EP 8: Nathan Deily, Chief People Officer and Co-Founder - nth venture
James Mackey 0:00
Hi, and welcome to episode eight of Talent Acquisition Trends and Strategy. Today we're joined by Nathan Deily. Nathan, how are you doing?
Nathan Deily 0:11
I'm doing great. Thank you, James. It's great to be here.
James Mackey 0:21
It's great to have you on the show. We're really excited. I'm excited to jump into some of the topics we outlined. But before we do, could you tell everybody a little bit about yourself?
Nathan Deily 0:30
Sure. So I am currently the Chief People Officer and Co-Founder of nth Venture, which is a venture studio, we will maybe get more talking about the company as we go. I started this role about five months ago, and we stood up the company.
Prior to that about 20 years, primarily in HR and People Operations spanning for big companies, Microsoft, Honeywell, Aerospace, Raytheon, and LivePerson. Not necessarily in that order was LP, Microsoft, Honeywell, and Raytheon, if you're going back a brief time at a company called Fisher Scientific, it's now part of Thermo.
James Mackey 1:13
Very cool. I know one of the things that we discussed and I think we're both really passionate about is, just focusing on what's happening in the talent acquisition space, specifically for startups in this new remote virtual world. So I wanted to just at a high level, get your thoughts on how you're viewing talent acquisition for startups right now. What are you seeing out there right now And what are you focused on?
Nathan Deily 1:37
Well, it's an exciting time, because all the old rules and paradigms that we all used to have to play by, have pretty much gone out the window, maybe not 100%, but pretty near. Some of that is driven by the pandemic, and some of that is driven by technology and the way workplace culture is changing. And some of that, I think, is cultural change. And it's hard to disentangle all those things.
What I think you can say is that there's an appetite for something new, different from the usual that people have experienced. And if you can bring that differentiation, that value prop, you're going to be successful, because people are hungry for that change.
There are a couple ways we've tried to do that, and that I'd be happy to talk about, but I think you see in the market, quote, unquote, a lot of experimentation, where people feel emboldened to do and try different things. And they're having some success with that. And the companies that aren't changing, I think are finding themselves increasingly struggling and probably need to think hard about what sacred cows are willing to have a look at.
James Mackey 2:47
Sure. So for your company, can you give us a couple of examples of some of the shifts that you're seeing right now?
Nathan Deily 2:54
Sure. So we've got about 41, 42 employees right now, it's about evenly split between Advisory Board folks and full-time folks who are committed to the studio or one of the operating units.
What's different about nth is a couple of things. One, the values and culture that we have, and two the comp model, and I'll touch on the second one, first. So we're about building businesses rapidly and making them successful. And the traditional Startup Challenge is what they call the J curve, which is a dip in profitability for the early stages of a company's growth because you have to fund things like all the different tech stack items that you need to run the company, you have to pay salaries, you have to get benefits.
One of the things that differentiate our approach from that of other traditional startups is that we're attempting to kind of kill that J curve. And we're attempting to do that by having a radically different comp model. So instead of offering traditional salary and benefits, what we do is compensate people on equity and something we call a talent profit pool, which you can essentially think of as your share of operating profit.
So revenue, less expenses become operating profit, we make a decision about funding the talent profit pool, some things get reinvested back into the business for growth, but everybody's essentially an owner of the business and has a share of the profits. So when you succeed, the company succeeds. And there's no effectively no upside to the earnings that are available to you as a member of that business. So that's a really new and compelling thing. And it goes with the mission and professional values that we touched on earlier, and I'll tell you how.
Our purpose statement is to set talented people free through the power of ownership. I love that and I was part of creating it. And you can see that it's tangible in the comp model and the way that we execute it. So we call it radical incentive alignment. And it is! I mean, you think about the traditional job offer that someone is getting with salary and benefits. And this is not that!
It's really fundamentally different and it's good in some ways because it speaks to you. I think the appetite that's out there for something new and different.
James Mackey 5:04
One follow-up question on that. For this model, is it specifically for the individuals employed by the venture studio? Or is it for the portfolio companies as well?
