Our new video podcast series My First 16 features interviews with founders and CEOs of fintech companies about how they acquired their initial customers and the hard lessons they learned along the way. Subscribe to the a16z channel on YouTube and follow this show on our podcast feed so you don’t miss an episode.
In this episode, a16z partner Seema Amble talks with co-founder and CEO of Mercury Immad Akhund about the idea of a minimum delightful product in fintech, doing the spreadsheet math on unit economics early on, and how to compete in a category already filled with incumbents.
This transcript has been condensed and edited for readability and clarity.
Seema Amble: It’d be great if you could just walk us through how did you found Mercury and what was the background to starting the company?
Immad Akhund: Sure. So I had this idea for Mercury in 2013, but it didn’t start until 2017. So it was kind of in the back of my mind for a long time. All of these tools that were useful as startups for running your business had improved a lot. When I first started in 2006, everything was really bad. There was no straight there was no Gusto, there was no Rippling, there was no Slack. Everything was quite painful as an entrepreneur. And then there was this kind of 10-year period where things had generally improved. Every one of these categories had had a really strong product, but banking was still exactly as they had been forever. And it just seemed obvious to me that someone would make a better bank product for for startups and for entrepreneurs. It wasn’t until 2017 that I could do it myself since no one else had, and that’s where the idea came from.
Seema: Like so many of our founders, you had the pain point yourself and decided to go tackle it head on. So when you got started, how did you think about the MVP?
Immad: Banking is a utility, right? And there is a pretty high bar of existing players there. And I always had in my mind that I wanted to be your primary bank account. So we slightly simplified it. But I focused on a very specific ICP, 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’s still a fairly high bar. But I felt like I very deeply understood what that bar was. I was very stubborn about a certain set of features that no other bank had done before.
I felt we needed both domestic and international wires. Now there are other new banks that have done that, but back in 2017, no one had done that. And I was also fairly stubborn about wanting to have immigrated immigrant founders support. Because I was an immigrant to the U.S. and I wanted to be able to support people like me. I always felt, yeah, immigrant founders are a pretty large set of founders and I didn’t want to disqualify that segment. So, I had a very specific kind of feature set and spec in mind. 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.
Seema: So you your MVP was actually fairly robust in terms of feature set. It sounds like that was pretty intentional. Was that because this was what you were hearing from potential customers, that they needed a whole set of features or how did you end up making that decision?
Immad: I think it’s important to understand what you’re trying to achieve. I think there’s a set of companies that are trying to do some thing new in a new market that there isn’t an alternative product or there is an alternative but it’s super different. 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 so 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 a kind of new market, new idea. Then , what you’re really testing is does this idea have any legs at all? And does anyone care?
I think as long as you understand who you are, you can kind of decide what makes sense. If you take Mercury or Figma, or those types of things where there are incumbents, it’s a complicated issue problem. You have to spend a reasonable amount of time, sometimes years, developing. I mean, it kind of still is an MVP, I prefer minimum delightful product, but that minimum is just way higher than in a new market.
Seema: I love the minimum delightful product. I love that phrase. So you were working on this for a year and a half, during that time what did what did the company look like?
Immad: We kept it pretty small. 7 engineers, if you include me, one designer and one kinda product slash everything else, who’s my co founder. I’m a big fan of keeping teams fairly lean at the start. We actually raised 6 million upfront, so we had a lot more money, but I think pre-product market fit, it’s better to be sub 10 people.
Seema: Let’s shift gears a little bit into how you found your initial customers and who you decided to target?
Immad: So during that year and a half, I talked to about 100 startup founders. Part of it was like, “Do people actually want this?” and it was actually kind of funny, it was a little disheartening. A lot of them were like, oh yeah, this sounds cool. But they weren’t that excited about it. That’s one of the slightly funny things about talking to customers before you have something like that. It’s actually hard to really learn because 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 focused on going to the startup community, the people I understand and they tend to care about product. And 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. We did a beta, before we launched, a lot of time during the beta, it just basically didn’t work. But we were kind of testing it with some real customers. And they weren’t putting all their money into it or anything, but it was useful. A lot of those people were people that I 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. They’re all like, perfectly in the ICP, they were all early stage seed stage companies. And obviously, they, to some extent, they liked me, so they were willing to kind of try out the product.
Seema: You said you weren’t necessarily getting super strong feedback from a lot of the initial customer conversations. What empowered you to push through?
Immad: There’s this concept of 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, if you look at the reason people use things, sometimes people use something new, because it’s a super strong pain point for them. And then they can often describe that pain point and say, 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’s in that group. Some people really hate their banks. Obviously, we can relate to that. But most people have a bank account, and at the point before Mercury launched, I don’t think many people could imagine a much, much better experience. And I actually feel that a lot of successful companies, they are in that bucket. Take Slack or Zoom. All of those things existed. There was plenty of instant messaging and plenty of web communication things, they just all kind of sucked. So when you came out with a much, much better product, it got people really excited. But I think you kind of need to see that.
Whereas if someone describes a much, much better product, it’s hard to get that excited about the description of a better product. 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.
Seema: You ended up having an amazing launch. What would you attribute to, to that? And how did you convince customers to trust you, with their money?
Immad: There’s a few things 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 winning people’s trust, because using a startup to do your banking is quite a difficult thing to convince people of. So there’s a bunch of factors. Number 1, in 2019, the fact that we were launching a full bank product was very unusual, like no one had really done that in the business setting. So the meme of the idea was very shareable and likeable and people were very frustrated with their bank.
