Saturday, September 7, 2013

StartUps and Wall Street: Common Imperatives

StartUps and Wall Street: Common Imperatives 



Thinking with Roseanna DeMaria

I had a lively conversation with my friend and former colleague Roseanna DeMaria this week. Roseanna is an expert in organizational design and transformation, a top leadership coach and a passionate educator. So always thinking and learning. (You can see her talk about leadership and learning in this interview with Russell Sarder: Click for Video). Roseanna is a colleague from the pre-credit crisis days of Wall Street, like me she is a former Merrill Lyncher. (And by the way, watch out, she started honing her people judgement skills as a prosecutor!)


Driving value creation - and the startup mindset

Everyone knows that the value proposition for people and businesses is critical for success. As Roseanna noted, it exists on many levels: 
a) the value created by the business model itself 
b) the value delivered by the talent running the business and 
c) how the culture or DNA of the business fosters a mindset around its value creation. These three are usually inextricably interwoven and driven by the leadership of the business - in a startup context that most always means the founders. These founders/leaders determine how the business performs and how the people in it perform. Value creation takes no prisoners in any business, least of all a highly resource constrained startup. Consequently, in the start up context, it is very dangerous for founders/leaders to "miss" the fundamental concept of value creation and the three levels cited above. Get it wrong and your start up is simply, excuse the pun, a nonstarter.


Wall Street and start up imperative similarities

While discussing these issues we compared our work with early stage companies in the B2B space against our previous Wall Street experiences. We concluded that many of the imperatives we were driven in our own Wall Street careers seemed to translate very well to start up land. Indeed Roseanna (ever the creative one) coined the term: "Wall Street Ready start up".  Not a company ready for or headed towards Wall Street for an IPO (although many might aspire to be). Rather a startup that has a clear understanding of value creation, and with it an exceptional level of competitive drive/focus, combined with a sheer will to win that elevates its chance of success in what is a very long odds game.


So what makes a startup "Wall Street Ready"? 

ie What are the characteristics of a startup with a B2B product/service that operationalize these drivers of value creation? We identified three:

1. Urgency, urgency
2. Customers are priority #1,2,3 
3. Be the Wizard/ess of Oz


1. Urgency, urgency

Startups have no time for bullshit, professional or personal. You just get things done ... bulldozing through, or weaving around, constraints to drive the business forward. It means setting tough targets and deadlines and holding everyone accountable to them, not least the founders. For all its faults, so gravely exposed in the financial crisis, an intense sense of urgency was always a hallmark of Wall Street for me. In my case lived intensely as a sell side analyst. You were only as good as you last idea and had to move like crazy to create and deliver the next one in a timely manner in an environment where information to generate those ideas was widely available and the number of other smart and hard working folks trying to do the same thing was a constant source of pressure. 

2. Customers are priority #1,2,3 

Ultimately customers are all that matter. In a B2B/enterprise context validation (and survival) is much more a function of getting entities often much larger than yours to pay hard cash for something that they have been persuaded adds value to their business. Which means customers always come first: you listen like crazy, respond, iterate and treat the ones you have signed contracts with like gold. As the saying goes, startups fail for one reason ... they run out of money. So you have to drive as hard as you come to get money coming in to offset the inevitable early stage burn and de-risk he uncertainties of fund raising! The rise of the trading and proprietary risk taking culture at many Wall Street firms laid many of them low and devastated the economy five years back. Still in my view many parts of the business, especially in the more commission based equities arena (including research) and the financial advisory corporate finance side, adhered and likely still do adhere to the mantra, and do so obsessively, that the client always comes first. Dealing with the client call, the client request for a client meeting was always my number #1 priority. Wall Street Ready startups think the same way.

3. Be the Wizard/ess of Oz

In the B2C space an attractive website or a well designed app can give you instant credibility with millions. Not so B2B. A startup selling to the enterprise means you have to look and act like a (much) bigger company than you really are. You are selling, initially very much person to person, into a high level at established and often risk averse enterprises. You have to convince them that you can deliver, will support what you deliver and have a vision for your product that is compelling and aligns with their vision for their own business. And fundamentally at a personal level they must trust "you" or rather initially you the CEO. That means you need to look and act the part - sustaining your executive presence both in person and virtually. Meaning look and act the part in F2F meetings but also online personally (aka Linkedin) and corporately (aka your website and other marketing materials). It means seeking out opportunities not just to attend conferences but speak or join panels -- to look like a player not another observer. When I moved to the US in 2000, after seven years in Asia, I needed to convince long established industry experts at my buy side clients (never mind the CEOs and CFOs of major corporations at the likes of AT&T and Verizon) that I knew what I was talking about. In telecom services be it in terms of technology, regulation, market and competitive dynamics, arcane financial details - all of it. I was lucky to be at a very credible platform but still I had to find ways to project a sense of expertise that was at time frankly well ahead of what I truly possessed ... although hopefully that expertise caught up with the projected version fairly quickly!