The DealMakers podcast features entrepreneurs that have been successful with M&A transactions or capital raising efforts.

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David Steinberg is the co-founder and CEO of Zeta Global which offers technology and marketing services to help brands acquire, engage, and retain customers. The company has raised over $150 million at a valuation that is rumored to be over $1.3 billion. Prior to Zeta Global, Steinberg cofounded Sterling Celullar Inc., Inphonic Inc, CAIVIS Acquisition Corp, and XL Marketing Corp.

 

In this episode you will learn:

 

  • The dos and dont‘s of raising capital
  • How to approach acquisitions 
  • Ways to hire smart individuals
  • Bouncing back during difficult times

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About David Steinberg:

 
Prior to founding Zeta Interactive and CAIVIS Acquisition Corporation in 2007, Mr. Steinberg founded InPhonic in 2000, a leading online communication product and services provider.
 
InPhonic was number one on the Inc 500 list in 2004, the same year it went public in one of the largest technology deals of that year.
 
In addition, InPhonic was one of the top 10 marketers on the internet from 2004 through 2007.
 
Prior to InPhonic Mr. Steinberg also served as chairman and chief executive officer of Sterling Cellular a B2B and retail wireless communications provider and Sterling Communications a communications telemarketing company, both of which he founded as well.
 
Mr. Steinberg was named the Greater Washington Ernst & Young Entrepreneur of the Year for communications in 2002.
 
He currently sits on the Board of Directors of the U.S. Chamber of Commerce, Washington and Jefferson College , Greater Washington Sports Alliance and Faster Cures. Faster Cures; having been formed under the auspices of the Milken Institute.
 
Mr. Steinberg holds a B.S. from Washington & Jefferson College.

 

Connect with David Steinberg:

 

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers show. I’m very excited about the guest that we have today because he is the dealmaker himself. So, without further ado, David Steinberg, welcome to the show today.

David Steinberg: Thank you, Alejandro. It’s really exciting to be here.

Alejandro: You studied in Washington and Jefferson. Is that right?

David Steinberg: That is right. Yes.

Alejandro: And then you stayed around the area and then did you go straight into business or what was that triggering event that got you into starting Sterling Cellular? What happened right before that?

David Steinberg: I came out of school during the last Great Recession. There seems to be one every ten years. It was 1990 when I was coming out of school, and nobody was hiring. It was a very tough time. I ended up going to work on the Hill for Senator Kennedy. So, Ted Kennedy was my boss’s boss. I didn’t obviously report into him and started working on Telecom issues. It was very interesting. I started learning about wireless. They were starting to sell wireless licenses, and it was starting to really heat up. I thought that would be a really interesting kind of business, although I didn’t have a lot of business acumen at 20 years old. So, what I did was, I ended up going to work for an insurance company, selling disability insurance to self-employed people. It was funny. I remember I made two phone calls. I called my step-father who is a seasoned entrepreneur who built a very large company and sold it. He said, “This will be the greatest education you could possibly have.” I called my Ivy League-educated father with his MBA, and he said, “Are you insane? You’re going to go sell insurance?” I did it for about a year before I went out, and then I started Sterling Cellular. It was a really exciting time, and as I always like to say I became an entrepreneur for the same reason a lot of us do: nobody would hire me at the time. So, I had very low opportunity cost to getting out there and doing it.

Alejandro: We’re talking about 1993. What would you say was that triggering event for you where you said, “I’m going to take a leap of faith on this.”?

