It’s a tight talent market out there in the technology industry. And that’s especially for all C-suite positions right now, says Stephen Kuhn, partner at Advantary. Yet companies, especially startups, are facing pressure from their boards to hire senior executives.
And that means they’re sometimes rushed into bad hiring decisions.
Stephen talks about a short-term solution to this issue that can have long-term positive impact on companies facing these challenges, as well as…
- A strategy for getting breathing room to recruit the right people, while still achieving important milestones in the company’s growth.
- The incubator marketplace that brings together corporate M&A and startups
- What companies doing cross border deals need in their back pocket
- A little-known decision-making processes to work through tough issues
- And more
Mentioned in This Episode: www.advantary.com
Patrick Stroth: Hello there. I’m Patrick Stroth. Welcome to M&A Masters, where I speak with the leading experts in mergers and acquisitions. We’re all about one thing here. That’s a clean exit for owners, founders, and their investors. Today I’m joined by Stephen Kuhn, partner of Advantary. Advantary provides interim CXO services across the entire C-suite, including CEO, COO, CTO, CMO, CSO, and wait for it, CPO. That’s a lot of Cs. Advantary augments a company’s management team long-term or short-term, full-time or part-time. Stephen, thanks for joining me. Welcome to M&A Masters.
Stephen Kuhn: Patrick, thanks very much for having me.
Patrick Stroth: Now before we get into all things Advantary and C-Suite, tell us what led you to this point in your career?
Stephen Kuhn: I’ve been in the technology industry in Silicon Valley for the last 40 years. I was born and raised in San Francisco. Started programming professionally when I was 16 in 1978, and got the entrepreneurial bug. Sold my first company while I was at UC Berkeley. Went onto study Managerial Finance at Harvard, and have in total started nine companies. I’ve been CEO at seven. Seven companies were pure tech. One was a boutique tech M&A Investment Bank, and I subsequently ran M&A Core Public Software Company. And the last company, the ninth company was a PE firm focused on the wine industry, so decidedly not tech.
Patrick Stroth: Well I’ve got to ask you, and this isn’t something that you and I prepared for, but coming from one native San Franciscan to another native San Franciscan, we’ve got quite a few in our audience. There’s a question we always ask each other is where’d you go to high school?
Stephen Kuhn: I went to San Francisco University High School.
Patrick Stroth: How about that? Okay, congratulations for you. I went to SI. That’s for our listeners who probably don’t care about that. Tell me about Advantary.
Stephen Kuhn: Advantary is a partnership of 11 and counting. We’re adding new partners. Highly experienced entrepreneurs who have started dozens of companies, raised hundreds of millions in debt and equity capital, and had many exits. We provide interim CXO services across the entire C-suite with the exception of CFO. We engage full-time or fractional, long-term or short-term, but it is an interim engagement. We’re not a placement agency. We help companies prepare for and go through transitions, including capital raises, the loss or hiring of key executives, technology issues, stagnation, accelerated growth, and international expansion, which is a major focus of our group this year.
We relieve pressure on companies as they look for CXO’s in this very tight talent market. We serve the small to mid-sized technology market, including SASS, Syntax, AR, AI, IOT, Blockchain, Cyber Security, Digital Health, and with the addition of our newest partner, Consumer Package Goods and Supply Chain Management. There’s a lot going on on the technology side of that these days.
In terms of size, there’s no company that’s too small. It’s frankly only an issue of budget. And there’s no company too large. We have a billion dollar plus revenue public client. But our sweet spot is clients with revenues between 5 and 75 million. But we go lower including pre-revenue companies of course, and obviously higher revenues as well.
Patrick Stroth: Well that’s one thing that is striking is that when we were kids dreaming about going into business or being successful, the idea of success was build a company, sell it, and then at a young age in your 30s and then go buy an island somewhere. And one thing that’s just more and more common in Silicon Valley, it’s not just here, it’s just concentrated, is people like you who are extremely successful, could have bought several islands out there. But instead of shopping for hammocks and boats and stuff, you’re going out and finding more challenges, more companies to help. It’s striking how this is what you live for and just being able to provide great services and add value to other startups. Back when you were starting up you’d get them moving on, it’s really a fantastic resource that’s out there.
What’s the type of value that Advantary brings because I can tell you right now, finding talent, if that’s tough, finding management is even more so. What do you bring to bear for owners and founders that is not otherwise out there?
Stephen Kuhn: Unlike a traditional consulting firm, think of McKinsey or Bain or PWC, we actually provide hands on operational services. It’s the highest, best value we can provide to our clients, given the length of experience, the breath of our experience in the technology market.
