25 Jan How To Be Successful With A New Startup Company In A New Country With No Connections With Susan Kish
In today’s episode, we talk about how to be successful with a new startup company in a new country with no connections, which our guest, Susan Kish, has done. Susan Kish is working on her own startup, is working inside large companies, she’s had successful exits, and she’s raised money. She talks about not having to have an exit strategy for certain industries, the timeframe that inventors expect to make profit from their investment, and so much more. Enjoy the episode.
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How To Be Successful With A New Startup Company In A New Country With No Connections With Susan Kish
Hello and welcome to The Successful Pitch. Today’s guest is Susan Kish, working for her own startup, working inside large companies, she’s had successful exits, she’s raised money. She just has such a huge background starting with graduating from Harvard and going into banking and then being the director of Knowledge Services at Bloomberg, all the way up to being the CEO and founder, dealing as a business development consultant with companies focused in transition. As if that’s not enough, she recently became a Connections Science Fellow at MIT Media Lab and is currently working as a senior advisor to a handful of Fortune 100 clients in media, energy and finance. Susan, welcome.
Thank you so much, John. I’m delighted to be here.
Let’s take a deep dive. Take us back to getting out of Harvard, 1980, what are you going to do with your life, how did you go from that to where you are now?
I can assure you, it never crossed my mind that I would be an entrepreneur, that wasn’t a career path, wasn’t something folks talk about at that time. If we thought of an entrepreneur then, it was Richard Branson in Virgin. I’m not even sure he was around then. I went to work for Chase Manhattan Bank, who at that time had a fantastic training program. It was like an MBA for a first graduate. I’d major in history and science, which was a fascinating area to major in. Not really good on the what you do next category.
But a bank like Chase was extremely happy at that time to hire liberal arts graduates and basically put them through a training program that taught you all about accounting and taught you about finance and taught you about corporate finance, M&A and it was really a terrific foundation. It was wonderful at that time to being a banker. I was at Chase for five years and then at UBS for close to fifteen. In retrospect, I was what was now called an intrapreneur. We didn’t have a term at the time. I started a series of business, launched a series of products and found that I really loved building businesses, that that was really what made me happy to work until whatever hours and happy to work whatever is required.
Can you tell us the story of one of those businesses you started as an intrapreneur?
One example would be municipal finance. UBS, this is the late 90s, UBS was a AAA rated Swiss bank. At that point, when I joined them in the late 90s, ’95 I think was when I started, I joined them in ’85. This would be the early 90s when they had me starting this for finance group. UBS had decided that there was an opportunity in the domestic, meaning the US based municipal finance sector, but they didn’t know what that opportunity was. I had started a broker dealer business lending to broker dealers. The branch manager called me up one day and said, “Susan, we want you to start a municipal finance business.”
I had no idea about what this sector entailed or what our positions should be. They gave me probably a month to immerse myself in the sector. I came back and I said, “There’s a niche called credit enhancement.” That’s where we use our credit rating to take the risk and provide investors with the security of a note issue, a revenue bond, a municipal bond. He said, “That sounds great.” I came back with a three page business plan and it was all systems go. We built a small team and within probably three, four years, we were the leading provider of credit enhancement. It was a wonderful niche market and it became a very profitable business for the bank.
How wonderful. Great experience. You really had the inside scoop as to what it takes to make a startup inside a big company, not instantly but certainly sooner than later, profitable, which is always a great sign of success.
I think so too. It also taught you patience. You don’t turn that around, you don’t build a business like that in six months to a year. I consistently found that when I worked at UBS. I needed to budget myself three to five years to get a business to pivot to the right place for you to find a niche and to build from there and to build something sustainable and something with significant impact. I’ve actually seen that consistently in my career. Big businesses rarely happen in the three to six months timeframe that we’re all seduced by these days. Businesses often take that three year plus to really make sure you got traction, you’re in the right market, you’ve positioned and priced it right.
I love it. We’re going to tweet that out, “Big businesses rarely happen in three to six months.” That should grab somebody’s attention. From there, you’re working at Bloomberg New Energy Finance in London. You’re traveling the world and learning all kinds of things. One of the things I see here is that you were involved with Coding for Non-Coders. Let’s talk about that since that’s a big topic for you with your TED Talk.
There were a couple of years in there when I was a classic entrepreneur with a variety of different forms and exits.
