Adam Ferris (CFO at NY Shipping Exchange)

Hey everyone, this is Erik Torenberg and you're listening to Execs by On Deck. Execs is a show for founders, operators, and leaders who want to understand the playbooks, frameworks, and tactics that leading tech companies today have used to scale. Our guests are tech execs in key roles at top tech companies who share their hard-won, earned secrets on how to scale faster. Adam Ferris is the CFO of New York Shipping Exchange. Before, he started a company and worked as an investor at Goldman Sachs. Adam's the first CFO we've had on the show, so we discuss how to build out a finance team, how to set that team up for success, And how founders should think about the finance function in their businesses more broadly, from forecasting to managing burn. So Adam, the goal for this podcast is to take executives of every function and have them walk through to founders listening basically how to build out their function. So you're our first finance leader. So excited to have you on. Welcome to the podcast. Thanks for having me.

Thanks for having me. This is great.

Yeah, long time coming for sure. Yeah. So, Adam, why don't we start out by saying first how you became a CFO at your, at your current company, New Shipping Exchange, and why don't you describe what the company does?

Yeah, sure. So, um, let me start with the company. Uh, so what we do is we make shipping reliable, uh, in the ocean freight market between the shippers and carriers. And so we have a technology stack that, that makes that possible. We're the leader in our category, and especially what's happening in the shipping industry right now, you know, our software, our service is in need more than ever before. And we have 6 of the largest carriers on the platform. We have over 200 shippers on the platform, and we're just growing like crazy. It's been amazing. How did I get into the role of CFO? So I got to know the company when I was at Goldman. I was an investor at Goldman. You know, the team that I was part of invested in fintech enterprise tech companies. companies. And NisheX came to Goldman for the opportunity. Eventually, we invested and led in their Series A. And so, I got to know the founder and the board. I sat on the board as an observer, worked very closely with the founder and the company to really get it off the ground. And so, when an opportunity came up eventually where the founder reached out and said, hey, look, we're looking for an of finance, why don't you join us? At the time, as you know, Erik, I was really trying to go down the path of being an entrepreneur myself, and COVID hit, and so I was thinking, let's go back to investing. And, you know, he sold me on the idea of, you know, let's continue the entrepreneurial journey, build a company together, just in a company that may not be one that I started, but know very well. And so he brought me on board. And so it's been 2 years now.

That's awesome. And for audience context, I was lucky to back that company, Adam, and I'll be lucky to, if I get a chance, to back your next one. Let's talk about when founders should think about bringing a finance leader on board or even just their first finance hire. And what does it look like for founders before they have that person? How do you advise founders on that?

Yeah, so I think in general, There are different tiers of finance hires. Obviously, there's the bookkeeping at the most basic level, like, do you have good books? Do you know what's going on in the business? I would say that there's a next tier after that of, are you putting the operational infrastructure in place, both invoicing and really scaling that so nothing falls through the cracks, you're collecting on time, etc.? And then there's another tier above that, which is really kind of the strategic finance leader who's helping you see around the corners, coming up with a plan, having the right analytics in place so that you're drawing on the insights and communicating that across the company. And so there's different tiers, especially in the early phases. Let's call it when you're kind of serious, you can get to Series A with an outsourced bookkeeper. There's a number of companies out there that are making that possible and much easier to do. I would say when you get to the Series A, you should definitely hire someone who's kind of a VP of finance, finance equivalent, someone who has maybe more of a controller background, who can really put in the infrastructure in place so that ultimately the finance function is kind of the nervous system of how to think about the company. And you won't be able to know how much you're spending, where you're spending, how quickly you're burning, how much cash you have, whether you have a $100,000 invoice that's sitting somewhere and you have to pay out and you think you don't need to. And so definitely at the Series A, highly recommend having someone who has that kind of finance controller chops to really come in place. So I wasn't the first finance lead. We had someone in the company, at least in Nishek's startup, who had that kind of background and did a phenomenal job putting the infrastructure in place. And then me coming in is really building out the direction. And so I do think that it doesn't have to be the CFO, doesn't have to be a finance head. I mean, frankly, CFOs sometimes at the stage of a company could be overkill. I'll be frank, there was a question of what should your title be, and I handle much more than just the finance function. So we had to just pick a title. But someone could operate in the role of thinking about the business model from the ground up, putting out the projections, making sure that you have a good sense of where the burn is coming from, what the policy, the investment policy across the company is. And I think, you know, the person who you bring in for a VP of Finance in the Series A type company should be able to do some of that. And with the right support and the right advisors, you could get to, let's call it, 80%. It's really as you get closer to the Series B, when investors are really thinking about kind of the growth engine and the repeatability of the business, when you start really having to have that kind of bottoms-up forecast that's predictable, repeatable. And there's a lot of other nuances that come from that.