So you mentioned talent at such a premium, it’s hard to come by, that’s absolutely right. And a lot of companies are forced into a high pressure situation where they need to find, locate, recruit, and retain senior management. And in this market, it’s extremely difficult. And making a bad hire is sometimes existentially costly. I’ve certainly seen examples of firms that have made bad hires in C-suite, and I can think of some in particular in the chief revenue officer role that have been unqualified, culturally not a fit, and culture is a really important aspect here as well. You need people who can really fit in.
And so if a company is compelled under pressure from the board, pressure from their performance in the KPI’s on their business plan, to get someone in, just anybody who’s breathing, to find a CXO who can fill the role, that can be very challenging. And so we can step in on an interim basis, provide some real support. During the time that they’re out recruiting, the company can make forward process. It can achieve its milestones while taking the time, having the breathing space to actually find the right person for that role.
Patrick Stroth: One of the things I was thinking of, is you’re bringing somebody in to a CXO position while your client company is out doing the longer term search for the longer term solution. Largely what you’re doing is shorter term. You can do the long-term, but I get the sense that more of your stuff is targeted, your service is targeted towards short-term, is that right? Because if it is, I think it removes a lot of conflict because you can get somebody who can plug and play and they’re not worried about preserving their job or their role. They’re into add value with the knowledge that this is not going to be forever, so you’re not playing defense. You’re just working forward, and you don’t have to worry about legacies or things to kind of build in as you take a position. I think that’s a nice, un-conflicted approach.
Stephen Kuhn: Yeah. That’s absolutely true. And we work with firms, I think our shortest engagement has been probably six weeks or a couple of months and we’ve had, have a client for well over a year now. But we typically work from a quarter to a few quarters in length of the engagement.
So sure, we can come in and solve a particular problem, work with the company through a challenge or a transition and stay on for a bit longer to see through the onboarding of our replacement frankly.
The value we can bring is yes, the experience, yes, the understanding, we’ve made lots of mistakes ourselves. We can load balance as well. A lot of firms don’t need a full-time CXO. A classic example that most people are familiar with is a CFO. A lot of early stage companies don’t need a CFO. Similarly, they may not need a full-time Chief Product Officer, Chief Technology Officer. You’ve got a small firm that’s got a founder who’s a great engineer, who perhaps hasn’t been an entrepreneur before. Hasn’t run a team of engineers, doesn’t mean they’re not smart, they’re usually brilliant. But they just lack some experience and we can provide that mentorship, that guidance, and actual hands on architecture, scaling issues, security issues, so on and so forth, on the technology side, experience on the product side, the marketing side or revenue or business development.
So coming in on an interim basis to provide support when support is needed, to step back when it’s not. It actually, and because we’re consultants we’re not employees so there isn’t the tax issue there as well, we can be very cost effective for our clients.
Patrick Stroth: What does it look like to work with Advantary? I mean, describe types of engagements that you have available.
Stephen Kuhn: So we, in addition to the interim CXO positions that we’ve talked about, we actually have five package services if you will, that we provide and they are briefly, pre-transaction preparation and execution, getting ready for a debt or equity transaction, whether that’s a capital raise or M&A event. A lot of companies aren’t properly prepared, and so deals don’t get done, they get done more slowly, or on sub-optimal terms. And here’s the situation with the old adage, an ounce of prevention is worth lots of pounds of cure here. They can really drive a lot of value out of Pre-Transaction Preparation, proper preparation.
Second is around growth, strategy, marketing, sales, business development and cross border expansion. Cross border is a particular process as I mentioned earlier, for us because those firms outside the U.S. looking to enter the U.S. Market, are effectively doing a startup within a startup. It’s very risky, it’s very time consuming. It’s a real distraction from the core business.
As a team of entrepreneurs who’ve started lots of companies here in the states, we can provide a tremendous amount of value there.
Third practice is around technology and patent management, best practices, and implementation.
Fourth is around designed thinking. Designed thinking methodology is a terrific problem solving framework. And we help solve companies strategic issues leading them through a design thinking process. It’s extremely powerful. And the fourth is really focused at investors or buyers. So perhaps some of your clients for example, or your audience on the M&A side, we work with investment banks, but also the principles, PD firms, family offices, and corporate buyers on their pre-transaction diligence. So we can go in and look at a company’s team, the technology and their pipeline, their product market bid, their strategy and so on, to help the buyer if that fits with their objectives.
Patrick Stroth: That’s pretty comprehensive. You mentioned with the cross border so I don’t want to sound redundant here, but the services for Advantary are available not just California but what’s your service territory range? Entire U.S.?
