Balancing Hyper Growth with Risk: Secrets to Scaling with Brex’s COO and Alloy’s CRO

When scaling a SaaS company, striking a balance between hypergrowth and risk is essential. Brex’s COO, Michael Tannenbaum, and Alloy’s CRO, Laura Spiekerman, share top lessons on how to find the right balance.

Brex and Alloy are two companies that have both achieved hypergrowth. Brex is a company that provides credit cards for startups, and Alloy provides financing for small businesses. Both companies have achieved rapid growth by offering products and services that are tailored to and evolve to the needs of their customers within a highly regulated space. Both Brex and Alloy have been mutual customers of one another since 2017, and in this session, they shared their lessons learned on balancing production innovation with regulation while mitigating risks.

Risk Management Evolves As You Grow

As your SaaS company reaches hypergrowth, you’ll need to adapt your risk management strategies to keep up. Risk will most certainly evolve and change over time as the stakes for risk vs reward grow larger. For example, in the early days of Brex, before its official launch, one of its main competitors was Marqeta, who, at the time, only offered corporate debit cards.

Brex saw both a risk and reward opportunity.

They could risk pre-funding Marqeta accounts more like a credit card, in the hopes that they’d be rewarded with Marqeta users switching to Brex who didn’t want to be on the immediate financial hook for employee debit cards.

In this early case, the risk paid off for Brex and helped them launch their product with an early foundation of customers.

On Balancing Compliance and Growth:

Compliance, for any sub-category in SaaS, whether it’s marketing following GDPR compliance or your product team following FinTech compliance – it’s binary. There are different rules to both learn and follow. But to Michael Tannenbaum’s point, “You don’t want to comply yourself out of business. If you just focus on compliance all the time and take no risk, you have no business to protect. That’s an important lesson.”

In cases where you’re weighing risk versus reward and coming out on the fence about whether or not to proceed forward, Tannenbaum recommends asking yourself if your team would feel uncomfortable or “gotcha’d” after the fact.

The Secrets to Balancing Risk with Growth:

There is no one-size-fits-all answer to the question of how to balance risk with growth, but there are a few things you can do to make the process easier.

#1) Know your risk appetite as a company.
As you scale, both of our speakers suggest not only knowing what your risk appetite is as a company but actually codifying and clarifying that risk appetite on paper to agree on it.

Tannenbaum explains: “At Brex, we went as far as actually agreeing upon that (risk appetite) with our board, which is an option, not a requirement. But if you don’t do that, your risk appetite becomes all about whoever the executive or person or product manager or person-in-charge is. Whatever their appetite is, that becomes the risk appetite.

Taking zero risk is not effective. But establishing what you’re willing to take is effective. And writing it out and agreeing on it makes so much of the conversation not about who’s right and who’s wrong. But it turns it to, what is it going to do to the pre-approved and pre-agreed-upon appetite?”

#2) Hire a team that supports and assesses risk

Spiekerman adds that at Alloy, they’ve taken a very similar approach to risk as Brex and have even structured their hiring from the early days on to structure their executive team very purposefully this way. For Alloy, the playbook included hiring talent from former customers (who already understood the product) and hiring former founders or co-founders who understand all the back-end components of risk management in a business. They leaned on hiring executives with prior experience to help them navigate the early days of risk and reward.

#3) Remember that risks are not just financial or regulatory

Managing your brand and its reputation is paramount for hypergrowth companies.

Tannenbaum explains: “One of the biggest things that people miss a lot of times when they’re talking about risk management and talking about brand, is that your brand is very tied into your ability to manage risk.

If people lose confidence in your company, it has a flywheel effect on your ability to do business. And when you start to lose customers, you lose confidence. And then more customers drop. And so you really need to be thinking about this, even if you’re a marketing professional or not marketing, you want to be thinking, “How can I protect this brand as a part of my risk management?”

Spiekerman adds that, for Alloy, they follow this tent by bringing together their general counsel, marketing lead, and VP of People into the room, in addition to their executive team, when they’re making a decision with the risk involved because the risk will certainly impact all facets of the business, including marketing and brand, in addition to legal.

#4) Write the headline you don’t want
To wrap, a final point to weigh when managing risk at scale, is to ask yourself, “If the risk / strategy doesn’t pay off, what would the news article headline be?”

Think about 2-3 things you hope that people won’t say about your company next quarter. Are they 2-3 things you can be proactive about or even prevent altogether?

Tannenbaum and Spiekerman recommend forecasting upcoming risks and potential issues to mitigate them before they turn into a crisis scenario.

 

Published on December 6, 2022

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