Totally. No, that's a helpful construct. So let's talk about when founders are thinking about hiring, let's say, a VP of finance. Give us your frameworks in terms of what to look for. How important is prior experience, or what kind of prior experience? What they should be diligencing for? What are the key things to make sure you get right versus not get right. You know, a lot of these hires sometimes don't work out. Why don't you share some of your perspectives there?

Yeah. So, you know, a lot of people who have the skill set that you're probably looking for for this role don't know, haven't developed that skill set maybe in a startup. And so there's always that first jump. And I highly don't recommend someone, you know, who has that skill set to come in the VP of Finance and doesn't know what startup life is like. Because there's a lot of messiness, and especially the VP of finance and the finance function, they're going to deal with that messiness first. And so, finding someone who has, I would say, let's call it big accounting firm type experience, who's already jumped into a startup, maybe at a later stage, maybe at an earlier stage, but not in the VP of finance role, maybe they have, but has already tasted what it's like to be at a messy startup, because every startup at this stage is messy. I mean, you're being hired or you're hiring that person to create the structure. So, they're always going to jump into the mess. And so, you know, that's number one. I would say that you fish from that kind of pool. What kind of, you know, qualities, you know, mental, you know, personality that they should have? You know, definitely a person who is looking to build. Not everyone from that kind of background has the desire to build. And when I say build, I mean processes, what the company could be, believes in the company, Because that builder mentality will do wonders for the way that they construct the business. They have to be completely independent to really see where they need to build. Obviously, the more leverage that you can give the executive team or the more leverage you can give the founders in particular in thinking through what the plan needs to be, that's excellent. Builders tend to have that mentality. Then also, someone who can handle the ambiguity. Not everyone who comes from that background can deal with the ambiguity as well. And so you can test for that based on what their prior experience is, and especially when they're dealing with a startup in the past. If they want to continue to bang their head against the whole startup process, you know that they're at least comfortable with that kind of ambiguity.

Yeah, that makes a lot of sense. At a broad level, I'm curious for your mental model on how to build finance teams. When should one hire a CFO? There's always this question of, is the current VP of finance that we have able to be the CFO? What kind of experience is key for a CFO? So how might you recommend thinking about that?

Yeah, you know, look, titles, with startups, titles, you know, it's less important as, you know, what is the activity that they need to be doing? At some point, your company needs to make sure that you have good line of visibility for the next, let's call it 12, 18 months, on whatever the policy is today, whatever the product you have, go-to-market function, the segments you want to target, the experiments you want to do, and have it very, very, very clean and clear. Bottoms-up model, and so that you can effectively project out, hopefully have a repeatable business by that point, where meaning, you know, you know that certain dollars that you invest tends to return a certain amount. But then you have that bottoms-up approach, that meant that the actual financial model, and then you can start making adjustments every month, every quarter, as you learn more. And so this way you can manage your cash flows effectively. And so that, when I say bottom-up, it's down all the way from, what is your headcount projection? Literally, when are you going to hire people? At what time? You have to pay recruiters. What's the billing cycle for that? On the top line, which accounts are you going to close? When? What are the payment policies behind that? So that when you put the model together, and Erik, I'm sure you've seen a number of these as an investor, and it's quite detailed. And I don't think a lot of founders really appreciate the kind of detail that comes in this, especially first-time founders. And so, you know, getting someone who actually has done this before, seen this, is really critical. And you might get someone who has that kind of VP of Finance experience from an accounting background that eventually picks this up. But oftentimes, you know, for that kind of work, you know, highly recommend someone who's kind of been an investor. That's, you know, maybe a little biased here, but I would say that those type of folks tend to know how to build these things and know what to look for and how to manage the business in a way that investors really care about. You might get these people from investment banking backgrounds, but there's a lot where you can find it. But I think the real activity there is the forecasting. And then going back to the question, CFO material. Now, a lot of people will say, well, CFO title is someone who's kind of pre-IPO and earlier, but I think that activity, that core activity of forecasting and having that strategic plan around what are the financing events that are going to happen to fund that business, Really critical, and that's the skill set you're looking for.

