there's this concept of like vitamin and painkillers, which actually don't love that concept, but it kind of plays to that as well, right? Like if you look at the reason people use things, like sometimes people use something new because it's a you know, they're, they're like dying. It's like a super strong pain point for them. And then they can often describe that pain point and say, say like, oh, you know, if you could solve this for me, I would pay you this much money. And there's definitely like a class of startups that are in that kind of group. I wouldn't say Mercury is in that group. Like, sure, I mean, some people really hate their banks. And obviously we can play to that. But most people have a bank account and they don't really At the point before Mercury launched, I don't think many people could imagine a much, much better experience, right? And actually, I feel that a lot of successful companies, they are in that bucket. Like, I mean, if you take Slack or Zoom, you know, all of those things existed. Like, there was plenty of instant messaging and plenty of like web communication things. They just all kind of sucked. So when you came out with a much, much better product, like it it got people really excited. But I think like you kind of need to see that. Whereas if someone describes a much more better product, it's hard to get that excited about the description of a better product. I'm not saying like I was like that self-aware to realize that at that time. It was— this is mostly a post hoc kind of explanation of it. But that's kind of my thinking about why it wasn't as exciting to people as it was to me. Like I could imagine a product and I would use that product. And that was what like pushed me through it. And it helps a little bit, you know, that whole Steve Jobs thing, like the, is it Steve Jobs that said that? The, you know, if you tell people about what they want in a horse, they say a faster horse, but they won't like tell you about a car. What was that fourth thing?

I think Jeff Bezos also has a quote around not being able to predict consumer behavior either. So I think it's a common thing.

Yeah, exactly. Yeah, you should. I think there's a ton to learn from customers when you put a product in front of them and they use it and you see how they use it and you ask them like, oh, what more do you want? It's much harder to learn from customers when you imagine a product and you haven't got anything to show them. Yeah.

And so, okay, you ended up having an amazing launch. What would you attribute to that? And then also, you know, how did you convince customers to trust you? It's their money and, you know, It's their banking product. I'm curious how, you know, what messaging or positioning you used to make that successful.

There's a few things there. And actually, like the trust question and why the launch was successful is like the same question to some extent. I think the hardest part of Mercury is always like winning people's trust because it's, you know, using a startup to do your banking is quite a difficult thing to convince people of. So, so like, yeah, there was a bunch of factors. Number one, I think the idea of, and maybe now it would be a little more mundane, but in 2019, like the fact that we were launching like a full bank product was very unusual. Like no one had really done that in the business setting. So it was like, you know, The meme of the idea was very shareable and likable, and people were very frustrated with their banks. So they were like, wow, someone's like attacking this big, big problem. And that got people excited. So that's number one, the idea was exciting and shareable. Number 2, we had a very credible set of investors. So yeah, Andreessen Horowitz was our seed investor, but along with Andreessen Horowitz, we had about 60 initial angel investors. And some funds like Elad Gil, Justin Kahn, the original founder of SVB, was an investor. So we had these like people that lended us their credibility and brand to some extent. You know, people could say, okay, if, you know, if all these people invested in Imad, even if I don't know Imad, I can trust that like this product is like, you know, fairly solid and not gonna and going to be reliable. So that's number 2. And then number 3, we had a lot of time to polish things, you know, partly because we were trying to get these cards working and we had to do like 2 bank partnerships. So we had a lot of time to make it so the front page was very compelling, that the onboarding experience, like this kind of initial signup experience was very fluid and easy. And yeah, it was like you showed up, you click sign up. It was very nice experience. So the initial people that went through that experience then wanted to share that because it was such an unexpectedly nice experience and it was the first impression they got. So that helped continue this kind of sharing cycle.

Yeah.

And then lastly, like we were targeting this like fairly tight-knit community, right? Like founders follow each other on Twitter. We are in WhatsApp groups, we're in Slack groups. there's a lot of ways that founders and investors talk to each other. So that, yeah, it wasn't— I think if you go and sell something to a bunch of dentists, like they probably don't have that many dentist friends. Whereas like every founder has like 20+ founder friends that they're connected to in some way because it's just a fairly tight-knit community. So all of those factors led to like a pretty successful launch and something that like compounded the trust, right? Like when—

Totally.

After a few weeks, it wasn't just me or our investors saying, use Mercury. It was like our customers saying, oh, Mercury was amazing. I signed up and I already have money in my account and it's also nice. All that kind of stuff.

And how did you think about sort of the, you know, signup of customers and collecting feedback? Was there sort of like a first batch that you got off the first launch that you signed up and then you sort of pulled up and got feedback? Or was it more fluid over time where, you know, you just Got feedback as you went and then kept going from there.