Stephen Kuhn: It’s global in fact. We’ve got clients, certainly across the U.S., but also in Australia. We have a French client we acquired last month. And we are working in Mexico and Latin America as well. So really it’s global. We have a natural center of gravity if you will in the Bay Area. If you looked at a heat map of the globe, there would be a bright red spot around the Bay Area. But you’d see hotspots around the globe as well.
Patrick Stroth: Gotcha. Well now the biggest questions people have when they hear about services like this, well is it a fit for me, yes or no? And they can make that decision based on what you said.
The next thing, and this is just true of life, is timing is everything. At what point if there are people in our audience or there are questions, at what point should they start thinking about someone like an Advantary?
Stephen Kuhn: That’s a great question and it really depends on the nature of their needs. For example, if they’re thinking, even contemplating an exit in the next year or two, that’s a great time to be thinking about us to help in that pre-transaction preparation. A lot of things can be fixed relatively quickly, but there are a lot of things that take time. It takes effort to steer the big tanker in the ocean, to move in a new direction or to find the right person to fill that role. So we can be very helpful long in advance of those types of transactions, but then there are other things that are much more immediate. You need to hit your numbers this quarter, right. So you’re going to need some strategy, marketing, sales, and business development efforts.
You are looking to raise capital. And we can help prepare the company for that capital transaction. And those usually aren’t done a year or two in advance, that’s usually the next few months we need to get that done. So it really depends on the nature of the engagement.
Ranges from today, oh we need your help today. In fact I met with a client, a prospect yesterday who is launching here in the U.S., they’re a Mexican firm. And they’re looking to get launched in May. And they’ve got a tremendous amount of work to do before they can do that. So they needed immediate. So you can see it really depends on the circumstance, the context, and the nature of the services that they require.
Patrick Stroth: Yeah. Stephen, of the services and the types of engagements you talked about, the majority of them revolve around or have an aspect of the practice of M&A and we do try to focus on M&A. You’ve been around companies and helped companies that are both scaling and exiting. And so you’ve got a great perspective with regard to M&A. What do you see in the trends going forward here in 2019 going forward for M&A? Just at any level from what you have seen.
Stephen Kuhn: On the M&A side, clearly, historically, M&A has been roughly 90% of the exits. When companies exit, M&A is the exit of choice verses IPO about 90% of the time. I don’t see any change in that. If anything, despite some very large, very successful IPOs, I think the trend is definitely continuing on the M&A track.
And I pause there only because several examples came to mind of firms that are providing, think of co-location spaces, and other accelerator programs that are creating essentially a marketplace of technology and entrepreneurs. On the one had they’ve got small entrepreneurial companies with brilliant technology. And those companies are really good at innovating, creating new technology, and getting from zero to one, from nothing to something.
And on the other side of that market, you’ve got large firms, typically Fortune 500 firms, that are really good at scaling, but maybe not always so good at innovating. And so there are a number of incubators, an increasing number of incubators out there that are positioning themselves, as they say, a marketplace for large corporates to come in and get access and visibility to the startup world providing a key for them, which is innovation.
And on the other side you’ve got these young firms that are really good at innovating, and are challenged with scaling and are looking for opportunities to partner, in the short-term, partner with the larger corporates, but really looking to those corporates as their exit path. And so with the lives of these incubators, these marketplaces if you will as I tend to think of them, there is I think increasing amount of M&A activity. And as I speak to my investment banking friends around the country, both boutique and larger firms, they are absolutely saying trends up and to the right on M&A.
Patrick Stroth: This is a very good perspective to have. I appreciate that.
Stephen, how can our listeners find you to learn more about Advantary for themselves, for their own entities, or for their clients?
Stephen Kuhn: Yeah, thanks for asking. Of course there’s our website www.advantary.co. And you bring up a really important point which is that while we do work for the companies themselves, we’re often brought in and referred to those companies by, there’s other service providers. It could be one of our partners in the Fractional CFO space, it can be VC or PD or Family Offices as well. It could be an investment bank that needs help with one of their clients or prospective clients as they are going through or contemplating going through an M&A transaction.
So encourage all of your listeners if they think they have a need, or suspect they might have a need for some of our services, just go to the website. Pick up your keyboard and send an email over to me or to email@example.com and we’ll certainly get right back to you.
I’m also available of course on LinkedIn, easily findable there. Yeah, looking forward to hearing from your clients and seeing if we can be of help.
Patrick Stroth: Well it was a pleasure speaking with you today Stephen. Thanks very much. And if anybody needs to find out other ways to get ahold of Stephen, go take a look at our show notes at www.rubiconins.com. Hit the insights tab and you’ll find our interview there as well and you’ll have the show notes as well.
Patrick Stroth: Thanks for joining us today Stephen, and have a good day.
Stephen Kuhn: Thank you very much Patrick.