Let’s hear about that because everybody loves to hear a story about somebody who has a successful exit. Please, tell us one of those.
When I left UBS, it was to start my own company in Zurich, which was of course the triple challenge. You’re starting a new company and in a country where you don’t speak the language and where you actually don’t really know that many people and don’t know that much about building a business.
That’s the three Cs right there. A new company in a new country with no connections.
Add to that, the fourth C, which is the language, though that doesn’t start with a C. It was a fantastic learning experience. I found it exhilarating. Having been in a large corporation for all of my 20 years as a banker, being liberated to start something up in the late 90s, early 2000s, it was so much fun and so energizing, it was fantastic. We sold in the end, we sold that company to a … That company was a, in retrospect, I call it business think tank. It was focused on introducing the investors to entrepreneurs, it was focused on pulling together diverse perspectives to deal with, at that time, the very tough emerging questions about sectors. We sold that company to a firm called XING, which was the German LinkedIn. Then I joined a friend of mine, Michael Liebreich, who was building a clean energy research company called New Energy Finance. In turn, we sold that firm to Bloomberg in 2009.
Let me just ask you two questions right there, because so many people want to know, did you have an exit strategy at the very beginning or is this something that just evolved?
For First Tuesday, I can say with complete confidence, we did not have an exit strategy. First Tuesday was part of a global network that had started in London. We were part of the first wave or expansion. In the beginning, it was simply a cocktail party that worked up and turned into a business. An exit strategy was the last thing in our mind. Over time, we had found a sustainable business model turn more into a professional services firm. This predates LinkedIn, it predates Meetup, it predates so much of the technologies that we find ubiquitous today. That firm was also really affected by the collapse of the dot-com world and then by 9/11 and the nuclear freeze that happened after that. I would say that we never had a strategy of building to sell or building to flip. In fact, in my experience, I think given a choice of an investor who’s building to flip, an investor who wants to build a great business, I’d go for the latter every time. There’s a different commitment, there’s a different frame of mind, there’s a different sense of timeframe. One is being built for generations and sustainability and one is being built for whatever is going to get you a bang for your buck.
Let me ask you Susan, because you’re the perfect person to answer this. If you as an investor are looking to find a founder who’s not interested in selling it in three to five years, which is sometimes investors want that because they go, “Oh, then I can get my money back in three to five years at a high return, but instead, I’m willing to invest in you because you’re not going to sell in three to five years.” How do the investors typically see themselves getting their money back as the company just doesn’t go public or doesn’t get bought but just keeps getting bigger and bigger? Is it that the revenues are so huge that the percent of the company that they own is giving them some kind of residuals?
That’s an extremely interesting question. It comes up a lot in the energy and industrial sector. I do a lot of work with energy venture investors. I started a conference with Emerald VC. Emerald Technologies is a VC based in Zurich. They were one of the leaders in clean energy financing in early 2000s. We still convene as investor for them fifteen years later. What you found is that, in that sector, in contrast with much of a consumer based digital technology, you cannot invest with the intent you’re going to get out in two to four years. Industrial applications, most B2B applications really don’t get enough traction or scale to make an exit within that timeframe.
Yet, investors are needed because these companies have huge amounts of value to create and they need that financing to bridge them from the idea, the garage to the incubator, to the first office and beyond. I think typically how these investors view it is that they are building it to scale for the longer term and that often means, from an investor perspective, that you’re looking for an investment where you see a strategic investor in there from a very early stage. An energy investor for example, maybe there are two or three standalone VCs who are in there but they’re really happy when an ABB comes in, they’re really happy when a GE Ventures comes in because that gives you a path to hopefully on one hand a sales force, an application, a way to really leverage the technology. It also gives you the hint of maybe there’s an exit at some point down the road.
It’s a different perspective because in that case, you’re typically, as an investor, you’re looking for probably more of a strategic sale than your whiz-bang unicorn based billion IPO.
If customers become investors and then sometimes investors become the people that buy you or someone on your advisory board becomes your exit strategy, it all ends up in a way that the investors get their money back, it’s just done in a different strategy. Is that accurate?
I think so. Also it doesn’t mean that you’re not going to get a multiple for your investment. It just means you probably need to be a bit more patient and you need to have a long view in mind.
