Insights on growth from Hiroki Takeuchi, CEO GoCardless.
This September, Startup Victoria’s Growth Club was delighted to host Hiroki Takeuchi—Co-founder and CEO of GoCardless—who was out from the UK touring Australia.
Startup Vic’s Growth Club is a peer-to-peer group for local high-growth startup founders and CEOs to promote professional and personal develop through the sharing of challenges and advice. It takes the form of monthly peer dinners, bi-monthly education events, and quarterly retreats.
Growth Club events are a rare opportunity for Victorian scaleup founders to hear about and discuss the struggles and successes of building a business, uncensored. At one of this month’s education events, Hiroki shared his insights on the most challenging aspects of scaling a startup, and advice on how businesses can survive the challenging ‘teenage phase’ that claims so many.
“Building a fast growth tech startup is hard, and learning, sharing ideas and gaining support from peers is essential to success. I wish the Growth Club had existed when we started Culture Amp 9 years ago!”– Douglas English, Co-founder and CTO of Culture Amp.
“We can learn from each other and help each other within the community. That’s the best thing, coming to an event like this.”– Dominic Pym, Co-founder at Up
The GoCardless story
In 2011, Hiroki and his co-founders realised there wasn’t a user-friendly way to take recurring payments.
Most online payments were credit or debit card-based. Credit cards, however, get canceled, lost or stolen, and declined, causing pain for businesses that needed to take recurring and regular payments. Bank-to-Bank Direct Debit is the better solution but historically it is highly manual, requires a relationship with the banks, the technology is often legacy technology and near impossible for small businesses to implement. The co-founders saw the potential in Direct Debit, and transformed it from technology, into a product.
The GoCardless product put them on the radar of Y Combinator, the famous startup accelerator from Silicon Valley that coached the likes of Airbnb, Reddit and Dropbox in their infancy. This meant that the team was in good company, with access to some of the best minds in the industry.
“I loved it. As one of the more infant businesses, to hear the discussion helps me feel prepared for the future”– Frankie Layton, CEO and Founder of the Dirt Company
The team raised their first million and moved into the second chapter of growth, but Y Combinator couldn’t prepare them for everything that would be thrown at them as they scaled through the ‘teenage phase’ of growth, which many businesses don’t survive.
Know your market, then serve them
It might seem insane to turn down a customer who pays, but it’s often the right thing to do if they aren’t a market fit. Otherwise, Hiroki says, the company is pulled in too many directions, which limits growth long term.
Some of the earliest adopters of GoCardless were crowdsourcing platforms, which were growing quickly at the time. These partnerships drove a lot of the early growth for GoCardless, but a bad product fit meant that a lot of the resources went into building features for crowdfunding platforms that didn’t improve the product overall.
“It’s interesting from the growth point of view to hear what he’s gone through, trying to figure out how to make a product that’s suitable. It’s quite difficult to do, I found that quite relatable.”– Mickey DeWildt, COO and Co-founder of Influx.
It wasn’t sustainable. In the end, the team had to make the decision to wean themselves off the crowdsourcing platforms to find their best market fit.
Hiroki said that the crowdfunding revenue was addictive. He would avoid this kind of relationship in the future, but acknowledges if it’s between this and keeping the lights on, then it’s an obvious choice for any young startup.
Avoid it where you can. Smaller markets let you grow faster.
When experience counts
When GoCardless was founded, Hiroki and the other founders thought they would challenge the way everything had been done before. This, he says, led them to disregard the value of experience.
It wasn’t until they made some bad choices (very smart graduates with no experience) that they changed the way they thought about looking for talent.
The turning point for them was their first big hire, Carlos Gonzalez-Cadenas then the CPO.
“When you’re in a business you’re just in the bonnet the whole time. It’s great to look up occasionally and learn what you can from the people around you.”– Peta McLaughlin, General Manager and Founder of ETM.
Carlos brought years of experience from his time as CPO at Skyscanner. With Carlos, GoCardless was able to avoid making mistakes that would have otherwise impeded the growth that has pushed them into maturity.
Trying to be disruptive in everything that you do isn’t sensible. It’s better to focus on making a big change in your area of expertise, rather than trying to innovate in every part of your business.
Seed funding, the first million, is not the hard part. At this stage, the business is looking for a limited pool of local money, but it only takes a few keen investors to cross the million-dollar line.
The next stretch, between $5 M and $20 M, is much more challenging. At this stage, most companies don’t yet have the notoriety to pull funding from international VCs. This stage can be particularly challenging for Australian businesses, where the total pool of VC funding is $700 M, well behind what it is in the US and UK.
Outside investment is driving growth in Australian VC, but this is of little comfort to the founders in Australia who are chasing funding right now.
This is a broader systemic problem and one that Hiroki doesn’t have an easy answer for. Where possible look for a VC who is supportive, who believes in you, who will challenge you, and who is committed.
“It was great to meet some of the local Founders in Melbourne. What really struck me is how much energy there was in the room, how many shared challenges everyone faces. It’s amazing to see how much the ecosystem seems to be developing here.”– Hiroki Takeuchi, Co-founder and CEO of GoCardless
Hiroki says the most useful advice anyone ever gave him, in his time at Y Combinator, came from Sam Altman who told him: “Startups are like riding a wave. So long as you don’t crash out and die you will be successful.”
Any startup that avoids the common pitfalls can weather the tough times to become successful. Build a good product, find a market fit, and hire experience and you will survive.
In other words, ride the wave.
Writing by Sebastian Rumore, a content writer who specialises in telling the stories Australian start-ups. If you have a story to tell, get in touch at email@example.com.
Photos by Seam Media.
Video by Kris Vanston, Marver Media.