Number 2, we had a very credible set of investors. So yeah, Andreessen Horowitz was a seed investor. But along with Andreessen Horowitz, we had about 60 initial angel investors and some funds. So we had these people that lended us their credibility and brand to some extent. And then number 3, we had a lot of time to polish things, partly because we were trying to get these cards working. And we had to do like two bank partnerships. So we had a lot of time to make it. So the front page was very compelling, the initial signup experience was very fluid and easy. So the initial people that went through that experience 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.
Lastly, we were targeting this fairly tight knit community, right? Founders follow each other on Twitter, we are in WhatsApp groups, in Slack groups. There’s a lot of ways that founders and investors talk to each other. If you go and sell something to a bunch of dentists, they probably don’t have that many dentist friends. Whereas, every founder has 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 lead to like a pretty successful launch, and something that compounded the trust.
Seema: And how did you think about the, you know, sign up of customers and collecting feedback? Was there 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?
Immad: If you have a successful launch, like we did, it seems very obvious what is like hair on fire? And I would say that say the first six weeks, we thought sending international wires was working, but it wasn’t working. And so we obviously we were trying to fix it from day one, it but it took 6 weeks for it to actually become a smooth working process. So a lot of the initial 6 months was like, you 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, 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.
Seema: Let’s shift gears a little bit and talk a little about scaling up. So you’ve got your initial number of customers. I’m curious when you actually started investing in a go-to-market effort?
Immad: So for the first year or so, it was kind of this organic growth. I struck up some partnerships and we did some stuff but there wasn’t strong kind of leadership or even that many hires around sales partnership or marketing. And that was still working fairly well for us even a year later. The first hire shouldn’t be a head of sales. 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, we hired our first salesperson and we hired our first brand marketing person, and it was much more with the idea that they would also become managers as things worked. And then we just kept kind of incrementally adding. It was only about a year ago that we hired a VP of revenue, and a year and a half ago that we hired our VP of marketing.
Taking a function from zero to one is something that I think should be founder-led. And then once you’ve built out some of that function, then you can think about more like leadership roles.
Seema: I’d be curious to learn a little more about the pricing journey you guys had at Mercury and how you made those decisions on what to charge customers?
Immad: Yeah, pricing is kind of weird for Mercury. So the way we have pricing is actually, for the revenue we do make, how much do we pass over to people? So the rewards on credit card, for example, we have 1.5% cash back and that’s kind of like a pricing question or interest rates on deposits. And we have a treasury function, and we do have fees around that.
I think it’s good to have a philosophy around pricing. Amazon has this famous philosophy, right, your margin is my opportunity. So they always wanted to be the cheapest out there, that was always their philosophy. For Mercury, our philosophy was always, I don’t want to be the best pricing. I think it’s one of the mistakes that fintechs make is they become differentiated through pricing power, like we’re gonna give away the most margin possible. Whereas Mercury’s main thing was, hey, we want to be a really good deal. But we mostly want you to use us because of product. 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, because it gives you enough margin that you can do distribution and all this other stuff. Whereas, 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 worked for Amazon.
Seema: There are two interesting things that you mentioned there. One, 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 and just giving away product for free. And to your point, it almost seems like it’s a much stronger signal of product market fit or just that you’re truly delighting customers. If they’re saying, it’s not the price that is the reason I’m adopting this, I actually love the product.
Immad: I mean, that’s one of the problems with pricing first companies, someone else will come across and come by and undercut you. Then 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 undercuts you on pricing. Yeah, I think pricing is a very dangerous kind of methodology to compete on, it’s much better to compete on some other dimension.
Seema: You’ve done this multiple times before, if you were to compare it against rough map or one of the other startups, what have you learned through the journey. We’d love to hear any advice that you have for early founders.
Immad: To build a really big company, you really need a lot of customers. So you think that’s much easier to do when the demand is so high that people are coming to you. And it’s much harder to do when you have to kinda convert one person at a time and force them to use you, people really have to want to use you. I mean, obviously not every sale is going to be easy. But you have to have this kind of groundswell of demand. So you really have to think about, what can I do do have such a good product that creates that groundswell, which is I think product and distribution have to always kind of come together to some extent, especially when you’re really early.
Seema: I’d be curious how much did you actually think about unit economics and the CAC? Or was it more like, let’s get this product out into people’s hands and figure that out later?
Immad: No, I did the spreadsheet. I don’t know how convincing these things are really before you, you’ve tried them. I really think it’s very hard to know, things until you try it, like is the conversion rate of your sales pipeline gonna be 5% or 1%? And, obviously, the numbers are completely different between the two of them. But I mean, the other problem with any of these distribution mats is what you can do at Day Zero is not going to work when you have 10 million ARR.
Seema: I’m curious if you have you looked back at the spreadsheet. And how correct was it?
Immad: I mean, I’ve looked at my seed deck quite a few times. And, I mean, it’s mostly accurate. There’s some assumptions that were incorrect. But yeah, I haven’t looked at the projection math.
Seema: Last thing to wrap up. If you had to give one piece of advice to your earlier self on finding and winning your initial customers, what might that be?
Immad: Depends on how much earlier we go to my earliest self. I was very much an engineer and kind of worried about running sales processes and things like that. I think the thing that I would tell that person and I tell other founders is, I think it’s better to think about sales as a numbers game. It’s like how many people do talk to? How good is your conversion rate? And that equals how many sales you make. I think when you think about as an engineer, at least when you think about it more as a numbers game, rather than a kind of an emotional sales game, I think that’s when you can be more successful at sales. You need to run a process, you need to run a pipeline and that’s just what you have to do to be successful.
Seema: Well, thanks so much. It was great to chat with you. And thanks for sharing all these pearls of wisdom.
Immad: Thanks for having me, Seema.