Nathan Deily 5:15
Both. So nobody gets paid unless we are successful. Now the equation works out a little differently. If you're in an operating unit, it's about the performance of your operating unit. If you're at the studio level, it's a little more complicated. But the bottom line is that we all have a vested interest in making each other successful.
So a lot of the things that you see at maybe some other startups, and certainly in what you might call more mature companies, competing interests don't exist here. Like we all are only successful if we're successful together. There's no daylight between any of us in terms of what the priorities are. And it's driving revenue and operating profit because nobody gets paid if we don't.
James Mackey 5:59
Sure. It makes a lot of sense. From my perspective, just being a bootstrap founder, we had to be profitable essentially, from day one. And we had to think about things a little bit differently.
I'm curious to get your thoughts. How do you evaluate whether or not a business would be a good fit for this type of setup? For instance, can a down-the-pipe, B2B product company be able to scale in the early days through this kind of alternative compensation model? Or do you feel like it's for very specific niches or industries? Or how do you evaluate whether or not a cup is gonna be the right fit for this?
Nathan Deily 6:36
Like a lot of other founders or venture-related organizations, we've looked for where there's a gap in the market in terms of the offering. As I can talk a little bit about each of the operating units maybe to kind of give you a for instance of like the things that we think fit.
So first off is oddly, which is our full-service podcast production unit, that fills a gap in the market, there's a really a lack of provider that does A to Z for podcast production. A lot of people have to kind of roll their own, or they have to go with one of the major providers, like a Spotify or an IRA or something like that. And that's not always the right solution for everybody.
So what we're offering is really kind of differentiated for the market. It's everything from booking guests, to advertisers to the engineering of the podcast, all that stuff from soup to nuts. The second company is Falconer. That's what I'd call a sort of boutique capital formation. It's everything from crowdfunding raise to growth, capital formation, to m&a, to exit.
There are other companies out there that do this, but the sort of the genesis of that approach was based on crowdfunding. There are sites out there that sort of provide a platform for people to come and DIY plug information into a model. And a couple of players are emerging that are sort of providing strategic advisory services for companies to go do that. But nobody has professionalized the art of crowd fundraising beyond the sort of platform isation of doing that. So that's two of them.
The other two are Stampede Commerce, which is an E-comm roll-up strategy. So if similar to if you think about what people have done in the FBA space, we are looking to go out and aggregate high-performing eCommerce shops and then build some portfolio synergies around those, get them multiple, increased, and then either sell them or have a creative sort of value around them and then build a like a portfolio that can be sold together.
Then the last one is Merchant Boxes, which is also eCommerce related, but it's about bespoke packaging. So online, retail is huge. We all know that because of the pandemic.
So we're looking for businesses that fill an unmet need, that have something innovative or service oriented. And that are less capital intensive, if at all possible. So from as far as outside in, we've talked to a SaaS company that was looking at doing some unique what I'd call vacation - rental activity with sports vehicles, and stuff like that. We didn't move forward with them. But that's what would sort of be an example of companies that we talked to about the studio.
James Mackey 9:21
Okay. One more follow-up question would be, is there a certain area of scale or kind of a tipping point of scale that you hit where this no longer is applicable? Right. So it's like, okay, it's the full equity play until you reach x amount and revenue or X amount, and I don't know if they're their employees, or if they're considered equity owners, but where's that kind of tipping point occur if there is one.
Nathan Deily 9:50
So there are really two levers there that we talked about before equity and shares at the talent profit pool. So we have to be thoughtful about how we think to add up on higher equity awards, we have a 10-year vest, which is great because it incentivizes the creation of long-term value. But there's a limit to the number of shares as there always is. And we don't want to introduce dilution into that pool because ultimately that hurts everybody who's a shareholder, at some point, we may have to use equity to produce the business to get it to the next level.
The other side is the talent profit pool, the more of those shares that we distribute, and it's about the same size, but we've got a lot of depth there to go. So as we bring on folks and more mature stages of the company's growth, we can have a greater portion of their comp, be focused on that profit share versus the equity. So there are functional limits in terms of the size of the pools, there's the option at some point to do a little bit of dilution of the business economically. But I think ultimately, what we're going to learn is that there's a different threshold for each type of business.
