*At the time of this interview, David was the COO and CFO of Compass
Going back to the beginning of your career at Bain & Co. and Bain Capital – at a time when many other new consultants fresh out of undergrad are just trying to keep up – you simultaneously co-wrote the very popular Money Makers: Inside the New World of Finance and Business. How did you balance that project along with your day job?
It wasn’t easy, and I think it’s hard to continue a side project if you don’t have momentum. I had started working with Chris Howard (co-author of Money Makers) during the spring semester of my senior year in undergrad, which was made easier by the fact that I was a part-time student and only needed 2 1/2 credits. I then continued writing during the summer before I started at Bain. It was really a Trojan horse, that whole project, to meet and interview such incredibly interesting people. I knew it wouldn’t reflect well on me if I told them I was writing a book and then never actually did it. I was just sitting there thinking “I’ve interviewed David Rubenstein, Julian Robertson, etc….I’ve got to do something, otherwise that’s just embarrassing”. It kept me motivated.
Money Makers was important to me from a personal fulfillment aspect as well. You get to Bain on day one, it is a great place, but all of a sudden, you started to feel a little homogenous in your class. Having something else on the side was important for me. The project gave me great exposure to a whole different set of experiences than I’d had in a more normal professional services firm.
And to get into the details of the day-to-day – so you’re on the client site, and then you’re going home or to your hotel and working on Money Makers from midnight until 3am in the morning, then going back in?
Yeah, a lot of nights and weekends. I was weirdly fortunate at Bain & Company; I didn’t travel a tremendous amount. I spent nine months in the Private Equity Practice, which works hard but doesn’t travel.
Let’s focus on your career path: consulting to private equity, to HBS, and then directly to real estate startup Compass as the company’s Head of Finance and Operations. How much did your work on Money Makers – summarizing six fields driving the economy post-crash, including consulting, PE, investment banking and a few others – influence your career path? Was each of your moves part of a pre-conceived plan?
The original plan was to go into politics. I started working on Capitol Hill, got paid nothing, and everything was contingent upon which party was in power. I quickly decided I didn’t want to start my career there. So once I decided on the business track, I thought I’d do a couple years of consulting, go to business school, and then go try investing.
So with the move to Bain Capital, a lot of the folks I had talked to said that a) it’s better to try private equity now because even if you don’t love it, you can still go to business school to transition, b) there are a lot more slots for people like you before business school, and c) you then look better for b-school because you’re not just a consultant – you have more of a two-tiered professional background. They’d also say “but listen, you’re in a great place. There’s no urgency. Apply, and if it doesn’t work out, your bets are hedged.”
For me, private equity recruiting started in March of my first year at Bain & Co., so I’d been there for only seven months – that’s when a lot of these places come knocking. I’m perhaps overly-organized, so I made a little 3 x 3 of sorts: of large cap funds, midsize funds, and smaller startup funds, and of those who are actively seeking consultants, those who seem open to it, and those who did not want you unless you were at Goldman, in TMT, or in whatever Morgan Stanley group. I ended up at Bain Capital New York. I grew up in Boston and had been in a way setting myself up to be there without interruption – but there was the opportunity in Bain Cap’s satellite office in New York, and I decided to take it. I really enjoyed my experiences in the sense that I worked on four deals, which were all very different types of transactions with very bright people, but I knew pretty early on that it wasn’t necessarily the firm at which I wanted to build a career. There was no opportunity cost to b-school in that they kick everyone out after two years to go anyway, which is what I had wanted to do, to begin with, so I took that path and thought I would figure it out from there.
Compass has had great success since you joined the company, raising over $70mn with a valuation of $360mn in under two years. How did you choose that particular opportunity (interest in the real estate market, network, etc.)? What advice would you give consultants aiming to enter the startup scene with success (i.e. what should they look for)?
