Cash is King and Reputation is Queen. How trust can make or break a startup.
If you are curious about how a multiple award winning, high growth startup can die twice, you might be interested in reading the below. Oyst’s story is the story of a phoenix reborn from its ashes and shot in the heart at the take off.
The recent good results (50% monthly growth, zero churn, promoter clients) led to a €1.5MM fundraising round which was cancelled at the last minute causing Oyst’s premature death.
Indeed, Term sheet + successful due diligence ≠ cash
Oyst is (was) a one click buying solution for e-commerce websites. Think of it as an Amazon-like 1-click buying functionality but universal and for all e-commerce websites. One of the 2 initial founders (the other being a co writer of this post) was a magnetic leader with a great vision to simplify e-commerce. His greatest strength is probably his capacity to attract amazing talents with a very strong conviction that lifted the whole company. On the other side this exceptional willpower created a gap between the plans in his mind and what the team delivered or what the customers wanted. Did his thinking go too fast or did the team members execute his vision too slowly?
What happened?
12 months ago, Oyst was a rising start-up making the headlines and this week it ceased its activity after their lead investment fund’s withdrew post term sheet and after a successful due diligence. What happened in the meantime? Mainly a major downsizing, a turnaround with profound organizational changes and a personal bad buzz impacting indirectly Oyst’s reputation.
In order to fully understand the reboot (or turnaround) which we will call Oyst-2, one needs to understand the first phase of Oyst’s history which we will call Oyst-1.
Here is a snapshot of main issues before summer 2018:
- Oyst-1 was founded on an amazing idea (universal 1-click buying solution) but had flaws in its execution.
- It had a poorly defined mission and an over-promise.
- It was a very vertical, top-down organization working in silos with all trust being placed in the founder and his vision.
- There was too much funding and no proper budget, which led to a lack of focus, a very excessive monthly cash burn and a desire to scale too fast.
- It had an extensive sales and marketing team selling and promoting an unfinished product.
- Product market fit wasn’t thoroughly checked (especially regarding e-merchants’ integration).
- A €2MM fundraising round was announced in November 2018 but never materialized as a consequence from the bad buzz.
From bad to worse
You think that’s a pretty bad situation? Wait… It gets worse. In May 2018, a new management team is brought in and helped formalize the Oyst-1 issues above. Decisions were made to let go two thirds of the employees, divide cash burn by 3 and unplug our solution from the 160 e-merchants to fix the product. That’s when it got tricky. During the same week, a very bad buzz linked to previous activities of the founder popped up in the French press and was re-published in the tech and startup news. The triple storm of the massive lay-off, the unplugging of the entire client base and the founder’s bad buzz properly kicked off the turnaround of Oyst-2.
The personal bad buzz generated distrust at all levels in the company because of the initial vertical organization and the former blind trust in the founder’s vision. After the bad buzz, the founder left in order to protect the company (the bad buzz being personal and unrelated to Oyst). This triple storm profoundly weakened the company and nearly led to its death. We had to rebuild trust from the ground up, layer by layer starting by the mission, then the people, then the product, followed by customers and partners.
Everything is about trust
The experience of Oyst’s turnaround taught us a few meaningful takeaways which we believe are worth sharing. None of these learnings are breaking news and they’ve been taught over and over again. We’re not pretending to lecture anyone but we’d like to share our learnings especially those stemming from difficult situations. We would like to emphasize once more how important trust is for companies in general and for start-ups in a seed phase more particularly.
Place trust in your mission
Our business is B2B2C. We sell a solution to e-merchants who themselves offer it on their websites to end users. Oyst-1 hadn’t really defined its mission and was therefore following self-centered KPIs (volume) rather than client centric KPIs (merchant satisfaction). What are your main KPIs? Business or Customer KPIs? It’s a traditional question for B2B2C start-ups especially at a young age: who is your customer? B or C? Of course you need both but you won’t get the C if you don’t have the B! Who do you really serve?