Obviously, Falconer, as a boutique, capital formation firm, is going to have different issues of scale than Audible is producing podcasts, and Stampede doing an ecom roll-up. It's gonna vary by business.
But I would say, for right now we're looking at revenue north of a million. Once we've gotten there, I think it's really time to reassess. And all those businesses are well on their way. In fact, one of them is, almost there.
James Mackey 11:27
Does your team, is it in a sense like a traditional venture, and you're typically taking on a minority equity ownership in these firms? Or are you taking on a majority equity ownership? I guess, my question would just be, if it's a minority, equity ownership, then I guess the founders could just change their mind about it.
Nathan Deily 11:48
Yeah, we do have an ownership stake in each of the operating units, I won't get into the specifics of what it is. But let's just say that, we have a lot of influence over the decisions that get made. And we hire people very intentionally, who share our philosophical outlook in view about the creation of value.
Now, at some point, there may be difficult conversations about exiting one of the businesses or having it spin-off and leave the studio, you know, entirely and stand on its own. But you know, we're not at that, we'll cross that bridge, kind of when we come to it. But at least today, in the early days, we're not at the point yet where we need to have any of those tough conversations, and we've got enough of an ownership stake and with the vesting schedule working the way that it is, we don't foresee running into any issues anytime soon.
Now, what could get interesting is as we tried to fund the different operating units further, as we talked to outside investors, that cap table, changing dramatically, and then the conversation changes. But for right now, we don't foresee any issues.
James Mackey 12:56
And my next question is probably going to be very situational as well. But I'm also curious to learn how the team decides on what operating income to target, right? Because I mean, you still need to be large enough for the profit share. So people that can essentially, unless everybody is like a, you know, a founder that's exited three times before something like that, most need some cash flow. So how do you go about determining the operating income to target to make this model work?
Nathan Deily 13:29
Sure. So we can make that decision in a couple of ways. One is, you know, planning and forecasting and taking a look at what we expect to the business, we expect to book in a particular quarter, we typically do these calculations quarterly, sometimes monthly, depending on how quickly the unit is growing. And then ultimately, it's a question of how capital intensive the business is. And what does it take to fuel the earnings growth? Right.
So it'll be a little different for each business, we do have advisory board folks who come from different, related backgrounds and profiles that are going to give us really good advice. It's not a decision that we ever intend to make unilaterally or to force on an operating unit. We have a smart, great group of presidents, men, and women, we have really experienced people at the studio level. And then we have the advisory board. So it's a conversation between each operating unit.
Unfortunately, it's difficult to give you a magic number, other than to say, we can also take a look at what the market is offering in terms of comp for the rules that we've hired and have that is a little bit of a benchmark, to understand. And we use that when we're making offers as well so that we are trying to be competitive, but really the, at the end of the day, if people are going to build wealth, they're going to build it from the equity.
James Mackey 14:53
Right. I mean, the whole target operating income is an interesting topic, and it obviously varies from industry to industry. In the specific needs of the business, and whether it's services or tech, I mean, for the longest time with my company, I was targeting a 12% operating income, because I wanted to invest as much as I could back into growth. And at the same time, we needed to have cash reserves in place. As a bootstrapped company, it's not like we had several million bank accounts.
So now we're hitting a different level of scale where we want access to more cash. So we've actually increased our targets a little bit in terms of expanding that operating income. But then I've spoken with different SaaS founders that have some funding, and they're intentionally targeting breakeven to maximize growth potential. Because they already have cash in, you know, in the bank, so they don't have to worry about having the cash reserves. So they can be a little bit more aggressive, or obviously, some companies if they have enough funding can operate at a wall. So it's kind of all over the place. But I just think it's very interesting to talk through. So I appreciate the conversation.