There was definitely some luck involved. I had six criteria for a post-business school opportunity, and the stage of the company didn’t really matter as much – there were actually some more entrepreneurial investment firms that I thought were potentially interesting whom I spoke with as well. The macro-thesis was believing that I had learned enough stuff in these very well-trodden paths that with the right team around me, hopefully, I could have a positive impact versus filling an open role in a larger established company.
For criteria, one piece of it was geography: my preference was to come back to New York, though I’d look at things in Boston and San Francisco even if they weren’t my first choice. Second was an industry that broadly interested me – so not healthcare, and not a bunch of other things. But real estate, financial services, and a couple others I could see myself in. Third, and most important functionally, was a role where I would have an impact on a business, and that (fourth) the business had a positive expected trajectory. Fifth was ideally knowing someone in the company because I thought that would be helpful. I didn’t have to know them super well or be best friends with them, but I had a relationship with Robert Reffkin (CEO of Compass, ex-McKinsey) and knew some other folks at the company. Finally, I thought it was important that there was an equity component in some form. No matter what, I wanted to feel a deep personal investment in the success of the business. So I looked at a lot of different options but tried to keep those criteria in mind. I figured I’d reasonably get four out of six, and the opportunity at Compass was six of six.
And just for our own personal knowledge – you were connected with Robert Reffkin (Co-Founder and CEO of Compass) and history was made?
I met Robert at a conference called Renaissance Weekend in 2009 in Charleston. I had been in New York for a bit and wanted to get involved in a nonprofit, ideally education-related. A mutual friend connected me to Robert, who had this idea to start a nonprofit (now America Needs You, www.americaneedsyou.org) that provided professional development support to first-generation college students. I’d been involved in something at Duke trying to help aspiring first-generation college students, and saw that a lot of the ones who got to college had no support and dropped out or had other difficulties. So I had familiarity with that population, and knew actually targeting people in that first year of college, or while making the transition to a four-year college, was a really important time.
Beyond concept, though, here was this Goldman Sachs guy trying to start this organization all on his own on the side of his day job, and at first, I thought “this thing is going to be a total mess”. But I liked the idea and thought, if he was doing something useful there, I’d be more than happy to help. Fast forward a few months and Robert had hired one of the best nonprofit Directors on the east coast, had Goldman Sachs as a corporate sponsor, had a whole bunch of great mentors and mentees, and a first fundraiser with (then Mayor of Newark) Cory Booker and Howard Marks…
Yeah, that is very fast for the nonprofit world.
He is very impressive. I made a mental note that Robert was someone I wanted to stay in touch with and hopefully have an opportunity to work at some point. I heard he left Goldman in my second year of business school, reached out, and we chatted for a bit – nothing very substantial, and I never really thought twice about it. And then, in February, he called up and said, “We (Compass) are looking for a Head of Finance and Operations. Would you be interested, and if so can you be here in 24 hours?” And I said, “I am very interested. I will be there in 72 hours.”
So you settled on 48 hours?
Yes – typical Robert. I called up a bunch of friends of mine who were CEOs and CFOs of high-growth tech companies to try and fill in some of the gaps in my knowledge of what I should be doing for those first few months in that role – to institutionalize an idea of growing the company. And then I came to New York. Robert didn’t need to spend much time with me by that point, but I met with Ori (Co-Founder and Chairman) and a few others and got an offer the next day. And at that point, the only thing I was negotiating was the number of days a week Robert wanted me at Compass while I was still trying to finish business school.
Before this interview began, Robert mentioned “90% of my time is spent interviewing and hiring people,” and we know that’s a very large part of your role as well. For consultants looking specifically to get into a startup like this, what can they do to make themselves more attractive for this kind of opportunity?
There’s a big difference in whether or not the members of the leadership team of a company have been consultants, or have been in a professional services firm, and understand how powerful that skill set and training is. There’s an appreciation that there has been a really good selection process in many cases, and also that they got to learn a whole bunch of things that are really useful in tackling problems. Robert and I are both former consultants, so we have a voracious appetite here at Compass for those types of folks.
