Get to product/market fit before you invest heavily in sales and marketing: A term first used by Andy Rachleff, product/market fit is the first step to building a successful company — it’s the process of identifying a compelling value hypothesis that articulates the key assumption that underlies why a customer is likely to use your product. Companies often go through many iterations before they find product/market fit if they ever do.
I had the pleasure of interviewing Haresh Patel, CEO, Mercatus. He has built a 30-year career that spans launching entrepreneurial startups to leading three public companies, with a proven penchant for igniting corporate turnaround, change management, and new revenue growth.
He started his career at Texas Instruments and has served as Sr. Vice President at WJ Communications, Inc., Vice President of Worldwide Sales for Agilent`s $2B Semiconductor Group, and Vice President of Worldwide Sales at PMC Sierra Inc. before making a strategic move from semiconductors to global renewable energy in 2009. He founded Mercatus Inc. as an investment bank working with large investors and asset owners to acquire renewable energy assets. He built the software out of frustration with investment processes with a goal to finally democratize how data is managed and exchanged as the “single source of truth” for asset/fund performance and risk. Today, Mercatus serves more than $540B in assets and investments under management for the world’s leading private market investors.
Haresh holds a BS in Electrical Engineering from the University of Notre Dame.
Thank you so much for joining us! Can you tell us a story about what brought you to this specific career path?
Prior to pursuing the path of an entrepreneur, I had been in the semiconductor sector and selling microprocessors for 25 years, launching my career at Texas Instruments, where I stayed ten years starting in sales. At age 35, I became vice president of sales at PMC-Sierra, a fast-growth, publicly-traded company where I stayed another nine years. By 2008, I just wanted something different — a career change. And change is what I got. The good news is that I was hired right out of the gate by a high-profile solar technology company based out of Austin and was so committed to the change that I was ready to move there. The bad news is that the job didn’t last six months. Not only was the timing terrible — it was around the time of the 2008 financial meltdown — the company realized it didn’t have the manufacturing recipe, so the last thing they needed was a vice president of sales. I didn’t get along very well with the CEO either, which made it easier for them to fire me. A first for me!
Considering I was six months into a new career in one of the world’s worst economic recessions, and that, statistically, it takes nine to 12 months for an executive to find a job in a stable market, I figured it could take me triple the time. So, I decided this may be the best time to start a company rather than continue working for someone — to fulfill a career goal and learn how to build the kind of company I had envisioned.
In essence, Mercatus is the byproduct of being fired…and I had never been let go from a job before. It sounds cliché but being fired was the best thing that ever happened to me. It’s a success story I hope to write a book about someday.
Can you tell us a story about the hard times that you faced when you first started your journey?
Mercatus started as a sell-side investment banking firm helping solar developers find investors for their projects to fulfill their vision of building a solar power plant. With the investment banking model, you basically get paid based on success. So, you put in a lot of hard work and, like the Pied Piper, get paid once you deliver results. In other words, we were a young bootstrapped company and relied on success-based compensation. Not once but several times over the course of a few years we got stung pretty badly each time we encountered situations where clients didn’t want to honor their contract to pay us for the results.
In the midst of all of this, I read an article about the history of Southwest Airlines and its warrior culture that stemmed from a three-year legal battle with three major airlines before they ever got a plane off the ground. Southwest’s early battles formed the basis for the company’s warrior spirit. Three incumbent carriers — Braniff, Continental and Texas International — dragged Herb Kelleher (then CEO of Southwest) through three and a half years of litigation and 42 judicial and legal proceedings, including one in the U.S. Supreme Court, before Southwest ever got off the ground. Since that time, whenever Southwest has been under attack from a competitor, the employees have always rallied — often decked out in camouflage and fatigues.
I had never sued or been sued in my entire personal life and career, but realized we needed to fight for what we were owed, even though we had no idea how we were going to pay the attorneys (we had less than $5K cash left and we had to make payroll). But in the end, we won five out of five. The most fruitful one was beating a public company that owed us several million dollars. Those experiences were really difficult but instilled a warrior culture in Mercatus right from the start. If we were going to honor our contracts, whether written or built on a handshake, we expected the same from our clients and partners.
Where did you get the drive to continue even though things were so hard?
I have always stood on the principle that you live and die by a handshake; you live and die by what you agree to and expect the same of others. There is also the factor of economic necessity and survival. With the public company we sued, I had to dig deep. By then, we had reached series A funding, and part of the series A covenant was that we would drop the lawsuit because the lead investor wanted us to focus on building the business rather than fight a lawsuit. But I stuck to my guns even though we did not have another investor lined up. I told the investor, “This is a matter of principle. They owe us money, but I’ve got to continue with this lawsuit, and I’ll be the first one to drop it if I feel like it’s not going to be good for the business. But give me a chance to build a business and right what’s wrong.” In the end they agreed to invest in Mercatus.