Nathan Deily 16:01
What's nice mathematically is that it gets fairly simple. I mean, you have, you have revenue, you have a small amount of expenses, like I said, before the tech stack, you don't have salaries and benefits and all that other stuff. Although, again, we are looking at benefits as a possibility.
So naturally, with that sort of operating environment, a lot hits the bottom line. Because each business's tech stack is slightly different. But you've got those kinds of tools in place, and then you have everybody's blood, sweat, and tears. So there's not a hell of a lot coming out of top-line revenue. That's, that's fixed anyway.
There are essentially those operating costs that are minimal for most businesses. And it varies a little bit by type. But most of the money is flowing down to the bottom line. And then it's really a question of what do you do with it, you find the TPP? Or do you fund additional growth? So we sidestep a lot of the issues about what to target. It's really a question of, what do we do with what we generate? So the businesses are designed to be profitable, essentially, from day one, sort of, like you were saying about your own situation?
James Mackey 17:12
Yes, 100%. I would love to hear, as these companies start to reach the next kind of phase of scale if you will. From a talent acquisition perspective, what do you see out there in terms of founders, and equity stakeholders within these organizations?
Is there any common, let's just say mistakes, or maybe incorrect assumptions that you see, like in terms of a trend, in terms of when they view talent acquisition, they think something's going to work? But then you have to share like a process. So actually, we're gonna get the best results. If we do XYZ.
Are there any situations and trends in terms of maybe incorrect assumptions or just maybe different tactics or strategies that you help implement to get better results? I'm curious, your thoughts there?
Nathan Deily 18:03
Yeah, given our approach, I can really only speak from what it's like to be that dramatically different from a lot of what the rest of the field is offering in terms of value, prop and experience. But I'll tell you some things that I think have been the most compelling and sort of opened the door to further stages of the conversation. And so one of them, going back to that purpose and I'll talk about professional values a little, is offering that.
So when we talk about setting talented people free through the power of ownership, we are essentially talking about them like declaring professional independence. And being an owner of a business in a way that typically isn't offered even at an early stage startup, where you'll have a sizable equity share this is by design set up very differently. So you're coming in with a significant stake in the business that you are helping found and create from the beginning.
So that just is a big differentiator. And then I think the next is about the culture that we want to create. And we focus really on three things: integrity, which sounds simple, but it's table stakes. and it's really important. Discipline is about the intensity with which we execute the quality of what we produce and acumen, which is about the unique skills and expertise that everybody brings to the table. We run teams lean, we run really fast.
Nth has only been around for about five months. So I joined at the end of November of last year. And we've got four fully functioning articulated businesses going. We just had the strategy review for Stampede last week. So we're moving at a kind of breakneck speed, pace, intensity, all that is great. The thing is, this isn't for everybody. Right? So I think that's the key to, to assess really early on and where a lot of people go wrong, is getting an idea of what's meaningful for the candidate you're talking to early on.
So one of the things we talk about from a cultural standpoint is like hovering over the whole pyramid of Maslow's hierarchy of needs, right? Is everything from I got a job so I can pay my bills and my mortgage, it feeling fulfilled and part of something, even to the sort of pinnacle of being transformative and taking yourself to the next level, because it's not just, you know, I'm going to go be the Head of People Operations, or I'm going to be the finance person or the IT person, it's I'm going to be a business owner, and a part of this in a way that's sort of fundamentally different from anything else that's out there.
So we're successful in the conversations, because we're reaching people where they are and kind of on every level, and we find out quickly by asking four or five standard questions, is this right for you? And I think that's helped us to weed out some of the false positives early on. Has every hire been perfect? No, we've made a couple of mistakes.
I think where I see things going wrong, is where expectations aren't well set. And I've had a couple of conversations before I came to nth where I was looking at opportunities. And you hear one thing from a recruiter, which is dramatically different from what you hear from a hiring manager, which is different from what you hear from potential peers or people in other parts of the organization. So managing that gap between espoused values, the nature of the role, or the culture of the company, and what people actually experienced in the process, and what they're actually going to get when they join that cognitive dissonance kills people fast. And with the level of choice that folks have, they can go literally across the street, or anywhere in the country without having to leave their home, which puts them in the driver's seat.