Yeah, that's helpful. On Nishek's website, you're listed as leading the company's business and financial strategies. Talk about the difference there and what that means.

Yeah, so, I mean, it was kind of like, hey, do you want to have a COO title or CFO title? Like, what do you want? So, you know, day to day what I do is, you know, I work very closely with the founder. His name is Gordon. He's awesome. one of the most charismatic, hardworking, high EQ, high IQ type people you can work with, but he needs leverage. And so, I work with him very closely in really shaping the direction of the company, working very closely with the rest of the executive team around where do we need to put people, how should we expand into Europe as an example, what are the type of roles that we need to have there. If we were to raise an extra X amount of dollars, What should we do in terms of the roadmap? What makes sense? What doesn't make sense? And so when we think about the financial elements of this, think of it as just forecasting the model out and knowing where the cash is going to come from and who the relationships you need to have. But then there's an element of what should you be doing from an investment standpoint and working very closely with the heads of product, heads of engineering, and also the go-to-market teams to Really understand where they want to invest.

As a part of that, you're constantly making a series of bets. You're sizing, predicting, doubling down. How do you think about what makes a good bet? What's your framework?

Yeah, you know, this is quite interesting. You know, now, you know, from sitting in an investor seat, now coming into the operator seat with, you know, a company that has some scale, I mean, it's, it's, it's a, it's one, you know, there needs to be more writing on this. Um, and I, and, you know, there's some folks who really are thoughtful about this stuff, but it's not as robust as other areas. But, you know, so, so, you know, my thinking on this is a little crude, but trying to figure out the right words for this. But when we think about the bets, you either have your core product that is already proven out in the market. And so really the bets you're making there to some degree is really on the go-to-market motion. Which segments should you target? Which geographic areas should you go in? How quickly are you going to actually create the organization to be able to do that? What's the payback period? Are you going to maintain the kind of retention rates that you've had in existing segments. So think of it as, you know, maybe depending on the stage of the company, but your core business is already, you know, fully formed, um, and you're really trying to get the distribution out in, in the right ways. And then, you know, there's other bets related to the product itself, right? As you're kind of discovering new features, um, new, new, new whole new products entirely that are complementary to what you're doing. Um, and so, you know, it depends on the company, depends on the market environment. So You know, I remind everyone in the company that, you know, our strategy highly, highly depends on 2 things. You know, what is the market telling us that they want? Or what are the inklings that we have based on, you know, our experience in the market? And number 2 is literally, you know, what is— what are investors willing to fund? You know, depending on where you're at in the company, you could be cash flow positive if you needed to, and really you sort of control your own destiny and can create your own policy that way. Or you're still trying to get to that promised land, and so you still have to cater to the investor community to fund you to that process. To the extent that you still depend on the capital markets, you have to be mindful of how— what could be sold, what story from a direction qualitative and also quantitative standpoint could be sold. Uh, and then fund that, uh, through the process. So, so generally, you know, what bets are we taking is, is a function of those 2 things. And, uh, but, but I would say any company that's sort of Series B and below, like, there's only one core, you know. Either you're trying to find that core, and once you have that core, like, you know, drill as much as you can to expand and take the market share that you can. Um, you know, post-Series B, maybe there's an opportunity to kind of, you know, hedge your bets a little bit or experiment. With some smaller teams. Specifically at NisheX, as an example, we really are a software stack. There are some threads that we're pulling related to payments and payment services. So you could think of us as a vertical SaaS company that's now trying to explore how to get in the payments flow and how to think about that and leveraging the software we have. But that thread of a bet on the side is still very, very small until we are in a position where we can start actually allocating resources against that. We're not 100% there yet, but we're close.

Totally. Talk about the craft of forecasting. How do founders make sure and finance leaders make sure to do that well? Any common mistakes people make? Talk a little bit about that.