David Steinberg: You know, it’s interesting. I think it was actually ’92 or ’93. I don’t remember which, but wherever you saw that, I’m sure it’s right. I had been selling insurance for about a year and a half. I was doing very well at it. I had really fine-tuned my sales skills. I just saw no long-term opportunity in that world for me. Interestingly enough, I got invited to give a speech in Ohio for the insurance company that I worked for. As a part of it, I had already built a team. Not a big team, but a team of five or six people who worked with me. I was invited to bring them the speech. I remember it like it was yesterday. A Budget Rent a Car. Sitting on the counter was a gift certificate for a free wireless phone. I said, “Well, I could use a free wireless phone. That would be really cool.” Back then, we wore suits. That was a suit-jacket pocket. I wore it. I went to give the speech. I came back, and two weeks later I put that suit back on, and I found that gift certificate. I went down to a place called ASAP Cellular in northern Virginia, and I said to the woman, “How do you afford to do this.” And she said, “Oh, my goodness. We get the commissions, and we make a percentage of the recurring revenue forever, and the margins are huge. All we have to do is give a phone away, which gives us a three-month break-even. I literally walked out of that store and said, “I am in the wrong business.” I left the insurance company, and I founded Sterling Cellular in my basement a couple of weeks later. So, between the telecom information that I gathered working on The Hill and the information I learned through that process, I did what I now call a triangulation process where I take three different data points, and I put them together with my decision-making. In that case, I felt like I had made a lot of money for a young man of my age at that point. But I also knew I wasn’t going to be able to create wealth working for somebody else. At that time, I just had very little to lose, and I thought it would be a cool thing to do, and I did it.

Alejandro: Got it, and this started out of the basement of your house there in Maryland?

David Steinberg: Yes. That’s back when I lived in Bethesda, Maryland. I founded it in the basement of my townhouse. I remember. The funniest part about it was we grew that business pretty quickly for that time. You’re going back a long time now, but we ended up with 20 employees working out of my basement. Every one of my neighbors would every day complain that people were parked in their parking spots and we couldn’t get enough parking. We legitimately couldn’t get enough parking, and everybody who was in our neighborhood hated us. So, we finally had to open an office. I was like, “This is horrible because I had to spend the money on office space, but it ended up working out pretty well.

Alejandro: So, the first year there, David, you guys did like over a million in sales. Is that right? The early ’90s, over a million in sales first year is quite significant.

David Steinberg: Yeah. We did a million in sales our first year, and I think we did over 10 million our second year. Back then, that was a lot of money. It was a really big deal to us at the time, and we built that business, and we sold it. That was a pretty good outcome.

Alejandro: Got it. What was the triggering behind selling the business and to whom did you sell this?

David Steinberg: It’s interesting. I built five companies as the operator. I’ve invested in far more throughout fund, but I built five companies as the operator. I sold three, taken one public, and now I run Zeta Global. Of the three I sold, two of them I sold to AT&T. It worked out well. We sold it to AT&T. Well, at the time, it was called Southwestern Bell Mobile Systems, which then became Singular, which then became AT&T Wireless again. You could go through the whole makeup of the telecom system, how it broke apart, lived apart, then all came back together over a 20-year period.

Alejandro: David, why did you decide to sell?

David Steinberg: It was one of those things where we had built out a really interesting retail ecosystem. I didn’t like being in the retail business. I didn’t like having to manage as many stores as we had. So, we sold it, and we started back then as a telemarketing company to telemarket the sale of wireless and communication products. We found that one person sitting at one desk could sell as many wireless phones a month as somebody sitting in a kiosk in a mall. Or two people could sell as much as a full line retail store. We ended up at one point with 5,000 telemarketing sales reps at my next company, which was Sterling Communications. We built that into an interesting business. We ended up selling that to AT&T as well. 

Alejandro: Wow. Are the terms public of both transactions?

David Steinberg: No. We didn’t make either public, but both were in the tens of millions. Not the hundreds of millions. 

Alejandro: Got it.

David Steinberg: The great thing about those transactions were we really didn’t have any partners. So, unlike the way we build businesses now, where we have tons of outside capital and shareholders, you might sell them for less, but you kept more.

Alejandro: Yeah. Because right now, there are a lot of people raising tons of money, and then they sell them for billions, but people need to know that when you’re raising money, you’re diluting themselves. Obviously, the percentage is less.

David Steinberg: The thing that most people don’t get that I really want to make clear is you’re not just taking the dilution, you’re also having to live with the liquidation preferences. 

Alejandro: Right.

