Unqork founder and CEO Gary Hoberman took an unusual path to entrepreneurship, spending decades writing code and managing massive budgets on Wall Street (his prior role was executive vice president and global CIO for MetLife) before starting his own company. By his estimation, it was the best thing he could have done to set him and his company, a no-code application platform, up for success.
In this interview with Future, Hoberman explains how his experience working inside large enterprises has made it easier to sell to them, and provides advice for other startups looking to close enterprise deals. He also tells enterprise buyers how to best invest in startup technology, and shares some pros, cons, and tips for working inside a large company.
FUTURE: Let’s start with the obvious: Going from Wall Street CIO to startup founder seems like a pretty stark change. Why did you make that decision?
GARY HOBERMAN: I always call it the leap out of the C-suite, from the corporate jet to Zone 5 of United, where they don’t allow carry-ons.
But I started my career on Wall Street, literally right out of business school. I loved this idea that technology was magical, that it could solve problems. You could tell a machine to do something and it listened, and I felt there was no more exciting place to put it to work than the money movement of Wall Street – the exchanges, the trading, all of the operations where when you make a mistake, it’s critical to a business. You can’t make a mistake.
So I made that my challenge: How do you actually solve those problems?
And on one hand, wherever I was working, I was doing that. I was solving those problems. On the other hand, though, it was still within a specific group and function, or division, or company. So although it was rewarding doing what we called “intrapreneurship” – creating something like a startup inside these 200-year-old companies and creating the belief that you could improve processes – I left the corporate world because I realized there is no light at the end of the tunnel unless you create it.
As a CIO, I would be flown out to the west coast. I would meet with the CEOs of all the large-cap tech companies and sit with them in their executive briefing centers in Seattle and California and hear what they’re working on and where they’re going. And we’d meet with venture funds, as well, and hear portfolio pitches. And all I kept hearing is that we’re still creating software the way it’s been created since punch card machines. Yet around us, we celebrate the scale of cloud computing, infrastructure, security, and databases.
More importantly, 80% of my spend – and that was $1.2 billion a year – was spent on what you call “just keeping the lights on.” The projects you were working on were end-of-life projects. “Oh, Microsoft’s going end-of-life for something new. Great, we’re going to spend a million dollars to resolve it – or 10 million, or 100 million.”
Meanwhile, the remaining 20% – the new, sexy things that drive the company forward – was being done with custom code. All that was doing was creating legacy code. The second it went to production, we suddenly categorized it as legacy and it was no longer new. It had to be maintained and end- of-lifed just like everything else. That was my epiphany.
Politics are a huge thing inside some organizations . . . don’t downplay the organisms inside of companies that are there to protect and maintain the status quo.
You mentioned “intrapreneurship” . . . Now that you’ve been on both sides, I’m wondering how well a large company actually can mimic the startup experience, or if enterprises should just embrace who they are.
I agree with you to a degree. A bank is a bank. It’s not a tech company, even if you have more engineers than Microsoft. But the reality is that I personally don’t believe that centralized innovation makes much sense. Innovation is something everyone should be thinking of how to do, and do it within their team and their function.
For example, at the height of the 2008 financial crisis Citigroup stock plummeted, and we needed a way to innovate. I remember going to pitch the CIO and said, “We need to create a lab for innovation in the building. People need to walk through and see it, and feel that there are still things being built and created.” I was given a budget one-tenth the size of what you needed, and we built what we called the Rethink Inc. lab. It became the place we would innovate, and we accomplished a lot.
But to be successful, you had to understand the politics that were happening around you, which is very different from the startup world. At Unqork, there’s no politics, there’s no bureaucracy, there’s no BS.
Politics are a huge thing inside some organizations. And for anybody creating companies, don’t downplay the organisms inside of companies that are there to protect and maintain the status quo. I’ve seen it outside in, and I’ve seen it inside out, and some of the stories would probably scare you.
Changing topics a bit: What are some things that B2B startups need to know about to sell to large enterprises? How do you get a foot in the door? And once you make a deal, what are some traps to watch out for?