Yeah, I love how you said craft because it is a craft. There's an art and a science to it. You know, what I've seen is folks that try to build a model by using crude, you know, top-down kind of growth measures, saying, you know, okay, well, we've been growing at 10% year over year, let's just continue to grow that at 10% year over year. And, and, you know, those, those are mistakes. Really, the way to think about modeling— and this is very much like a private equity ethos of modeling, you start from bottoms up and think about the drivers of the business. Let's say that you already know what your product is, you already have some proof points on your go-to-market, and so reflect your go-to-market strategy as part of your model. So as an example, let's say that you're a B2B sales kind of startup, you know that if you had this many, you know, this many inside sales type folks, you tend to produce this amount of return or this amount of leads. Just use that as your growth mechanism, as your growth lever. Now, it's not going to come out precise, but you're going to get closer to that than doing a top-down version. Also, you know, when you think about that, you might get really complex, maybe less in the financial model, but more in the operating model to say, okay, well, you know, here are some leading indicators of, you know, things are going well. You might have top top of the funnel kind of metrics that eventually get down to a close. And so, every month or every week really, getting those numbers and seeing whether or not their mental model actually matches. So that's a principle, bottoms up. Another point here too is your model is a reflection of how you think about the business. And it becomes something that can actually be used to communicate to the rest of the company, the drivers, where to focus time on, what not to focus on, et cetera, but also communicates to the investors the thoughtfulness behind, or I should say, the clarity around what you need to be doing and how you need to be doing it. And so, I've seen a number of these models sitting on the other side, and you can definitely tell a team that really understands what they need to be doing next based on the model. And then some teams just, you know, top line kind of, you know, those could still be good investments, but, you know, you're sort of going to have to go through a couple layers deeper to really understand their logic and their thinking behind it. Totally get it that some founders can't build a bottoms-up model, but eventually you should have the staff to be able to do that. And once you have that, then that really reflects your business.

Yeah. You know, it's interesting, since we've booked the podcast, the market has, you know, taken a turn for the worse. You've been on both sides of the table, and so you've seen in the last year-plus founders raise at valuations that they wouldn't have raised at today. I'm curious how you think about that from a macro perspective of what that means going forward for lots of these startups.

Yeah.

But then also, perhaps more importantly related to this episode, is from a micro perspective, how do you think about fundraising? In a bear market? And how do you advise founders on how to think about that?

Yeah, there's a lot to that. I'll start with the general statement, but every company has its own approach. There's nuances related to the fundamentals of their business. But the general approach is like, look, like I said, your strategy is a function of what the market's telling you in terms of the actual customers and so on, and the fundraising strategy, especially as a startup. So Capital markets have spoken and said, hey, look, you know, we've become more conservative.

Like, why?

This is a structural bear market in the private markets because interest rates are rising and there's a looming potential of recession. So you have to kind of keep that in mind. And over what time period is that going to be kind of a quote-unquote bear market? Um, you know, no one really knows, but, but, you know, we're, we're thinking about it as at least a year plus. to, to, you know, really get to the other side. So what does that, what does that mean? Um, you know, really is it's going to be harder to fundraise. And usually when people become more conservative around fundraising, there are 2 things that happen. Number one is, um, investors who— investors don't dabble outside of their circle of competence. So let's say, you know, in our, in our world, Um, you know, you might have had investors that dabbled in, in logistics or did a couple deals and really enthusiastic about it. What tends to happen is, you know, the investment committee as a whole, um, go, that's a little outside of our circle of competence, let's not explore that. And so you might get some people, you know, retrenching into areas that they're familiar with and focusing on those. The second thing that happens is there's a flight to quality. Um, quality kind of manifests at different stages. And in different ways. But generally, just think of it as whatever you thought you needed to prove before, assume it's much higher. Okay, so I needed to show $1 million in, you know, run rate. Maybe you need to show $2 million or $3 million, right? Depending on what, what that looks like. Your gross profit margins of, you know, 40% were okay in a previous market. Now it's really like 70%. And so this idea of quality, I mean, there's general rules of thumb that everyone should know, you know, predictable growth rates, high revenue, um, uh, you know, high gross profit margins, you know, payback periods that are, you know, less than a year, uh, you know, high retention rates so that you have LTV to CAC of, you know, something 3x. I mean, there's a lot of different metrics that, you know, investors look at, but, but just assume that you sort of, you trench up, right? And so, you know, now this gets into, you know, specifics about a company. Um, you know, look, it's, it's going to be tough for a company that's really close to cash out. I mean, this is, this is really, you know, hunker down and You know, try to you know fundraising is really find the investor that believes in the thesis that you already fit in, and there's that search problem. You're not going to be able to convince someone who doesn't already believe in what you're doing. You just have to find that person, right? And so that's that's really you know kind of if you're really close, like fine, you know get close to that. And having existing great investors, you know like you know Village Globals of the world, and there are very few of those, you know you know who have the network who can say okay I know this guy or gal. really believes in this, you know, you should talk to them. And so those are the folks who are really close to cash out, you know, maybe early stage. If you're later stage, you know, look, if you haven't shown good metrics, good fundamentals, that's gonna be tough because, you know, the question is like, you know, you already got your shot to prove it out and then you sort of have to figure out what's the right process. Do you cut burn substantially? Do you find an exit opportunity? Um, you know, there's a lot of different mechanisms for that. That's really tough to, to be in that position. Um, and then for folks who are like just starting out, this is, you know, an amazing time because, uh, for every bear market there's always a bull market. And, um, you know, if the bull market comes around in the next couple of years, you could be, you know, swimming, you know, like slingshotting out, um, of, of, of this market right now. So, so really there are nuances for, for each stage, um, but generally macro, we're gonna go in into a tough environment.