David Steinberg: We hear a lot about how evaluations are skyrocketing, and everybody’s becoming a unicorn, but if you’re putting a three or four-times liquidation preference on that capital, or you’re putting one or two times with a deferred dividend that compounds, as a founding team, you are really pushing yourselves down the capital stack because then the teams all go and raise debt against the equity they raised from the venture debt guys. Then that sits in front of them. So, I always joke that most entrepreneurs today who are raising outside capital, they do it really quickly. I’m always a fan of bootstrapping for the first few years if you can. Now, the great thing about Zeta was I was able to be the first two rounds of funding with my partner John Sculley, and my other partner, Bill Lamon. The three of us were able to put up effectively the first three rounds where I did the first 10 million myself. 

Alejandro: We’ll get into Zeta Global in just one second. After these two transactions, David, you go on to found your next one which is InPhonic. Is this right? 

David Steinberg: We founded InPhonic. Interestingly enough, we figured out that through the virtual sale of wireless phones through telemarketing, meaning you’re no longer at a store, you had to deliver it, that the internet was going to be the next big distribution point for wireless. So, we founded InPhonic on the premise you could sell and activate wireless phones on the internet. That was the original premise. It then grew into the ability to push information off of the internet onto the mobile ecosystem and the ability to disseminate information to decentralize mobile points versus having to sit on a static device on your desk, which sounds pretty humdrum today, but when we did that in 1997, ’98 it was a game-changing. So, we built that business. Grew it. We took it public. We then founded a separate business called Wirefly which was the largest independent seller of wireless phones on the internet. We called it the Expedia of wireless phones. We built that. We then sold Wirefly to InPhonic, and then we took InPhonic public as a merged company. Technically, my fourth company, which was Wirefly, InPhonic being the third, we sold to my third company, then we took that business public. What became a pretty big IPO. I always love to joke that in 2004, InPhonic was the second biggest tech IPO that year behind a little company that almost nobody has heard of called Google. They faired a little bit better than we did. But for one year, we were #2. 

Alejandro: That’s amazing, and I love to hear the IPO experience, but before we get there, is it possible to walk us through how you guys capitalized the company?

David Steinberg: Interestingly enough, when I sold Sterling Communications which was the telemarketing company to AT&T, they had no need for our fulfillment facilities, our engineering groups, for our pick, pack, and ship of wireless products and phones, so literally at the closing table I said, “Would you mind if we kept that instead of you taking it and having to deal with shutting it down.” At the time, it was Singular, and they said, “Yeah. We don’t want that.” I then said, “You know what would also be great is why don’t you give us the exclusive contract to sell wireless phones over the internet for AT&T?” At that time, nobody even knew what the internet was. They were like, “Sure. Sounds great.” So, for a number of years, we were the only seller of wireless phones over the internet for AT&T Wireless. Now, that obviously changed at some point, but that was a pretty good head start for us. I took all of those assets, and I did them as a tax-free contribution of assets into what became InPhonic. So, we were able to maintain a pretty large hold of it. Then we went out and raised outside capital. I think it was 1998 when we raised our first outside capital for InPhonic. Literally, we sat down with a great team, with a guy named Tom Smith who at the time was running Mid Atlantic Venture Fund with his partner Mark and a couple of the other guys. We gave the pitch. By the time I got back to my office, they were in northern Virginia. We were in Georgetown. On our fax machine, just to speak about how old this was, was a term sheet for their investment. They literally faxed the term sheet to invest, and we got it before we were able to get back from northern Virginia to our offices in Georgetown, and they became our first investor. Then we did a series of investments there that ended up with TCB, one of the most important kind of Silicon Valley tech investors did our final investment before we went public. 

Alejandro: We’re talking about the late 90s, so what were some of the profile of investors because the ecosystem for investing in startups and in privately-help companies was not as developed as we have it today. It was different?

David Steinberg: Yeah, very different. Very Silicon Valley days. I mean, listen. It’s still New York, Boston, Silicon Valley days. Now, if you look at stuff like Steve Case is doing to try to make venture capital available through the whole country, it’s really interesting stuff and what they’re doing, but the vast majority of venture capital back then still came directly from San Francisco and Silicon Valley. We raised capital from the Mid-Atlantic Venture Funds as a startup but then ended up raising our largest capital round which was more money by far than we had raised in every round prior to it from Technology Crossover Ventures which is based in Palo Alto. Jay Hogue who is the legendary visionary founder of that group led the investment into our firm with Will Griffith, and Jay joined our board. It was an amazing experience at the time. But back then, you had to have that San Francisco/Silicon Valley capital to really make it work. Today, the capital is pretty well distributed between San Francisco, Silicon Valley, Boston, and New York, although you still look to the Valley to raise your meaningful capital if you’re a startup.

