How VC funding changed us – and why that’s a good thing

Two years ago, we received $25 million in Series A funding from Insight Partners.

We were elated! Getting venture capital funding was a big step for us, and we’d worked hard to get there. We felt like we’d made it.

But getting funding was not the end of the story. It was just the end of our bootstrapping chapter, and the start of a chapter all about growth fueled by an infusion of venture capital.

The reality is that growth has changed us in ways we never expected, challenging our expectations and forcing us to learn.

This post is about how Knak has changed in the last two years – and why that’s a good thing.

We changed the way we think about hiring

The venture capital was meant to fuel growth, and to grow we needed to hire. Two years ago Knak had about 30 employees. We had an ambitious plan to add 50 more employees as quickly as possible.

I’ll never forget our leadership team meeting in Montreal right after the funding closed. We spent the whole time discussing how we were going to attract new talent.

The job market was very tight at the time, and consequently employers were offering big salaries and lots of perks in an effort to fill vacancies.

How were we going to make Knak stand out?

We took what in hindsight I consider to be the wrong decision: We shifted our focus to perks and away from people.

A startup attracts a certain kind of person – someone who enjoys a challenge and is willing to take a bit of a risk, someone who is attracted to the job because of the product or service the company sells, or because of the people who work there. The salary and the perks are further down the list in terms of importance.

Before we got VC funding, our careers web page reflected that. We pitched Knak as a cool company offering prospective employees a challenge.

At that Montreal leadership meeting, we decided to revamp our careers page and make it all about perks. We highlighted things like the MacBooks we provided, the beach vacations everyone could get and the professional development opportunities we funded.

Big mistake.

We wanted people who shared our vision and values, people who would be challenged by the difficult parts of the job. But because the job market was so tight, we were in effect lowering the bar and looking for people just because they were available.

We made it all about speed. We even developed a metric that measured how quickly we filled job vacancies, and prided ourselves on getting that number as low as we could.

What we should have been focusing on instead was retention and employee satisfaction, and making sure the people we hired were right for the role.

We did hire people, and we hired quickly. And some of the people we hired at the time are incredible; they are still with us and doing a tremendous job. But too many of those new hires were not a good fit, and either left quickly or were let go.

To be fair, late 2021 and early 2022 was a particularly hard time to be hiring. It would sometimes happen that we’d sign someone up, then at the last minute they’d renege and take another offer.

Nevertheless, we were going about hiring the wrong way.

We ended up wasting a lot of time hiring, training and onboarding the wrong people – people who ultimately left, forcing us to start the hiring process all over again.

What we should have been doing is finding the right person at the first go. Even if it took longer initially, it was better than having to start the search over again because someone didn’t work out.

We’ve now changed our approach to make it align with our new learnings. Hindsight is 20/20, but if I had to do it all over again, I would never even have changed our careers page, because before we did, we were getting exactly the kind of people we wanted.

We just needed to learn to take our time. That was a hard lesson to learn, and we’re still recovering.

We adjusted our core values

Very early on in Knak’s existence, we set down 10 core values that defined us. Once we started to grow, it became apparent that we needed to update that list; it just didn’t fit anymore.

For starters, the list was too long. We found that few of our employees could name all 10 items on the list. If people didn’t know what the values were, what good were they?

Secondly, we found that some of the values on the original list weren’t adapted to a larger company.

For example, one of our original values was ‘transparency always.’ Well, in the eNPS survey (eNPS stands for ‘employee net promoter score’ and measures how happy and engaged employees are), one person complained that employees could no longer see the executives’ calendars in the system. This, the employee said, was a lack of transparency.

The fact is, in a bigger company executives cannot have their calendars on display. Sometimes those calendars contain sensitive material, and for legal reasons discretion is required. So while we believe in transparency, the way that particular value was presented created problems.

Another value on the original list was positivity. We found that some people refrained from raising difficult or negative issues – issues that absolutely needed to be raised if they were to be corrected – because they felt they had to remain positive. Again, while positivity is important, the way it was presented was not creating problems.

I feel strongly that a company benefits when it’s guided by a list of core values; it’s kind of like a company’s operating system, the basis of its culture.

We have created a new list of core values. It contains only five items that reflect the culture we are building now: Lead with transparency; Embrace a growth mindset; Take calculated risks; Keep it simple; Get shit done.

That’s it.

It’s easier to remember and more focused on where we’re going.

We refocussed on employee satisfaction

When we got our VC funding, our eNPS was 100 – as high as it could be. That number dropped significantly as we grew, and the drop worried me a lot. Suddenly, we had to refocus on keeping our employees engaged and happy.

I think there were several reasons for the drop.

One of them was that because we were trying to grow very fast, we ended up promoting some people too quickly. People were promoted two or three levels up the ladder overnight, with no coaching or training. It was almost impossible for them to be successful; no wonder there was dissatisfaction.

We also weren’t used to processes and procedures. As a start-up we really didn’t need them, so it wasn’t natural for us to document things. That meant there were no written job descriptions for a lot of roles. That created uncertainty – and contributed to problems we encountered in hiring. Sometimes we didn’t know what kinds of skills were needed for a specific job because nothing had been written down.

And as I noted earlier, the long list of core values created some problems. One of our original values was about valuing balance. But balance means different things to different people, and in a larger company there are more people with more views about what balance means to them. People started challenging us on the definition of work-life balance. We needed to refocus, and we did. Employee satisfaction went up after we took more time to listen to our employees and act on their suggestions.

Our leadership team needed to rethink its role

Before the arrival of VC funding, our leadership team had specific roles. I, for example, was heavily involved in marketing. And Brendan Farnand, another co-founder and our Chief Customer Officer, oversaw sales.

After the raise, Brendan and I figured we should step back from our specific roles and focus on more strategic things. We decided to pass the marketing and sales batons on to others.

In hindsight, we realize that we made the mistake of handing things off too quickly, without giving the new leaders clear direction and without setting out expectations about what we wanted. You need to trust new leaders, but you also have to set clear parameters about how they should operate so that they can be aligned with your expectations. You also have to be sure you have the right people with the right experience in the job.

We’ve adjusted our roles to take account of our learnings.

Parting thoughts

When I look back on the last two years at Knak, I see that a lot of great stuff has happened.

Being associated with Insight Partners has helped with recruiting, giving us an added boost of credibility. They also gave us amazing advice and access to incredible advisors.

The leadership team is less stressed because they don’t have to agonize over every dollar spent – though it feels strange to go from saying no all the time to saying yes a lot.

The economic situation has changed, and hiring has become easier.

We have learned from our mistakes, and Insight Partners has let us learn.

It’s good for me to remind myself every so often that startups are always on a roller-coaster. Things rarely go the way you expect them to, but that is part of the journey. I learn more when I make mistakes than when everything goes smoothly.

I look forward to the next steps with confidence. We’re on a more solid footing, and our newly acquired experience is proving its worth every day.