- Unlearn the lessons of boom times on fundraising, hiring, operations and scaling.
- Re-find customer urgency, take care of your customers and work backwards from that to develop a plan.
- Employees and business partners may well have answers you lack.
The success of Airespace and MobileIron offer lessons for founders navigating the Covid-19 crisis
In the summer of 2008, just three months after MobileIron raised $8 million in series A funding, Bob Tinker, the CEO of the mobile security startup, got an email from one of his marquee investors. Sequoia Capital was summoning him, along with the CEOs of all other companies in its portfolio, to a meeting just days later on Silicon Valley’s Sand Hill Road, the epicenter of the venture capital world. Attendance, the email noted, was not optional.
Tinker was unphased. As a first-time CEO, he assumed this kind of meeting was common. Once he got there, however, fellow CEOs set him straight. “Apparently, it was the first time Sequoia had done this,” Tinker says. “Now I was nervous.”
What followed was a presentation of the now-famous R.I.P Good Times presentation, which quickly leaked, and eventually was published by Sequoia. The 56 slides detailing the economic devastation precipitated by the subprime mortgage crisis were intended as a wake-up call to startup CEOs.
“The punchline was effectively, ‘The world's changed,’” Tinker says. “You need to have 12 months of cash left. If you don't have 12 months of cash left, cut your expenses now, so you can have 12 months of cash left. If you can't figure out how to do that, you're basically toast.”
Tinker took the advice to heart. With a renewed sense of urgency, he began making changes in the following days, weeks and months that helped MobileIron to not only survive the painful downturn, but also to profit handsomely from the recovery. Ultimately, his actions put the company on the road to a successful 2014 IPO.
No one knows how long or deep the current recession, precipitated by the Covid-19 crisis, will be. But it’s clear that the startup world, like every other sector of the economy, is being deeply affected by it, much like it was in 2008. And in light of the ongoing uncertainty, Tinker’s renewed focus on customer urgency, willingness to rethink how to help customers and ability to defy conventional wisdom in the face of the downturn, serve as lessons for CEOs and executives grappling with how to successfully navigate the current turmoil.
Become indispensable to your customers
As Tinker returned to his office following the Sequoia meeting, he realized MobileIron was in a relatively good position. The company had just 12 people who were focused on building a minimum viable product and finding product-market fit. Its burn rate was relatively low. “For companies that had already scaled up, it was gonna be ugly,” Tinker says. “We could hunker down and focus.”
But staying focused, by itself, wasn’t going to be enough. Before launching, Tinker had talked to as many as 60 potential customers so he could build device management software tailored to their needs. Now, those companies, which he calls “teaching customers,” were facing a new reality. “Our customers’ world had changed,” Tinker says. “All of a sudden, their interest in working with a startup on a new mobile security project went out the window.”
So Tinker decided to go back to many of those teaching customers to figure out how MobileIron could help. “We discovered a new value proposition, which was cost reduction,” Tinker says.
It turns out that the same technology MobileIron was building to manage and secure devices on a network, could detect when a smartphone was roaming internationally. At the time, smartphones were relatively new and many business travelers would come back from overseas trips facing shocking roaming data bills, sometimes in the thousands of dollars. “We found out we could actually detect that and help prevent it,” he says.
With that realization, MobileIron embarked on what Tinker calls a “half pivot.” “We knew our management security value proposition was going to be important in the long run, but it wasn’t urgent right then,” he says. The company turned the capability to detect international roaming into a product that customers were willing to pay for, even in the depths of the Great Recession. “Our focus on helping with cost reduction in 2009 and 2010 was urgent enough to get our foot in the door with many customers,” Tinker says. Once the economy began rebounding, many of those same customers ended up buying MobileIron’s full security and management software. “If we had not found that new source of customer urgency, I'm not sure we would have survived,” Tinker adds.
Partners as saviors
For Tinker, the focus on helping customers with cost-reduction was not new. Following the 2001 dot-com crash, he was an executive at Airespace, a startup that was equipping businesses with Wifi networks, then a new technology. The crash could have crippled Airespace not only because customers no longer saw enterprise Wifi as a top priority, but also because they suddenly had become leery about buying from an unproven company. “In go-go times, customers don’t mind buying from startups,” Tinker says. “In a meltdown, companies are concerned about buying and about who they are buying from.”
Under pressure, Airespace quickly discovered that its Wifi network technology could do something else: voice calls within a business that bypassed telephone and cell networks. “Customers were looking to try voice over Wifi to save money,” Tinker says. There was one problem. It’s most notable rival was Cisco, which as one of the most powerful companies in tech was seen as a much safer bet by prospective customers.
Airespace realized it needed help from established partners who could lend it credibility. After exploring various options, it signed reseller agreements with three major telecom companies, Alcatel, Nortel and NEC.
“When you have a better technology and a better product, and the only reason customers aren't buying is because they're just worried about you as a company, you can solve for that by teaming up with a big firm,” Tinker says. “It proved even more impactful for us than the voice over Wifi product.”
Catching the rebound
The strategies Tinker followed at Airespace and MobileIron did more than get the startups through the downturn. It positioned them to take off in the economic rebounds that followed. For starters, the companies had established a foothold with customers.
What’s more, as in most recessions, VCs had held off from backing potential rivals. “At MobileIron, there were no competitors funded until the market started to turn in 2010,” Tinker says. “That gave us a big head start.”
For its part, Airespace, Tinker says, “Took off like a rocket in 2003 and 2004.” Revenue surged from a couple of millions to tens of millions, setting the stage for the company to be snapped up in a blockbuster, $450 million acquisition in 2005. The buyer: Cisco.
Learning and unlearning
While Tinker recognizes that the Sequoia presentation was “a kick in the pants,” he admits he didn’t handle everything as well as he could. His biggest mistake, perhaps, was believing that, as CEO, it was entirely on him to figure out how to move forward. “I basically locked myself in a room and said, ‘I’ve got to figure out the new plan,” he says. “But actually that was not true.”
Once he recognized that, he turned to his colleagues with questions, and it was they who came up with some of the tactics that helped MobileIron weather the crisis. “It’s a classic first-time CEO failure,” he adds.
Tinker credits his success, in part, to his ability to buck what often counts as conventional wisdom in the startup world. “There’s this meme in Silicon Valley that actually ends up being really unhelpful to founders and can potentially be fatal: That you have to focus on one thing and put all your wood behind that arrow,” Tinker says. “If you've got the right target with the right arrow, yes, you should do that. But what if you're wrong?” Understanding that both Airespace and MobileIron were slightly off target during the downturns was critical, he says.
Ultimately, he says, crises force founders to question their assumptions about how to operate, especially if those assumptions were made during boom times. “You have to unlearn how you worked for the last several years,” Tinker says. “If you think about how you raise capital, how you hire people, how you make plans, it was always based on the way the world worked in the recent past. Well, raising capital in downturns is hard. If you have to do a flat round or a down round, that's okay. You used to be constantly focused on scaling. Now, you have to unlearn that, too. Focus on surviving.”