Alejandro: Got it. How much capital was raised before the IPO?

David Steinberg: You know, I don’t remember the exact amount, but I know the round with TCV was 56 million in primary. We had raised money along the way. Call it 75+ million pre-IPO. Then we raised about 100 million in the IPO. We raised meaningful capital. Of course, the company priced at 750-million-dollar value and ended up trading at 1.6 billion at one point as a public company and did well all along the way.

Alejandro: How was the IPO experience for you?

David Steinberg: It was, I’d like to say, painful, but it was probably one of the coolest weeks of my life. As a serial entrepreneur, I think most of us dream of that kind of IPO experience. It’s also one of those things that it’s incredible, but once you’re running a public company, it’s nowhere near as fun as you think it’s going to be. We did the roadshow. We had an incredible team between Deutsche Bank and J. P. Morgan leading our deal. The range was 15 to 17. We ended up pricing it at 19 and opening at 24. Some amazing stories along the way. We did a big party, like a lot of companies did at that time, in the NASDAQ overlooking Times Square. Flew off into the sunset that night on whatever the latest G was at that time back in D.C. It was literally as storied as you could get. It was as good an experience as you could have had.

Alejandro: You were flying with the bankers, I would assume, in their private jet?

David Steinberg: We flew for ten days all over the country on private jets, and with the teams out of Deutsche Bank. In fact, Andy Cass and Emmanuel Desousa of Deutsche Bank are still dear friends who took the company public, and John Altenburg at Deutsche Bank is still a dear friend. We know all the J. P. Morgan guys still very, very well. Allen & Company was on the book as was at the time Tom Wissel and others. It was the storied completion of that process. When you go out as an entrepreneur, and you start at 21 years old, you dream of taking a company public. We hit the dream, and then you wake up, and you’re in the reality of having to run a public company, which I will tell you is not fun. We did not enjoy that process. People always say to me at Zeta, “You’re pretty big. Are you thinking about going public.” And I say, “Yeah. At some point, I’ll have to do it, but I’m putting it off as long as I can.”

Alejandro: I hear you. The other guests that I have as well sharing their experience of being a public company, they were not very happy about their experience until they did the acquisition. But anyhow, how big were you guys able to take InPhonic in terms of like employees. Did you guys take it to 300 million in revenue or more than that?

David Steinberg: We did. Yes. At our peak, we did about 350 million in revenue. We had about 1,000 employees. It was a cool company. We were really on the forefront of what was happening with the internet meets mobile meets information. It worked until it didn’t. The most valuable lesson, and I always take valuable lessons out of failure. Even though Zeta by most accounts was considered a failure, towards the end, it certainly didn’t finish up that way. Although, the group that bought it well after I left ended up turning it around and selling it to Walmart. Today, it’s the crux of the Walmart Talk More product which is Walmart’s wireless product. For what we did, the three big things that I’ve tried to take with me is 1) The people who get you to where you are, are not always the right people to take you to where you want to go, which is very hard as an entrepreneur. You really want to be really loyal to the people who have been loyal to you, but if you don’t build around them and you don’t trade them into people who can take you to the next level, you end up not being able to get to the next level. 2) Don’t borrow 100 million dollars in upmarket to buy back stock when you’re burning cash. Bad idea going into one of the biggest downturns of our generation. We were sitting on that balance sheet going into 2008. Even though I was no longer CEO of the company, I was still chairman. 3) Finance and processes are substantially more important than you understand as you scale your business. Those are things that once again not to tout Zeta, but those are things we’ve really taken seriously here that I probably didn’t even know when I was running InPhonic.

Alejandro: I’m excited about talking about Zeta, but what I want to ask you, David, is all the founders that are listening and myself included, the highs of being an entrepreneur, they are really fantastic, but the lows are also very tough. 

David Steinberg: Yes.

