This is part two of a two-part conversation with serial founder and pioneer of “digital identity” Garrett Gafke on how he built and launched his most successful startup, IdentityMind. Click here to read part one.
Recently, I sat down with Garrett Gafke to talk about how he built his startup, IdentityMind.
The conversation was so packed with nuggets of entrepreneurial wisdom, that we ran out of time halfway through the script.
Garrett was kind enough, however, to take the time out of his schedule to sit down with us again, to create part two.
In part one, we discussed how Garrett validated his idea, timed his product and the beliefs and values that make up his entrepreneurial mindset (if you haven’t had the chance to read it you can see it here).
In part two, we delved into onboarding early adopters, leadership & the people behind his startup, how he maintained a positive company culture and the key lessons he took away from his experience.
As I mentioned in part one, the actionable advice Garrett shares from his 25 years of experience in Silicon Valley is a must-read for any founder beginning their startup journey.
R: Garrett, last time, we were talking about your entrepreneurial experience more from a mindset perspective, not only with your company Identity Mind but with all the products you worked on.
Today, I wanted to focus more on execution, – starting with your early adopters. What was your process; from onboarding early adopters all the way through to growing the company over the subsequent years?
G: These things are always trial and error.
We didn’t have all the right questions, particularly with early customers.
In terms of knowing the product-market fit, it’s important to reiterate how ahead of the market we were with IdentityMind.
We were doing different things to ensure we could deploy the platform into just a pure e-commerce payment space vs. overall Know Your Customer (KYC) – which is where the team and I wanted the business to go.
We wanted to get KYC solid but this was a fragmented area and we were changing that. As well as the AML functions of the platform which was more forward-thinking with lots of homegrown solutions being thrown at it.
To really prove the business we needed data, we needed transactions to make the platform better and ultimately a better network effect to really bring value.
Once we’d gone out to market, it started to move very quickly.
“A lot of getting those early customers, and building our network, was just brute force and begging friends who had companies to use our service.”
Not an unusual strategy as your network is important.
Slack is probably the most famous example of this. Their founder Stewart Butterfield has that well-known quote:
“We begged and cajoled our friends at other companies to try it out and give us feedback. We had maybe six to ten companies to start with that we found this way.”
So, we followed a similar tac and were able to lock in on the pain points and get a shot at solving them.
During this time we also proved the pricing model (which changed around 20 times over 10 years)
We were very early in the crypto market, we worked with companies like Coinbase, Circle, Simplex and handled lots of the ICO’s during that craze, it was unfortunate as no one else would touch them.
I mean all of them, felt cryptocurrency was voodoo. Interesting now as it has really gained mainstream appeal.
They were up and coming, just like us. And they were getting told no, just like we were. The life of the entrepreneur and founder!
We were a little startup but we had a very robust platform that they needed.
They needed that holistic view of KYC, onboarding, AML, etc.
We’d also taken that holistic view to the banks and got them to understand how our platform could help them.
The message here is that you’ve gotta have the mentality to leverage everything.
We were very creative in the different ways we handled going after different businesses.
We were going after payments companies but also focusing on the fintech market as a whole.
The challenge there was really in going after fintech. We were targeting the people using their devices to sign up for fintech services.
“We got told no left right and center because we weren’t backed by big banks.”
The old guards always wanted to hear that a large bank was using you. However, this was not our focus and would prove to be more important as time went on.
Apart from the crypto industry, at that time having information on users’ reputations was very important to them.
They’re trying to prove their integrity with the market, in the new world of blockchain that was being built.
We timed the product well in that respect.
Rui: Let’s change gears, Garrett. My next set of questions are mostly related to the team. Who did you have with you in the early days of IdentityMind? What was the team composition?
G: The team composition in the early days was a couple of engineers and a strong product person. Then we had some outsourced functions in the form of cryptographic engineers – some people out of Stanford were helping us in those areas.
They were getting the work done, they understood how to do it, and we were able to grow their skillset and their careers.
Meaning that these people we brought with us in the early days ended up in C-level positions with us.
Our CTO, CPO, Chief Data Architect were all people who started with us in a junior position. They were truly amazing and just needed the right type of leader to unlock them.
They were hungry and forward-looking enough to evolve into those executive roles.
“We kept the primary team together through multiple fundraising activities, acquisitions and evolutions of the business.”