Like, if you have a successful launch like we did, I don't know, it seems very obvious what is like hair on fire. And I would say the first, yeah, like for example, for the first 6 weeks, we thought sending international wires was working, but it wasn't working. And so people like, we had this feature where someone would send money and it just wouldn't work. So we, yeah, obviously we were trying to fix it from day one, but it took 6 weeks for it to actually become like a smooth working process. So a lot of the initial kind of 6 months, I would say it was like, you know, you kind of rank all the things that are broken and you try to fix the most important broken thing first. It was very much like that. It wasn't like, it wasn't like, oh, let's get subtle feedback. It was just like, okay, here's all the crazy broken things. Let's just go fix them one by one. Right.

Let's shift gears a little bit and talk a little about scaling up. So you've got your initial-ish number of customers. I'm curious when you actually started investing in a go-to-market effort, whether that's the head of sales or marketing and sort of moving away from primarily founder-led sales into a more scaled-up go-to-market effort.

I'd say for the first year or so, it was very kind of this organic growth. And, you know, I struck up some partnerships and we did some stuff, but there wasn't a strong kind of leadership or even like that many hires around sales, partnership, or marketing. And then, you know, that was still working fairly well for us even a year later. Like we were still growing organically, but then we started kind of investing. I'm not a, I mostly think of these things as like, I think it's a mistake when startups go and hire, like the first hire shouldn't be head of sales. Like I think you should just go hire some salespeople and see if there's a repeatable process that you can come up with together. So, you know, we hired our first salesperson, John Hardy, who's still at Mercury. And we hired our first kind of brand marketing person and it was much more— mostly ICs with the idea that they would also kind of become managers as like things worked. And then we just kept kind of incrementally adding. It wasn't like actual like true execs. It took us a while to hire those. Like, you know, it was only about a year ago that we hired our kind of VP of revenue and a year and a half ago that we hired our VP of marketing. But yeah, I don't think like Like taking a function from 0 to 1 is something that like, I think actually kind of should be founder-led with like some like IC or player coaches. And then once you've like built out some of that function, then you can think about like more like leadership roles.

That's something we hear a lot too. I think it's better to get the doers rather than the managers, right? So you want the folks who are going to actually help build the business and sometimes that person has a little less experience necessarily, like, but they're, they're able to actually like propel the business from, from their own, their own actions. And then you can bring in leadership later. But you want, you want that core function that they're able to run versus necessarily someone who's going to like, you know, build an empire under them and not necessarily deliver on the, the actual, like, yeah, the core function that needs to be done, whether it's marketing or sales or brand or partnerships.

Yeah. And those people aren't always, you Yeah, the person who's gonna be the IC and then figure stuff out is not necessarily great at like managing a 30-person team and, you know, and vice versa, right? Like someone who's like doing a 30 or 100-person team is not gonna be great at like the IC role. So it often is just a different person. Sometimes you can have, you can hire someone that grows into the exec role.

Sure.

And we've had a few people do that too.

Got it. I'd be curious just to learn a little more about the pricing journey you guys had at Mercury and who and how you made those decisions around what to charge customers.

Yeah. Pricing is kind of weird for Mercury and maybe for other fintechs as well, where it's a free product on the whole. So the way we have pricing is actually for the revenue we do make, how much do we pass over to people? So rewards on credit card, for example, we have 1.5% cashback and that's kind of like a pricing question or interest rates on deposits. And we have a treasury function. We do have fees around that. I think it's good to have a philosophy around like pricing. Like, do you want to be like Amazon has this like famous philosophy, right? Like your margin is my opportunity. So they always want it to be like the cheapest out there. And that was always their philosophy. For Mercury, our philosophy was always like, I don't want to be the best pricing. I think it's one of the mistakes that fintechs make is they become like differentiated through pricing power. Like they're like, we're going to give away the most margin possible. Whereas Mercury's main thing was like, hey, we want to be a really good deal, but we mostly want you to use us because of product. Like, We want to be the best and most easiest to use product. And then we want to be a reasonable pricing deal, but we don't necessarily want to be the best pricing out there. And I think that's a much better take personally in fintech because it gives you enough margin that you can go, you know, cover your fraud and you can do distribution and all this other stuff. Whereas, you know, if you are all about just giving away as much as possible without making money on it, then it's just a much harder— position in my opinion, but, you know, obviously it worked for Amazon.

So, got it. Yeah. There are 2 interesting things that you mentioned there. One, I mean, you know, you were really— it was when Mercury launched, it was a time when a lot of other, a lot of the other card products in the market were focused on rewards or just giving away product for free. And to your point, it almost seems like it was a— it's a much stronger signal of product market fit or just that you're truly delighting customers if they're saying, well, hey, I'm not actually— it's not the price that I'm is the reason I'm adopting this. I actually love the product. So it seems like that's also a really good signal of like, yeah, that the customer delight going back to that point.

Yeah. I mean, that's one of the problems with pricing-first companies. Like someone else will come across and come by and undercut you. And then like you have a set of customers that are extremely price sensitive. So they're much more likely to like go to the next company that like undercuts you on pricing. So yeah, I think pricing is a very dangerous kind of methodology to compete on. Like, it's much better to compete on some other dimension.