Alejandro: I probably assume that for you, after experiencing this crisis and seeing the downturn and all of that, I’m sure that for you leading the business at that point was really difficult, so how was this experience for you as well?

David Steinberg: Well, listen. What you also don’t know is, I was going through a difficult divorce simultaneously. So, you want to talk about a low point in life. It was bad. I don’t know how to put it technically other than that. It was definitely the low point of my adult life. Seeing this great company we’d built effectively being taken from us, the good news is, it was a great business. It had the wrong balance sheet, and it definitely had the wrong capital structure. The guys who ended up buying it ended up doing really well with it. But, as the guy who was “losing” it, that was not a fun time in my life, and I was going through a lot of personal turmoil as well. But you have to own your mistakes. Where that ended up, it had the wrong capital structure, and it had the wrong balance sheet going into the downturn that we dealt with because of the decisions I made as CEO. So, you learn from that. You take ownership of it, and you hopefully take those lessons into the next evolution of what you personally become and what you personally try to build. That’s where I am today.

Alejandro: What was, for example, for you coming out of this situation where you were dealing on the personal side, and then also on the business side with unpleasant scenarios, did you have like a big breakthrough moment for you?

David Steinberg: You know, I didn’t, interestingly enough. I had a lot of little breakthroughs. There wasn’t like I woke up one day and said, “Ah hah.” But you have to understand I moved from the office I was in for many years as the CEO, chairman, and founder of InPhonic to the office as the new CEO and founder of what became Zeta. I literally moved my furniture from one to the other.

Alejandro: Wow.

David Steinberg: So, I was not a sit-around, and I’m still not a sit-around type of individual. I generally have a lot going on. For better or worse, I found that keeping myself busy through that process and building my next business was the best way for me to cope with it, and it worked. Now, a lot of lessons came out of it, and a lot of reflection, and a lot of time looking back at what I could have done better and what I didn’t do right. But there was no moment where I said, “All right. Let’s go off into the woods.” I do want to say that I was very fortunate in that I had already sold three companies by the time I had founded this. So, I wasn’t losing my home. I wasn’t worried about paying for the kids’ prep schools, which a lot of guys run into. I had the luxury of having put a lot away and having been smart with what I had made. You know what I’m saying?

Alejandro: Yeah.

David Steinberg: So, even when I had to split it up through my divorce, I still was fine. You know what I mean?

Alejandro: That’s amazing.

David Steinberg: Well, listen. We just didn’t spend money on stupid stuff, and interestingly enough, I still try not to because as an entrepreneur, you learn. There are always going to be highs. There are always going to be lows. I still have a funny story going back years. I’m a pack rabbit like I’m terrible. I keep everything. I have an off-site storage facility in D.C. where I still keep everything. At some point over the last few years, I was going through stuff. I found a stack of sterling cellular payroll checks to me that I never cashed because we didn’t have the money in the bank for me to cash them, but I ran them through the payrolls so the taxes would be taken out. I didn’t want to get in trouble, but I made sure that everybody else’s payroll cleared. As an entrepreneur, that happens.

Alejandro: I hear you. That says a lot about you. You know, putting your people first. So, that’s great. Absolutely. So, David, let’s talk about bouncing back. Let’s talk about Zeta Global. So, Zeta Global started because you started putting a couple of companies together. But walk us through the incubation of this idea and how you brought it to life.

David Steinberg: The real concept initially was how do you make data actionable? The other concept when you look at triangulation was at that time, ten years ago, if you wanted to be a large company, you needed a CRM provider. You needed a data provider if you even bought data. You needed an agency to build your marketing. You needed creative. You needed some type of network to activate e-commerce. You needed a network to run ads online. You needed at one point, 16 different vendors by my count to manage what Zeta today delivers through its marketing cloud in one solution. So, the two real concepts were how do you make data actionable? How do you take data because back 11 years ago when we founded it, people were starting to look at data as interesting? Big data didn’t even exist yet. But we were looking at it and saying, “Okay. More data is being created a day than the 100 years leading up to that day because of the advent of digital.” We thought that using that data and turning it into the ability of help large companies create, maintain, and monetize customers would be a massive differentiator going forward. Now, the truth of the matter is we didn’t know exactly how we were going to do that, but that was the premise. So, we then started buying really interesting small companies that either owned very interesting pools of data that they had permission to market to or software that allowed people to market to it. We merged all of that into today which by most accounts, Zeta Global is the third largest data and analytics platform on the world. 2.2 billion people a month hit our platform that we track everything they’re reading, what they’re searching, what they’re buying, where they are buying it on top of all of their demographic information. We have about 2,500 sales of data or information points per person on a static basis, and we import about a trillion marketing signals a month that we match back to the unique individual where we build an intent-base score. So, we allow our clients who are very large financial institutions, very large automotive manufactures, very large airlines, very large travel companies where we help them by using their CRM data merged with our data cloud to use our marketing cloud to help them create, maintain, and monetize customers on a substantially lower cost with us than they could do without us. The business has grown pretty rapidly. 