Yeah. And so that makes me think about just runway in general, in terms of what are you advising founders on? Any sort of golden rules around runway, whether it relates to, okay, don't fundraise unless you have this amount, or always strive to have this amount, or consider doing a RIF or layoff if you don't think you can get to a certain amount. What do you advise there?

Yeah, look, uh, you know, you're gonna have to kind of get it through the trough. So, you know, let's call it at least 2 years worth of runway, um, you know, preferably 2.5 plus. Um, that's really, you know, uh, tough for a lot of, uh, companies. You know, if you got lucky and, and were able to raise a lot of cash, you know, it's a matter of just, you know, cutting burn a little bit and giving you, giving you the extra 2 years. But I would say, you know, 2 years at least. The kind of metrics you need to show really depend on the stage that you're at, but obviously aim for quality. So generally, quality retention, quality gross profit, quality, depending on the stage, the payback periods on your go-to-market, whether it's generally CAC, marketing, or sales expense. I would say those are the 2 Totally.

No, that's, uh, those are helpful principles. I want to zoom out from finance and more just on, on company building in general. Talk about how you, uh, think about constructing an exec team more broadly and how you, you know, thought about it at NisheX, but also just when you're advising entrepreneurs. What are some principles that you, you know, think about when you're thinking about how to build swear a team? Yeah, I mean, I think, you know, by or some misconceptions you think founders have or don't get right?

Yeah, no, it's a good question. Um, you know, the exec team, you should think about the exec team as the unit that really functions the company. And so you have to construct that exec team in the most effective way. And really comes down to, and this is, I think, maybe not as comfortable for some folks, but build the exec team around the the founders.

Okay.

The founders have the energy of the company and give that kind of credibility and forward momentum. And depending on the founders, I mean, if you get funded, investors have a pretty good sense of this. Those founders tend to hustle, do well. And so build the executive team around the founders. And so what does that mean tactically? really build out the executive team based on activities that you may, as a founding team, have weaknesses in. So you might be a highly technical founding team, you should really appreciate, depending on the stage again, you should definitely round it out with someone who has really good go-to-market chops. You might have a good sense of what needs to be done in the market in terms of your expertise, let's call it, about the category, and you have great relationships, so you kind of act as the salesperson, the go-to-market function, and give the vision of the company. But then you need to really round out with folks who really know how to scale a technical stack or know what good looks like in terms of building out the business. So that's an important principle. Now, tactically, about the specific functions, again, titles, A lot of people like to think about models like titles, like you need a finance function, you need a— and Erik, you know this. Sometimes you have a head of people who's part of the executive team, sometimes you don't. Sometimes you have to have a finance— sometimes you don't. Sometimes you have one product lead who handles all engineering and product, sometimes you don't. And so, I think for a lot of people out there, there is no one size, one right model. It's what model works for the people who are already there. And that first starts with the founders, and then you work out what the activities that need to be done there after that. So I'd say those are the principles. And then, you know, how do you find the right exec team? Again, it goes back to, I think, this general rule of thumb in startups: find people who want to build, you know, people who really get jazzed around taking, you know, something from nothing to be something massive. Execs absolutely need to operate on first principles because anyone who takes kind of a playbook in one industry and applies it will likely, if not fail, face a lot of challenges in applying it. And so you need someone who really understands how to think about the nuances of your business and the industry that you're in front of and the segment that you're dealing with to say, okay, this is exactly what we need to do and here's how we need to allocate our resources. So first, you know, builders, hustlers, First principles thinkers. Really, really critical. And then everything else, you know, it really depends on the business.

