CEO Spotlight: Joe Mrak, FolioDynamix

Joe: 2 equity raises totaling $26 MM with ~10 MM of it as secondary; 2 rounds of venture debt, and many rounds of venture banking.

Chris: What were your initial thoughts and what ultimately guided the selection of Edison as your first institutional backer?

Joe: Edison was the only firm that saw and committed to the original vision of the firm. They understood the Fintech space and how our mission would solve a real gap in the advisor marketplace.

Chris: How did things change in terms of managing the business after the investment? 

Joe: It never did. Edison was always supportive of where we were going with the business and provided constructive feedback as to where to best invest in the business or cut bait. We had some tough moments in 2009 when the markets crashed, but worked together to get through it as we were still growing; even in AUM fees bottomed out.

Chris: I always hear from CEOs that hiring is a great challenge. Was it hard for you to find like-minded people as you executed on your strategy?  

Joe: Yes. It’s still a challenge to find people that have domain expertise, drive and an entrepreneurial attitude.  I also learned, you cannot be afraid to fire those that don’t work out. Do it quickly -- It’s better for all. But, sometimes you also find some really great talent, and likely people you will work with together for a long time.

Chris: What’s the most important thing that you learned about managing others?

Joe: Trust them. If they are not a fit get them out asap. Define their box, but let them own their world. Always listen first before reacting and do whatever you can to build team unity and trust.

Chris: What were the biggest challenges for the company during your tenure?

Joe: The market crash in late 2008-2009 was without a doubt the hardest time I have ever went through in my career. We make a decent amount of our fees off AUM, so when the market cuts in half, so do many of our fees/revenues.

We also had some product and technology struggles that year, getting to market to compound the pain along with being understaffed. We closed our first round of funding in August 2008, so this was the first experience with our firm for Edison, and it was a tough time even though we were growing by adding clients and accounts. We almost bottomed out. It took a little bit of cutting and some smart investment at the same time coupled with a lot of faith from Edison.

Chris: How large was your board?  Did your board truly add value to the company’s development?

Joe: It was 7 people. We had a good dynamic, and it was helpful from a financing standpoint, for sure. Lots of deal knowledge that helped when raising debt, and during M&A.

Chris: What’s the most important thing that you learned about yourself?

Joe: I learned I am a good problem solver. I realize now that is what I do most of my day when not in front of clients and prospects. Every day, running a company is an adventure if you’re growing fast, and problems will present themselves. How you react to them are key.

Chris: Anything that you wish you’d done differently?

Joe: I would have hired a CFO sooner. I didn’t, going into this, place enough value on that role since I was comfortable with finance myself and had some great support in that department. Ultimately I learned what a CFO really does and what they are good at. It made a tremendous difference in hiring a great CFO, and I will never go back into battle without one.

Chris: What have you been up to since the exit?

Joe: We have a nice opportunity to keep doing exactly what we were doing before so my team is excited about that. We continue on our growth mission and focus on providing the best end-to-end experience for financial advisors. I did manage to finally take a full week of vacation in the Caribbean that was long overdue, and get the ski house I always wanted in Vail so that I can have greater family time when not focused on work.

Chris: That sounds great! Last question: What’s the best advice you ever got? And what advice would you give to other CEOs planning for exit?

Joe: Great question – best advice I ever got was “cash is king,” and build a strong profitable business so that you can control your destiny rather than put yourself in a vulnerable spot. Focus on the fundamentals, not just the vision.  This is so very true and I think many times, founders and entrepreneurs get caught up in their vision at every cost rather than focusing on the basics around building a business. It’s great to invest in growth, but if you’re not growing at a really fast rate, you better be profitable.

My exit advice is: Be patient. Know what your inflection point is and take advantage of the market dynamics. Take the time to find an investment banker that you are really comfortable with and will best tell your story as they will be the face of the business at one of its most important junctures. Tailor your message to each buyer so that they best understand the value you would bring to them to maximize the firms value at exit.