One thing we did was clarify our mission and who our customers were. We are here to help and serve e-merchants. That’s the Why! (Thank you Simon Sinek). How we do it is by boosting online conversion through e-commerce simplification. The What is our tech.
When facing major difficulties, work on your mission first. Our experience shows that it gives a sense of higher purpose to all employees and it’s the glue that is going to create loyalty, resilience and collaboration towards a collective goal. A mission people trust is something you can hold onto in bad times. As an example, when the company had a near-death experience in September 2018, a reminder of our mission to help e-merchants during a daily meeting helped us to synchronize and prioritize action between techs, ops, account managers and so on.
The entire team that chose to stay after the triple storm did fully trust the mission to serve and satisfy e-merchants. This created a tremendous amount of energy and made all later changes possible. Reworking our mission was the layer foundation of Oyst-2.
Create trust among people
According to our experience, the second layer of trust to re-establish in a distressed company is the trust between people. Coming from a very vertical organization with communication issues, the most desired outcome is trust, collaboration, co-construction and a bottom-up approach. Creating a horizontal organization doesn’t happen overnight but our experience shows that is not only possible but much easier and faster during difficult times. The ingredients we found out to be the most useful to reinstall trust are:
1/ Installing accountability and responsibility through a bottom-up approach. It’s no longer the CEO who decides projects, roadmaps, budgets and so on but the team. Accountability and responsibility come as a bundle and you can’t have one without the other. Employees truly have the power to change things if the environment favors it. Empowering people to launch their own initiatives, and projects will liberate energies in amazing ways. For example, Joshua (sales) created the “merchants wall”: one article of each e-merchant displayed in the office as a physical reminder of who we serve and our client-first approach. Enzo (product) launched the “automation day” initiative: the entire team working a few hours in multi-disciplinary teams to identify and automatize time consuming or low added value tasks. Beyond the practical value of this initiative, the team building value is tremendous.
2/ Transparency & feedback culture: you can’t withhold information or feedback if you want people to truly collaborate, which we implemented through a culture of verbal feedback. If someone sees that a colleague is going in the wrong direction or is about to make a mistake and remains silent about it, then he is as responsible as the person making the mistake. An example about transparency in the company: the fundraising round had its own visual board in the office where the status of progress with VCs and Business Angels was displayed in real time with reasons for no-go.
3/ Collective intelligence and co-construction: It’s OK to fail but only if we fail collectively. i.e. it’s no longer possible to fail solo on a project that one is running solo without involving his colleagues (you can also replace “fail” by “succeed”). A project owner benefits from the team’s collective intelligence by having his own project challenged at each milestone. This co-construction maximizes chances of success and increases adhesion to the overall mission and company objectives.
We learned two major things during this cultural pivot:
- the strength of an organization is a multiplication of two factors: quality of the people x strength of the bond that unites them.
- these 2 factors (quality of people and bond uniting them) reinforce each other: the stronger the bond between people, the more they share, the better they become individually and collectively.
Create trust in your product
The product should be about your customer not yourself: We were overwhelmed during Oyst-1 by the fast growing volume figures and overlooked what was important when launching a new product on the market: are your customers happy?
This is why we decided to switch from volume-based KPIs (TPV) to satisfaction-based KPIs (NPS). This can be tough and at times counterintuitive: it means you need to forget a bit about your revenue (after a long period of product building) to make sure that you are serving your customers perfectly. We put all those things on the wall, and repeated them again and again in our team speeches, and in our roadmap and feature prioritisation.
Stabilizing before optimizing, even if sometimes the economic equation (or your customer’s) tells you otherwise. A new customer first wants to be sure that your product does work. Only then can he assess if it delivers its promises. Improving our documentation, testing, bug fixing (even minor ones) through a rigorous lean approach of our product was key to Oyst’s comeback. Although very minute work, our churn rate went from double digits to zero.
