As startups scale and succeed, other companies line up to do business with them. These legacy institutions — consultants, analysts, agencies, etc. — are meant to support them on their journey.
Instead, they are failing them.
How do I know? Because I lived this on our journey scaling Dyn.
It’s funny how these companies are nowhere to be found until you’ve made it to some degree. But once you’re discovered, boy oh boy, do they surface and apply the pressure to engage. Once your ARR scale is uncovered, your Forbes thought leadership article is published, you win that EY award or you score that TechCrunch headline, the laundry list of vendors never ends. Oftentimes they’ll even be forced on you via your board or investors.
It’s a rite of passage for growing businesses that these firms eventually get you on their radar and pounce. And unfortunately, our industry has just accepted these pay-to-play, siloed, slow, expensive and redundant firms as the de facto — whether or not they provide actual, meaningful value. It’s just the way it is.
Big, pre-IPO companies must allocate massive budget to play the game with these vendors. The perception is that you mature by securing the services of these firms, and if you don’t then you aren’t serious about your business.
I see why it benefits the vendor, but does it truly benefit the companies? Here are some examples of what I mean:
- Management consultancies: $600,000/year
- Strategic communications firm: $360,000/year
- Executive coaching:- $144,000/year
- Sales training: $500,000/year
- Analyst firms: $480,000/year
- Independent finance consultant: $120,000/year
- Independent sales consultant: $240,000/year
- Independent marketing consultant: $480,000/year
- Public speaker training: $100,000/year
- Investment banks: $75,000/year, plus 3% to 7% deal-contingent fees
Total: $3 million/year, plus deal fees that can more than double that amount
These were actually our numbers. Yikes!
We can all think of examples of firms and/or people that may fall into the above buckets. It makes me sick to my stomach to add up these operational expenses. What’s even more egregious is that there can also be common shares on single-trigger agreements spread across many of these firms and individuals — who all show up after you’ve gotten your business into the growth rate groove. The numbers can and do add up into millions of dollars that don’t reward your rank-and-file team that’s doing all the hard work.
I’m not saying that none of this is worth it. Some of these partners truly add value. A select few are worth the top dollar they command. They can protect against the different types of risk — market, execution, compliance and technology — that abound in a growth- and late-stage startup.
But the sum of all the parts certainly doesn’t add up in your favor. Are all of these companies truly needed, and are they the correct use of all that cash? It’s a rat race, and it needs to change.
This is why we created York IE.
Yes, we’re an advisory firm. Yes, we’re an investment firm. But we always put the best interests of our clients and portfolio companies first, and we get in at the earliest stages, where the help is needed most.
And that’s not just lip service. Our entire operating model is built on that promise, and we operate as independently as we can.
Unlike other firms, our incentives are aligned with those of the entrepreneurs and operators we work with. We invest on a deal-by-deal basis and act as an extension of their operating teams — providing an outsized amount of help in ways that traditional venture capital funds simply can’t. We don’t need one company in every cohort to become a unicorn so we can generate the returns that our investment partners expect. We just need to build profitable, sustainable companies.
And that applies to companies outside our portfolio too. We provide Advisory as a Service to tech companies across all stages and verticals, because we want to help as many operating teams as we can.We have an engagement model to meet the startups where they are on their journey.
In doing so, we’re reshaping the way technology companies are built, scaled and monetized. We’re disrupting venture capital and private equity, plus all the go-to-market, management and marketing agencies and consultancies.
Sure, we benefit too, but it’s not without a conscience. Hit us up today to learn more!