I think that’s a very important aspect that directly affected the culture we were able to build into the company.
There was always a sense of purpose and passion within the company – it kept everyone rowing in the same direction.
The other important part of early hires is ensuring they know what they’re signing up for.
It’s very difficult for people who’ve come out of a large company with a significant structure and resources to take on a role in an early-stage startup.
For example, if you onboard an engineer who’s spent the last 20 years at Cisco as your first or second hire, they’re going to find it tough at first. After all, they’re used to that paycheck always being met – they’re used to a certain structure.
That’s a very different environment to the one we see in startups which is that of “see a problem, fix a problem.” Or, as I like to call it, overcoming business challenges in the chaos.
R: Absolutely. It’s a vastly different mindset.
And it’s not that the person doesn’t have the skills to do it, but with considerably different resources, the game changes a bit. I have a bunch of follow-ups already.
The first thing you mentioned is the team growing with the company. Your early hires turned into great executives because they were hands-on, they knew the company from the get-go and had a great leader.
But some will argue that knowing when to replace someone on the executive team according to the startup’s stage is also paramount to success.
Do you believe that a leadership team is better when they start at the bottom, doing the operational grunt work? Does this make them better equipped to handle the leadership role vs. a college graduate who comes straight into a management role?
G: Wow. That’s a tough one.
So, my grandfather always used to say, it’s kind of like a mailroom mentality. You start in the mailroom, you learn the operations. Then you move up and do the same at the next level because there’s a lot to learn in these organizations.
I think it just depends on where you are in your career. If we focus back on the first time founders, first time CEOs coming out of college, there’s a very different maturity that goes on, some have it and others may work at it and learn it.
I think you’ve seen this through businesses that have been very successful from the early days.
Google’s an interesting example where Eric Schmidt moved in as the CEO.
While Sergei, Brin, and other individuals were focused on engineering and other different areas, that allowed them to step into those roles as they matured and really understood the business.
It’s a very difficult question to answer because it’s very much based on the individual.
I’m sure there are individuals that you’ve met, coming out of college that are incredibly mature, they’re just that kind of person.
That being said, I can tell you that no one is born ready to lead a small, medium, or large organization.
Elon Musk didn’t just wake up and become a leader, he works on those things. As do all who work with him. The team is critical to the process.
As an entrepreneur and founder, you will actively work at many things you do, including being a leader. It’s like I said in our previous conversation:
“The entrepreneurial journey is the largest self-exploration you’ll ever do as a human.”
So, do you just roll out of college and do it?
Many people do, and many of them are successful. It’s a “right time, right place, right person” situation – the entrepreneurial holy trinity.
It’s also one of those situations where investors put money into the individuals and teams that they believe in – Reddit’s story is a prime example of this!
They know that as the founder, this is your baby and you’re uniquely qualified to handle it correctly. And they want to make sure you have the opportunity to see it through.
Entrepreneurs who aren’t ready for that opportunity, that CEO role, often develop issues with ego at this point.
That’s why, as an entrepreneur and founder, you need to have a boatload of confidence, but also an equal amount of humility to balance it out.
R: Let’s move on to the second thing I wanted to follow up on, which was the product person you had on your team. We talk a lot about product at Altar.
In fact, product reasoning is at the heart of our value proposition. Not only does the product have to solve a real problem, but it also has to provide an amazing experience in doing so.
15 years ago, when the internet was still in its infancy, there wasn’t as much importance given to product.
Firstly, because the competitive landscape wasn’t nearly as crowded.
Firstly, because the competitive landscape wasn’t nearly as crowded.
Users were also willing to tolerate an app that had slower load times, bugs, etc. As consumers, our standards weren’t as high.
Nowadays, if you have to wait more than 2 seconds for something to load you click the back button. If you’re using an app and the experience is not smooth and straightforward, you’re on the App Store looking for an alternative. The importance of a product is obvious to everyone these days.
When you were starting IdentityMind how important was it for you to onboard a product person from day zero?
G: It was critical.
The person who fills that role has to be able to share and see where the vision of the business is going.
I was lucky to have someone very disciplined on the product side for us. I’d also come from the product side. I was already kind of a nerd in that area, I’d been around a lot of good product people and understood the basics. However, I still was not solid enough to be in the details.
“Our product person was a key player and critical in making our very extensive platform work.”
