Ecosytem Exchange: Creating Fundable Companies
By Daniel Natal
Video Available HERE
On Thursday, May 17th, in downtown Greenville, the NEXT organization sponsored an evening with Paul Singh, of ResultsJunkies.com, as well as Brooke Navarro and Ben Freeland, both of whom are investment bankers at Barclay’s. All three came to share their thoughts about what makes companies attractive to investors.
As the assembly subsided into an attentive silence, Paul Singh took the stage. A native of India, he shared many penetrating insights into the decentralizing effects of technology and the opportunities that this was opening up to people around the world.
Now with the ability to do business anywhere, he said, “You don’t have to leave Greenville to build something big; you just have to think big.”
After sharing the success stories of many daring startups, Paul Singh said, “In building your company, don’t look to attract entrepreneurs; look to attract entrepreneurish.”
Ben Freeland, of Barclay’s, echoed this point when he took the stage. He said that the single most important criterion in a company’s ability to attract outside investment is their corporate culture. Freeland’s colleague, Brooke Navarro, endorsed his remarks by adding, “Many successful companies stall out at the $30 million-level. Once they hit that plateau, they can’t seem to get much higher; and, when you examine it, it’s invariably because they failed to create an effective corporate culture”.
Freeland would return to this theme later, when asked by emcee Alex Estevez what advice he had for entrepreneurs in the room. He said simply: “Team-building is the most important thing you can do. It’s the first thing that outsiders see when coming into your company. Just walking into a business, you can feel the vibe in the air.”
Freeland gave the audience to understand that “corporate culture” was a sort of barometer that venture capitalists use to assess the future prospects of a company.
And it was at this juncture that the two guest-speakers from Barclay’s Bank presented their most pronounced contrast to fellow-speaker Paul Singh. For, whereas Singh stressed the triumph of the individual entrepreneur, Ben Freeland and Brooke Navarro stressed the importance of Process. The two messages were not contradictory. Rather, Singh’s perspective was that of the small nimble startup of the Twenty-First Century (where more emphasis was placed on innovation than size), whereas the two investment bankers from Barclay’s were harking back to an older Twentieth Century industrial conception of operations of scale.
The official theme of the evening was “Creating Fundable Companies: From Seed To Exit,” so the two perspectives complemented each other perfectly, as they both cast light on how companies attract capital when they’re young and small, and, by contrast, how they elicit the interest of financiers after they’ve attained a certain size and prestige.
In Tendencies and Tensions of the Information Age by Schement and Curtis (1995), the authors cite how the complexity of growing corporations in the mid-19th Century created the pressures to shift from the old model of the genius-run company (of Thomas Edison or Henry Ford), to a new managerial style. Writing of railroad manager Daniel McCallum in 1855, Schement and Curtis said that, after a series of railway crashes, a light broke over his mind that, as companies grew in size, the need for better communication was paramount. “McCallum’s innovation of technique was followed by communication breakthroughs, such as the memo. These inventions and others became the basis for administrative management and the massive corporate bureaucracies that exist today.
“Once adopted, administrative management required commitments from managers. They needed to believe in the superiority of rational decision-making over intuitive decision-making. They could not allow themselves the excitement of wheeling and dealing in the manner of their predecessors. . . . Jay Gould wheeled and dealed himself into an enormous railroad empire by manipulating stocks and bonds. But his machinations risked the entire enterprise more than once.”
In other words, as we transitioned from an early stage of capitalism to a more mature form, the organizational structure of companies had to change as the old “seat-of-the-pants genius founders” gave way to a new managerial class.
The event put on by the organizers of NEXT presented a well-rounded perspective of businesses at all stages of their development, and how those companies (at their respective evolutionary junctures) might best attract capital. The audience in attendance was, needless to say, intellectually engaged by every minute of the keen discourse.
Their engagement was less intellectual than emotional, however, when, at the end of the evening, Venture South’s Matt Dunbar received the Phyfer Innovation Award for his many years of work in the Upstate, regarding economic development and his extensive angel investment activities.