Veteran I-Banker Greg Porto Part II: Don’t Be Right, Be Relevant

Yesterday, seasoned investment banker Greg Porto filled us in one of his roles as the managing director at Ion Partners, i.e. helping innovative companies secure the next round of capital from later stage investors. Today, Porto looks back to his 23 years experience in the industry, offers advice to startups and shares his perspectives on the kind of companies that will likely survive the economic downturn – insights that angel investors can draw on.

* Edited interview

VH: Looking back to your 23 years experience in the financial industry, what golden nugget of advice would you give to entrepreneurs?

GP: I keep in mind what a senior investment banker told me in my early career days, which has proven right again and again: “You have a choice in business to either focus on being ‘right’ and alone, or being ‘relevant’ and indispensable.”

Being ‘right’ means focusing on what you think is important, essentially ignoring the market and hoping everyone else comes along for the ride — not a high-return strategy.

Being ‘relevant’ means continuously meeting needs — of customers, employees, suppliers, and all the other people important to your business — such that you become indispensable to them. When you’re indispensable, a strong platform will be formed to help you build your business.

VH: “Don’t be right, be relevant” — well said; makes a great headline too. What other suggestions do you have for startuppers?

GP: I’d say be realistic; always lead with logic and not emotion. Within that context here are my top five pieces of advice:

• Ask yourself how well you’ve defined your market and product niche and how your product fits a customer’s need at a price point that’s both attractive to the customer and profitable for you. This is the single most important business question for a start-up to address.
• Make sure your management team has the experience and temperament to perform and deliver.
• Set very, very conservative internal management projections, especially with respect to cash flow and burn rate. And plan ahead. Think about what you need today, as well as six months from now and beyond.
• Get proper legal advice, starting from the very beginning. Eliminate the risk of not complying with laws and regulations. You’d rather deal with the legal work upfront than to have the rug pulled out from underneath you later on.
• Don’t be afraid to add board members and advisors with different expertise as the company grows and its needs change. This will ensure you have the proper experience and fresh perspectives to propel you forward.

VH: Regarding advice #5 above, can you tell readers the basic responsibilities of the board?

GP: Responsibilities of the broad of directors include

• defining strategies
• appointing management
• setting operating policies
• human and advisory resources
• identifying the necessary financials
• providing fiduciary oversights by representing shareholders and complying with laws and regulations

And of course they’re responsible for what many people identify boards with — raising capital and deciding when to sell or expand the business through acquisitions.

Note that private companies aren’t constrained with public reporting and certain compliance pressures, so I find that private boards (board of directors of a private company) tend to have freer discussions that focus on more long-term planning, and on developing and exploring ideas than public broads (board of directors of a public company).

VH: In your opinion, what kind of companies will survive the downturn?

GP: The companies that will likely survive will

• Identify market segments/niches that are most relevant to customers and quickly exit those that they’re not.
• Accelerate efforts to win new business from weakened competitors – now is the opportunity to pick up market share, solve customer issues that have been neglected by competitors, and build customer loyalty.
• Be capital efficient. Maximize return on ‘spending’, whether it’s a dollar spent on employee salaries, a piece of equipment, marketing, etc. Companies will need to do more with less and rethink their assumptions.
• Be aggressive and innovative about sourcing capital and create a unique selling proposition for the company, i.e. what makes your company unique and why should an investor invest in your company?

Link:

• Connect with Greg on LinkedIn