I think consulting firms do a great job at picking people who are obviously great academically out of undergrad, but who are also weirdly wired in college to – with no compensation and real clear reason – choose to be Editor of the school newspaper, or to be head of a bunch of clubs, or start a nonprofit on the side. And those are the types of people you want when you’re trying to staff a company. The folks who are here until God knows what time… I mean, I’m frequently here until very late, so I do actually know what time [laughs]. But there’s this compulsion to get things done right and done well, and any operator of a startup or a business who thinks, “Oh, consultants want to take your watch and tell you what time it is” have really missed the boat on a huge opportunity. It’s an opportunity to bring on board some of the best people from top tier schools who want to work hard, learn a lot, apply themselves and tackle interesting challenges. At Compass, we want people who have natural intellectual curiosity and who are excited to tackle tough problems, because that’s what we need and that’s the opportunity they are presented with here.
And then, given all the positive things consultants, in general, can offer – which we at ConsultantTrack certainly appreciate – we also know that not all consultants, even at the top firms, are created equal. Do you have any thoughts on that, meaning, getting into the real differentiators of OK and stellar consultants? Obviously part of it is swinging at the wrong pitches, which can set cycles in motion.
I should qualify that we at Compass have a big appetite for consultants, but we only want the top 20%. Even in my experience, there were people in my class who were fantastic, and others who are perfectly fine but who wouldn’t be the right fit for the needs we have here. It’s helpful that I know, from my own experience, the type of consultants who I find most impressive. I hired one from McKinsey who was that way, and he’s maintained an incredibly high bar since he joined.
So the people we have are the best of the group. So what does that mean? That means that when you talk to them, they remember the nuances of the projects they were on, like what were the salient business issues, what was the approach, etc. They talk about it in a structured way to diligence the problem. They speak about it not as a drone, but with an actual interest in those issues and challenges. They know what happened post project rather than just reciting something that is on their resume.
For example, if it were a private equity diligence deal, this person would want to know whether or not the sponsor they were working for actually got the deal. If not, who did? What happened? Did the company survive? There was a guy who we just interviewed where we dove into a pro bono project he was part of on the policy side of things, and he really understood all the nuances of the policy angles – we then spent 15 minutes talking about what generates business for his firm. That was a great conversation.
Many consultants would kill for your current role as COO/CFO of one of the hottest startups in NYC. What skills have you leaned on from your consulting days specifically to get where you are today, and what others have you had to develop along the way? What single characteristic would you say has most contributed to your success at Compass? Throughout your career?
It’s actually hard when you look back to decipher. A lot of my experiences reinforced each other in a really positive way. So I’ll start with what consulting doesn’t teach that has ultimately been important, and then I’ll answer your question.
The two things that are most important to success in my job are selling and negotiating. Often they’re one and the same, but as a COO/CFO, it’s also a lot of internal negotiation with people in terms of what they want and what you’re willing to give them, and being okay with being the bad guy as long as there’s a framework and you’re fair about it (Robert loves making me the bad guy) [laughs]. Then there’s the external piece – with vendors and people who we are trying to hire to sell. I’m not actually out selling real estate, but I’m constantly trying to sell the business, whether it’s in meetings with hires like chatting with you guys when I’m talking to developers, or talking to any number of people.
I’m always trying to help push the business forward. It’s understanding how to identify what someone’s motivations are, or what they’re thinking, and then hitting on the menu of options that in any good business or situation you can pull on – then being reasonable with your negotiating, and helping them understand the framework for why you’re asking for what you’re asking. That’s really important. In this job, where I’m either 100% responsible, or tangentially responsible, for everything that gets done beyond truly building the product or actually selling real-estate, it’s incredibly detail-oriented and very project-focused and managerial.