Yeah, that's a very helpful framework. I want to ask similarly in terms of board construction. What would you advise entrepreneurs in terms of constructing their board and effectively managing their board?

Yeah, board construction is a function of your capital raise history. Period. Some people, and you might, you know, now I'm sitting on this side, so I can say this, you can get the advice that you need without having a board member. Just keep in mind, founders, board members are there because of your capital raise history. It's a control mechanism. And as long as founders know that, you know, you're going to have a great relationship with your investors and board members. So that's one. So what does that mean then in managing your board? Keep in mind, your board is, you know, depending on the stage of the company, I mean, effectively, you know, you got to make sure that you're managing their expectations as investors. And so, when, you know, knowing what you're moving towards, keeping them updated frequently, being extremely clear around what's going on in the business so that there's no surprises. And this is really important. Even though I said the board is based on the capital history, they're really important in supporting you.

Yeah.

period. Like, so, so it's, it's you decide to take money, they wanted a board seat, and you went through the, you know, vetting process. Now they're on the board. They're there to support you, period, and support the company. Your interests are aligned. And so, you know, keep them abreast with all the issues that are happening. And it is— it should not be— you shouldn't wait until, until the board meeting for this. Um, and just keep them updated so that, you know, they can, they can guide you and, and provide some advice. I mean, they may not have all the answers, so, you know, it's, it's fair to ask them for, you know, a connection to, to a potential right person for that. But also, uh, you know, board meetings are a great way to kind of show progress as well. I mean, this is, you know, for a lot of folks out there, if you're doing really well, your board is pretty, you know, passive. So, uh, you know, but still keep them up, you know, posted about what's going on, and, um, so that there aren't any surprises and they can be supportive wherever you need them to be. In terms of board meetings itself, it's hitting on the key milestones, right? What are the financials? What are the latest developments in terms of product, staff, new insights that came up? What's your go-to-market process, how that's going about? And then general resolutions that need to happen. Awesome.

That's a very helpful framework in terms of how to think about the board. I want to segue to another topic I know you've thought quite a bit about, enterprise marketplaces. Talk about frameworks you have there in terms of what's important to get right and any misconceptions you see people having about them. Why don't you talk about that for a bit?

Yeah. You know, I've been thinking a lot about this. So when I was at Goldman, we spent a lot of time, you know, investing in financial exchanges. Which I would say is probably one of the largest markets for B2B marketplaces. And now with NisheX, we started off as a B2B marketplace and have transformed. And so, seeing it from multiple angles here, B2B marketplaces are extremely tough. And here's the biggest challenge around them is, if a marketplace already existed, there tends to be relationships involved in maintaining that marketplace. And if you're repeatedly buying in the market, you're also dealing with the same people over and over again. So that's, that's point one. So there's this big relationship-driven element, and then it's very hard to displace that. Number 2 about B2B marketplaces is, let's say that you could displace it hypothetically. The challenge is that it's very tough to justify the same take rates that you might see in other kind of B2C, you know, consumer-related marketplaces, because you're probably dealing with procurement processes that are, or procurement purchases that are just, you know, in the millions of dollars potentially, or hundreds of thousands of dollars. And so when you are then trying to take some, you know, typical take rate that you might see in other markets of, you know, in the hundreds of bps, you know, that's really hard to justify the thousands of dollars that you're paying up. A few transactions would be enough to justify a full headcount. And then why do they need your marketplace? You know, those are important principles. Now, how do you build a B2B marketplace? One, extremely tough. And I think there's very few market— very few businesses can actually build, let's call it enterprise-grade B2B marketplaces. And so you're going to have to really find that lower end of the market where charging your BIPs is not enough to hire a headcount, but also not enough for relationships already established. And so, you know, that's really tough. So what we've done at Nishek's kind of lessons learned is really, and this is kind of also lessons learned in the financial markets, is focus on building efficiencies first. And maybe there's an opportunity for a marketplace element. As an example, you know, what we've done is take the relationship that exists today, accept it. It actually could be your friend, because if you build a tool out that helps those sides, it could actually spread quite quickly. But build— accept the relationship and then build efficiencies in that process. You know, what is a problem that they have in even just dealing with their counterparties? It could be a lot of things. It could be, I, you know, I wish I had more insights around my procurement process. And you see a bunch of companies doing something like that. It could be that, you know, in our case, there is a trust problem and a coordination problem. Hey, you know, when we procure this, it's really tough for them to actually follow through on the relationship. And hey, by the way, it's really tough for my company as a whole, even though I'm the one signing this contract, to follow through on this relationship. And so, you know, what we do as an example is we give that single source of truth, that data, those workflow coordination layer, That just makes that relationship, you know, takes it to another level, enhances it, and people absolutely love that. And so when you think about enterprise B2B marketplaces, you know, it's actually best to think about it in the financial exchange, in the financial capital markets world, like a trading venue. How do I make the people who tend to work with each other and repeatedly work with each other just have efficiencies in the process? You're not going to dislocate them. You're not going to displace them. They like it. They want it. You know, so they're buddies in many cases. But how do you make their engagement with each other just, you know, 10x better? And that's really where the opportunity is. And when you build that efficiency, then it becomes where, okay, great. You know, to the extent that new needs come, you're not going to fully, you know, create a marketplace out of that. But when new needs come, Being that kind of tool that kind of creates that efficiency becomes the kind of conduit for those insights, a conduit for that kind of new purchase that needs to be done. In our case, it may be, oh, you know, I have this new trade lane that needs to be filled. You know, is there an opportunity for us to, you know, match an opportunity there? And so we might help, you know, because we know both sides, it's like, okay, you know, Joe, you should talk to Mike here. You know, there's an opportunity. Now we're, you know, doing that manually, but eventually we'll be able to do it in an automated fashion. But that's kind of the process. And that pattern actually played out in the fixed income markets. I mean, there are huge 10 double-digit billion-dollar market cap companies out there, like MarketAxess and Tradeweb, that have taken what they call over-the-phone kind of brokering market and actually made it more electronified. And I really see that as a model to really take it to other B2B marketplaces.