It comes back to bringing in those foundational people early and growing them through the process.
R: It’s great to hear that advice because we still see a lot of cases where founders take their business idea straight to a developer. They hand over a list of features that they think are relevant without considering the users real needs, they just assume.
G: You’re really touching on a key point here. It’s something we still see today which leads to lots of work for the company down the road to unravel.
There is a problem as well, that even if you do bring on a product person, many of them only understand how to do requirements.
You have to teach and coach product people to go into a startup process and say, “let’s go through market fit, let’s go through the addressable markets, let’s go through how we’re going to deploy, let’s go through the user journey and a customer experience.”
That’s actually not normally what you see from early product people. That’s what you start to get from more mature product individuals that have been through a few of the journeys.
You know you have a good product person when someone from the company says:
“We need X feature for the platform, it’s a must-have!”
And they turn around and says things like:
“Great! Is it deployable across all customers? Is there revenue to be generated from this feature? Does it help to improve the users’ experience?”
You start to get into the typical business dynamics.
So, it’s really important to lay the foundations of a great product team. Also, that initial product person can be a great filter. But to have any chance of being successful you have to be able to work closely with them. As with any early hire.
R: Perfect.
Now, the last follow up on this first question.
You mentioned culture and you talked about being able to maintain culture. And I mean, the environment when building the first version of the product is a vastly different environment than when the company is raising Series D.
You raised over $25M with IdentityMind. How were you able to maintain the culture as IdentityMind grew and evolved?
G: It all starts with you. The Founder. The company is a full-blown extension of you.
You have to bring the same values that you have in your life, in your family, to the startup.
Then, you want to bring in people in the early days who have similar values to you.
Then when the next round of hires comes along, they will share those values and thought processes and the culture will spread to them that way.
“If you culture right, you’ll get to a point where the company’s grown but it’s still like a family. There are 100 or 200 people and everyone is taking care of each other.”
I mean why would any company want to have a culture where people say bad things about each other like they want each other to fail. It makes no sense. It’s human nature, unfortunately, but it makes no sense. You also must see those who do not fit sooner and act on it.
These things start at the top and from within. And it’s as much about nurturing the positive as it is about not tolerating the negative.
That’s number one.
And then it’s about maintaining it.
The way I did that would be to talk about it all the time. Every meeting we had, from a small group meeting to an all-hands, I would stand up for 15 minutes and talk about it again. Beyond talking about it, I always showed it in my interactions, meetings, and personal attention to each person.
Here’s why culture is important, why diversity is important. Here’s why you should take time to reach out to everyone in the company as an individual.
It’s the personal things, like a handwritten Christmas card to all the employees, a phone call on their birthday, you get the idea.
“Trust me when I say that maintaining a positive culture is the most important thing you can do for the longevity of your business as a founder.”
You can see when a company gets acquired or goes through an exit, whether or not they will be successful just by looking at cultural fit.
In the end, it really comes down to people’s values and their value system.
If you start bringing on a bunch of people who’re just looking for a paycheck, it’s gonna be tough to create a positive culture.
If you onboard passionate people who’re aligned on your vision and enjoy working with other passionate people, things become a lot easier.
But critically as a founder or founding team, your company has to be an extension of you.
It’s about caring and nurturing people as well. I used to say to my leadership team, it’s a similar approach to raising children, right?
Your son or daughter won’t just stand up and walk one day without any problems. They’ll fall down and it’s going to take them some time.
You don’t see the child fall the first time and go “Ah, no good, gotta throw this one away.”
Of course, you don’t! You work through it with them and help them.
It’s that level of care and nurturing and, and understanding that things take time.
You know, again, you have to give yourself to that culture. Whoever the founder or founding team is, they’re literally going to give a part of themselves to this company, no matter what.
R: Did you have a written culture deck?
G: I believe at one of the off-sites, I presented something around the meaning of culture.
I was trying to expand culture and get it into people’s mindsets.
Basically, I ensured that the conversation was always going on. I would really reinforce it, as would others in the company.
It was very much a function of a family-like culture.
I would tell people: you don’t get on with everyone in your family – it’s going to be the same here. But, at the end of the day, we’re all in it together.
So, there’s no reason to battle against each other.
That was number one, treating each other with love, compassion and understanding.
Number two was understanding what we were trying to accomplish as a business.
