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💥 Why ‘Founder Mode’ is the Most Dangerous Blog Post for Founders

Zach Perret, CEO and Co-Founder of Plaid—a platform revolutionising financial services—has raised over $734M from top investors like NEA, Spark, and a16z. With Plaid now serving thousands of companies, from Fortune 500 firms to the world’s biggest banks, Zach has learned firsthand the challenges of scaling a tech giant. In his recent 20VC podcast, he shared candid insights on why Paul Graham’s recent "founder mode" post can be dangerous, why grinding through tough problems can set you apart, and how deliberate decision-making has been key to Plaid’s growth.

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📆 Published: October 16th, 2024

🕒 Estimated Reading Time: 3 mins. Time saved: 47 mins🔥

💡 The Pitfalls of ‘Founder Mode’: Why Not All Advice is Universal

Zach cautions against blindly following popular advice like ‘founder mode’ without considering how it fits your specific company. He cites Paul Graham’s blog post as an example of advice that could lead to harmful practices, like undervaluing experienced executives or encouraging founders to micromanage. Zach argues that while founders should stay close to the details, they must resist the temptation to get involved in every small decision.

Takeaways

• Avoid taking popular advice as a playbook; adapt it to your company’s context.

• Recognise that not all advice is universally applicable, especially high-profile frameworks.

• Use advice as a reference rather than a rigid rule.

• Evaluate the specific needs of your company before implementing popular strategies.

🚀 Rapid Expansion Woes: A Lesson in Sequencing

Zach shares a hard-won lesson from Plaid’s rapid expansion phase: trying to launch multiple products at once creates complexity and strains resources. In his words, it was like “a snake digesting an elephant.” By launching three new product lines simultaneously, Plaid faced overwhelming challenges in sales, branding, and support. The problem wasn’t just adding more products—it was about balancing the focus and attention each product needed to thrive.

Takeaways

• Sequence new product launches in stages; don’t overwhelm teams with simultaneous expansions.

• Validate each product’s success before tackling additional initiatives.

• Minimize stress on resources by testing one product at a time.

• Create structured growth that aligns with the company’s operational capacity.

📊 Navigating Resource Allocation: The Power of Atomic Teams

Plaid’s approach to managing new ideas begins with “atomic teams”—lean, self-sufficient groups of key personnel that can test product ideas quickly and with minimal overhead. An atomic team is typically a small cross-functional group with a product manager, engineers, and sometimes a designer or data scientist, tasked with finding out if there’s something viable in a concept before further resources are committed. This lowers risk and gives each idea room to develop without getting crushed by company-wide expectations.

Takeaways

• Use small, agile teams to test new ideas with minimal distraction.

• Allocate additional resources based on milestone achievements.

• Empower atomic teams with the autonomy to experiment and learn.

• Avoid overwhelming resources and let ideas develop in controlled, low-stakes environments.

💪 Embrace the Grind: Finding Defensibility in Hard Work

Zach is a big believer in tackling “grinder problems”—the tough, repetitive tasks that most others would avoid. At Plaid, integrating with thousands of banks in the early days wasn’t glamorous, but it gave the company a defensible edge. These “grinder” challenges create unique advantages because few competitors have the patience or persistence to solve them.

• Look for difficult, tedious problems that competitors avoid.

• Recognise that defensibility can come from persistence as much as innovation.

• Create long-term advantages by solving “grinder problems” that others find too hard.

• Embrace persistence as a unique value driver for your product or service.

👥 Recruiting for Impact: Why ‘Spikes’ Beat Balance

Hiring at Plaid, Zach opts for a “hire for spikes” philosophy—looking for candidates with exceptional strengths in specific areas, even if they have weaknesses elsewhere. This creates teams of specialists who bring unique, high-impact skills, which he finds more effective than building a team of generalists. He values unusual perspectives and diverse backgrounds, which he believes add to the company’s creativity and problem-solving ability.

• Build teams around people with standout strengths, even if they have weaknesses.

• Seek unique perspectives and diverse backgrounds to boost creativity.

• Avoid “well-rounded” hires if spiky, high-impact skills add more to team performance.

• Value specialists who complement team needs with their unique talents.

🧠 The Experience Trap

Perret also shared how his thinking on hiring experienced professionals has evolved:

"There's this thing internally called the experience trap, where we basically thought that anyone that had been doing a certain thing for more than 15 or 20 years wasn't a fit for Plaid, because we just had this bad assumption that people that had been doing a thing for that long weren't gonna hustle."

He now recognises the value of experience, especially in specialised fields, while still maintaining a balance:

"We're in financial services. We want a 70-30 split. 70% of people on our team should not have come from financial services. 30% should have."

Takeaways

• Avoid dismissing experienced professionals outright

• Balance is key - aim for a mix of industry veterans and fresh perspectives

• Evolve hiring strategies as the company grows and enters more specialised fields

💡 Challenging Common Silicon Valley Beliefs

Perret emphasised the importance of questioning popular advice and finding what works for your specific situation, giving examples of commonly accepted practices that may not be universally applicable e.g.:

1. Hiring a VP of Sales early: Perret advocates for founder-driven sales in the early stages, which can provide valuable customer insights.

2. Implementing OKRs: "OKRs were built for manufacturing. We don't manufacture software. We're not running an assembly line to create software."

