The Resilient Entrepreneur, Edition #66
Hi there
I hope you had a great week!
Here are the topics in today's edition:
- Loyalty in Business: Why Leaders Must Give What They Expect
- Why Capital Efficiency Matters to Startup Founders
- Never Sacrifice Your Reputation for Money: A Founder's Red Line
Please reach out if you have comments, questions, or suggestions for articles!
Talk soon 👋
Tom
LEADERSHIP FOR RESILIENT ENTREPRENEURS
Loyalty in Business: Why Leaders Must Give What They Expect
Loyalty in business isn't just top-down. Learn how reciprocal loyalty builds trust in business leadership—even during difficult decisions.
Loyalty is a virtue, and loyalty has a long history.
From medieval kings to modern politicians, everybody expects loyalty from their subjects or subordinates.
Parents are expected to be loyal to their kids even when their kids are doing stupid things at school.
In business, employees are expected to be loyal to their companies and represent the company’s interests.
Let’s take a closer look at loyalty in a business setting.
Top-Down Loyalty
This is the standard view of loyalty: The company’s leadership makes a decision, and the team is expected to represent that decision. Even if it means telling a customer that he won’t get what he wants or that prices will go up.
The same is true for internal decisions: Team A will lead the new app project, not Team B. We will phase out Slack and migrate to Microsoft Teams, even though everyone loved Slack. We’re going with Architecture A instead of Architecture B for the new SDK. We have to save money, so everybody has to contribute to the cost savings.
On all these decisions, leaders expect employees to be loyal. Leaders expect them to spend their time implementing those decisions rather than gossiping about the decisions.
Bottom-Up Loyalty
But have you ever thought about loyalty from the other perspective? At Yonder, the B2B SaaS company I co-founded, we have a long history of being loyal to our employees. That doesn’t mean that we never fired an employee, or that we accept any behavior. I even had to fire a co-founder.
Let’s look into an example.
Recently, we had to make a change in leadership. We felt it would be better for the company if a long-serving team member of the affected team would take over the leadership role.
As a first step, I spoke to the outgoing team leader and asked for a plan to remedy certain leadership deficiencies. Being loyal to the team leader, I didn’t mention yet that I intended to make a change in leadership. I wanted to give the team leader a fair opportunity to tell me how to correct the deficiencies.
The team leader decided to talk about the deficiencies I mentioned with a team member — and not surprisingly, the one team member that we had envisaged to become the new team leader.
That wasn’t how I had intended the conversation. Now I was in a dilemma. On one hand, I wanted to be loyal to my outgoing team leader. On the other hand, I wanted to be loyal to the team member who would become the new team leader but didn’t know yet.
I decided to speak to the team member who would become the new team leader and disclosed my plans. Then, I spoke to the outgoing team leader to make sure that all three of us had the same level of information.
The conversations followed a different sequence than I’d originally intended. But nevertheless, I could credibly demonstrate my loyalty to both persons.
Conclusion
When you demand loyalty from your team, the least you can do is give back loyalty to the team. That’s easy to do when everything runs smoothly, but much less so when you have to make difficult decisions.
LIFE HACKS FOR RESILIENT ENTREPRENEURS
Why Capital Efficiency Matters to Startup Founders
Capital efficiency means doing more with less. By historical standards, it's still much easier today than it was for previous generations.
What traits do investors appreciate about founding teams? My favorite ones are strong execution and capital efficiency.
At Yonder, the B2B SaaS company I co-founded, we were always diligent with our capital, even during good times. For over 4 years, we bootstrapped. We didn’t fully use COVID-19 loans. When fundraising and valuation went crazy in 2021, we didn’t raise excess capital but used our cash wisely.
Why did we behave like this? Just like energy efficiency, capital efficiency is an attitude. It’s not something you can reach suddenly in one step, but something you develop over time.
Episode 1: COVID-19
When COVID-19 hit, I remember the Sequoia pitch deck “R.I.P. Good Times” from 2008 being recirculated amongst entrepreneurs. A product of the financial crisis, it warned entrepreneurs about lower valuations, smaller financing rounds, and longer cycles to raise capital. It also urged entrepreneurs to cut costs immediately to survive the downturn.
We also cut costs when COVID-19 hit. But our concessions were smaller than in other companies, as we were already capital efficient then and never spent lavishly on non-essential items.
No fancy office furniture.
No admin staff on the payroll.
No company cars.
No hidden founder perks.
No branded cups, notebooks, and hoodies for our employees.
Episode 2: Keep Improving
Even though we have always been capital-efficient, we haven’t reached the optimum yet. You can always improve your cost basis, irrespective of the economic conditions.
Each time somebody leaves the company, we diligently consider not replacing the person one-to-one, but becoming more efficient and through that more capital-efficient.
Every month, we check if we really need all those software tools that we are paying for.
