Confessions of a FinTech Junkie

A few weeks ago I talked to the Founder of a high growth fintech company that I’ve been following for a long time.  The company’s business model intrigued me and their growth chart went straight up at a 45 degree angle.  I really liked the Founder and his business but for a series of semi-bad reasons I hadn’t pulled the trigger on making an investment.  If I’m honest, I had resigned myself to the fact that I might have missed the boat – it might have just been too late to get involved.  So, my follow-up call was to see if there was one final, creative way to structure an investment.

So when the Founder opened the conversation by telling me that the company had missed its quarterly numbers for the first time since inception I was very surprised.  The numbers weren’t bad, they just weren’t what had been forecasted.  One quarterly miss after many quarters of outperforming and the nature of our conversation changed completely.  It was obvious that DEFCON 3 had been officially declared so instead of playing “potential investor” on the call my Operator instincts kicked in and the call turned into a coaching session.

What I found interesting about the conversation was the Founder’s struggle to figure out what to do next.  He had proven himself to be a talented CEO, leader and visionary – nobody doubted his skills.  But, because of the disappointing quarter he found himself being assaulted in every direction imaginable with lots advice and all of it different.  For the first time in the company’s history, the members of his Executive team couldn’t agree on what corrective actions to take.  A Board Member suggested a very radical change to the sales model.  Another Board Member thought the company should re-examine its pricing model.  A third Board Member thought the company should re-forecast the three year operating plan based on the recent trends and reduce their burn rate accordingly.  And the Founder’s usual go-to support system (his co-Founder) was MIA trying to put out fires. The situation was a mess all from a few months of lukewarm performance.

My answer to his dilemma came in the form of five words: Listen, Study, Decide, Communicate and Act.

1) Listen to all opinions.  If explained well, each opinion will be an articulation of the hypothesized causes of the problem and the action steps that are most likely to correct the situation.  The best Lieutenants and Advisors will be able to explain WHY they believe their solution is the right one (i.e. – cause, effect, action, reaction) and these are the opinions that need to be held in highest regard.

2) Study the fact pattern with the goal of drawing your own conclusions based on the data you have at your disposal.  Don’t be afraid to challenge your team to go on fact-finding missions.  Don’t be afraid to look at the fact pattern through the lens of the opinions you’ve already heard and feel empowered to ignore opinions regardless of who they’re from.  If a Board member gives an opinion that crosses into a domain that they know little about then the fact that they’re a Board member shouldn’t matter.

3) Decide the course of action.  It’s a fantasy standard to believe that complex problems get solved quickly or with a single action so be realistic but aggressive with your plan.  Make sure the plan includes timelines for deliverables and measurements for success.  Be confident in your choices and own the plan.  It’s OK to be wrong, but it’s not OK to generate doubt in your organization through inaction.

4) Communicate both the “what” and the “why” for your plan.  The “what” steers the organization and the “why” demonstrates that there’s logic behind the decision.  If the “why” isn’t compelling then you haven’t done enough work.  It’s important to acknowledge the opinions that weighed into your decision making process but it’s also important to make it clear that the “what” needs to be owned by the group.

5) Act as a group. Rely on each other to execute the plan and squash negative behaviors.  Fixing a problem is difficult even when everyone is marching in unison and distractions can crush a team’s chance of success.

Hopefully the advice I gave him will prove to be helpful.  Truth be told, while we make our living at QED by making investments that produce great returns, our DNA is geared towards finding ways to be helpful to the people and companies we touch.   I thought I was going to have a conversation exploring deal terms but instead ended up reinforcing for the CEO what he wanted to do anyway — be a CEO by making the decisions that matter most.  Maybe a deal will be on the table in the future, but even if QED never gets a chance to invest in the company I feel like my time has been well spent.  Onward and upward!