I’ve been working in startup territory for nearly 5 years. Initially I spent 3 years full time at the Thalesians a company I co-founded. For the last 2 years my full time focus has been Cuemacro. The whole startup experience has been mostly about learning. Coming from the corporate world of banking, it has been somewhat of a change. I guess the key question is this, am I happy I made the jump to startup life. The resounding answer is yes! However, this does not mean it has been easy. Certainly I’ve had to make adjustments and my share of mistakes along the way. Many plans I had, succumbed to what can be bluntly termed as the reality of the market. I’ve had many conversations working in the corporate world, keen to move to the startup arena. Hence, I thought it would be a good idea to outline some of the points which you might consider if you want to make the move.
Funding, funding, funding
Startup life, in particular at the beginning is about trying to stay afloat. There’s usually no money coming in at the start and you need somewhat of paying the bills. For me, trading FX on my personal account funded me for a while. It also provided a useful proof of concept given my whole business model is around FX research. I’m not suggesting everyone doing a startup begins to aggressively take FX risk! Now that my startup has become more developed, I’ve been able to fund the business directly through revenue generated, and my hope it is to continue down this track.
However, it’s important to think about how you will cover your expenses whether that is through savings or some external funding, when you do not have sufficient revenue to cover expansion. As your business grows, external funding can help to accelerate that process, even if you do have reasonable revenue coming in.
Going from short vol to long vol
Following on from the point about funding, working in a startup requires somewhat a shift in mentality. In a bank, you’re essentially short vol. You get a regular income, till well you don’t. In a startup the payoff is somewhat different. It’s more about the longer term value of the business which you are building, that is the payoff. As the business grows of course, the hope is that it will also generate regular income.
Marketing is key
You might well create the best product and provide the best client service. However if nobody is aware of your company, it’s somewhat puzzling how you can monetise what you do. Personally speaking, my background is more as a “builder” creating products and services for my clients. I enjoy delving into the minutes of the market, and analysing data to understand how to forecast it. I’ve had to learn the whole marketing aspect of running a startup. I certainly don’t claim to be an expert sales or marketing person. However, slowly, I’ve been trying to build that skill set. A startup is in different stage of its brand’s existence, compared to a large corporate. Hence, you have to work doubly hard to establish the brand. Just because you worked in a big company before, doesn’t automatically mean those people who were clients, want to be clients of your startup. You have to work to show them the benefits.
Everyone has to do everything
In a small startup, there isn’t the luxury of employing lots of people to do specialised functions. I end up doing marketing as well as research work, as a result. My colleague Shih-Hau Tan gets involved in many of the research projects that we have and I work on a lot of a projects with him. If you aren’t keen on doing stuff outside your comfort zone, startup life is going to be very tough. In a large company, everyone has their own specific skills to do specific tasks. This isn’t the case in a startup. Getting the right people to work with you is even more important in this context.
Learn from mistakes
Everyone makes mistakes whether they are in a corporate or a startup. However, in a startup there’s even more of a need to learn from them. Given it’s a smaller company anything has a disproportionately bigger impact on the business as a whole. If something doesn’t work change it! A trader doesn’t just blindly put on a position without any risk management and knowing how much AUM they are prepared to bet. A startup is the same, when making a decision, just as important as knowing what to do if it works, is figuring out how to stem losses if it doesn’t work.
Trading is actually a good preparation for a startup
I’ve heard that skills such as trading are very specific and not transferable. I would totally disagree! The ability to manage and understand risk whether it’s an FX spot trade or in other decisions are the key to succeeding. In a startup it isn’t just about the good stuff, it’s also about managing downside when it goes wrong. A trading mentality can help in my view (although some may disagree) to understand this.
It’s tough and I certainly haven’t figured out many things in a startup! But the key point is to keep on going and adapt your strategy, to focus on what is working and conversely try to cut your losses from things which are going nowhere.