Behind every great tech company of our time lies, what I like to call, a WTF moment. That magic moment where someone throws up their hands at an inefficiency that all others had come to accept and resolves to transform it into an opportunity. In my opinion, nothing creates a more dynamic or successful company like a good WTF moment. Business and technology are ever-changing, and people who can see beyond business as usual—those who can envision new and more efficient ways of doing that business—will create unfair competitive advantages for themselves, their companies and their businesses.
My first WTF moment happened in 1985; I was an intern on Wall Street assigned to the painstakingly manual task of writing paper tickets for each trade executed. I realize this might be tough to imagine in today’s world of the ubiquitous computer. To paint a picture of exactly how taxing these inefficiencies were, you can look back at the NYSE in the 1960s and 1970s when the market would have to shut down on Tuesday and Thursday afternoons to allow time for the back office to process these trades—WTF! The problem was that no one thought to challenge these inefficiencies or leverage technology. The computer was relatively new and everyone had already accepted the manual work and lag time as a cost of doing business. Since I was the one up close and personal with the manual task, I did not.
A mantra I’ve stayed true to over my last four companies (and have held my employees to as well) is “if it ain’t broke, break it.” What I mean by that is just because something seems to be working fine from the outside, doesn’t mean it can’t be made better by taking it apart, adding innovation, and building something completely new. And so after a year of learning everything I needed to know about the mundane world of paper tickets, I began the process of electronifying these trades and inventing the first order management system (OMS). My pitch? Better, real-time data that allowed traders and portfolio managers to focus on their investment strategies instead of the clerical work of manually writing tickets, calculating positions and inputting into various different systems. And to appeal to management, I used a similar pitch that many tech companies still use today: scale your assets without growing your head count.
My current company, Liquidnet, which I founded in 2000, was the result of another WTF moment. Institutional asset managers (i.e.mutual funds, pension funds, hedge funds) generally need to trade an enormous number of shares of a single stock in order to get into or out of a position. These orders consistently outstripped the available supply in the market, causing stock prices to rise or fall with their demand. The industry considered it the cost of doing business, but that cost was an unbelievable $100 billion a year of investor returns just because the market could not efficiently handle these large orders. Liquidnet created a wholesale market that connects asset managers directly to each other so they can safely trade large blocks of stock without moving the stock price. We’re now in 44 equity markets across five continents and our customer base includes over 800 of the world’s largest institutional investors that collectively manage $15 trillion in assets.
It sounds easy in retrospect, but the truth is educating the marketplace, creating demand and getting the first few customers to sign up takes time—and money. At my first company, it took us five years for the OMS platform to become mainstream and adopted by the industry. Since then, the venture capital industry has grown into an enormous source of start-up financing with U.S. VCs investing approximately $77.3 billion and closing nearly 8,100 rounds in 2015. It has never been easier, cheaper or faster to create disruptive companies using technology and someone else’s money. All you need is the right idea, the right solution and the ability to act on it.
My advice to those looking to start the next Unicorn? Saying WTF—and feeling the frustration that comes with inefficiencies around the status quo—is not something that should annoy you, but rather something that should excite you. You should look at it as the first step to your next breakthrough.
Image Credit: CC by Tomais Ashdene
