How to Grow a Startup During a Pandemic? Be Willing to Say ‘No’


The Mentor:

Jim McKelvey – Frustrated by losing a sale because he was unable to process a credit card transaction, Jim McKelvey co-founded fintech platform Square with Twitter’s Jack Dorsey in 2008. The San Francisco-based com­pany went public in 2015 and booked $9.5 billion in revenue last year. Today, McKelvey sits on the firm’s board of directors and reportedly owns nearly 5 percent of the $120 billion com­pany, while also running a data-sharing startup, Invisibly. He recently shared his experience building the company in his book The Innovation Stack.

The Mentee:

Ali Moloo – Growing up in a family of hospitality workers in Alberta, Canada, Moloo saw firsthand how disconnected and old-school the process of running a hotel can be. In 2015, he founded my­DigitalOffice, a Bethesda, Maryland-based company that places everything from inventory to payroll to convenience-store sales onto a single software platform. The company today has 3,500 hotels on its platform, including Best Western, Mar­riott, and Hilton locations, and revenue is rising quickly. But the fast growth has raised a new set of questions.

Ali Moloo is sitting in a glass-walled conference room in a New York City high-rise, discussing the challenges of being both founder and CEO with his mentor, Jim McKelvey. After they chat for a while, McKelvey steps out for a bathroom break. A curiously long time passes without his return. So Moloo goes searching for him and finds him locked in the hallway outside the restroom–a cell-service dead zone–on his knees, attempting to break out with a small tool. “Five more minutes,” McKelvey declares, brushing off his pants, “and I would’ve had it.”

McKelvey carries the picklock with him at all times, just another way of ensuring that he’s prepared for any moment of crisis. It’s a mindset he adopted when he launched Square amid the financial meltdown of the late aughts–something he maintains has made his company stronger. Moloo’s experience has been similar: His startup has enjoyed its greatest period of growth during the pandemic–revenue was up 90 percent in 2020, and he’s projecting a 300 percent increase in 2021–even though his customers have been doing terribly. He’s now facing the challenges that come after the first flush of success.

McKelvey Last year was a weird time for the hotel business. Covid had pretty much shut down the entire industry. Somebody in your situation had a choice: Do you have the company go dormant, like some plant that’s trying to survive the winter? Or do you get out the grow lights and freaking fertilize it?

Moloo We did the latter. We were out there in the market talking to people, saying, “How can we help you?” We created a free product for the hotels that helped them see into the future a little bit and understand how their properties were comparing with the market. It gave us a lot of exposure and it opened up the ability for us to have conversations. We ended up realizing that because they were down so many people, they could no longer manually capture information, but they still needed information to run their business. So we actually became more necessary during the pandemic.

McKelvey You lapped the field while everybody else was asleep.

Moloo Today, we have two relatively large customers, each of which makes up close to 20 percent of our business. Sometimes, some of those bigger clients want to influence your product–they make feature requests that don’t fit. How do you make that decision of whether to push back or just do it?

McKelvey At Square, we had Starbucks as a client, and I can’t tell you the specifics of how that relationship ended, but I can tell you that the relationship ended. When you’re small, a big company will ask you for a bunch of features that only they want. Most of those companies are incompetent at developing the product themselves. They’re working with you probably for a bunch of reasons, most likely the fact that you’re able to execute faster than the competition, which puts you in a stronger position than you might realize. You can say no to the features that don’t fit your road map.

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Moloo Interesting. Because you feel like they’re the 800-pound gorilla.

McKelvey Well, they are, if you look at your relative size. But unless you’re in a highly competitive market with undiffer­entiated substitutes, once they choose you, it’s a marriage. You’re not some sort of prisoner. If it doesn’t cost you much and it makes your big client happy, it’s a no-brainer.

The tricky one is when they’re asking for a feature that you planned to implement, but it’s still a year out. What can happen, especially with software, is you end up patching and hacking in their feature request just to shut them up, as opposed to building the underlying data structures you need to support that feature.

I see you smiling. I see your guilt and shame.

Moloo It may have happened!

McKelvey Look, we have all accelerated a feature that wasn’t supported by the code. And that’s the one that bites you, because you get two years down the road, and you’ve laid all this other stuff on top of that. And then you need to do some sort of horrible replumbing. I ride the subway in New York. Will they ever fix it? I don’t think so. We’re always going to have rust, rats, and whatever that black filth is, forever.

Moloo You brought Jack Dorsey in as CEO right at the start of Square. When do you know if you’re still the right leader for the business?

McKelvey I’m not a good leader. I’m a good founder, which is different. I’ve always been way more comfortable innovating and doing stuff that might not work as opposed to repeating something that I know works. As soon as it’s been built and you need somebody to just rinse and repeat, that skill set is different.

Twenty years ago, I learned that I needed to replace myself at the start. So, I would always begin by partnering with somebody like Jack, who wanted to run the company. Ask yourself what makes you happy. If it’s watching something grow and improve, and dealing with the inevitable competitors and copycats, then take the management track. Become the leader of the company. If that’s not who you are, then find that person, empower that person, and get out of their way.

Moloo Interesting. For me, one of the reasons for becoming an entrepreneur is freedom. You don’t want someone else telling you what to do. But the life of a startup entrepreneur is everything but freedom for an unforeseen period of time.

McKelvey You work for every customer. Instead of one boss, you have seven.

Moloo And you’re always wor­ried about your employees.

McKelvey Here’s the thing. That guilt–that responsibility you feel for your employees, your customers, and everybody who’s bet on this new thing you’re doing–is what ultimately makes you successful, because that’s when the survival instinct kicks in.

Moloo You’ll keep going. You’ll pull all-nighters. You’ll do whatever it takes to make it work.

McKelvey And you’ll do that for reasons that are not money, fame, a big title.

Moloo I thrive off of this. But it can be challenging for family. What are your thoughts about that?

McKelvey The first thing is not to pretend that you have a normal job.

Moloo [Laughs] I did that for the first couple of years.

McKelvey You and your family have to figure out what that balance is. My wife and I just read a book called Fair Play. It teaches you to divide the household tasks. Here, I’ll show you. [Opens a spreadsheet on his laptop.] These are the 100 or so things we have to do. She is responsible for laundry, gifts, making sure we have health insurance. I am responsible for transporting the kids, tidying up, dental, mail, thank-you notes. Right now, we have a potentially sick kid, and I’m going to deal with the sick kid, because that is my responsibility. And then, if you finish everything, you get to do stuff–like I’m taking off tomorrow and I’m going to go see the Rolling Stones. It’s OK, as long as my stuff is done and I’m not dumping stuff on her.

Moloo This is amazing. This is probably going to change my life. My wife is going to really like you for this.

McKelvey Entrepreneurship is tough on relationships. It helps to get everything out there on the table. Just don’t let your wife see how many things I do.

From the November 2021 issue of Inc. Magazine



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