Banking vs. Operating

Posted by Jeff Lu on March 11, 2010

So it’s been 8 months since I left the world of investment banking for the world of operating a real business.  I now manage the Affiliate business development team for HealthCare.com.  We run a PPC ad network for health and life insurance advertisers.  I do miss the world of finance from time to time, but 99% of the time, working at a startup has been so much more fun and rewarding for me.  Here are some of the difference:

Having a Scoreboard

As an analyst, I used to find out how well I was doing my job during reviews, which occurred only twice a year.  I would receive a score a score (1-3 or 1-5, I forget) on a number of key skillsets/characteristics.  This would be backed up by some anecdotal data points (both good and bad) from the senior bankers.  As you might imagine, there’s a lot of subjectivity when it comes to your review and imbetween reviews, the perception of your performance is not always transparent.

As a manager of a division, I have a daily scoreboard.  I know how much money we are making the company every hour, day, week and month.  We have monthly revenue goals to hit.  Beyond those metrics, we have other supporting metrics to measure such as how many leads we are contacting, how many opportunities are we converting, etc.  There is rarely any doubt regarding how well we are performing and it’s not subjective.  Every member of the team has their own business development style and the only thing that matters is performance.

When I first started, our division’s P&L was in the red and having this daily scoreboard put tremendous pressure on me.  Banking was a lot of pressure in that you had a lot to get done sometimes and felt like there weren’t enough hours in the day to get it done.  The pressure I felt at HC.com was different.  I felt like we had to perform and the whole company was depending on it.  It was a hard adjustment but now that we are killing it, it’s exhilarating and an hourly, daily, monthly source or pride.

Becoming a Ninja (vs. Being a Robot)

To be a good investment banking analyst, one needs to become very good at following directions and perfect a few tasks/projects that you will have to perform thousands of times during the program.  When you start, there are other analysts, a year senior to you, who can show you the ropes and you just follow their model for success.

When I started here, there was no model for success.  Howard Yeh, then VP of Corporate Development was promptly promoted to COO and my principle responsibility was to take over the responsibility of recruiting new affiliates and managing other business development team members.  Howard had some ideas on what might work but he didn’t have a proven model yet either.  We worked as a team to come up with new ad products that would enable us to partner with different affiliates in various capacities.  It was and still continues to be a struggle at times but the freedom and responsibility can be hugely rewarding.

The reason why I used the word “ninja” to describe my role is because I’ve heard it used a lot among startup communities when people talk about the type of people they want to hire or work with.  I think it’s relevant for our team because we were giving a mission to accomplish: to hit certain revenue goals.  We were given the tools/weapons to accomplish this but we weren’t told which ones to use or how to go about accomplishing our mission.  It took a lot phone calls, emails and product iterations to get to our current growth profile.  Being a ninja means figuring out a way to get results.

Hiring and Working with Ninjas

Hiring and managing other people was something I was least prepared to do when entering this job and it’s still a skill set with which I struggle.  When I was an analyst, I was the bottom of the totem pole.  The only other people I had the opportunity to manage were analysts junior to me, who I could pass on the work I didn’t want to do.

When I first started at HC.com, I still had an analyst mentality.  I wanted to run half a dozen weekly reports that would analyze the affiliates we signed, the affiliates we had to implement, the delta in our revenues by affiliates, what the reason for this delta was, etc.  This took up half of my day every Friday.  I also wanted to review emails that the other business development managers were sending, and periodically be on calls with them.  Basically, I was spending a lot of time micro-managing and not trusting the people I was working with, but sometimes it was necessary to make sure we were performing.

We recently moved a colleague from the SEO department to my department and I’ve realized the importance of hiring the right people.  She reminds me of Mark Pincus’ interview with the NYTimes, where Mark challenges each of employees to be a CEO of something.  Julia has really taken the initiative to learn as much as she can about how to become an effective recruiter of affiliates and has really become our CEO of recruiting medicare and life insurance affiliates.  I’m really proud of the work she’s done for us and it will turn into a lot of revenue for us very soon.  Her contribution moves beyond just making money for us; the fact that I don’t have to micro-manage her makes my life easier.

Not having other ninjas working for you takes time away from tasks that you should be focused on.  It diminishes your ability to be the CEO of your responsibilities.

Before moving on, I wanted to share something that I’ve learned from Julia.  Being fearless and aggressive when pursuing affiliates.  Here are some highlighted examples of some successful emails (emails that elicit positive responses) she’s sent that I would have never sent:

1.) Subj: I think I haven’t heard from you on this..

Email Copy:  Hi, just a quick follow-up to see if you received my email last week, I want to make sure it didn’t end up in your junk/spam folder.

Responses vary =) from “your email got into spam” to “I was on a vacation and just got back to office”, etc.

2.) Subj.: do you own this domain?

Email Copy: Hi Jason, do you still own this domain – domain  name?

They usually respond very quickly, confirming that they own it. And I try to respond immediately till they are warm.

3) Subj.: did you implement the codes?

Works very well with the guys who sign and do not implement immediately.

4) Killer Email: Use with caution

Hi ____,

I don’t want to be annoying, I called and emailed several times to discuss the potential partnership, are you too busy to respond or simply not interested?

If for some reason you don’t think we are a good fit for you, are you okay with telling us No?