Alejandro: Nice.

David Steinberg: We’re 1,400 employees operating out of 26 offices on four continents. It’s been interesting. We have 758 clients, 500 of which approximately are in the Fortune 1000 largest companies in the world. One of the other things we learned at InPhonic was we effectively at one point had four customers. The four main wireless carriers were our customers. We interacted with millions of end users, but almost all of our revenue came from those customers. Today, Zeta has 750 customers, not one of which makes up even 5% of our annual revenue.

Alejandro: Yeah.

David Steinberg: So, it’s really been interesting as we built it. The other thing I learned at InPhonic is if you build a company that’s profitable and has cash flow, it’s very difficult for people to come down hard on you. Zeta is a very profitable, nicely cash flow-positive business that allows us the type of flexibility that a lot of high-growth tech companies don’t have. 

Alejandro: Got it. So, what was the founding team of Zeta?

David Steinberg: So, Zeta was founded by my partner John Sculley and I. I always joke, John is a little bit better known than I am having run two small companies. One being Pepsi. One being Apple. But really, it was the two of us. Then my third partner, Bill Lamon, who runs mainline capital which is a Philadelphia investment vehicle, this is the third company that Billy has invested in, and he was our seed investor with me. This is the third company I’ve done with John. So, John and I have sold one company, took one public, and then founded this, and it’s been really interesting. But you want to talk about back to your original question, kind of a life moment. Kind of waking up in reality. I went from having 1,000 employees on Monday. That afternoon, I moved into my new offices, and I had two employees.

Alejandro: Wow.

David Steinberg: So, it was pretty interesting. But in November of 2007, that’s when I moved into the new office space. We didn’t really found Zeta until the spring. We founded the vehicle in 2007. We raised capital in November 2007, most of which I put up myself with Billy and John. Then we did our real launch going into the spring of 2008.

Alejandro: Got it. For something like this, I would imagine to support the growth, and you probably learned your lesson with InPhonic like being on the debt side and on the credit side. Now, with Zeta, you have that experience. You’ve raised money. So, how much capital have you guys raised to date?

David Steinberg: In outside equity, we’ve raised about 150 million dollars. We do have debt today, but our debt is, call it 2 to 2 1/2 times or [inaudible 34:41] 6 times. We manage the debt against the cash in the bank. Our net debt is below two if you take the cash in the bank minus the debt, divided by our last 12 months. We feel like that’s a very healthy place to be. We’ll occasionally flex up to 2 1/2 or 3 if we’re buying a really interesting tech company, and we’re merging it in. But the goal is to be back down below 2 and net within 12 months of buying something.

Alejandro: I think I saw somewhere that you guys all-in-all combined close to 400 million. I wanted to ask you here, you guys and talking about that statement that you just made about acquiring companies, you’ve made quite a bunch of acquisitions. Right?

David Steinberg: Certainly, people make a very big deal of that, but I want to be clear. We’ve bought 11 companies in 11 years. So, we bought an average of one company per year. In 2018, we didn’t buy one company. Some of those deals were acqui-hires where you’re buying great technology, and you’re buying great people, but you’re not even buying any revenue. I don’t think we’ve done one deal that had greater than 25 million dollars in revenue in it. Most of the companies we’re buying are 10 to 20 million in sales, great technology, great team, have hit a point where they can’t really take their business to the next level, and we merge that into our data cloud or our marketing cloud. Then we roll those products out as an incremental offering into our existing client base. So, we’re also able to grow those companies pretty quickly once they become divisions inside of our own business. So, for example, we have a growth rate organically of greater than a 20% annual rate averaged over the last three years. Our growth is faster than that because we bought companies on top of that.