Trusting your product works well is also crucial for team motivation. Our sales force became much more convincing with clients and prospects. The Operations team, who oversees customer integration, was put under much less pressure to test every single possible case and be wary of some random production issue. Our team felt proud and empowered when our product started to gain a level of quality that was deemed by our customers as significantly above market standards, fueling their energy and ambition to replicate with every e-merchant.
Build on something you master. This sounds quite obvious but you need a product well documented and tested, basically a product you can trust. A lot of things have been written about quick and dirty product testing in order to ensure quicker iterations. Quick and dirty product testing is one thing but when you start to grow your customer base, you have to switch to a more durable product mindset. Moreover, it is crucial for making later development and feature improvement possible to build on something you can trust. We divided feature development time by 2 by working hard from an eventually clean base.
Earn your customer’s trust
The value you create (or destroy) for your customer is superior to the value you create (or destroy) for your company. (Thank you Kevin Kaiser). Once you genuinely believe that, then you are ready to sacrifice some of the short run volume, turnover, margin in order to protect your customer and create long-term value. As our dear friends and lean management experts from Operae Partners would say: “build a quality wall”. As an example, in July 2018, we collectively made a decision to unplug our technical solution from our 160 clients, therefore bringing our turnover down to zero. The V1 product wasn’t fully finished and a few minor bugs and imperfections were causing client’s insatisfaction and churn. It was a bold move but after having fixed the product and replugged the solution V2, our merchants were thankful and quickly excused the initial frustration from the unplug. We would rather clean our own mess while protecting the client (and lose revenue) than expose the client to a potential insatisfaction.
Trust your customers, listen to them and co-construct your product: This sounds very elementary but more often than not, when caught into operational action and with difficulties to deliver a product, startups can ignore what their customers say in order to go faster.
During the few months between the V1 and the V2 of our product, we had numerous roadmap discussions with our clients. By prioritizing the features and specs that had the most value for them, we maximized their satisfaction and reinforced their trust.
Under-promise, over deliver: Making exaggerated promises about your product benefits generates at best frustration from deceived customers and at worst a no-deal from lack of trust. We inherited from customers’ defiance due to exaggerated promises from Oyst-1 and took an opposite standpoint: under-promise, over deliver. For example we did not improve technical integration time overnight but one thing we did was being very transparent and even pessimistic about integration time (and keeping customers informed every step of the way). We managed to be either on time and sometimes early compared to schedule which triggered client satisfaction (even though we weren’t specifically faster). Under promising allowed us to manage client expectations and increase their satisfaction when we over delivered.
Earning your customers’ trust will result in your customers following you blindly. We experienced it first hand during our recent financial difficulties. After the VC backed off at the last minute after term sheet and due diligence, our biggest customer offered to finance our company (thank you Michael, Julien and David). When we announced that Oyst had to cease its activity, we received love letters from a great majority of our customers who also claimed they would follow us should we somehow re-start a similar business. (Thank you Louis, Marc, Adrien, Stéphane, Carlos, Marion, …)
Earn your partners’ trust
(investors, suppliers, wider ecosystem)
Be genuine and fair: Sounds cheesy? Does it remind you of your mum’s recommendation? You’re damn right it does! In times when you’re in a position of strength, don’t step on other people. When you’re weak people will remember you’ve been fair in the past. The opposite is also true. We experienced it during our fundraising tour, when some VCs showed reluctance following Oyst-1’s attitude.
We learned in Business School that Cash is King but we should also have learned that Reputation is Queen. Oyst died from a lack of cash but it’s reputation issues which created the difficulties during the financing round. We did no less than 110 meetings with VCs and Business Angels (no, there is no typo: one hundred and ten) during our fundraising roadshow. While some VCs said no for very valid reasons (not enough sales traction yet, questions on economic space) sometimes after investment committees, most investment funds either closed their doors or dropped after a successful due diligence because of a reputational risk. We don’t blame them and still learned that the transparency card we played was the right one to play.
