Buy Time for Your Startup: Rebuild the Engineering Process

The Perilous Spin: From Aviation to Startups

Within the realm of fixed-wing aviation, excluding aerobatic flight, a spin represents a critical emergency situation. Without proper spin recovery training, a pilot risks exacerbating the problem, significantly elevating the probability of a crash. Remarkably, despite these potentially fatal outcomes, pilots in the United States holding amateur licenses are not mandated to undergo such training. The rationale is that uncontrolled spins occur infrequently enough to not necessitate widespread instruction.

Startup Spins: A Parallel Emergency

Startups, too, can find themselves entering a comparable state of crisis, akin to an aircraft entering a spin. My own company, Kolide, experienced a precarious situation in early 2018, just one year following our Series A funding round. We were experiencing limited market adoption and rapidly depleting our substantial cash reserves. We were losing control, facing an imminent risk of failure.

The Stall: The Precursor to a Spin

All spins originate from a stall – a loss of lift occurring when an aircraft flies too slowly or its nose is angled too high. In Kolide’s case, both contributing factors were present.

Initially, we secured funding at a pace that outstripped our readiness. The resulting post-money valuation necessitated ambitious, ultimately unrealistic, objectives. Compounding this issue, we lacked firm conviction in our product and overall strategy, leading to hesitant development and insufficient investment in crucial areas. Consequently, we were operating at an excessively steep angle and insufficient speed, resulting in a stall.

The Critical Role of Time and Altitude

If a stall remains uncorrected, a spin can quickly develop. A flat spin is particularly dangerous. Once initiated, experienced pilots employ specific techniques to regain control of the aircraft. However, nearly all recovery methods rely on a vital resource: altitude – effectively, time.

Similar to pilots, startup CEOs often lack formal training in navigating these crisis scenarios. When Kolide began to spin, the predominant advice I received centered around minimizing losses through a sale of the company or a return of funds to investors.

Facing Imminent Failure

At that time, I could find no successful precedents of companies overcoming similar challenges; only examples of complete failures. By February 2019, both of my co-founders had left the company.

Despite this clear indication of impending collapse, I was ultimately able to stabilize the situation and redirect the company towards a successful fundraising round. The following details how I rebuilt the engineering process.

Rebuilding the Engineering Process

The recovery involved a fundamental shift in approach, focusing on regaining control and establishing a sustainable trajectory.

Securing Crucial Time for Recovery

Kolide possessed several advantageous factors that facilitated the company's turnaround, but the most critical was our early recognition of a deteriorating situation and the availability of sufficient capital – and therefore, time – to implement a recovery strategy. A delay of even a few months could have drastically altered the final result.

Although we maintained a healthy cash reserve, it was paramount to extend the duration that reserve could sustain us. This necessitated rigorous cost reduction, going beyond initial cuts to identify and eliminate further expenses. Like many SaaS companies, our primary contributors to monthly net burn were personnel costs and the cost of goods sold, specifically Google Cloud Platform expenses.

As a core component of our restructuring, we swiftly reduced our workforce by more than 50% through layoffs and decommissioned infrastructure supporting discontinued research and development projects.

Surprisingly, the staff reduction yielded an additional benefit: enhanced agility. The sobering experience of losing colleagues instilled a laser-like focus within the remaining team. I established a goal at the outset of our recovery to develop a completely new product within 10 weeks and secure our initial sale within 14 weeks.

These exceptionally ambitious timelines, and the constraints they imposed, streamlined our team’s decision-making processes and concentrated our efforts on essential tasks. For instance, the Stripe billing integration wasn’t implemented until after the product launch; it wasn’t required until the expiration of our initial users’ 30-day trials.

Remarkably, despite a historical pattern of missing engineering deadlines at Kolide, we not only met these new targets but also delivered a superior product compared to our previous releases.

Identifying a Viable Market

Having addressed the time constraints, a significant challenge persisted: a lack of clear market vision. Despite rapid progress in engineering, we were essentially enhancing a product previously developed, one that hadn't achieved substantial sales. Consequently, a crucial step in our turnaround involved analyzing the shortcomings of our initial product vision and formulating a considerably improved alternative.

With a focused 10-week schedule, I had approximately four weeks to prepare before engineering completed the fundamental features common to all SaaS products – including user authentication, team access controls, and search functionality. Following this, the team would be prepared to begin work on the core features, requiring design mockups, user stories, and supporting documentation.

I concentrated on direct communication. I initiated calls to a wide range of individuals. This included previous customers, independent consultants utilizing the open-source technology underpinning our solution, and organizations that had opted to create their own tools instead of purchasing commercial alternatives.

Several concurrent occurrences helped pinpoint our key differentiator.

The first was a conversation with a 60-employee startup that had developed its own IT and security solution to address compliance issues while safeguarding user privacy. Their IT lead dedicated 90 minutes to detailing the specific challenges they faced, which weren't adequately resolved by existing commercial offerings.

Secondly, I reviewed a blog post from Netflix detailing their internally developed security tools. In contrast to typical commercial solutions that proactively restrict devices, Netflix’s approach actively involved end-users in identifying and resolving security and IT problems. This was a remarkably innovative strategy.

The third pivotal event involved a Kolide engineer, initially assigned to a standard Slack notification interface, who enthusiastically demonstrated the advanced capabilities of the Slack platform and suggested we explore a more comprehensive notification experience.

These seemingly disparate events coalesced into a unified concept, ultimately leading to the definition of a new product category we termed Honest Security.

We developed a Minimum Viable Product (MVP) and, during its construction, continuously validated it with our existing network of contacts. By the time of launch, we had refined the experience through multiple iterations, responding quickly to feedback from potential customers.

Restarting Our Trajectory

The comprehensive recovery strategy implemented for our organization is frequently described as a “complete reset.” This involves a fundamental dismantling of the previous entity, with a new company being constructed from the remaining assets. However, the primary impact of a reset extends beyond mere symbolic change; it communicates a revised outlook to investors.

Past shortcomings are largely overlooked, and the company is evaluated based on its current performance, as if operated by an entirely new team. This recalibration of expectations provided both myself and our reduced team with the flexibility to adopt a more pragmatic and attainable strategy.

As initial successes were achieved – including meeting the launch deadline and securing our first sale – our self-assurance increased, alongside our capacity to pursue more substantial objectives aligned with a Series-A funded SaaS business.

Within almost two years, significant growth and advancement were realized by the “revitalized” Kolide. Crucially, this progress furnished external stakeholders with the data necessary to form accurate assessments of our future prospects.

This enabled a well-informed decision to provide us with continued support. We have successfully navigated the downturn and are now operating at full capacity.

This leads us to the present moment, as we prepare to initiate the process for our subsequent funding round. This is not driven by necessity, but by choice – and is substantiated by our demonstrable traction.