Entrepreneur by accident
Entrepreneurs come in different shades and colours. But all of them have several common traits – and a lot has already been written about these traits. This post is more about what makes each entrepreneur unique and amazing. I would like to illustrate this with a real example of four entrepreneurs who seemed to me to be playing to a different set of beats.
These four had two things in common:
• Capital markets were in their blood. They had all served at very senior levels in global investment banks and asset management firms.
• They loved working with high calibre people
Like all entrepreneurs, their story also begins with a problem they spotted and decided to fix. Investment banks and asset management firms worldwide were faced with spiralling research costs that clients were not willing to pay for. Yet research was essential to provide a cutting edge to investment recommendations.
Outsourcing work to lower cost geographies – in the manner of the global IT industry - could be an option to cut costs. However, there was a problem with this scenario. While IT companies offshored repetitive and/or structured work, which was not seen as strategically cutting-edge, the strategic component of IT consulting continued to stay insourced. So outsourcing investment research, considered the core of investment banking and asset management, was simply unthinkable.
Take Apple. While the company could outsource manufacturing the iPhone to Foxconn in China, technology and design still remained the preserve of the Apple team at Cupertino. Offshoring research would be akin to offshoring technology and design.
However, the four demonstrated enough passion and deep knowledge of the domain for a couple of global investment banks to have confidence in them and their services. Thus was born team AMBA (an acronym derived from the first letters of their names).
Andrew Houston, a British citizen lived in Bangkok; Mohan Alexander, a Keralite who had grown up in Mumbai and was based out of Hong Kong; Brad West, an American who lived in Singapore; and Anand Aithal, a British citizen of Indian origin, who lived in London. Together, they were a formidable team, with a global reach and diverse skill set.
I gradually realised that making money wasn’t even among their top three goals:
• They just seemed to be following their passion – recruiting amazing capital markets professionals and building a great workplace where they could thrive and have fun. Every Friday evening, all AMBA offices worldwide would light up with well-contested debates on current events related to the world economy and capital markets.
• They were extraordinarily liberal in sharing equity with all key employees. They were particular that senior executives remain invested in the success of the firm, and encouraged them to buy equity unlike most of today’s startups where equity is tightly held by a few investors and founders. (They also rewarded performance with equity.) The employee stock options plan was also very transparent (and structured in favour of the employee), again unlike most of today’s startups where these plans are very opaque, and exits are a time for heartburn when key employees are forced to read the fine print.
• They were so particular about protecting the interests of their clients against any violations by their own teams that the primary role of the chief compliance officer was to protect the interests of the company’s clients and represent them within the company.
• They had appointed independent directors to ensure that minority shareholders were taken care of (and seen to be taken care of). These independent directors were compensated sufficiently for them to take serious interest in their roles. Corporate governance was of the highest order.
• They created a strong and empowered leadership team and delegated key decision- making to this team. The leadership team was invited to join Board meetings at fairly regular intervals, and without fail, all strategy sessions of the Board. The only thing they ensured was that everyone was aligned on the core values.
• While their competitors were resorting to unethical means to boost profitability (using the same analyst to bill two different clients; having an analyst work two separate full/part shifts on two different billing opportunities; having a very high player-coach ratio that impacted the quality of work etc), AMBA strictly stayed away from these cheap tactics.
They didn’t name a CEO. They believed all four had a flaw that would render them ineffective in the role, and that they worked better as a loosely-knit team. Quite naturally, this significantly slowed down decision-making in the beginning (when they hadn’t yet hired a strong team). When the Board pushed them to identify a CEO, rather than choose from amongst them, they agreed to hire a CEO from outside. Which bunch of founders would do this? I think it reflected their honesty. At another level it also pointed to their being idealistic in a bookish way as opposed to being pragmatic. As expected, the external CEO didn’t survive in the role for very long. It was at this stage that they reluctantly figured out that one of them needed to be the CEO. Mohan took on the mantle and remained in the role until his exit.
Each of them was a refined individual in their own unique way. Every client was assigned a code name to protect their identity (that was the only name by which they were referred to in any conversation). The choice of the code names was also very interesting – you could get a decent overview of world history and geography, by searching for the references behind every code name. Andrew was the perfect people person; Mohan was someone every client completely trusted; Brad was hands-on and authored all the research training manuals in the early stages, and built research processes subsequently; Anand was the strategy guy. Between them, it was a pretty well-rounded team.
For the first time in my career, I was seeing a bunch of entrepreneurs whose primary aim was not to raise money or aim for a spectacular exit. They were all enthusiastic professionals who were simply happy to work with similar high calibre professionals and building a workplace of their dreams. At one level, they were reluctant entrepreneurs, but great human beings.
Nice people can be successful too. On a bright winter morning in December 2013, in a strategic move, Moody’s acquired AMBA, and in one shot, endorsed the quality of the asset that these amazing entrepreneurs had built!