It was this cultural mindset that resulted in almost zero unwanted staff turnover at IdentityMind.
And I mean from growing it from day one all the way through.
We experienced everything together. Parents passing away, kids being born, graduations, marriages, divorces, everything.
And if you can experience that with them, it’s going to help your business.
“You have to see that there’s a vulnerability in people’s lives. They have other things going on. And you have to be part of that. You have to let everybody in.”
That’s the difference. And that’s different from a very large corporate world, where, quite frankly, you’re not supposed to let people in.
No one’s really supposed to know what’s going on. It’s a very non-transparent environment.
You want a culture that thrives and people that care about each other. You want people to come together to work on the company’s mission. That’s how you get those things to work.
R: Thank you for that. Beautiful wrap on the culture topic.
Let’s move on to the next question. What did “a day in the life” look like when you were laying the foundations for IdentityMind?
G: I think from an organized perspective of my mind, I would break part of the days down into strategy, fundraising, customer outreach, development, hiring, etc.
You’ve gotta have those self-discipline areas where you compartmentalize your day to actually accomplish certain pieces.
But the rest of the activity and the noise that goes on around that is actually pretty quiet when you have a small team.
But then when the company expands into 20, 50, 100 plus people that’s when the noise becomes extreme. The level of activity becomes very different.
In the first several years, generally what you’re doing are those functions. And within each of those functions, there is a different level of activity or investment of your time.
For example, if you have investors already, be it nervous investors or friends and family, you’re constantly trying to reassure them that things are moving in the right direction.
And that’s a constant thing you’re going to have to do. It’s one of the reasons you have to become an excellent storyteller.
But there’s another reason you’re going to have to create that storytelling skill to be a great entrepreneur.
“A day in your life for around the first four years is going to be constantly reaching out to customers and prospects and telling them your story.”
You’re going to be refining your area, looking at your market and asking the question: what’s really addressable? What’s sellable? How am I going to penetrate that addressable market?
One of the hardest parts is convincing those first few customers to buy in. And it’s going to take a lot of time and effort.
As an individual building a business, you’re allocating the time as best you can to these aspects. What you’re not allocating your time to at this moment is family.
Your family takes a significant backseat during this time.
This is a very difficult part of the process, and even harder to explain to someone who is yet to go through it.
It’s tough. You know, we had both our children when we were trying to build IdentityMind.
Luckily, my wife was there and I had been successful in prior ventures so she could be there to raise our children. And I was there as much as you can be when you’re building a business.
“There is no work-life balance as an entrepreneur, I want to be very clear that there’s no balance.”
People who tell you they have a work-life balance when they’re building a company are bullshitting you.
As a founder, work-life balance doesn’t exist in the early days because you’re in the fight. You’re battling all day, every day. You’re giving a piece of yourself to this company.
If a founder tells you they have a work-life balance, they don’t. You’re operating a company 24/7. You’re on call all day, every day. Period.
It’s the equivalent of staying at home and raising children. It’s 24/7. No pay, no love, no nothing – you’re working. And that’s your job.
And it doesn’t matter if it’s the middle of the night. If they get up, you get up.
Oh, they pooped their diaper? You’re cleaning it up, you’re dealing with it.
And it’s a mentality that you’ve got to have whether you’re starting a business at 20 or 50.
I can’t stress this enough, if you’re operating a startup or starting a business, it is your life. There is no balance.
R: Interesting. Instead of struggling, and failing, to maintain a balance you just have to accept there isn’t one. Live the life most won’t so that you can achieve the life most people can’t, right?
I’m going to jump into the finishing questions. So, first is, were there any mistakes you wish you’d avoided when building IdentityMind?
G: Most of the mistakes turned into lessons.
“Just be prepared for the fact that you’re probably going to make ten thousand mistakes or poor decisions as you start a business.”
There are some things that I look back on where it would’ve been better if we had avoided them. We took money from some of the wrong people, for example.
That created massive distractions, not only for existing investors but for internal operations, you know, just wrong people, wrong investors.
But even that is a lesson I learned and a mistake that I didn’t make again.
That’s the top one but I have too many to list.
You’re never going to see these things without hindsight as well. You may have a gut feeling about certain things but you’re never going to know.
R: What lessons did you take away from Identity Mind?
G: Again, too many to count, but I can leave you with some of the top ones.