Since COVID-19, work behavior has shifted from mostly on-site to hybrid remote and on-site. Furthermore, our team has internationalized and only parts of the team are based in our headquarters in Zurich nowadays. At the same time, office space prices per square meter have fallen by 50% in Zurich as a consequence of COVID-19. So being capital efficient means we will be moving into a smaller, cheaper office.
Episode 3: The World in Turmoil
Retrospectively, COVID-19 looks like a walk in the park compared to today’s turmoil: Multiple conventional wars all over the world. Trade war fuelled by the Trump administration. And many other challenges.
The world is changing so rapidly that you cannot foresee the events with ample warning time any longer. Raising money has become difficult again, so capital efficiency is becoming even more important now.
Episode 4: A Look in the Rear Mirror
Before we start whining about how evil the world has become, let’s be clear: In the three decades between 1990 and 2019, we have enjoyed an endless party of unrestrained upturn. And now we see the return to normalization in historical terms — life will become harder, and we will need to do more with less.
Switzerland, my home country, was spared in World War I and World War II. Nevertheless, times were tough at that time. Looking at the example of Swissair, the national airline at that time, exemplifies the existential struggle many Swiss companies faced between 1939 and 1945: Robbed by their core business, encircled by countries at war, and more than half their personnel on active military duty.
So maybe we’re not that bad off in our current times.
INSPIRATION FOR RESILIENT ENTREPRENEURS
Never Sacrifice Your Reputation for Money: A Founder's Red Line
Never sacrifice your reputation for money – even when the money is tempting. A real-world founder story about staying true to your values.
The main purpose of a business is to make money. If you cannot generate profits after an initial build-up phase, it’s questionable if your company has a right to exist.
That’s the capitalistic and economic view, and I fully align with this view.
Our former president of the board had a saying:
Business is easy: Revenues up, costs down. What’s so difficult about this?
This might sound placative, but he is right. Being profitable comes from — guess what — higher revenues at lower costs. Improving capital efficiency is a standing task for all entrepreneurs.
Building a business is a rollercoaster and never a straight line of progress. Sometimes, unforeseen problems appear and cost you tons of money. Sometimes, economic and market conditions change and pose new threats or open up new opportunities.
As the Founder & CEO of Yonder, a B2B SaaS company, I’ve been in this game for many years. I have dealt with many unforeseen problems, and I have seen economic and market conditions change.
Now what does this have to do with reputation? Read on to hear a true story of how changing market conditions provided a real test for the founder’s core values.
The Market
In our domain, we have seen a market consolidation over the last two years. One of the key players in our space started acquiring adjacent businesses. We appeared on their radar for the first time in 2023, when we politely declined a deeper conversation.
In 2024, we had several companies reaching out to us to explore potential avenues to join forces — i.e., to acquire our business. The key player mentioned above was one of them; in the meantime, they had already acquired a couple of other businesses.
Based on the interest and the changing market dynamics, we decided to enter a deeper conversation with some of those interested companies.
The Proposal
After talking to all the interested companies, we ended up entering into a letter of intent with the company that reached out to us already in 2023.
The intention was to build a next-generation product together, incorporating the best of both worlds. That sounded compelling.
They asked me what would scare me so much that I would walk away from the deal. I said, office politics and if our team wouldn’t have a bright future in the new setting. They acknowledged my statements, which sounded even more compelling.
We signed the letter of intent and dived into the due diligence. The due diligence was strenuous, but very structured and progressed well. Until that famous last call.
The End
We dialed into a call with the subject “founder roles”. In contrast to all the previous calls, there wasn’t a clear agenda, and the call started very unstructured. Half an hour into the call, I asked what was the purpose of the call. “Uhm, ehm, ahm, we need you to come up with a team draw-down plan.” My co-founders and I had a puzzled look on our faces and asked a few clarification questions.
They confirmed that they wanted us to fire the entire team and that only the three co-founders would survive the transaction. They also confirmed they would look to migrate all our customers to their half-finished next-generation product we thought we would build together.
I (literally) told them that building the next big shit together would still be a very compelling perspective for us, but building the next big shit without our team would just be big shit.
They didn’t appreciate it. They kicked us out of the call and it was the last time we ever spoke.
What Survived from This Experience
The three of us walked away from this transaction without sleeping over it. What’s the point of drawing red lines when you don’t respect them? What’s the point of core values, when you sacrifice them for the perspective of cashing out personally?
I always had strong core values, and I never ever in my life sacrificed my values or my reputation for money. How should I have looked straight into the eyes of my team and into the eyes of my customers if I would have sold them out, at my personal financial benefit?
I am eternally grateful that my co-founders share my core values. That matters much more to me than a quick personal financial benefit.
About Me
Growing a company 📈 in uncertain times 🔥🧨 is like running a marathon—it demands grit, strategy, and resilience.
As a tech entrepreneur 💻, active reserve officer 🪖, and father of three 👩👦👦, I share practical insights and experience on entrepreneurship and resilience in The Resilient Entrepreneur, my weekly newsletter.
When I'm not solving problems, I recharge and find inspiration in the breathtaking mountains 🏔️ around Zermatt 🇨🇭.
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