So, how are things going today? How did grit and resilience lead to your eventual success?
Things are more exciting than they’ve ever been! In many ways, the whole idea of Mercatus was an accident. Becoming a software company — with no software experience or legacy — was also an accident. But that lack of legacy was probably our greatest strength because it allowed us to think differently. It allowed us to ask questions like 1) Why do investors live in an unscalable and error-prone world of email and excel, people and duct tape? 2) Why does software get built and sold for individual departmental pain points while the organization needs to collaborate and access data across multiple disciplines to make key decisions? Why did Microsoft and everyone else claim to centralize data but leave Excel totally disconnected, creating hundreds and thousands of hard to access and control data silos? Silos still exist today, keeping locked up the most pristine financial data needed to make accurate data-driven decisions. We are addressing a major pain point for the fastest-growing segment in investing in the financial markets, which is the private market, and we have some of the biggest brands using our software.
Our series of unfortunate events and hardships allowed us to stumble into the silver lining and forced us to focus on what we were to become.
How did grit and resilience lead to your eventual success?
Two things come to mind: First, when you are given lemons, you make lemonade. As a first-generation immigrant from India, I have always been the underdog. When we moved to New Hampshire, we didn’t look like everyone else. Throughout my school years, I was the only Indian kid. I had a funny name, I was the introverted kid in the back. Middle school was the toughest, as I got bullied pretty badly. I kept my nose to the books and eventually in my junior and senior year I got elected as class president. At the University of Notre Dame, the student population was about 97 percent upper middle class, white Catholic. I got used to living under that shadow, underrated and overlooked, but it also motivated me to prove people wrong and show them I am not going to fail.
Predictions that I would be the one to fail motivated me to succeed. When we were making this last pivot just a few years back to private markets, for example, one of my longest-serving advisors said I was an idiot to make this move, and that we would fail badly. Of course, that just motivated me, and I am working harder than ever to prove him wrong.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?
I’m more careful now, but I made the mistake, more than once, of replying to “all” when I was blind-copied on a potential customer email by a Mercatus team member. I replied to one, writing that I thought this potential customer had his head screwed on backwards…or buried in the sand…something like that. The customer responded by saying, “Well, Haresh, as much as I hate being insulted, you’re damn right.” That mishap eventually led to getting them as a new customer because he knew what I wrote was the truth. I did that a couple of times and this one happened to work in my favor, but the lesson learned is obvious. Before you hit the send button, make sure you know exactly who’s getting your response!
What do you think makes your company stand out? Can you share a story?
We had a marketing agency to help us with some core messaging a while back, and their outside perspective brought a few things to light. With my background in sales, it should not have surprised me that after a deep analysis and talking to our customers, our focus on them — our customers — is what really stood out. I guess when something like that is just part of your DNA, you don’t realize that it is a significant differentiator. When we started the business as a software company, for example, we were a US solar investment platform. The same basic thesis of what we have today, which is helping centralize data, help customers connect their employees and their workflows, hopefully, in turn, help them scale and make better decisions. But our software platform was just optimized for solar assets in the US. The world’s largest renewable energy power players saw beyond our platform and the inherent flexibility we built to help them rapidly diversify into new regions and asset classes. They asked if we could move quickly beyond US solar and wind and work across all eight of their asset classes and 35 countries. It was an enormous software undertaking that I committed to with a four-month delivery deadline. Later, my vice president of engineering told me it was impossible. It would take two years. So, I consulted with one of my advisors who confirmed my VP was correct and that I over-committed. He then told me I had two choices: go back and apologize and tell the customer you cannot deliver or pretend you can do it and apologize later. But I was determined to fulfill the promise. I had the team and senior advisor go “back to the drawing board” and do some heavy research. They came back a few days later concluding it could indeed be done in that time frame if we re-architected our platform using some best-in-class external components vs building it all from scratch. To shorten the requirements gathering process, we rented several Airbnb’s in Rome and relocated almost half the company for six weeks. It was hard on the employees being away from family that long. We eventually did deliver — ahead of schedule. There are many customer stories like that. So many of our customers are caught off guard (in a good way) because they don’t expect us to deliver an enterprise-grade solution in less than 90 days. It’s a blessing for us to compete like that, as the software industry has a notorious reputation for long and costly time and budget overruns. Customers just are not used to software vendors delivering ahead of schedule and under budget.