Alejandro: I think that acquiring companies, I’ve done that as well, but I think the toughest part is really the integration. Integration is a beast. So, what have you learned about integration? 

David Steinberg: Well, it is hard. It’s always harder than you think it’s going to be. There are four things we really look for before we buy the company. The interesting part about it really is, the integration starts when you decide you want to buy somebody. So, there are lots of companies that we think are great businesses that we’ve looked at that we have not bought because we didn’t think we could properly integrate them. So, we really boil it down to a roadmap. The other thing we’ve done differently at Zeta than we’ve done at any of the other companies I’ve owned is we built M&A and integration as separate groups outside of our operating function of our business because what I found is, whenever you get on a deal to buy somebody or integrate somebody, your core business suffers. By building it as separate groups that don’t touch the operation infrastructure of the day-to-day business, we don’t see that normal downturn in our core businesses while we’re buying and integrating new companies. Quite the contrary. They can continue to flourish while we wrap other businesses in that give them new products to grow in.

Alejandro: Really cool. The growth has been unbelievable. I think I saw somewhere a report that the evaluation is over like 1.3 billion, so that’s really cool. Congratulations on that. So, I wanted to ask you on really building the business itself. At the end, it’s all about people. You said you have like 1,400 people right now?

David Steinberg: We do. Although 750 of our employees are at our campuses or offices in India. We have about 500 employees in the United States.

Alejandro: Got it. So, in terms of hiring, because you need to become a rock star at hiring. So, what are the essential traits that you typically look for in people when you’re hiring?

David Steinberg: One of the things we really over-index on here is intelligence. It’s funny because we brought some new people in over the last couple of years, and the thing they always say to me first is, “I can’t believe how smart everybody who works here is.” Now, let me be clear. That excludes me. I’m generally, when we sit in our operating meetings, I’m the least educated guy in the room, but at the end of the day, you can teach a really smart, hardworking person how to do almost anything, but you really cannot teach somebody how to be smart no matter how badly you think you can. Now, that’s not to say people can’t get more educated and people can’t get more information, but we really over-index on intelligence and hard work. You certainly want people who are also hungry. They want to succeed. They’re willing to work hard to get there. The other thing we’ve really done is, we’ve been able to very effectively take people who are great, but really not the right people to take us to the next level and either transition the matter of the organization with no bad blood and really staying friends with them, or finding other roles internally for them. That’s an art. That is not a science; that’s an art. If you talk to my investors, they’d say I way-overpay on severance, and we do way too much for the people we employ. I really live in this: it’s a small world, and it’s a short life, and we try to get along with everybody. Which is not to say it works for everybody. You could look at some of the companies we’ve bought where we’ve bought companies where we had 300 or 400 employees, and in the first six months, we’re moving 200 of those jobs overseas, which is not a happy experience for the people who you’re moving out, but as harsh a reality as this is, if you don’t make the businesses profitable, and you don’t get them to be a division, not a separate entity, you’re never going to succeed as a whole. Sometimes, you have to make hard decisions. Now, the other thing you have to know as an entrepreneur is what are you not good at? I will tell you at 23 years old I thought I could do everything. At 48 years old, I realize that I’m really good at certain things, and there are other people who are substantially better than me, and I try to go out and get the people who are better than me to do the functions that I’m not exceptional at. So, you look at Steve Gerber, who is our president and COO: Columbia MBA was at Bain and Company for many years. Then went to Digitas who was part of the team to help sell it for billions of dollars. Our CFO, Jarrod Yahes was the CFO of Jackson Hewitt, and before that was one of the guys who was one of the early team members to help build EXL. Steve Vine, our general counsel. K. Schuler, NYU Law School, was at Registry.com, one of the smartest deal guys out there. I could go through the entire list of the senior team and how good they are at their functions. Part of growing up as an entrepreneur is really empowering your people and letting them do their jobs. I can’t say I’m always exceptional at that, but I can say I’m substantially better than I was 26 years ago when I started my first company.