Yeah, that's really interesting and a helpful framework for how to think about that. Adam, you've been an investor and an operator. Talk a little bit about the mindset shift as you shift between the two and talk about how being an investor has given you a better appreciation for some of the details in being an operator.

Yeah, that's a really good question. What an investor really knows about, at least when you get— you see a lot of companies, you know what quality looks like. You know what metrics they are, you know what the kind of enthusiasm of the customer is. And so, you know, as an investor, you really see that what quality is. And as an operator, really what you're doing is you're kind of imagining the future of all the things that you need to do, and then executing against that so that you can be a quality company. And so, you know, when you're an operator, it's really, really tough sometimes to know what quality looks like without actually seeing enough. And so, you know, I highly recommend any operator actually being an investor on the side. I mean, now it makes it so much easier with, you know, AngelList and, you know, a number of folks, you know, there's a really thriving community to be an angel investor, but it helps exercise the muscle around what quality looks like. So when you're building out the strategy and you're building and you're executing against it, you know where you need to go because as an operator, you're making, you know, hundreds of incremental decisions of should you hire this person or not? Should you actually let go of this person or not? Should you go into this segment or not? Should you encourage this development in this product feature or not? And sometimes it's explicit, but a lot of times it's this gut visceral feeling. And I find that a lot of operators, people that I've worked with, et cetera, they know what the numbers are, but they don't viscerally feel the number. They don't viscerally feel like, okay, if I hit that, like, why is that so much different than this? Like, if I have 70% gross profit margins or 30%, you know, what does that really mean? And I think, you know, what operators will benefit— and this is why you have to have a good relationship with your investors. They get a pulse on like what good is, and so they can guide you. But, but I think it's really important that, you know, operators really feel viscerally what they need to move towards so that they're executing Making the incremental decisions in the best way possible.

I love that advice because you often hear the opposite and very complementary advice, which is that investors should have operator experience to have better sympathy, empathy, credibility with entrepreneurs. Similarly, entrepreneurs have to work with investors. But also investors just see more businesses at orders of magnitude more scale. And so to have a better sort of macro understanding of various different elements of one's business, it's great for both to have both experience. Adam, that's a great place to close. Thank you so much for coming on the podcast. For people who want to learn more about NisheX or anything else you're up to, where can we point them?

Yeah, feel free to reach out, adam.farris@nishex.com. And yeah, I'm happy to answer any questions anyone has.

Awesome.

But thanks for having me, Erik. Appreciate it. This is fun.

This has been a great episode. Thank you, Adam. Thanks for listening to today's episode. Execs is produced by On Deck, where top talent goes to start companies, find their next roles, or invest in their careers. If you're looking to start a company, uplevel your career, Or navigate a career transition, I encourage you to visit beyonddeck.com. See you next time. Bye.