Yeah. And then I think the second thing you mentioned too was, you know, while you weren't directly juxtaposing the product against a bank, right? The fact that you were signaling it around saying like, hey, the pricing is more subtle or is more transparent is a more like subtle but almost obvious way to juxtapose this. You don't even actually name the banks. You just say like, look, this is simple. And people are used to, you know, they've, everyone has experienced the pain of too many fees, especially as a startup. And so, you know, that already, that's like one of the biggest pain points that resonates again, without even naming necessarily who you're coming up against. Again, you've done this multiple times before. If you were to compare it against RevMap or one of your other startups, what have you like learned through the journey? And we'd love to hear any advice that you have for early founders.

Yeah, to build a really big company, you really need like a lot of customers. So you, I think that's like much easier to do when like the demand is so high that people are coming to you. And it's much harder to do when you have to like kind of convert one person at a time and like force them to use you. Like people really have to want to use you. I mean, obviously like not every sale is gonna be easy, but— you have to have this kind of groundswell of like demand.

Yeah.

Maybe like, yeah, high, high ACV enterprise products are different, like where you only need like 100 and you're making a ton of money or something like that. But for a lot of like more consumer SMB things, like you need this like real groundswell. So you really have to think about like, what can I do to have such a good product that creates that groundswell, which is, you know, I think product and distribution have to always kind of come together to some extent. Especially when you're really early.

Totally. Yeah. And I think that's actually a really good point. We often distinguish, right, the SMB acquisition versus, you know, your outbound sales-led businesses and in SaaS or B2B fintech where, you know, you need more of like a $10K to $12K ACV to really justify a sales team. Whereas you're going after the SMB, it's more of a consumerized go-to-market. I'd be curious, like, how much did you actually think about unit economics and the CAC and, and all of that working? Or, you know, was it more like, let's get this product out into people's hands and figure that out later?

No, I did the spreadsheet. I don't know how convincing these things are really before you've tried them. But, you know, you should do the spreadsheet and go, okay, you know, if we wanted to do sales, like, what would the ACV be? Like, you know, how much would you have to— I really think it's very hard to know things until you try it. you know, is the conversion rate of your sales pipeline gonna be like 5% or 1%?

Sure.

And like obviously the numbers are completely different between the two of them. Some products I guess you could like pre-sell them and like that will give you like some insight into it. But I mean the other problem with any of these distribution maths is like, you know, what you can do at day zero is not gonna work when you have $10 million ARR anyway. So you kind of to some extent have to like, I think the thing that you can predetermine is like, going after something that's got a big enough TAM, right? Like if it's a, if the TAM is big enough and obviously business banking is a huge TAM, that gives you a lot more room for maneuver, right? Like you can, you can figure something out. If the TAM is small, then like you just don't necessarily have the same level of like flexibility in figuring out like GTM. Yeah.

But out of curiosity, when did you do that spreadsheet?

Oh, day zero. I mean, I was, You know, basically with Mercury, I was like, okay, I can't build this without raising money because you can't get a bank partnership without raising significant money. So, you know, it was like straight into— I did build some like screens and things like that, but it was very much like straight into like a funding process where I was trying to raise like at least $5 million. And I think it's always worth doing like some sort of projections, even if you're very early. It wasn't like super complicated. I could probably dig it up. It probably looks a bit silly now.

Yeah.

But I had some, I had some—

I was curious if you, have you looked back at it and, you know, how correct was it?

I mean, I've looked at my seed deck quite a few times and it's like, I mean, it's mostly accurate. Like we're mostly doing what it says. There's some assumptions that were like incorrect. But yeah, I haven't looked at the projection math.

Well, yeah, last thing to wrap up. What's, if you had to give one piece of advice to your earlier self on finding and winning your initial customers, What might that be?

Depends how much earlier we go to my earlier self. I think the, to my earlier self, I would say, you know, I was very much like an engineer and kind of worried about like running sales processes and things like that. I think the thing that I would tell that person and I tell other founders is like, I think it's better to think about sales as like a numbers game. It's like, how many people do you talk to? How good's your conversion rate? And, you know, that's, that equals how many sales you make. So I think when you think about, as an engineer, at least when you think about it more as a numbers game rather than like a kind of an emotional sales game, I think that's when you can be more successful at sales. You're just like, you know, you need to run a process, you need to run a pipeline, and that's just what you have to do to be successful.

Yeah, no. And I think we hear a lot of times more thought is, or more founders put time into sort of just the rough math of how all that works. than they talk about, but it's super valuable just, you know, I guess understanding exactly how the pieces shake out so that you're not— yeah, to your point, you're not worried about it and you have sort of a guiding North Star again, even if it's only directionally correct. Well, thanks so much, Immad. It was great to chat with you and thanks for sharing all these pearls of wisdom.

Yeah, thanks for having me, Seema.

I'd like to close by thanking my guests. for sharing their insights on finding early customers and building strong businesses. You can hear the rest of My First 16 by going to a16z.com/podcasts, and be sure to go to a16z.com/fintech for the latest industry-related content. There, you can also subscribe to our monthly fintech newsletter. Thanks for tuning in.

Thank you.