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| Home - CEO Spotlight - Oct 04 Issue |
CEO Spotlight: Bob Zangrillo, NorthStar
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Angel Mehta: What does the competitive landscape look like right now? Is there one?
Bob Zangrillo: The competitive landscape looks like a series of point applications. One interesting fact is that in 1999, the internal technology teams of a company like Morgan Stanley were in the range of 2000 - 3,000 people. They had a bigger IT Staff in house than Siebel or Oracle; so these companies were effectively the largest proprietary software development companies in the world.
Since then, of course, the trend has been away from proprietary development. In the mid-nineties, they migrated from a ‘build your own’ type organization, to more of a ‘let’s buy a point solution’ organization.
Of course, companies continue to transform and the financial services industry is starting to look for more of an enterprise wealth management solution that will encompass multiple point applications. That’s where NorthStar comes in.
Angel Mehta: What kind of progress have you made so far? What is NorthStar’s # 1 priority right now?
Bob Zangrillo: Our key initiative is working with four of the top global financial services institutions that represent over $4 trillion dollars of assets… we’re moving them onto the NorthStar platform.
Angel Mehta: You mentioned before that going after the segment for $1m+ deals focuses your sales efforts. But how large is the market within financial services in terms of the number of companies / potential customers that have the ability to spend that kind of money and take that kind of risk on an application of that size?
Bob Zangrillo: In today’s world, commercial banks, retail banks, brokerage firms, private banks, trust companies and insurance firms are all able to offer investment products and have entered the wealth management market. You’ll see large on-line brokers, like Schwab, making it top priority to get into the advice space, as an example. We view the wealth management market as a $6 – 9 billion opportunity.
Angel Mehta: Let’s go back to a comment you made about recharging your batteries after Interworld. On a recent VP Sales search I conducted, one of the Board Members kept rejecting candidates because he feared they had been ‘too successful’ – in other words, he thought they wouldn’t be motivated because they had made too much money in the past. You mentioned that passion is a key component of starting a company. So in your opinion, is it possible to have the same kind of passion and energy AFTER a successful exit?
Bob Zangrillo: Definitely. Passion never comes from just the financial rewards of building a company. Real passion needs to come from some innate desire to be the best in the world at something. At Interworld, it was about having more eCommerce transactions on our system than any other system in the world. We didn’t obsess about the X millions of dollars. At NorthStar, the passion is about revolutionizing the way financial institutions manage the $27 trillion dollars of investable assets. It’s about transforming the market.
Angel Mehta: Do you think that when a venture investor looks at an entrepreneur who’s had a big, successful liquidity event, and says, “Geez, I wonder if he’s or she’s still hungry...” Are they focusing on the wrong thing?”
Bob Zangrillo: Yes. They need to focus on the personality type, not the balance sheet. I can tell you that I am flying back and forth between New York and San Francisco every week, splitting my weeks, and I’m working harder at this particular venture than ever before. Because I’m passionate about NorthStar. To be successful, a company needs 100% of the CEO’s interest. That is most critical thing, and I don’t care if they’re worth $500 hundred million or worth nothing. If they have the right personal qualities, they’ll be successful in that initiative.
Angel Mehta: How do you determine whether you’re growing fast enough, or too slowly? It’s a question that a lot of first time entrepreneurs struggle with, I think…
Bob Zangrillo: I believe in the early stages of the company, pre-customer, pre-product, that none of these enterprise software companies should be burning more than $5 million a year.
Angel Mehta: How do you arrive at that number?
Bob Zangrillo: That’s my rule of thumb. One of the problems today is a lot of the people in the venture community have got to the point where they want to put a lot of money to work really quickly, have companies grow at rates at which they’re not possible to grow. The market should dictate those rates versus individual venture investors or individual entrepreneurs. Focus on building into market demand and not ahead of it.
Angel Mehta: Are you implying then that a company that burns $5 million a year could grow just as fast as a company that has $15 million?
Bob Zangrillo: Yes, but only as the market dictates. You cannot grow faster than the market will allow – period.
Angel Mehta: Okay, so the amount of money you spend is irrelevant?
Bob Zangrillo: I think it’s irrelevant to some degree, yes. Understanding that gives you the flexibility to not burn yourself out. You realize that you cannot time the market. I think it’s almost impossible to see a wave, know exactly where it’s going to hit, know how to respond. What is possible is to know that there is a wave coming, get out there and paddle until you catch it. It didn’t make sense, in theory, to start a software company focused on financial services in 2001. The financial services industry was in disarray. They were cutting budgets on everything, and there were hiring freezes and no money to spend on anything except support existing operational systems. It was the worst time to be selling into a financial services company. I said, listen, it’s a cycle, we’re going to go through it and we’re going to be in development for two years because it’s a big footprint and by the time we come out there will be a new economic environment and an a new wave. I didn’t know when it was going to come; I just knew it was coming, and we had to get out there and get ready for it.
Bob Zangrillo is Chairman and Chief Executive Officer. Prior to founding NorthStar, Bob was the Founder, Chairman and CEO of InterWorld, a leading enterprise eCommerce software application provider. He was one of the early visionaries to recognize the enormous potential of Internet commerce and how it would transform the way business is conducted in the new global economy. As a result, he has been recognized for his leadership in the industry and has received numerous personal and technology awards such as 1998 Ernst & Young Entrepreneur Of The Year® and Crain's Top 40 under 40 Award. For article feedback, you can contact Bob at: bob@northstar.com
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net
 
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