Two weeks ago, Parallax encountered a startup crisis. At the end of it, I like to think we navigated it fairly well. Here’s what happened, the outcome and lessons learned in managing startup crises in general.
Note: I won’t dwell on necessarily on lessons about the specific situation, and more on general lessons learned in startup crises. If you want to read about lessons from the situation itself, read our blog post here.
What happened?
Due to changes beyond Parallax’ control or fault, we received sudden news that a major partner of ours was terminating several customer relationships, including ours.
This unexpected development required us to act swiftly, as we were only given 4 business days notice until termination, to ensure the continuity of our services for our users as the termination meant major downtime and disruption. Without going into detail, it was... not good.
What did we do?
Immediately, we…
- communicated the news to our investors, in hopes they could help us negotiate this tight termination timeline.
- devised a plan to hack together a solution that minimized disruption for our most active users. For focus, we also stopped new user registrations so we could focus on our existing active user base, our top priority to keep business as usual.
- communicated the news to our users, relaying our plan and estimated timeline. The full blog post relaying the info: https://www.withparallax.com/blog/important-update-parallaxs-path-forward
The team worked nights and weekends. We estimated we’d finish the hacked solution in 1.5w. We finished it in 4 days (thanks to our amazing team and new partners!) That must be some record for the quickest migration in history!
We were lucky: we had already been migrating to a new partner when all this happened, which expedited a lot of the process. If we hadn’t already started this work, it would’ve been more painful for us as a company, and for our users.
What was the outcome?
At the end of it we:
- successfully negotiated new terms
- successfully migrated about 85%+ of our existing active users to new infrastructure, minimizing disruption
- continued to see the user love from our community
Lessons Learned:
- Transparency, urgency and user-focus are the most important principles to live by when handling startup crises.
- Transparency: We kept our investors informed when major changes happened, and they appreciated that a ton. We sent our users constant emails, kept our blog post updated when new information and an extensive set of FAQs, and reacted to any and all questions in our community, which we asked everyone to join for more real-time communication.
- Urgency: We needed to act extremely quick because, well, we didn’t have a choice and it was the right thing to do. There was no use beating around the bush or acting slowly — speed would protect our user’s interests more than anything.
- Commitment to Users: Our priority remained clear: to ensure minimal disruption for our active users and maintain the integrity of our services.
- Ask 👏 for 👏 help 👏. Some founders shy away from sharing “bad news” to investors. Not me. That’s (supposedly!) what they are there for - to help in times of crises. I’m so grateful for key investors and other people in our network who really helped us with our negotiations. Also grateful for the ones who couldn’t necessarily helped but rooted for us and supported us along the way. It was also a great test of which investors actually read my investor emails and had our backs.
- Cut the noise and focus. Minimizing disruption for our existing active users was the #1 priority. Other initiatives didn’t matter. That also meant pausing new registrations, which diverted from the #1 priority. While it took a hit in our growth, it was the right thing to do.
- Crises bring teams together. Interestingly, when checking in with team members, some found the process exhilarating. Of course, far from the ideal situation, but it was a chance to come together as a team towards a tight, well-defined goal. And there was some fun in that!
- The more communication, the better. I communicated to our investors and partners on a regular basis, a good tool to make sure everyone was aligned, focused and aware. However, admittedly, this was something I don’t think we did enough of internally. While we had some check-ins on progress towards the migration, there weren’t enough check-in points or, on my end, not enough emphasis on the need to overcommunciate regularly. If we did, it could’ve saved on some confusion on work done. For next time!
- Crises are part of the startup game! When reflecting with members of the team, the consensus was… “well, it’s a startup! it happens! it’s life!” Very fair. A day in the life.
- Big picture, big picture, big picture. When I first got news of the termination, cortisol ran through all parts of my body. Panic! Anxiety! Stress! I called our lead investor up to relay the news. He could hear the panic in my voice, so helped ground me and reminded me to think of the big picture: Ultimately, this was not an irreparable situation. In the grand scheme of things, we’d find our way back, even stronger especially given our strong brand, a supportive community and the larger market we’d tackle.
Follow the 3 and your users will thank you for it.
Of course, It was hard to grok in the moment, fresh from hearing the news. But turns out, he was right. 🙂
Hope the above helps you (and future me?!) navigate startup crises like a pro. Open to even more feedback on how we can do even better if this happens again.
References:
- Fortress has revised its initial termination notice, allowing Parallax to continue operations with specific conditions.
- This includes phasing out deposits into fiat accounts while maintaining cryptocurrency operations and other activities not related to CRB. CRB accounts will remain active for a limited period, allowing for already incoming funds under the condition of ongoing communication about the wind-down process.
- Thank you to those who facilitated communication with CRB and Fortress, aiding in this development.
- The situation has enabled a hybrid interim migration strategy...
- We quickly migrated majority of active users to new accounts, thanks to a hybrid solution developed in partnership with Bridge and Fortress.
- Now: The focus now shifts to completing our full migration (work ongoing, anyway) and enhancing our infrastructure with our self-custodial wallet solution on solana.
- Continuing efforts to obtain Money Services Business (MSB) registration and bolstering our compliance measures, including the integration of our Know Your Customer (KYC) and transaction monitoring systems.
- New user registrations remain on hold, with plans to reopen once our KYC framework is in place.
Thank you again to all who helped out, checked in and sent virtual hugs! They mean a ton.
Best,
Mika and the Parallax team
Sharing some user love from our community!