Yes, especially if you’re going to wait that long then you want the multiple to be higher as well typically. Let’s dive into your TED Talk about Coding for Non-Coders and how your whole philosophy is how important it is to stay relevant. I watched it. It was fascinating and riveting. It’s always the unexpected that grabs people’s attention in any kind of a pitch or a talk. Bring that talk to life a little bit for us.
For me at Bloomberg, I was working for the CEO, managing the portfolio of innovate projects. Typically, that involved two or more divisions of the firm. I was frustrated when I had the opportunity to work with the tech folks and the engineers because they were making decisions, evaluating options and positioning initiatives in ways that I didn’t really get it. It was hard for me. You can only ask a stupid question so many times. At the same time, I was seeing that there were all these fantastic learning to code initiatives going around and yet they were all focused to, I don’t know, teenagers or first time entrepreneurs, people in their teens and 20s. Yet, what I was seeing was my generation, senior executives were needed to have that same understanding because there was really no channel with which they could do that in a gracious way that fit in their schedule.
It’s almost like you’re speaking a different language literally.
We’re going to tweet out your line there, “Stay curious to stay relevant.” That’s such a great takeaway.
It is critical I think as we do it. What I found in Learning How to Code was it was on one hand breathtakingly, humiliating is not the right term, but really brought your feet to the fire because you had to figure out how to write a line of code, you had to figure out that if you put the period in the wrong place or used a comma instead of a semicolon, the whole damn thing will be screwed up. You needed to not just learn one language. At that time, I was building a website, an online magazine because I wanted to read articles from Bloomberg News in a more pleasant way. I found I had to actually master three to four languages, I had to have an aesthetics sense, I need to have design, I needed to understand problems, you had to apply logic. All these things had to come together. It was hard for me to do because I’m not an engineer by background. It was also hard for me because a classic executive schedule is broken to 15 minute or 30 minute chunks during the day. To actually do this, you need to be able to zone in for one hour to three hours.
Do you think your experience learning a new language in a new country helped you learn this new coding language?
To a certain extent, it did. On the other hand, it was illusory because when you learn a language, let’s say, you’re travelling in Italy, you can always get away with half a dozen words of those languages and pointing and sign language. You can communicate. People are forgiving. Coding is not forgiving.
That’s so true. One little thing is often, “Forget it.” I love it. Let’s dive into what you’re diving now with being the advisor to so many of these Fortune 100 companies in this media energy finance. Is that some trifecta that I’m not 100% familiar with? I know about energy and finance, but the media part is new to me.
I think what is common for all those sectors is that they are sectors at various stages of transition. To some extent, media was really a leader in that. The transformation of the web, whether it’s newspapers or print or magazines, continues. The business models and the relevance of those players is, it’s played out in everything we see. The other of course, transformation media was the telcos, the battle of the telcos and the voice over IP providers, the battle of the telcos and cable. We continue to see that. Yesterday, I got something from Verizon trying to make sure that I didn’t cut the cable. I already did cut the cable. What’s interesting between that sector and, let’s say, financial services or energy is that those are two sectors that are I think in early stages of complete transformation. For banking, you can’t read about financial services without reading about the surge of fin tech and reading about, gosh, what is it that Facebook’s thinking about? What is it that Google is thinking about?
Just the way that we all send payments now, you can use PayPal, you can use Venmo. Who needs a bank?
When was the last time you physically walked into a bank? Financial services and not just banking, banking, insurance, reinsurance, the whole panoply of those services is undergoing transformation and there’s such inertia and there’s such a huge amount of regulation that prevents these guys from being nimble. The change is not going to happen in a year but the world will look very different in ten.
Those companies have their own venture capital division now looking for startups because they can’t be as nimble as they need to be and they want to invest to stay cutting edge.
A firm like Goldman Sachs has really shown that actually you could do that very powerfully. They have put a lot of money into that area. They’ve put a lot of emphasis in some of their best talent in that area. Their technology is increasingly viewed as really an interesting view. You can see what these financial institutions are doing around the technology like blockchain to find out where they’re trying to experiment and where they are fighting to maintain. Again, I would argue their relevance in that world.
What do you do Susan, when you’re advising some of these executives in these industries that are going through such disruptive change? How do you help them through this transition? Do you work on a long term plan? Do you work on short term plans? What do you find consistent things that all of these industries in huge transition need your advice on?
