Growing a startup through ups and downs

Interview with Sandi Lin, CEO & Co-Founder of Skilljar

Sandi is a B2B founder who has raised $20M+ in funding for her company, Skilljar. Sandi has experienced the range of highs and lows as she’s led Skilljar through its evolution to success. We sat down with Sandi to hear her perspective on what founders can do to manage this rollercoaster and position themselves for success.

Q: What made you decide to be a founder?

A: I have always been the type of person who likes a challenge. I had an amazing experience at Amazon, but I was ready for my next challenge, so I decided to take the leap. I got comfortable with not having a salary for a while and making lifestyle changes to accommodate. I didn’t have an idea or a team, but I had the desire to start something. This was back when being a founder wasn’t glorified like it is today!

“Lean Startup” was a big thing back in 2013; the basic principle is your plan is going to be wrong. I call the first two years of Skilljar my first two failed startups. I signed up for the journey and I was realistic about what that meant. This was back before #MeToo and funds like January Ventures. No one wanted to invest in a female CEO in Seattle who was building enterprise software at the time.

Q: Who did you turn to for support?

A: In the really early days, my brother in law was very helpful. He had started a company 6 months before me. Some of my coworkers at Amazon who had started things in the past were also really helpful. Having one or two close people that I could really be honest with about the ups and downs was key.

Q: At what point did you know it was starting to work?

A: You’ll never know. Product market fit isn’t static — you can get it and lose it. In the early days, I thought in 60 day chunks. Every 60 days I would ask myself if I had enough conviction to keep going with this. Doing customer discovery is great, but getting customers to actually pay you for something is what matters.

The first time I thought we had something meaningful was when we were 5–6 people, 2 years in, it was early 2015, and we had pivoted towards an enterprise model. We started getting inbound interest from big companies. We were invited to participate in a bake-off at a Fortune 500 company. They later shut down the whole business unit so the deal never happened. This was 2 years in when we were struggling with a lot of ups and downs — we didn’t have much in the way of resources. Even angel investors then told me I couldn’t quit.

When we raised our Series A, that gave us external validation from Silicon Valley. After having toiled in obscurity in Seattle for years, it was meaningful and also gave us validation for customers. Eventually, having 50 companies started to feel like a clear signal and big enough sample that we were onto something.

Q: Fundraising — which round was hardest and what are your tips for raising in an uncertain time?

A: We have raised ~$20M total. Our next round will be from a growth stage investor.

Each round is hard for different reasons. The whole thing is awful and time consuming. The seed round was probably the hardest. There was an infinite supply of seed stage companies. Seed investing was very hyperlocal. I had great Seattle angel investors, and I could barely get meetings in Silicon Valley. There was so much pattern matching. The other reason it was hard is that I had something to lose. By the seed round, I had conviction there was something worth doing, 4–5 team members, customers that had put everything on the line, angel investors. It was psychologically hard — we had a lot to lose.

I decided from there that I would make sure to have undeniable traction when I went out to raise our Series A.

Q: Do you have advice for early stage founders now? How do you balance extending runway versus hitting metrics for your next round?

A: You have to make decisions that are authentic to yourself. I’ve been told by 99% of investors that I won’t succeed because I won’t move my company to the Bay Area, or that we’re not growing fast enough. Now I’m told that I’m responsible. You have to do things that are true to yourself.

On the growth side, unless you are extraordinarily lucky, you won’t hit your growth targets. Every playbook of what investors are looking for will go out the window. Your goal is survival. Given the situation now, there isn’t going to be a perfect growth round for investors.

Growth for too long has been treated as an input, not an output. In reality, growth is a lagging indicator of your product market fit. Focus on: do you have the right inputs to generate growth. If you have an engine of growth, you can tell the story of how you will grow later. We’re looking at a bunch of different scenarios now, and then looking at how it would impact expenses.

There are 3 ways to think about being responsible: Grow expenses in line with revenue, or less than revenue. Know what your zero burn plan would look like. There is so much uncertainty now. Having a plan for different scenarios gives a lot more comfort.

Q: How are your approaching communication right now in this time of uncertainty?

A: Your investors and your team are looking to you for leadership. Ambiguity creates anxiety. We have been very transparent about our plans and fundraising at Skilljar. I commit to honesty and trust. People want to know you have a plan for various scenarios, but you don’t necessarily need to share every detail. You don’t want to freak people out!

Tactical things I do:

• I send a weekly email on Friday: Top of mind, progress against goals, miscellaneous (new hires, book recs). It takes me 30–60 minutes.
• I have a value called “learn and adapt”. Early stage startups are all about adapting.
• We do a Friday Social Sit Down, and a Wednesday Fun Lunch Question.

Q: What advice would you give to a first time founder?

A: Take care of your own psychology and wellbeing. Everyone is depending on you and you’re being asked to do things you don’t know how to do. Try to take care of yourself, exercise, etc. It’s easy for simple self care to fall by the wayside. I’m religious about my sleep and my own rituals. The company won’t succeed if you’re not in a good place.

Having confidants helps. Cofounders can make a big difference. Sometimes cofounders can be the problem. Often you don’t want to go open kimono with your investors.

In the early days, you are answering help tickets on vacation. You’re taking your laptop to Safeway because you don’t want to miss a chance for a customer demo.

I probably work 60 hours per week right now, which is manageable. I used to do digital free Saturdays, but it’s really hard.

Q: Do you recommend sharing scenario plans when fundraising?

A: For my angel round, I wanted to raise $500k and I raised $1M. For seed, went out to raise $1.5M, and ended up raising $2M+.

Have a plan but signal some flexibility. Investors may know more than you about how much you need to raise.

I’m a first time founder. I was never optimizing for dilution. But we did optimize for partner and firm and clean terms.

Our angel round was poorly priced, so we took an enormous amount of dilution. No company ever died from having too much cash in the bank. It’s a privilege to have options. Just look for a fair and competitive valuation.

Q: How did you connect with angel investors?

A: I know I would hate fundraising, so I set a quota for myself. I decided to meet with one angel investor per week, and then I asked to keep them updated and added them to my list. I sent updates religiously. You need to have 3 non crazy interactions with an angel investor to get them to invest. You don’t need to find the perfect people — set your goal and stick to it.

Q: We’ve heard the advice: Don’t waste a good crisis.

A: I do think companies are taking this opportunity to trim under-performers. It’s a good time to make a cut if you need to. No one wants to be an ambulance chaser.

We’ve had weekly customer only coffee hours each week, asking what they’re seeing and hearing. No one needs another article about how to work remotely. Think about how to be of service to your customers. I’m not a fan of free everything, we’re a business and have jobs to protect. It’s hard for startups to make a dent. Startups are crazy, but enterprises are even crazier right now.