Why is Now the Time to Start a Company with David Booth
In this conversation, we discuss why On Deck is doubling down on IRL programming, why he believes venture-backed founders need to be deeply connected to the Bay Area, why now is the best time to start a company, and how startups help combat stagnation.
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David is the CEO of On Deck, where he's focused on building the world's most powerful ecosystems for founders to start and scale companies.
Actionable Takeaways
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1. Free up investor dollars from regulation.
Extensive regulations governing investing prevent dollars from making its way into startups. Some regulations are justifiable, but the current status quo is unfairly onerous.
The first solution is to get rid of the accredited investor requirement, which requires you to have an income exceeding $200,000 or a joint income of $300,000 with your spouse, in order to invest directly in startups. Read the comprehensive case for abandoning this approach here.
The second solution revolves around crowdfunding regulations. The Securities and Exchange Commission raised the amount that companies can raise through crowd fundraising from just over $1M to $5M. Some argue, however, that the cap should still be much higher, and the reporting requirements should be made easier.
1. Free up investor dollars from regulation.
Extensive regulations governing investing prevent dollars from making its way into startups. Some regulations are justifiable, but the current status quo is unfairly onerous.
The first solution is to get rid of the accredited investor requirement, which requires you to have an income exceeding $200,000 or a joint income of $300,000 with your spouse, in order to invest directly in startups. Read the comprehensive case for abandoning this approach here.
The second solution revolves around crowdfunding regulations. The Securities and Exchange Commission raised the amount that companies can raise through crowd fundraising from just over $1M to $5M. Some argue, however, that the cap should still be much higher, and the reporting requirements should be made easier.
1. Free up investor dollars from regulation.
Extensive regulations governing investing prevent dollars from making its way into startups. Some regulations are justifiable, but the current status quo is unfairly onerous.
The first solution is to get rid of the accredited investor requirement, which requires you to have an income exceeding $200,000 or a joint income of $300,000 with your spouse, in order to invest directly in startups. Read the comprehensive case for abandoning this approach here.
The second solution revolves around crowdfunding regulations. The Securities and Exchange Commission raised the amount that companies can raise through crowd fundraising from just over $1M to $5M. Some argue, however, that the cap should still be much higher, and the reporting requirements should be made easier.
Transcript
Introduction
Patrick: [00:02:41] My guests today are Scott Davis and Rob Wertheimer. Scott and Rob head up Melius Research and are the authors of a great book called Lessons from the Titans. The book explains what the industrial giants of old can teach the new generation of high-growth businesses, how to survive and deliver shareholder value over multiple decades.
Drawing on their experience as industrial analysts, they present case studies on businesses like Danaher, Roper, Honeywell, Boeing and GE to reveal both what does and doesn't work when it comes to capital allocation and business strategy as a company enters a more mature phase in its life cycle. Please enjoy my conversation with Scott and Rob.
What The Old Industrial Titans Can Teach Us Today
Patrick: [00:03:18] So Rob and Scott, I’m so appreciative your time today. I'm really excited to dive into the many lessons that you've learned from industrial titans in business and stock market history. You mentioned before we hit record that your book, which isn't that old, has really been hitting its stride recently, probably because so many of these lessons have seemingly become more applicable especially to the technology sector in the last year, year-and-a-half or thereabouts.And I thought an interesting place to begin our conversation is not with specific companies, which we'll definitely spend a lot of time on since the book sort of goes into the business history of all these great old industrial businesses.
But instead, just to ask you what it’s felt like to watch this technology drawdown, I'll call it, happen and start to think about the lessons from these industrial titans and how they may apply to tech businesses. It seems like that intersection is just a really fruitful place to begin. So what’s it's been like to watch and what have you told people, especially in the technology sector.
Scott: [00:04:17] You’d love to say I told you so, and I think that's an obnoxious way to start the interview. But I think the reality is that we were watching the tech sector make so many of the same mistakes that the industrial world had made in decades prior and certainly had to manage around. We were a little bit disappointed that the tech sector didn't take the lessons from our book or I would just say the standard lessons from business historically, a little bit more to heart.I think there was a view within the tech sector of it's different this time. And it's different this time is a very dangerous play to run a company. So when we think about the three fundamental pillars of sustained success, operational excellence, does the tech sector itself have operational excellence? Culture, is that culture supportive of the organization's mission? And then the last one, just capital allocation. These companies are generating a ton of cash.
And I think one of the most exciting things about tech overall, to us, at least wasn't necessarily the growth rates, which certainly have been exciting. But the cash flow generation within the sector was incredible. But how you deploy that cash is typically at least historically, the difference between long-term sustained success and failure. When the book was published, we felt like the tech industry was collectively flipping us the middle finger and saying, "Sure, We know these are well-spun stories, but these guys are all dinosaurs and they don't matter anymore. So move on."