I would be most grateful if you would say NO as early as possible so we are not wasting each others time =)

Thanks,

Julia

Limited Resources

“Resources” can refer to a lot of things when talking about business.  It could refer to capital, the available time of people who work for you, your own available time.  For the purposes of this section, when talking about “resources” I’m referring to time.

As an investment banking analyst, you are the resource and you’re a near limitless resource.  All possible financial models, analysis, presentations, graphs, charts, etc. are deemed necessary to win and service the client.  If the resource hits a “limit” as in, there’s not 25 hrs in the day, your associate (1 level above analyst) who is staffed on the deal will be forced to help out.  Sometimes, investment banking felt like a series of sprints and with each spring, a late night or an all-nighter.

Going from being the resource to having resources has been a nice change, however there has been a culture adjustment.  I had to learn that not everything that we could do to sign and service an affiliate was necessary.  I used to bend over backwards to sign and keep every affiliate but I eventually learned a valuable lesson that I’ve read from Steve Blank‘s blog and book before.  The majority of the revenue (for us probably 80%) will come from a small percentage of your customers (~10 affiliates).  Small affiliates have been just as hard and time consuming to sign but they are usually more of a pain in the ass to service.  I now spend 90% of my energy and resources on a larger opportunities who can really move the needle for us.

Having limited resources has helped me prioritize tasks against the revenue potential.  It’s helped our team stay focused on opportunities that will help us get to our goals.  It has even helped us prioritize our internal development queue as we invest in our platform.

Why Do You Work?

Posted by Jeff Lu on June 3, 2009

I read a post today by Larry Cheng of Fidelity Ventures today that really resonated with me.  The post is about what motivates people to work.  I’ve been thinking a lot about my career these days and contemplating if I’m motivated and realizing my potential at my current job.  I’ve been thinking about what motivated me for a while and I came up with 3 things and in this order of importance:

1. Being challenged and learning – When I reflect on my favorite times at work; when I was excited to wake up and get to work asap, it was when I was doing things that were HARD.  It was when I had to do things that I had never done before and sometimes under immense time pressure to get it done and get it done right.  Unfortunately, I can only think of 1 or 2 instances that this has occurred in the past 6 months.

2. Increased responsibility – I think this motivator is somewhat tied to the 1st one.  Once you’ve done something that’s higher up in the “stack”, you want to keep doing it.  So it’s a combination of improving one’s position in the company and being challenged with bigger and more challenging tasks.

3. Money – Money is actually the very last factor for me.  I find it unfortunate that management seems to forget this.  More often than not, employees are motivated by more than money.  Tony Hsieh, the CEO of  Zappos gets it.  He realized that creating an entrepreneurial, collegial environment that encouraged learning allowed him to build a best-in-class customer service team for below market pay and benefits.

I’d like to end this post with an except from Larry’s post:

After hearing this and many other answers through the years, I am left with the impression that there’s a reason people work that sits above all of the specific reasons they give and ties them all together.  While at any given moment, answers like money, learning, enjoyment, or others may feel like and may in fact be the dominant reason – I think they all tie into a more subtle, constant, overarching reason why people work.  The impression I have is that people work because it gives them a sense of significance that would not otherwise be there.

I think many times in my career, I have forgotten this point.  We think by organizing the right comp structures, the right bonus plans, etc. we are “motivating” people.  But, really, I think the better motivator and long-term retention vehicle is to give someone a sense of significance.  If someone feels significant, many other “important” things become secondary.  Given that, maybe I should change my question to: What gives you significance?  Never mind, that’s way too hard to fit that into an hour interview.

Everyone Is Getting Discounts… VC’s Want One Too (Part 1)

Posted by Jeff Lu on March 12, 2009

My colleague on Twitter... the 2nd time someone commented to me on VC down rounds

Last week I heard two people comment to me about venture capital firms (VC’s) making a collective effort to use the economy as an “excuse” to lower valuations… and why shouldn’t they want a discount? Everywhere I look I see clothes, electronics, cars, services and, of course public equities being sold at a significant discount from what they were sold for the same time last year.

Originally, the main purpose of this entry is to talk about private company valuations and how VCs can make capital more expensive without lowering valuation, but now I’ve decided to divide this into a 3 parts.  Part 1 will cover valuation of early stage companies, part 2 will cover how the the public equity markets are affecting private equity valuations and part 3 will cover down rounds and intricacies of term sheets.

WAIT! There is more to read… read on »

Build Your Network Before You Need It

Posted by Jeff Lu on February 26, 2009

by: Keith Ferrazzi, Tahl Raz

Guy Kawasaki is great at writing insightful and easy to understand “how to” articles.  He wrote another good one earlier in the month titled “Ten Ways to Use LinkedIn to Find a Job“.  He actually gave 11 pointers in this article and I thought the 11th was the best:

“Build your network before you need it. As a last tip, no matter how the economy or your career is doing, having a strong network is a good form of job security. Don’t wait until times are tough to nurture your network. The key to networking (or “schmoozing”), however, is filled with counter-intuitiveness. First, it’s not who you know—it’s who knows of you. Second, Great schmoozers are not thinking “What can this person do for me?” To the contrary, they are thinking, “What can I do for this person?” For more on schmoozing, read “the Art of Schmoozing”

This advice might seems obvious but it’s hard to implement.   It’s natural to only want to network when we need something from someone, or when we are out of job.
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