Maybe it’s because I really understand the enterprise, but we decided that we have to start with Tier 1 customers and Tier 1 problems. Tier 1 customers are the Fortune 100 and Fortune 250. They are your largest, biggest, most difficult customers to sign. They put you through 1,500 questionnaires on compliance and security, and they’ll come do on-site checks. Tier 1 problems are normally the problems that no one lets you near. They’re the problems that only custom code has been able to solve, because no software package can.
And I would recommend that strategy for any startup, because the reality is if you get the platform working and find product-market fit and features for Tier 1 customers and problems, everyone else downstream is easy. Every other industry is easy, and every other problem you could throw at it becomes easy. Instead, a lot of companies start with the simple problems and then say, “OK, we’ve built something simple, now use it for your complex problems.” And it doesn’t work.
We wanted to be able to walk into a customer meeting and have an answer when somebody says – and someone always will say it – “Who are you working with that is bigger than us and more complex than us? And what use cases have you done that are more complex than what we have here?” Because they’re going to be skeptical of you as a startup founder and your team.
I think that’s critical to get going in a way where you deliver value, instead of doing what I would call pushing software licenses like drugs. A lot of companies are just pushing a license with no value, and it’s hurting organizations. I would encourage everyone creating companies to sell to the enterprise: Focus on the value you help them achieve. Let them see the value and experience the value, because that’s how you’ll succeed.
And if a deal isn’t a good fit, saying no can be a smart business decision. You don’t want to be cornered, or painted into a box of doing something that’s easy but not adding a lot of value.
What’s going to happen in the real world with your client is there’s going to be a job change. . . . And when that client’s project suddenly becomes less important to them and takes a backseat, your business is out.
You mentioned that skepticism that large enterprises often have, so what about the inverse? What do enterprises need to understand as they’re trying to engage with a startup?
The thing that I know doesn’t work within enterprises is when there’s no sponsor or commitment, or there’s nothing you could attach to that’s a real business value. We tell every customer, “Just give us a challenge. What’s the most difficult thing you can dream of that you need an engineer to code?” If you’re a startup working with a large enterprise, and it feels like a project is going nowhere, you’re probably right.
The inverse is that businesses need to apply technology to problems that are real. Every business needs to treat every technology project as a business case. You’re investing this money, and you’re expecting a return. One study showed that 93 percent of large technology initiatives started in enterprises fail to deliver any value, which is insane.
So when you’re working with a startup, assign something that is meaningful – something that, if and when they succeed, delivers true value to your shareholders and your company. Don’t do something halfway. Don’t just dip a toe in the water to test it. Because without understanding if it works, where do you take it forward from there as a sponsor? How do you help them drive it forward?
Your point about having a sponsor or internal champion seems spot-on. How important are those types of relationships?
I had one potential investor who said, “Pick one client, stay stealth, get it live to production, and then go to your next client.” And what I could tell you coming out of the corporate world is that is the absolute worst advice anyone’s going to give you.
Why is that? After all, it makes sense on paper. But what’s going to happen in the real world with your client is there’s going to be a job change. There’s going to be reprioritization, re-budgeting, cuts, regulatory concerns – outside forces you have no control over. And when that client’s project suddenly becomes less important to them and takes a backseat, your business is out.
We started with five concurrent clients in all different industries, so that we understood all their needs. It also mitigates risk because you’re not dependent on a single change in the company.
In the startup world, we need more people who know the pain and suffering that’s happening in the enterprise world.
Given all of this, what’s your advice to someone starting out as an engineer and trying to decide between the startup world and the enterprise world?
The number one thing I’ve learned is that you have to wake up and enjoy what you’re doing. You have to feel passion for what you’re doing, whatever that is.
In the beginning years, though, I would definitely say to work hard. It doesn’t matter what you’re doing. My first job was debugging someone else’s code. There is nothing more boring than that, but the truth is that I learned how to be a great engineer. I learned how to make sure it’s actually coded correctly. You also need to experience things to know what to build, and to know what you enjoy.
Don’t be afraid of going to a big corporation and making a difference there and being excited about that. I would say that in the startup world, we need more people who know the pain and suffering that’s happening in the enterprise world. You need to understand that to be able to fix it. I started this company not to compete against large enterprises, but to empower them to succeed and get out of their own way. And I always have that experience in my mind.