Maple Finds What Sticks
Founder Spotlight with Sid Powell (original published on my newsletter Jan 31st 2023)
Last September, I met up with another visionary Web3 founder, Sid Powell, the CEO of Maple Finance at the Harvard Club of NYC. We talked about his founding story, the growing client base, while navigating the existential challenges he faced while building the businesses. Things were looking up.
Then the FTX saga happened. With that, the Web3 world turned upside down for every crypto company. Maple was no exception. Over the last few weeks, the protocol had to face a defaulting client - Orthogonal Trading failed to repay $35M worth of loans from a pool. Even though Maple is not the direct lender, it was indirectly impacted and had to control costs and ruthlessly set product priorities.
This is a story that most Web3 founders can likely relate to today. Even the Web3 behemoths, like Coinbase, had to cut more than a fifth of their workforce to adjust to this new economic reality, after a prior similar scale cut in the middle of last year. But as everyone knows, now is the time that will make the winners stand out from the losers. Let's see together why Maple is likely to come out on top.
First, what is Maple?
Maple Finance is one of the leading decentralized capital markets platforms, built on Ethereum. Specifically, it serves lending to institutions via credit pools that are settled on chain.
The problem of running a credit fund in TradFi (Traditional Finance) has to do with bifurcation of asset rules and records. In other words, the rails over which most financial transactions are happening are disjointed from the ledgers that keep track of those rules pertaining to the assets and transactions. This results in complexity when setting up and running a credit fund.
Just like Shopify made it easy for small businesses to launch online stores, Maple is making setting up a credit business easy - eliminating the need for a credit manager to invest in legal, compliance, expensive loan systems, and onboarding with banks. In simple terms, Maple is turning the fixed costs of running a credit fund into a variable cost, making setting up a credit fund-like business easy.
What was Sid’s founding story?
Prior to starting Maple, Sid spent a number of years in traditional finance, specifically in securitization - dealing with lender-facing financial products. As a treasurer, he had to source loans from the banks, manage the reporting systems, and coordinate with 3rd parties. It was clear that there was a way to leverage smart contracts to automate these activities and create value for all involved parties.
Financial back-end systems were almost exclusively excel spreadsheets, or slightly glorified versions thereof. These siloed systems were often not talking to each other. This lack of connectivity created a problem of operationalizing the running of a credit fund - especially getting capital and managing the repayment of loans. Sid set out to solve the frequent discrepancies hindering operational efficiency in lending businesses with Maple Finance.
What are the existential challenges that faced Maple Finance since inception?
The first existential challenge Sid faced was finding Product- Market Fit (PMF).
As a founder, you have a very particular idea of what will work. But in reality, most of the time what you think will work is not actually what works. It is like flying a plane, you have to constantly course correct. For that reason, you always have to talk to your potential customer.
Sid and his team spent a lot of time with their potential customers, while working with a design firm to prototype their suggestions. Tools like Figma were particularly helpful to prototype and get direct feedback from the customers. It is only when you put rubber to the road that you can see what works.
Then, as the business started to take off, attracting and retaining top talent became the key priority.
Getting early people right is very important. Sid found that it is best to go with a good recruiting agent, especially for the core hires. Ads and job boards would undersell your company and the opportunity.
Early on, they had a hire who was very good at independently executing, which was great for their individual productivity. As the team scaled, they were finding that we need people who are better at coordinating with teams, in order to get the same productivity boost. Going back to the recruiter for evolving needs has been an accelerant.
Last, but not least, were the legal challenges.
People often assume that all lawyers will have the same opinion. Even years into starting Maple, Sid is still getting very different opinions from various lawyers he is working with. Some legal partners are more or less flexible than others. His piece of advice here: don’t totally reposition your offering or customer experience based on the opinion of one legal partner!
This is where the story would have ended, if it wasn’t for the FTX demise.
So, what exactly happened to Maple since November 9th, 2022?
Like most Web3 companies, new existential crises emerged after the FTX collapse. Businesses were no longer able to count on venture funding to power their growth. They had to prioritize revenue. They also had to cut costs and make difficult decisions to let go of team members. Maple was no exception.
In times like these, it is clear that the founder's most important role is to bring revenue in. For Maple, it meant shifting focus to lower risk products and starting to address features of their existing products. They had to ruthlessly prioritize people’s time.
Nowadays, with a change in ecosystem venture funding, companies were having to be much more deliberate with their planning and forecasting. Now you have to think hard if your product is actually priced appropriately, when you release it. If you continue to create products that cost more to operate, you are hurting your runway.
To bolster stable revenues, Maple took measures to diversify into real world assets, such as tax credit receivables, reinsurance pools, treasury yield on chain. They also began actively managing collateral that secured the loans to protect lender value locked in protocol.
Maple executed a headcount reduction in mid-December. Sid’s goal was to be transparent with his people so that they were not suddenly surprised, and be expedient with decisions so that everyone could get back to building. Everyone who remained was given extra time off following Christmas to recharge.
Closing Thoughts:
As we see the winds of the market shifting, companies that prioritize effective growth and efficient utilization of existing capital are the most likely to survive long-term. This often leads to difficult decisions and may even cause negative short-term market reactions. However, discipline and focus in bear markets allows companies to take advantage of growth in the long-term.
We commend Sid and the Maple team for decisive, intentional action to overcome adversity and come out stronger.