Takeaways

• Question popular advice and find what works for your specific situation

• Be willing to adapt or create your own approaches rather than blindly following trends

• Some common practices (like early VP of Sales hiring or implementing OKRs) may not be suitable for all companies

⚡ Speed vs. Being Right

When asked if speed is the most important factor for companies going from 0 to 1, Perret offered a nuanced perspective:

"No. Being right is. And then speed."

He elaborated:

"Once you've found product-market fit, yeah, move fast. That's absolutely the right thing to do. Before you have product-market fit, sure, maybe you should move quickly through ideas, but also spending the time to think about what the right thing is, gathering the signals, gathering the data, understanding what you need to do. Be right, and then move fast."

Key takeaways on speed and strategy:

• Being right is more important than speed, especially in the early stages

• Move fast after achieving product-market fit

• Take time to validate ideas and gather data before accelerating

⚖️ Fundraising with Purpose: Rejecting the ‘Always Be Raising’ Mentality

Zach has a unique take on fundraising, rejecting the “always be raising” mindset common in Silicon Valley. Plaid raises capital only when it’s essential, often going years between funding rounds. He believes fundraising should be seen as a tool to enable growth, not as a recurring milestone. By focusing on sustainable growth, Plaid has been able to maintain flexibility and avoid the pressure to meet investors’ short-term expectations.

• Raise money only when it’s necessary to fuel growth, not as a regular milestone.

• Focus on sustainable growth rather than constant fundraising.

• Avoid pressure from investors by pacing funding rounds appropriately.

• Treat fundraising as a tool rather than a goal.

🎯 The Founder Trap: Balancing Hands-On with Delegation

While some founders interpret “staying close to the details” as a license to micromanage, Zach cautions against over-involvement. Effective delegation, he counsels, is about knowing when to stay hands-on and when to trust the team. He points out that while founders should stay close to critical areas that impact the company's direction, they shouldn’t be in the weeds of every decision. Misinterpreting this balance can lead to burnout, slow down innovation, and disempower teams.

• Identify key areas to stay involved but avoid micromanaging everything.

• Trust your team’s expertise to handle less critical tasks.

• Balance hands-on involvement with strategic delegation.

• Focus on high-impact tasks while empowering team ownership.

🎉 Celebrating Milestones: Manufacturing Wins to Drive Motivation

As a leader, Zach recognises the importance of celebrating progress, even if the team hasn’t yet reached its final goal. Early in Plaid’s journey, he found that celebrating small wins along the way was essential for maintaining team morale. He compares it to running a marathon: celebrating each completed mile gives everyone the boost they need to keep going.

• Break large goals into smaller milestones that can be celebrated.

• Boost team motivation by acknowledging incremental progress.

• Avoid waiting for “perfection” to celebrate achievements.

• Help sustain morale with small, manageable milestones.

💸 The Value of Secondaries: Aligning Team and Founder Financial Security

Zach shares how Plaid allowed team members to participate in secondaries (sale of existing shares by investors, employees, or founders to the public or institutional investors) after a near-sale to Visa that didn’t go through. This liquidity option helped employees feel secure and validated in their work, especially after a rollercoaster period of high expectations. He believes that secondary offerings, while challenging to manage, can create alignment and security for employees, especially during growth phases.

• Consider secondary options to offer financial security for employees.

• Align team incentives with company growth through strategic liquidity events.

• Manage team morale by providing financial security during high-growth phases.

• Retain employees by validating their contributions through secondary offerings.

📈 The Grind for Long-Term Value: Knowing When to Go Public

Zach believes in the rigour and visibility that comes with being a public company but emphasises the importance of timing. Plaid has long-term goals to go public, but he’s in no rush, choosing instead to wait for the right market conditions. Going public, should be a tool for the business, not simply a milestone to check off.

• Treat an IPO as a strategic tool rather than a goal in itself.

• Ensure timing aligns with company maturity and market conditions.

• View going public as an opportunity for visibility, not just capital.

• Focus on the strategic advantages an IPO might offer when the time is right.

In Closing: Adapting Advice for Your Unique Journey

Zach’s insights highlight one absolutely critical lesson: there’s no one-size-fits-all approach for founders. From avoiding ‘founder mode’ to the balance of product expansion and hiring for spikes, each of his strategies emphasises intentionality and adaptation to unique business needs. For founders and product managers, Zach’s reflections underscore the importance of forging your own path, even if that means breaking from conventional advice.

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📅Timestamps:

• (00:00) Intro

• (00:52) What Triggered Plaid’s Recent Growth

• (05:53) Are Great CEOs Defined by Resource Allocation?

• (09:03) What Is a Grinder Problem?

• (10:37) Is There Defensibility on Day One?

• (14:17) Biggest Lessons on How To Do Outreach

• (17:57) Hiring Mistakes

• (18:32) Founder Mode

• (21:05) Popular Silicon Valley Beliefs That Zach Disagrees With

• (23:17) Is Speed the Key to Going from 0 to 1?

• (25:02) How Zach Balances Big Rounds with Dilution & Valuation?

• (28:12) Making Money or Taking Secondaries Changed the Mindset?

• (30:52) On Raising $13.4BN Valuation

• (32:51) Is M&A Completely Shut Down? What Could Lead to Its Revival?

• (33:49) IPO Markets Today

• (36:41) The Biggest Flaw as a CEO

• (40:42) How Fatherhood Impacted Zach

• (42:47) Is Investing While Running Plaid a Distraction?

• (46:41) How Has VC Funding Moved the Needle for Plaid?

• (47:39) Quick-Fire Round