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July 27 2020 - New York, NY

How to do acquihires: Michael Tannenbaum

Thomas:
We're back in Brex in the Black with Brex's CFO, Michael Tannenbaum, and today we're going to talk about acquihires. Michael, why are acquihires important to a CFO?
Michael:
I think they're important for two reasons. One is that, typically, in a growth company, acquihires are one of the big levers to get talent, and often to get talent faster, and therefore, in some ways cheaper. As the CFO, managing head count and the head count roadmap is one of the biggest levers you have to both control growth and profitability. But I also think they're important because acquihires are a part of a broader corporate dev, a broader corp dev function. Acquihires don't necessarily always start as acquihires and they may start as acquihires and merge into other things. I think meeting with teams in and around your space is important for you to stay abreast of your industry and also identify M&A opportunities and product opportunities that can really value add into your company's product roadmap.
Thomas:
Can you talk a little bit about how Brex has done acquihires in the past and like the head count associated to this particular function?
Michael:
Sure, so I think the best thing you can do for acquihires is either be really passionate about yourself or find someone who is. In our case, we found what I might describe as a childhood friend and associate, Art Levy, who's joining us today. I'll let him introduce himself.
Arthur:
Hey guys, this is Art Levy, I'm VP of Business Development at Brex and in that function also oversee our acquihire pipeline.
Thomas:
Today, we've had a couple of acquihires so, Art, do you want to give us a little insight into how that has broken down and how you've been able to work with Michael throughout this process?
Arthur:
Yeah, absolutely. I think that when you're thinking as a company on whether or not you should pursue acquihires, I think the worst thing you can do is not have a proactive strategy, and what I would call box around it. Because what happens when you're a growth stage company, you're growing fast like Brex, you get a lot of inbounds of maybe smaller companies that have had a few missteps and want to be acquihired, want some Brex stock, potentially want to join our ride. I think, as a company, you have to have a vision on what you want and what you don't want. Because if you don't, then you're just evaluating everything and you can get into traps because then a lot of the thing about deals and M&A is that everyone finds it exciting. So everyone wants to be in the mix and sometimes you end up doing things maybe that you end up regretting. The first thing that we did here was really build a strategy and a box around what we want. What I mean by that is really have the guidelines of how big a team you're willing to ingest. When you say acquihire, what you mean by that? In a sense of like is your CFO, in this case, Mr. Tannenbaum, willing to pay extra for the team, or is it really only thinking about it in a talent point of view? How big a team are we willing to ingest? What locations would we have said team? Then also working with the product team, along with the finance team around the areas of expertise that maybe we're having trouble hiring. As an example, we were able to acquire a company called Elle really early on. They had really talented engineers and product, people that were critical to the building of Brex Cash. Those engineers are the type that aren't going to be on the recruiting pipeline, they're the type that are entrepreneurial and want to build something. That's the reason that we pursue acquihires because we believe that there is a talent that you can get from that that's different than just recruiting engineers that otherwise might go work at big tech companies.
Thomas:
That's clearly a lot, and that sounds like a really big role. I think, Michael, how have you thought about head count associated to support Art and his team around acquihires and building this pipeline he just described?
Michael:
I don't believe for an early stage company, and it really up to a growth stage company and a dedicated head count for acquihires. I think, in fact, people that are meeting with your company won't want to talk to someone who's dedicated to acquihires. Most people don't wake up and say, I want to be acquihired. It is, typically, it is not usually why you start a company is just to be acquihired. If you do, you should get your head checked. I think the point is you don't really want to meet with the acquihires guys. One of the effective things about Art is his the head of BD. That is a very natural conversation to have. I do not really believe in dedicated head count, I think certain head counts should allocate time and I think that is more effective.
Arthur:
Yeah, so, obviously, that has made my life much more painful, but I do tend to agree with Michael. I think there's a seminal work by Paul Graham from 2015 called Don't Talk to Corp Dev. That really encapsulates what Michael said. Basically, people don't want to be talking to the acquihire guy, they want to be talking, Oh, you run partnerships. Like maybe there's a partnership with us, and then the conversations develop and it turns out actually they love Brex and they want to work here. Or they want to talk to the product lead of the Cash product or the card product, and then conversations develop from there. I think Michael's right that you have more success if you paint it as a picture of collaboration and partnership. Because the truly best teams are going to want that view. They're not going to be like, All right, it's been six months, let's get acquihired. Put me on the phone with an acquihire guy.
Thomas:
That makes a lot of sense. Michael, anything or anything you'd like to add onto the acquihire process and allow founders to start thinking about this in a broader level and approach it?
Michael:
Look, I don't-
Arthur:
I think-
Michael:
Oh, no, Art, please you're the expert.
Arthur:
No, no, I think that one of the things, and Michael, as the head, or was a long time the head of Brex's amazing PR strategy, I think PR around this is important. You have to feed the network, so you know I'm running around, hawking our wares everywhere. I start to let people know that Brex is interested in talent acquisition. When we meet with partners, we mention it. I think it's a good idea to put out content around it. Like the head of Brex Cash puts out, Thomas Piani, puts out some thought leadership piece around banking as a service and how we're looking for teams to join this mission. I think you can do some soft, subtle things to let the community know that you're a buyer and we've seen that work very well.
Michael:
Helpful, I agree. I think my comment is just for the CFO perspective, which is I think acquihires are a really interesting way to add value as a CFO. I don't think that they're a core part of the job, but I think as you start to find your footing, I think you can definitely add a lot of organizational value and help both grow faster and reduce costs. Which is the Holy grail for a CFO in this world by having a clear and succinct acquihire strategy.
Thomas:
Great. Thank you so much for your time Michael and Art.
Michael:
Thank you.
Arthur:
Thank you.
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