So with that said, I think consulting does a good job with setting you on a track of three, six, and nine-month goals. Also, how do you communicate effectively by email? How do you work with teams? How do you encourage teams to do fun events? How do you bridge that gap of creating real bonding versus forced social interaction? Applied to my role today, it’s having to understand how you culturally get stuff right – to think about titles and descriptions and opportunities and bringing in the right people to the “big” meeting. All of those particular elements had been carefully thought through and established in the consulting processes, and having hired people who have also been through that process, we all have a real awareness of creating that effect and trying to pull forward.
Speaking to leadership and thinking back to your consulting and PE experiences in hindsight, had you managed in a real and meaningful way before you got to Compass?
No, not really.
So what did you do to prepare yourself, now that you’re on the leadership team and it’s pretty important you not get it wrong?
Well, I started here as a one-man band. I was Head of Finance and Operations, but no one reported to me on Day One besides vendors and our external bookkeepers. I spent a lot of time thinking about the managers who had been effective with me and thinking through what made the other managers and leaders here at Compass great and how I could be complementary to them and the organization.
Other elements included first informing those I was working with about how they were connecting to the broader goal of the company – why that document, or why something being where it was supposed to be, all really mattered. How their work was being used for the broader goal, and what the feedback was if they weren’t in a particular space. Second, empowering them as much as possible to figure out the right solution, and third, being supportive in any way – whether that’s advocating for them on their team with other executives, giving them resources, writing handwritten notes to everyone on their team defending them for something – whatever that was. And I think the combination of those three things, and having a complementary personality to other senior leaders in the company, has been received well.
Any missteps or anything you recall having done wrong? Whether it’s a people issue or judgment issue or speed issue?
I think the transition from a 15-person startup to a 170-person organization introduces particularly challenging issues in terms of leveling and communication – for people who are not necessarily at the senior level though in some cases were made more senior. It’s challenging in terms of the expectation on communication, information, and awareness of what’s going on. We’ve definitely had some learnings regarding how we communicate and having people feel informed – for example, in more difficult situations, staying positive while also giving people enough to understand what you’re talking about. And by far and away the best book on startup life that I’ve read is sitting on that bookshelf [points] – I bought it for Robert and all the managers who report to me directly – The Hard Thing About Hard Things by Ben Horowitz. You very quickly forget when you move from one small office where you’re sitting in an open floor plan and everyone hears everything, to all of a sudden being in a lot of meetings and calls, that everyone’s still talking just as much, but you just aren’t necessarily sitting next to them and hearing it all. And so making sure you have enough interactions to know what’s going on, over-communicating so anxiety doesn’t set in on stuff – because people want to be positive, but when not given the right access can revert to negative, and that’s self-reinforcing.
So you’re the sitting COO/CFO of one of the hottest startups in New York. What do you like least, and then most, about your role today?
I love the role and I feel very fortunate to have it. I think one of the things people don’t talk that much about, though it’s front and center in the book I referenced, is the amount of constant stress and anxiety that’s there. I actually don’t mind the stress and anxiety around important things, but I have an obsessive compulsive approach in general, and I get frustrated when I have anxiety about things that aren’t actually critical issues. I think it serves the organization well that I obsess as much about the price of the new chairs for our office as I do about really important stuff, though I need to work on it to avoid driving myself crazy.
And like most about your role?
What I like most is the variety and breadth of stuff that I get to handle. I play both roles in a joint COO/CFO position, and combined, it touches every aspect of the organization. I try very hard not to weigh in on things I do not have expertise in unless someone asks, but I usually have a seat at the table on a lot of the things that matter – and that’s not necessarily intrinsic to the role itself. It’s partly just proving value to the original founder and whoever’s leading the organization, and being able to be someone whom they want input from on key decisions. I feel very fortunate for that opportunity.
And going from the major decisions involved with your role to all of the little things, one of the most well-known parts of working at a startup is getting into the weeds with tasks that are not necessarily in your job description. What is the nuttiest hands-on thing that you have found yourself doing?
