Successful entrepreneurs are a distinct breed. You must have a visionary idea, and it must be one the market is ready for and needs. It takes a lot of hard work to execute that idea, and you can’t be afraid to move ahead before you’ve figured everything out. Summoning a mix of boldness, persistence, and confidence in yourself can keep you charging ahead even when all the answers aren’t available yet.
My partners and I took an unconventional approach when we started our current firm, Vestmark, which provides systems for financial institutions to trade investor portfolios. We had worked with venture capitalists (VCs) with a previous startup but decided to bootstrap this latest effort on our own. Once you've had success with a startup, the investors see that you know how to build a company, and they are more willing to take a chance with you. Venture capitalists can be immensely helpful, but we wanted to have total control over our destiny without having to consider the suggestions and input that quite understandably come from investors. We were fortunate that our success from the previous firm, along with some generous friends and family members who believed in us, enabled us to go our own way.
Each entrepreneur’s experience is unique, but some of the lessons I learned along the way seem to hold true for anyone who is considering taking on the immensely challenging but also incredibly fun task of starting their own firm.
Don’t be afraid to modify your vision
In the early 2000s, my partners and I saw an opportunity to help firms in the asset management industry deal with the new rules from the Securities and Exchange Commission requiring shorter settlement times of trades. The industry had been operating under the “T+3” standard, requiring that trades be settled within three days of the date investors requested them. The new rules were calling for settlement in T+2 and even T+1 for some investments.
We believed we could develop a workflow application that would help firms meet these new requirements. As we made sales calls to potential clients, we did find T+1 was on everyone’s mind. But in those conversations, the prospective clients told us their real pain point was the accounting systems they were using, one of which still worked off a mainframe computer and others on desktops. We saw an opportunity to solve a bigger problem and bring firms’ accounting systems into the 21st century.
Be prepared for moments when your ignorance may be exposed
My partners and I are software engineers, not accountants. We knew we could offer an effective solution, but we didn’t know every nuance of the business back then. Twenty years later, I am invited to industry conferences and handle media requests when people want expertise from our corner of the financial services industry, but you can’t have that when you’re starting out. You have to accept that you don’t know everything there is to know about the field where you’re trying to stake a claim.
In some of our early sales calls, some very senior people told us, “You guys don’t know what you’re talking about.” That can be an intimidating experience and can make you lose the courage to make your next sales call. If you believe you have a viable solution, though, you have to summon your boldness and moxie and keep making those calls to prospects.
It may seem naïve to think you can go into meetings with heavy hitters in the industry not having everything figured out yet. You might lose your opportunity, though, if you wait until you understand every nuance and detail – and the overarching solution you ultimately discover might not initially need those answers anyway.
The good news is that those early engagements with prospects, when something you didn’t know gets revealed, are great learning opportunities. With every sales call, your understanding of what clients need deepens. With all that you learn from these conversations, you can refine what you’re offering and the sales pitch you use to promote it. If you listen really well to one prospect, then you’re an expert when you visit the next prospect.
Keep your eyes and ears peeled for opportunities you might not have envisioned
In addition to having some flexibility with your overall vision, you want to make sure you are not so laser-focused that you don’t see opportunities to pursue or additional business that might branch off your primary offering. One thing that became clear to us in our original meetings was that the separately managed accounts (SMAs) business was poised to take off.
While complicated enough, trading in a traditional mutual fund is easier because all the security trades the portfolio management team makes are the same for the one pool of assets. Within an SMA, the timing of the purchase and sales of securities may vary in each investor’s portfolio to accommodate their particular needs and tax considerations. It’s more complex, but we believed we could handle this, and it became a key piece of business where we were really able to distinguish ourselves.
Bring in the expertise you need, even if it means taking talent from rivals – when you can
We saw an opportunity to build and improve on an accounting and trading system long used in the industry. Fortunately for us, some of the people who had built that system were no longer with the firm that offered it. We were able to hire them and draw on their deep understanding of the accounting and trading systems asset managers use while also looking to make considerable enhancements to the system we planned to offer. You must paint a huge vision for your employees, excite them with the challenge because those are the only people you want anyway, and align their interests with the company by creating a stock option plan. And if you don’t know what Qualified Small Business Stock is, you need to because the tax incentives for you and your early employees are huge.
Accept that your time won’t be your own – for a while
In the early days of a startup, the time demands on everyone on the team will be daunting. You have to be willing to put in 60-plus-hour-weeks, fly on a moment’s notice and hire a staff that is ready to do the same. As a trading platform, we needed to receive and process all sorts of files at 2 a.m. Naturally, we automated all of that processing, but things happen. At first, we needed the engineers who wrote the automation to wake up at 2 a.m. and check for errors, but eventually, we hired a dedicated night staff. The point is that as you grow the business, you will be able to hire people that enable everyone to have more balance in their lives. It can be a daunting experience, but when you have the urge to start a business, it can be a driving force that is difficult to resist. I can also say, from personal experience, that it will be an immensely rewarding endeavor.