Trust goes both ways: Choose your partners wisely and don’t put all eggs in one basket. Experience shows that we placed our trust into the wrong financial partner. After a few months of fundraising roadshow, we finally closed a €1.5MM seed round led by a VC with whom we had been having discussions for more than a year (we even spent months working on a POC for them and for free). At the very last minute (2 days before salaries pay day), the VC dropped despite term sheet and successful due diligence. We find it ironic that after months of re-establishing trust towards all parties involved (and a couple of near death experiences along the way), it’s misplaced trust in a financial partner that killed us.
Leadership’s mission: ensuring trust at all level
We believe that ensuring trust at all level (mission, people, product, customers, partners) is the leadership’s main responsibility. If done right, then trust in leadership will only come as a result. In our case, it was not enough. Could we have done more during these last 12 months? Probably. Was the situation too complicated? A vast majority of people thought we would never be able to come back and raise funds. We proved them wrong … but then we proved them right. Ironically, most recognition came for Oyst at a time when our product was flickering and today the final whistle is blown with actual clients praising the product and the team.
It’s a failure. Fact. It was also a hell of a ride, an incredible human adventure and an emotional roller coaster. Oyst is dead but we bet the bonds created this past year will last a lifetime. We will always remember the moment when we announced to the amazing 15 people team that it was over and that we had to fire everyone. They applauded. We fail and fire 15 people and 15 people applause…
We will also remember our KPIs from the last 9 months: 50% monthly growth, zero churn, high promoter score from clients (NPS>60) and users (NPS>70). We will remember the love letters from our customers and their willingness to start a new collaboration with our team should we start a new company.
If you Fail, Never Give Up because, F.A.I.L means
“First Attempt In Learning”.
Quentin Vigneau & Thibault Monnoyeur
Team: An immense thank you to the most resilient team ever! You are amazing, we learned a lot together and we will be in touch soon: Benjamin, Christophe, Cyril, Enzo, Isabell, Jérémie, Joshua, Julien, Marine, Matthias, Ménaïs, Nicolas, Onis, Rémi, Roman, Sami, Willy and Yann.
Thanks to all past employees and interns who contributed to the project (especially Julien for his punchlines.)
Clients: Thanks to all our clients who believed in us. Thank you for your time, your collaboration and your valuable inputs. We are sorry we can’t continue to offer you our service: Louis from L.H., Adrien from V., Clément & Pingki from J., Michael, Julien and David from P., Marc from LRDLC, Marion & Nicolas from J.D.O., Mickaël from P.D., Carlos from L., Stéphane from P.H.S., Benjamin from L., Nicolas from A, Christophe from E.L., Pierre from L.C.L., Jérémy from M., Nour from S.D., Virginie from V.C., Nicolas from 1.M., …
Suppliers: Thanks to all our suppliers who helped us during difficult times: Philippe & Elisabeth from A., Jordan & Shayan from A., Kevin & Nathanael from B., Louise from C., Elsa & Pierre from C.F., Marc & Sidi from D., Guillaume from F., Alexandre & Pierre-Antoine from F., Celine, Olivier & Samy from M., Olivia J., Marc & Thomas from O.P., Antoine from S., Arnaud & Matthieu from T., Marion & Matthieu from W.
The best board member ever: Hats off and a million thanks to Martin who has been there every step of the way. We will be in touch soon!
VCs and finance world: A lot of people in the finance world actually did love us and we would like to thank you for your help. Stay tuned, we will be in touch: Alexis, Benjamin, Charles, Gabriel, Jean-Christophe, Joseph, Julien C., Ludovic, Rodolphe, Thierry.
Business Angels: Against all odds, you chose to place your trust in us. Even though we ended up not taking you up on your offer, we would like to warmly thank you: Andrew, Antoine, Aurélien, Barthelemy, Francis, François, Frank, Gaspard, Jeremy, Mandy, Martin, Vincent, Yann.
Wider Ecosystem: Thank you for your time, help and advice. You didn’t have to help. Life is long and we will remember: Alexandre, Aldric, Camille, Charles-Henri, Cyril, Grégoire, Guillaume, Louis, Justin, Rodrigue, Sébastien.
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