Creating something out of nothing is a mystery for many of us, particularly if you’ve worked in the corporate world for many years. In today’s podcast. I sit down with Zach Garippa, Co-founder and CEO of Negotiatius, to look under the hood and discuss life inside a startup.
We dig into the business and personal sides of launching a startup and de-bunk myths about the entrepreneurial mindset. Counter-intuitively, risk mitigation – i.e. “calculated risk tolerance” – is one of the overall thematics of successful founders. Zach left a good job at Morgan Stanley and his co-founder, Tom Jaklitsch, dropped out of college to launch the business. Clearly, they both had high conviction and courage. And, would it surprise you to learn that they spent nearly 24 months researching the industry before deciding to quit job and school? That’s a lot of smart leg work around calculated risk tolerance.
We also discuss (the necessity of!) Flinstone-ing things in the early days of a startup...pressure as a constant...the hunt for traction and learnings...and how to get through problems quickly (i.e. "indecision is the killer").
And, finally, Zach gives us a primer on raising money as well as finding and keeping talent and customers – note that there are parallels across all three areas. Zach is also a big fan of picking up the phone and talking with industry folks to help problem-solve and solicit views that are contrary to his own. He also is a fan of short-form material when it comes to reading for business but prefers long-form reading for personal pursuits (hint: baby #2 on the way in March).
Zach Garippa is the CEO and Co-Founder of Negotiatus, a category-creating B2B software at the intersection of finance, operations, and procurement that radically simplifies spend decisions.
Founded in 2016 with a mission to empower businesses to make better spending decisions faster, Negotiatus serves hundreds of customers across the small and medium sized enterprise space. Negotiatus establishes itself as core spend management infrastructure by working within their client’s existing purchasing and payment process - from spreadsheets to ERPs and everything in between - and adding simplicity, automation, and insights to deliver value every step of the way. Negotiatus has been recognized as a pioneer by industry publications including Spend Matters and Inc, and is backed by leading investors such as Rally Ventures, 645 Ventures, Green Visor Capital, and Stage 2 Capital.
Prior to founding Negotiatus, Zach worked at Morgan Stanley in Financial Services - however, he credits his street smarts to his summers spent as a Doorman on Park Avenue.
Zach was born and raised in Brooklyn, New York. He graduated from Boston College Carroll School of Management with a degree in Finance and Economics and is an alumni of Regis High School in New York City.
07:30 Life as a founder during the pandemic
Zach and his co-founder, Tom Jaklitsch, put together a comprehensive work from home plan and a remote working policy on a moving forward basis, i.e. the lesson for them is “balance” and “flexibility” across the company — they probably over-corrected initially with work from home and now feel that having an office is important so folks can socialize and strategize but will be more flexible about working from home
He’s seeing mid-size and larger co’s leveraging WeWork and other co-working spaces so teams can met up in person
There is also productivity working from home but it’s different
16:00 Mitigating Risk for 24 months before the actual launch in 2016
Zach and Tom spent nearly two years sizing up the industry before launching the company
Zach left a great job at Morgan Stanley
Tom dropped out of college to start the biz
They also assessed their personal mental state of mind and decided that problems are synonymous with business; i.e. “If you don’t like waves don’t surf”
Must embrace the fact that there will be problems
He was proud of the reaction speed of the company during the pandemic, based on his and Tom’s founding state of mind
They decided early on to have a cash burn ceiling; this boded well during the pandemic and is a lesson for any times of turbulence
20:50 Putting up borders on the business and personal fronts
They put up business and personal boundaries and borders early on to make sure the first year was successful; Year 1 is different than subsequent years
Having a co-founder is key – shared duties, bounce ideas off each other, mutual gut checks, etc.
The game changer was when they entered an accelerator – ERA in NYC – and started to network in the community
They were in office at 7am and left at 11pm, every day including weekends, during the accelerator days
They learned that only throwing time at something ins’t always the answer because it’s an infinite loop
Instead, they set goals about where they want to be at the end of Year 1
Ultimately, a startup is a race against the clock
The valuation of the first round will have an effect on future rounds
24:30 Raising the first round of capital
Their first round was friends and family offering 5-10k checks
Zach remembers his hands shaking while depositing those early checks Their first marketing budget was in the hundreds of dollars per quarter
The first pitch deck was rudimentary and mainly focused on the fact that they were quick learners
27:30 Pressure as a constant
Always feel the pressure, even now, with larger checks from institutional round of capital and high net worth individuals
He wants to prove people who believe in him right; not so much about proving people who didn’t believe in him wrong
Hunting for "traction and learning” and go thru problems quickly and Measure outcomes
“Indecision is the killer” right or wrong isn’t the killer
“Calculated risk tolerance”
Don’t act on a whim and instead gather as much data as you can to attain high confidence when making a decision
Read the book No Rules Rules about the Netflix culture; instilled the entrepreneurial mindset across a larger company; distributed decision marking
34:00 The quest for talent
How the dynamic changes with hiring from early days to later days
The first 12-24 months of hiring was mainly ‘pitching’ the potential hires on the company as much as it was sizing up the candidate for fit
Zach takes a 50 year time horizon on the big industry problem that Negotiatus is solving solving
This helps potential hires to self-select and helps Zach and his team find the right employees who aren’t looking for a 12-month job opportunity
They also want employees who are willing and able to make decisions independently
They begged for interns in the early days; this of course has shifted now but it hows the need to hustle has remained
Hiring a chief of staff was one of the best things they’ve done because they lay out the rules for new hires around transparency and expectations; keep new hires engaged during their first 3, 6 and 12 months and beyond so they are enrolled into the mission of the company
41:30 Finding and Keeping Talent and Customers
He’ll hire people from startups or large co’s; he mainly looks for a value-based mindset
his chief of staff has experience scaling a prior business from 50 to 500 people
Early days of hustling for customers was parallel with early days of hiring
Get first customers thru the door focused on speed
Later days need to understand market and needs more
"understand who to say no to” - if prospect deviates from the company mission it’s almost not worth it
"Flintstone lots in the early days” - de-brief in hallway after sales pitches
Nature of SaaS is build product…get feedback from marketplace…add/remove features…go back to market again, etc.; this is the beauty of SaaS
Better than building a white whale that nobody will use
He’s married to his company values but not married to the way the product will be adopted by the marketplace
49:45 Measuring the Company
Implemented an OKR strategy - Objectives and Key Results
Documentation is huge - document and memorialize what took place in the board meetings in terms of decisions and goals
A personal mantra of caring about the success of the people around him
Suggests reading Psychology of Money, by Morgan Housel; applies to success not just money…he feels the book is about the ability to give you control over your own time. This is the chase for him; wants to be there for family and board
Lifestyle arbitrage in terms of managing your time and money; can out in the 16 hours but on your terms
56:15 A contrarian view Zach holds which he believes is 100% true
59:45 What is on his browser?
Sports – Knicks, Giants and Red Sox fan
Baby gear – baby on the way next month
Loves Scott Galloway’s newsletter and Tomasz Tunguz from Redpoint Ventures newsletter
Mostly though he talks to a ton of people to get his finger on the pulse of the market
Helps to validate a thesis he might have
Like to talk with people with conflicting opinions
Likes 15 or 30 minute coffees in person
You don’t want people to tell you what you want to hear
Read contrarian views or pick up the phone and talk to people
He finds this to be a hack to get multiple perspectives and what to implement and act on once ingested
Fan of short form
But on personal side can read the longs of long form on local high school sports
Objectives and Key Results – definition & examples
No Rules Rules: Netflix and the Culture of Reinvention, by Reed Hastings