Today I am talking about a topic that is frequent in the world of startups — that moment when your most substantial client departures.
Often you will see the 80/20 rule applied to the revenue distribution in startups.
Sometimes it doesn't matter. Sometimes it is a big freaking deal.
It could kill the company.
When you raise venture capital, all you are buying is time. Time to go faster, to make a few more mistakes and so on. You build on promises, based on the future value that you will be able to generate.
Venture Capital isn't for all companies, and sometimes it can be toxic. One must be thoughtful when considering taking it — a topic for another post.
My primary consideration when you lose your largest customer: do not freak out. The world isn't over; you will still find new clients and, like everything in life, this too will pass.
That said, it is essential to understand why that customer is leaving in the first place. Where you able to sense that something was wrong? Were you surprised by their departure? Are they going in-house, to a competitor? Is it a specific feature they requested and you didn't deliver?
Whatever you do, don't freak out. Be rational and understand the reasons behind the departure. Mitigate them and continue to build.
Regulate burn, so you ease the dependability on VCs.
Losing your largest customers is a baptism of fire. It is capitalism testing you and how strong your business is. This has happened a couple of times with our investments, and there is always a way out of it.
Other examples: when $TWLO lost Uber as a customer. The market freaked out. Yesterday $TWLO reached an ATH. Losing Uber was a great buying opportunity. When I was at $SEND, we also lost our largest customer. When that happened, morale was low, but in less than six weeks things were back to normal.
Your job as the CEO is to make sure things get back to normal as quickly as possible.
Today I'll chat with Dr. Cameron Sepah. Cam is not an ordinary founder. Cameron Sepah holds a B.A. in Cognitive Neuroscience from Harvard and a Ph.D.
I spent 3.5 months in Brazil during COVID. Unfortunately, Brazil is still a very unorganized country. The devil is in the details.