Lessons for a Startup from a Startup

(previously published on LinkedIn)

Anticipating and Navigating the Post-Launch Pivot

Launching a start-up is all about meticulous plans for products, patents, market share, and capital. In practice, those carefully orchestrated plans are quickly overwhelmed with the realities of budgets, staffing, leases, taxes, IT systems and everything else that didn’t make it into the spreadsheet plans. And, if the start-up has a regulatory approval component, challenges can compound exponentially.

Having survived the early phases of a start-up which has been required to navigate the rules and regulations of at least four federal agencies and a countless number of industry bodies, I share the following observations in the spirit of everyone who has helped me.

While a launch requires a brave and unwavering devotion to a narrow ideal, the (post-launch) running of a start-up requires broad flexibility, and an unwavering devotion to listen to everything and everyone.

Develop a Deep Bench

The launch of a start-up will demand considerably more time and money than originally planned – the rule-of-thumb “twice as long and twice as much” is probably a good guide. No matter how committed your founder or initial management team appears, the stress of running the start-up compounded with life outside the start-up (a.k.a. family, friends, mortgages, tuition, etc.) is likely to leave casualties in the management ranks.

  • make some of your earliest hires individuals you would like to see replace you
  • engage one or more industry veterans as advisors early in the process – they can both take a leading role at disruptive times, and help to recruit as and when needed

Don’t Rely on Thought Leaders for Validation

If your start-up is staffed with industry veterans, you’re likely to have good access to C-suite executives and industry thought leaders. While positive feedback from this expert group is important validation, it can lead to “false positives” because the industry leaders are likely to applaud innovation and more likely to think like you. Make sure you balance your pitches to leaders and innovators with pitches to actual practitioners – particularly those in the camp of “don’t fix it if it ain’t broke”.

  • ask the C-suite/thought leader for access to their managers and transactors, to hear a range of voices
  • make sure you have a good sampling of “bad meetings” – particularly where the audience is under-informed and not thrilled to be there, because that’s probably more indicative of a real-world conditions

Maintain a Continuous Long-Term Approach to Your Regulatory Regime

Regulatory relief and regulatory rule-making are at the heart of all new things in financial technology and the fund industry; in particular, the ETF industry’s push into (non-transparent) actively managed funds has made non-lawyers and industry observers active followers and participants in the regulatory process. Navigating one or more regulatory regimes requires unique focus and preparation, and it is tempting to regard a successful filing as an item on a checklist. In reality, because market structures change, and opportunity sets shift, one must view the regulatory process as a core ongoing requirement.

  • appreciate that every step you make in the regulatory process will either expand or narrow your degrees of freedom going forward – assess each correspondence, meeting or exchange in the long term
  • realize that regulators are assessing your filing with their own information set and on their timetable – try to help them by understanding their perspective and their challenges – it’s a forward-looking ongoing process