By the way, the flexibility to enable our customers to diversify into new asset classes, regions and unanticipated new business frameworks remain the single biggest differentiator, allowing us to beat large incumbent legacy technology providers.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out?”
Remember that this is a marathon. And in a marathon, you never sprint until the end. One of the best stories that illustrate this is a well-documented one about two world-renowned expedition teams racing across Antarctica in the early 1900s. One team committed to 20 miles per day regardless of the weather conditions, while the other evaluated both weather and team strength to decide their mileage each day. The second team, in good weather, did 60 miles, and hunkered down and added no miles in bad weather conditions. Most would assume the team committed to 20 miles a day would lose, but it was the team that took it a slow and consistent pace that prevailed. In fact, the team that pressed hard on good days never made it to the finish. They were found dead, frozen in their tents.
It’s all about learning to pace yourself, in work and in life, because the turtle always beats the hare in the end.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story?
After graduating from Notre Dame with a degree in engineering, I decided I wanted to go into sales (because I really disliked engineering) and got a job with Texas Instruments. As part of the training, I was parked in the marketing department, where I was encouraged by an executive, Ahmed Nawaz, to join marketing and avoid sales because he said sales was a one-way road. When he finally realized I was going to stick with sales, he said, “I’m going to give you some advice: It’s all about the money and focus on the right coattail.” He also said, “All dumb boats lift when the tide comes in,” which at the time didn’t make much sense to me. Then he told me about their office on the West Coast in Santa Clara, which was not known as Silicon Valley yet. He said it was an up-and-coming region and that I should go work for John Herzing, an up-and-coming sales leader. I took his advice and did very well riding the right coattail. And, as we all know, the semiconductor wave came in what was called the Santa Clara office and renamed the Silicon Valley Sales office. It was a great wave and, like all “dumb boats,” it lifted my career. John Herzing also rose to become Texas Instruments’ vice president of sales, and he was an amazing mentor to me. When the waves stopped coming in, I left semiconductors for solar in 2008, following the money — and the advice Ahmed gave me in 1984.
What are your “5 things I wish someone told me before I started leading my company” and why. Please share a story or example for each.
- Raising money is no different than selling an investor: Put your sales hat on and really learn who your potential investors are and what turns them on. Make a personal connection and apply all the skills from sales to raising money. You are selling yourself, your vision and ability to execute to an investor.
- That software companies have quick exits and are capital lite is a myth: The average SAAS companies takes 10 years and $60 million in capital on average. I heard this from a Denver-based VC and living in Silicon Valley I just didn’t believe him at the time.
- Make sure you have a deep Rolodex: You’ll churn a lot of people to get to the right core management team. It took us quite a while to get to the core five or six people we have today. I am very proud of the management team I’ve built.
- Get to product/market fit before you invest heavily in sales and marketing: A term first used by Andy Rachleff, product/market fit is the first step to building a successful company — it’s the process of identifying a compelling value hypothesis that articulates the key assumption that underlies why a customer is likely to use your product. Companies often go through many iterations before they find product/market fit if they ever do.
- Make sure you get the sales spec right: Spend more time focusing and really going deep on the spec of the salesperson(s) you really need — and get that right upfront.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I think we have already started a movement: how to unlock much-needed low-cost capital to halt and reverse global warming.
Today, we are putting enormous pressure on the earth, as India and China alone are adding 200 million people to the middle class every five years. They want cars, washers/dryers, dishwashers, etc. It’s putting a huge strain on the exponential need for traditional (and new) fuel and energy sources. But we have another race we have to win, which is reversing global warming. And we think we’ve got the missing piece of the puzzle, which is data transparency. And it’s not just with renewable energy, but infrastructure, transportation and real estate. They are all interrelated. Everything is tied around things like making a building more energy-efficient, making renewable power plants faster and at a lower cost than fossil fuel. It’s about making airports more efficient. Everything, however, is tied around access to low-cost capital. So, as I said, our whole mission is getting these large pension, endowment and insurance funds to reallocate money from traditional assets to sustainable assets and increasing that allocation from 1% to 6% to private market investors focused on real estate, infrastructure energy and power. What’s been missing is data transparency and information to help correlate returns to their traditional investment allocation schemes.
It is Mercatus’ mission to enable the multi-trillion-dollar transformation needed to support and grow sustainable technologies. In order to succeed, investors will need all the funding and low-cost capital they can get to force the replacement of earth-damaging fossil fuels with new renewable options. Because, in humanity’s race for life, clean energy is our only hope for a sustainable future.
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