Firstly, be careful when it comes to who you’re taking money from – as we mentioned in our last conversation. Choose wisely there because those outside investors can be highly disruptive to a business. We could have an entire discussion on this topic.
Next, get very solid board members who are not investors that have been around the block several times. Make sure they are aligned with the vision and team.
That will ensure you and your founding team get grounded and honest feedback vs short term thinking feedback.
Also, make sure that those board members have enough credibility to push back against VCs and private equity investors who are more naive about your business and have agendas in conflict with building a company.
I say this because I sit on some advisory boards, and I see that very few VCs have actually started or operated businesses. This is a trend that started in the early 2000s and now most VC’s and private equity partners have little to no work experience outside finance firms.
It’s important that you have people who know what they’re doing to ensure your business keeps moving in the right direction.
This leads me swiftly to the next lesson:
“Never take advice from people who have not done what you’re doing.”
You are not gonna learn to skydive from a guy who’s never been on a plane, don’t do the same for your business.
You want people on your board that have been through those things.
They’ve walked in the shoes they’ve been around, but they can also help.
I often see young founders get caught up in fifty thousand pivots because an investor has said: “Hey! Have you heard about this? You guys should really be doing this!”
And the young entrepreneur does it because they think “Oh my god, this guy who gave me money says I should do this – I should do it because he gave me money!”
“The risk is a young entrepreneur will be more worried about appeasing the investor than keeping the business on the right path.”
So you have to balance it. Take the feedback on board, explore the options given to you. But don’t just blindly agree if it doesn’t make sense for the business.
So having those knowledgeable people to push back on that is a good thing.
There’s an example I can give you to describe this more.
I sit on several boards, and I was in one board meeting and a professional investor turns to the CEO and says “You know, you should really be paying attention to your margins.”
And I looked at the guy and I said: “He’s sitting on 88% margins, what are you talking about?”
The investor turns to me and says: “Well we should be paying attention to those margins.”
Of course, the founder & CEO was agreeing with him blindly.
So, I ended up stopping the meeting and asking: “What are you worried about concerning the margins of the business?”
And the investor just wasn’t understanding why I was asking. It’s like he read in a business book that you’re supposed to “pay attention to the margins” without knowing what that actually means.
So I said to them: “What we surely could do is slightly erode the margins down and give more of it away and try to push the company to grow faster. So maybe bring it down to 82% – that’s ok, you’ve got plenty of margins to play with there.”
That’s very different advice to “pay attention to the margins.”
So having people around you that know their onions can really help you. You’ll find that often investors will say these things to test you and your team. In other cases, they’re just saying things for the sake of saying things.
R: Let me tell you that marketers have their personal rant on that with CEOs.
You can’t imagine, or probably you can, how many CMOs and marketing professionals come to me and say: “How do I tell my CEO that we don’t need to be on TikTok or Clubhouse?” Just because it’s the “next big thing”, or you read it somewhere, it doesn’t mean it’s relevant for your business.
It simply ends up hurting growth. That’s the bottom line.
Back on topic; that’s a great example. We talk about smart money with the founders we work with all the time.
Onboarding investors that are experienced in your industry and can guide you through the process is a distinctive advantage.
Otherwise, you risk bringing in someone who distracts you and blocks you from making good decisions.
G: I think “distract” is really the key point there. It’s the distraction that those individuals can bring in a bad way, in a harmful way.
R: Now, the last two questions:
First, if an entrepreneur goes to you right now saying, “I’m going to build a business” what’s the first thing they should do?
G: Go get a mentor. Period.
R: Short and sweet. How would you tell them to go about it?
G: Find someone you trust who has been very successful in the same sector you’re about to go into.
So, if you’re about to start a company, a tech company, go find a mentor who’s been successful in starting tech companies that you fully trust and have a personal relationship with.
Conversely, if you’re starting a coffee shop, don’t go find a tech CEO. Find someone who knows the coffee world back to front, inside out.
And it doesn’t matter who they are, as long as they’re relevant. It could be your mom, dad, nephew, next-door neighbor. As long as they’ve been down the road you’re about to go down.
Thank You (Again), Garrett…
… For taking more time out of your busy schedule to sit down with me.
I hope Garrett’s advice has shed some light on how to successfully build a startup as a founder.
One thing is clear, from culture to hard skills, employees to advisors, having the right people behind you can really make of break a startup.
Thanks for reading.