Alejandro: That makes total sense. One thing that I was present to now and probably the people that are listening are going to be thinking like, “Wow! He must be like so busy, and he’s day must seem like crazy.” Just out of curiosity, how do you do the breakdown of a typical workday for you? What does it look like?

David Steinberg: Well, it depends on where I am. I live between New York, LA, D.C., and Miami. I’m a Florida resident. When I’m down in Florida and go into our office in Miami, my workday is different than my day in New York. I’m in New York today. I wake up at 6:00 AM every day wherever I am generally in the world. I will, depending on where I am, deal with the other time zones. For example, this morning at 6:00 AM I was focused on what was going on in Europe and India. I then work out pretty much every morning. I see my children, and then I generally have some coffee with my wife, so I get to see her at least part of the day. Then I get to work around 9:30 AM where I generally have between 10 and 12 meetings or calls including a lunch every day up until about 6:00/6:30 PM. Then generally I’m doing a drink’s meeting when I’m in New York, and then I have a dinner meeting after that which I have both today. I’ll get home around 10:00, have a glass of wine with my wife, catch up with her about her business. She’s got a really cool business called Rethink Beautiful where they’re really trying to help people rethink beauty and understand fashion. We’ll catch up on what’s going there. Then I tend to go to bed between 12:00 and 1:00 in the morning, and then wake up the next day at 6:00 AM again and it starts all over again.

Alejandro: Really cool. So, knowing what you know now, David—this is a question that I typically ask the folks that we have here on the show. Knowing what you know now if you could go back to the past and give yourself one piece of advice before launching a business, what would that be and why?

David Steinberg: I get asked this question on stage a lot, and I generally get a lot of laughs out of the answer, but it’s the truth. If I could go back and tell myself anything, I would go back to 2004 and say “Buy as much Google stock as you possibly can.

Alejandro: I love it. But I guess from an operator perspective?

David Steinberg: From an operator perspective. You know, it takes a naturally optimistic person to become an entrepreneur. What I try to caution my friends who are entrepreneurs is to really focus on an aptitude for risk, not just a blind risk. Meaning, when I was a young man, I would take a yellow piece of legal pad paper. I’d put a line down the center, and I’d write on the left, “What’s my upside?” I’d write on the right, “What’s my downside?” That’s really where it started. If I could lose a dollar and make $10, that was a great trade. If I could lose $10 to make a dollar, that was a really bad trade. So, you finetune those skills over 25 to 26 years of being an entrepreneur but temper yourself. Stay optimistic, but don’t get overly optimistic, and focus on building an aptitude for risk. What’s my upside versus my downside? Most entrepreneurs know they’ve got to work their tails off to be successful. Most entrepreneurs know they need a big market opportunity. Most entrepreneurs know that raising outside capital comes with pain, but also comes with real opportunities that can go from there. So, there are a whole lot of things that are pretty well known. One of the things that’s not talked about as much, in my opinion, is this aptitude for risk. That’s something that I would really talk to entrepreneurs about, or at least to myself about it if I could go back 20 or 30 years. 

Alejandro: Got it. Makes complete sense, David. So, what is the best way for folks that are listening to reach out and say hi?

David Steinberg: Probably my email address which is dsteinberg@zetaglobal.com is a really good way to reach me. Always interested in hearing from entrepreneurs, probably a little less so service providers. I get a lot of that through LinkedIn already. But really love hearing from entrepreneurs and love seeing where we can be helpful. I should also point out that we have a fund called Caivis Investment Corp. where we invest into cold, new startups and entrepreneurs where we think there’s an opportunity for us to invest capital through Caivis, and then do partnerships through Zeta. We’ve done 27 investments so far, so it’s been really fun for us. So, if opportunities come up like that, we always want to hear about them.

Alejandro: Amazing. David, thank you so much for being on the DealMakers show.

David Steinberg: Thanks. I appreciate it. By the way, just so you know, now that we’re finishing seven minutes early, I actually have time to eat lunch before my 1:00, so I appreciate it.

 

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