So one of the things I tried to do, and the last thing I'll say, on this, I guess, is I tried to think of employees as the customer. And I know that's not super innovative for people ops or HR people to say, but it is kind of different for a company to say it. And we have all kinds of customers.
The ones who actually pay us, but there are other people who are delivering us value. And if we keep employees, and advisory board members in this case in mind the customer, then we're going to have a fundamentally different relationship. And I think that's what people want and they feel today, like, hey, you know, this is a two-way street, I have a lot of say, I have a lot of voice. And if you don't like I'm gonna take my labor and my brain power, my energy elsewhere, and God bless them. They should, because if you're not appreciated and valued, where you are, why are you there?
James Mackey 22:24
I agree with you, actually. I mean, that's a big part of what I'm always talking about the importance of just optimizing toward the employee journey. And obviously, it starts within talent acquisition when they're candidates. And I think too, there's actually still a lot of opportunity, even when somebody has left the organization to continue to find a way to maintain those relationships, and that network of people that have left the company too.
One question that I actually am curious to hear from you on is, your background, large enterprise, right? I mean, Honeywell, Microsoft, Raytheon, LivePerson. I'm not sure if they're enterprise or Mid-market. I can't remember.
Nathan Deily 23:09
It depends on who you ask. It's a tier-one service now. Great company. Ai-driven conversational E-commerce is huge. It is really the future of the industry. LivePerson has some great technology and some great people. Yeah, I guess it depends on who you ask whether it's an enterprise-grade company or mid-market, but it's tier one service for enterprise companies. So
James Mackey 23:34
So I think one of my biggest questions is what was it like making that shift from, let's just say large enterprise to what you're doing now working with the startups and very early growth companies? And what are some of the nuances and differences you're seeing? From a talent acquisition perspective?
Nathan Deily 23:53
You know, it's funny, like in a lot of interviews that I've had with smaller companies, like with LP, and with startups, you often get that question of like, can you whoever you are, be successful when you've come from this big cushy environment? With all this structure and resources and talent and infrastructure and all this stuff? Can you be successful in a "roll-up your sleeves and do it yourself, kind of environment?
I think, unfortunately, people kind of misunderstand what it's like to work at a big corporation, especially in HR operations. But, of course, this varies company by company. But I can tell you early in my career one of the first jobs I had was in Saudi Arabia doing technical staffing for programs that were supporting the royal Saudi Air Defence Forces. I do not have a huge budget or lots of resources or people to help me. I ran manufacturing and engineering sites. In aerospace, we had no money for anything, there was no budget. You had to roll up your sleeves and get things done. So you learn, I think, from an early point. Again, this all depends on the business you are in.
If things aren’t gonna get done, you kind of have to roll up your sleeves and do it and influence people to help you along the way, you can't do everything by yourself, you have to enlist that support. And sometimes you can get a budget. And if you're successful, sometimes people, the light bulb goes on. Or if you're implementing, like, you know, the Toyota Production System or other kinds of lean or agile, like you can necessarily get a blank check, but you get sort of licensed, to look for things to improve and get things done.
At companies like Microsoft, where you sort of have an embarrassment of riches, there's, there's a budget and a person for everything, it becomes about learning how to navigate that stuff. And it still is about influence. So I was lucky enough while I was at Microsoft to work in part of the company that was doing a startup accelerator. So I got a view of both sides of the equation a little bit like what it's like to be the four or five people that are trying to get something off the ground, working within that larger corporate construct.
But I think from the beginning, you become a lot scrappier than people think working at companies of that size. Because you have to, like budget and all that stuff tends to get retained at or near the top. And sometimes it trickles down, you know, particularly if things are on fire. But often, you know, you have to be really resourceful. And business people are and they become that way. I think no matter what, we're, you know what pond they're swimming in. But I would say don't sell people short, who come from enterprise culture in terms of resourcefulness or their ability to, to execute without their support structure around them, which is nice when you have.