Most recently, being here at 11am on a Sunday talking to the floor guys as they try for the third time to get the front reception area stain matched correctly (which is still not right) because we had to move a glass wall. That was one of those moments where it’s like, “this is really not a great use of my time” and “no one will notice but me.” But to me, if there is a paper towel on the floor I’ll grab it, pick it up, and put it in the trash. “Operations” is fully vertical.
In reality, only a very small percentage of people can pull off what you have pulled off to date. Meaning, top schooling, top companies and points of accomplishment, and then now a top position at a top startup where things will probably work out pretty well. Coming from a premier consulting firm, some consultants assume they deserve to reach where you are today without the thought, discipline, etc. that has gone into it. Can you comment on the difference?
Yeah, quite the opposite. Even post-Bain & Company, Bain Capital, and Harvard Business School, it’s not as if there were 100 opportunities that were all equally attractive to this one. I would sit in my apartment on campus studying each potential juncture and neurotically / methodically map out the entirety of a space for every opportunity of interest. Who did I know at any possible place? Or, who might I know in order to connect with those people? There is some dumb luck at different stages in terms of which opportunities materialize, but it’s around the cultivation of opportunities that create those things. I was very proactive in trying to go to events, meet people, and stay on their radars in a relevant way. Money Makers was one of the ways I did that. Even now, there are random people I met in college who I still keep up with here – because that’s where the unique opportunities really come from. Now, there are great professional opportunities throughout, and if your aspiration is to be a Partner at an existing firm then you may not need to do all of those things. But since I always knew I wanted to do something different and to be part of building something, it takes a very proactive approach and being open to the unusual opportunities. All that said, I feel very lucky to have ended up here. I don’t think it was just a function of competence in existing roles…those were the table stakes, but I think good fortune and relationship cultivation have been equally critical.
Do you have a favorite interview question that you use in almost all interviews as a quick way to calibrate on somebody?
No is the short answer. It’s important for me to move in a few different directions throughout an interview. I mean, there are certain interviewers, and I’m thinking back to one at Bain & Company in particular, whose style is to try and grill you and make you so uncomfortable that you could never believe that you had a shot at an offer…and clearly, a handful of us who interviewed with that person (and had that same impression) did. I’ve never liked that. At least in my role, I think you transition from being the interviewer to the person who is selling, so in that there’s the art of asking tough questions while still being a colleague in helping them along with those issues.
As I said, I think it’s important to tack in a few different ways. I do some lighter stuff around interests to make sure they’re personable and can communicate with a bit of banter, and I get a little tougher to see how they’d analytically structure a problem. There’s also the general stuff from what they’ve done, to gauge whether they are “glass half full” type people and if they have a proactive narrative and enough introspection to think about how they ended up sitting in front of me and what that means and why that’s interesting. Ideally, they have some good talking points about why they might want the role and to work at Compass as well.
As the COO/CFO of Compass, and as a normal, rational guy, what is your take on startup perks – the cultural things that are idiosyncratic to the startup world (pizzas, pool tables, wine bars, etc.)? Is there ROI on them? Or is it just something you must suffer because other people enjoy it (and therefore there is some level of ROI)?
I think it depends – there are a whole bunch of different sub-cultures and backgrounds in a company, and we might have more than most at Compass. For the engineers, for example, they have a very focused role with coding day to day, and you want to create an environment where they can have fun because they need a break and a social thing. I understand those distractions because they actually need them to balance doing something so intensely computational for significant periods of time.
I think the most important thing that gives people overall job satisfaction is the manager for whom they work, wherever they may be. I think, second to that, is being in an environment that feels positive. So yes, you can probably get away with a lot fewer things, but if that second most important criteria behind manager satisfaction is on a relative basis less expensive than 2-3 other HR people who are supposed to go around and help counsel people into thinking things are not so bad – that feels like ROI to me.