It probably would go down to three things, one is the classic issue of strategy. How we position ourselves and our firms so that the words in our mission statement are more than just words. Every business plan says something about innovation. Every business plan is something about repositioning. How do you actually translate that into something that’s not window dressing? Even VCs, there were just recently some research done in these months, I think Harvard Business Review article, about VCs, corporate VCs are increasingly focused on financing return, not strategic return.
Because it’s easier to measure a financial return, it’s harder to measure a strategic return. How do you reconcile those conflicting messages? I think that’s area number one, is around strategy. Area number two is around questions of what’s perceived as thought leadership. If you are in a sector, let’s say you’re a data company and you’re trying to ensure that your product remains relevant, top of mind, ahead of the curve, something that’s going to help your own clients transform, how do you do that? There are a gazillion data companies out there. What is it that’s going to make that difference so that somebody says yes to your product?
It’s not being seen as a commodity if you’re an architect firm for example. “Everybody could design this.” “No, we have a unique something that keeps us ahead of the curve.”
That’s right. You’ve been in sales for many years. You know it’s difficult to actually make a distinctive, to genuinely show that there is a distinctive difference and it’s not just window dressing, it’s not just a spin to it. The third area is, actually through working with them, is driving real innovation. That typically means helping them get out of their comfort zone, helping them work across their divisions and sometimes helping them work with outside players. Because sometimes all those talents, your firm itself may have a huge amount of talent but if they’re not given a safe zone, it’s tougher than to go out there and really try and experiment. It gets back to where we started, which was you don’t deliver that in three to six months.
You need to have that patience.
Love it. That’s so great. When you had a successful exit for your next one before you had to exit there, did you have to raise money? Did you have to pitch and raise money for the second company that had the exit?
Yes, we did. We needed to raise a second round before we did our exit. That was fascinating because at this point, New Energy Finance, this was mainly led by the founder CEO, Michael Liebreich and the senior executive team was a component of that. We had to figure out a balance between demonstrating where our potential was and demonstrating where our tangible benefit was. The tangible benefit was, “Here’s all the research that we produced, here’s the unique data sets that we’ve created, here’s our pipeline, here’s our existing clients.” That shows where the tangible benefit and the track record is. But effectively by asking for that next round, we were asking for the money to go to the next stage. We were asking people to buy into what the potential was.
Really I think the key takeaway for me is having had a successful exit under your belt, when you go to pitch for a second round of funding on your other company, there’s so much more credibility built up because you’ve already done it once successfully, the investors are much more confident in investing in you, the jockey, that you’re going to figure out how to do it again.
That’s exactly right. Also, I think there’s a difference when you have gone through that first round and you have looked how much cash you have in the bank and were your revenues are coming in and you’ve decided that you need to cinch your belt. Investors appreciate when you have gone through that kind of process. It’s remarkably easy to spend money. If you’re a well funded startup, the temptation to get lovely new offices and fancy furniture and Tuesday catered lunch is, those are marks of stature. Sometimes you need to look at it and go, “You know what, my revenue’s flattening out. This isn’t going quite the way. I’m going to have to pivot. I have to make the tough decisions.” That typically means an investor needs to know that you can make that pivot. You can say, “From now on, every penny is a hostage until released at gun point.”
That’s fantastic. What a great line. “Every penny is a hostage until released at gun point.” I love it. We’re going to tweet that out.
It is a flip of mindset for companies. In an environment where perhaps you’re nervous about raising that next round or perhaps you’re hearing that it takes a little bit longer to close that next round or perhaps you’re nervous about the outlook in your sector. Your ability as a CEO to make the hard decision needs to be seen as a sign of strength and a sign of resilience, not as a sign of giving up or sign of weakness.
Nice. Strength and resilience, what a great place to end the podcast. Susan, is there a book you’d like to recommend for people to read?
Actually, there is. I’ve been reading Behind the Clouds: The Untold Story of How Salesforce Grew by Marc Benioff. I have been really struck by how he talks about the power of events. For him to turn his customers into his partners or turn his audience into a community and to really harness the power of live events and live interaction to help drive his business. Somebody who has used events or been surprised over and over again at the power of events to put you on the same side of the table as your clients, he articulates it really well.
Susan, how can people keep in touch with you?
The easiest way is probably through sk@SusanKish.com. I do a fair amount of work both in conferences and in speaking engagements. That’s probably the best way to find out what I’m up to.
Wonderful. Thanks so much for being on the show, Susan. You’ve been a fascinating guest.
Thank you so much, John. You’re a wonderful interviewer.
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