James Mackey 26:39
Right, of course. And at LivePerson, I'd be curious to learn a little bit about it because your title is interesting, too, because it was Global People Ops and Technology. What was the technology component?
Nathan Deily 26:53
Yeah, I started out as a hire supporting the CTO and his org, which is about half the business. So everything from IT folks to data scientists, and software developers in between. So a big, big mix of folks. And then the more time that I spent there, for a 25-year-old company, there was what I'd call a lot of whitespaces, it was very entrepreneurial in nature. And there were a lot of things that didn't exist, but probably should have. And the culture was a bit Amazonian because a lot of the tech work had come from Amazon and from other big tech companies. So there's an opportunity, if you could write a memo and convince people to go do something, you could do it.
So it was interesting to come into that culture, and say, Hey, we gotta go create global leveling, and titled standardization for all the tech roles, that's half the company, we got to go do that because it doesn't exist. And we're all over the map. And we can't give candidates good offers, or maintain, or avoid things like wage compression, or you know, comp compression. So in a target-rich environment, you have a bit of a license to kill for projects that you could go and take on. And the more time I spent there, the more I looked around and said, This is broken, this is broken, this doesn't exist. You know, this system isn't where it needs to be, or doesn't have the capabilities that we need. And so when you run your mouth that much the response tends to be alright, smart guy, why don't you go fix it.
And so I got pulled increasingly more and more into the people ops area and started taking things on there before I moved on, but really, it was just a function of, you know, looking around with the experience I had about how it could or should work. Well, particularly from my Microsoft days, but also from other places. And applying that, and then the reward for doing good work, more work. In addition to what I had signed up to do, I got pulled into doing other areas. So it's a fantastic company.
James Mackey 29:01
Yeah, it sounds like you're probably working on a lot of very interesting projects, there. Seems like a lot of fun, and you were reporting directly to the CHRO as well.
Nathan Deily 29:10
Yeah, for a time it bounced around a little bit. The company has gone through a lot of change or at least was when I was there. I'm not sure I've been gone, you know, since September last year. But a lot of good change, growth and exciting things are going on with that business, particularly on the technology side of the house. That AI for conversational commerce stuff is just deeply fascinating. I met so many smart people, and the business could move at a pace that was just unbelievable.
So it was great to be a part of that now that that change is not easy. A lot of it was painful. You know, obviously can't get into the specifics around that. But you want to talk about rewarding people, talent-oriented people. You are not just running the same playbook every day and doing boring stuff. You're helping with the business side problems. And that's the sweet spot. I think for any of us, whether you're dedicated to talent, or you have a broader role, you want to be looked at as the person they come to, to help solve a problem that really matters for the business. If you can find that, you know, wherever you are, that's the place that you want to be as being viewed as a go-to resource that trusted adviser that problem solver. If you've got that you've kind of the possibilities are endless. So what I would say to people is "look for that environment. And I think you'll find it rewarding.
James Mackey 30:34
That's great advice. I completely agree with you. And I'm really enjoying this conversation. It's been a great talk, we are coming up on time here. Before we jump off, I did want to just give everybody an opportunity to be able to find you online, where should people follow you?
Nathan Deily 30:45
So you can check us out at nthventure.com, and check out our blogs. In fact, there's a really good blog post, a bit of a manifesto, it's called our Why. So it's nthventure.com.
We consider ourselves to be revolutionary capitalists after fashion and the incentive model I talked about is new and different. And we're building something literally from scratch. And it's amazing to be a part of so I'd love for people to check it out. Give us your feedback. We've got a presence on all the socials and LinkedIn in particular. So check that out. Let us know what you think.
We've got a podcast where we talk with founders, both our own from within the studio and outside, I'd encourage people to subscribe to that. It's called nthventure, it's available wherever you get your podcasts from. You can check us out at both of those places. And yeah, I think it'd be fantastic if people check that out and let us know what they think.
James Mackey 31:49
Agreed and I'm looking forward to continuing the conversation as well. Nathan, thank you so much for joining us today. And for everybody tuning in. Thanks so much. We'll see you next time.
Nathan Deily 31:58 My pleasure. Be free people.