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Neil Patel

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Everett Cook has gone from young entrepreneur to investment banking and building a big fintech startup of his own. His venture, Rho Business Banking has raised more than $130 Million from top-tier investors like Rogue Capital, Eric Kinariwala, M13, and Josh Stech.

In this episode, you will learn:

  • What Rho means for the future for CFOs
  • Raising and using debt versus equity funding
  • How to land your lead investor
  • The one month of the year you should never try to raise a round of funding
  • What the Series A round is all about
  • Top book recommendations for entrepreneurs
  • Everett’s top advice before starting a business

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    About Everett Cook:

    Everett Cook is CEO and Co-Founder of Rho Business Banking, a collaborative banking platform for fast-growing companies. Before launching Rho, Everett was a hedge fund manager at several New York funds, including Deutsche Bank, SAC Capital Advisors, and Taylor Woods Capital. His early entrepreneurial experiences (he started his first company at age 14) and his work under Michael Bloomberg led him to focus on building a fintech company that provides excellent service to startups and growing teams.

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    Connect with Everett Cook:

    Read the Full Transcription of the Interview:

    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. We’re super excited with our guest today. He’s one of a kind, born and raised in New York. You don’t see many of those nowadays. I think that we’re going to be learning quite a bit. The way that he experienced and learned about entrepreneurship and then went into the financial services world and did different types of angles and perspectives in it. That led him into the company that he’s building today, and I think that you’re all going to find it very exciting. So without further ado, let’s welcome our guest today. Everett Cook, welcome to the show.

    Everett Cook: Thank you for having me.

    Alejandro: Tell us about your upbringing in New York because I’ve met very few people that have been born in New York and that stayed in New York all of their lives. I don’t know why that is, but I guess that makes you one of a kind, Everett.

    Everett Cook: I don’t know. There’s a handful of us out here. Thanks. I grew up in New York. I love this city, and I spent most of my life here. New York is an amazing place because you’re exposed to so much at a young age, which can be terrifying for parents. I have a two-and-a-half-year-old, so I definitely feel that. But it’s also a blessing there, which is you get exposure to incredible people doing incredible things from day one. I was really fortunate for that to happen to me. My first real job was working for Mike Bloomberg at his company, on his campaign, and then City Hall. That was an inspiring opportunity for me. I was about 15 years old when that initially happened, and just to be able to see what one person can build. He’s, obviously, an outlier of outliers, but just to be able to see that this is possible. Maybe the odds are low, but it is certainly possible to make a massive scale from nothing. That really stuck with me. That was like one of the best things about growing up in New York was that you see it up close and personal. From a very early age, I was inspired to try stuff as an entrepreneur. I tried starting a web hosting company with a good friend of mine when I was 15. Then I started a concert company when I was 18. I loved music, and we produced the first hip-hop concert in Lincoln Center, which got a lot of press. I was 18 years old, and that was the coolest thing in the world I could think of doing. It was just seeing that at a massive scale and then trying stuff in a really small scale that it never left me. I was like, “Okay, entrepreneurship for me is what I want to do with the rest of my life. I want to build stuff. I want to build organizations. I want to make things that don’t exist in the world, and that’s how I got started.

    Alejandro: Do you think that a big trigger for you, or maybe that inspirational moment, was being able to work with someone like Bloomberg and understand that it’s possible for you to do that?

    Everett Cook: Yes, exactly. I was the youngest person at the company, and it’s a big company. I definitely was not doing anything very important, but yeah, exactly. Just to be able to see that was inspiring and set me on a journey that I’ve been chasing ever since.

    Alejandro: In your case, you go to school, and you went to Vanderbilt, and you studied economics there. Then, as a result of that, you went into Wall Street into doing investment banking. So why do you think it took you so long? We’re going to talk about Rho, which is your baby now, but before that, why did you take that route versus maybe going at it and starting your own company?

    Everett Cook: Yeah. I thought about it. I think the perspective was I felt like I had a lot to learn. I’m just naturally a curious person like I think almost every entrepreneur is. For me, I studied economics in college. I found it fascinating, basically trying to instill: why do people do what they do, whether it’s a single person or a group of people as a country or something into math, which I thought was really cool. I actually liked it, and I wanted to apply it, so I said, “Financing is a place to apply that.” Also, I was just thinking about great places around the world. I felt like there was so much out there, and it’s such a great lens to look at stuff when coming out of college and going into investment banking. Yeah, it’s brutal. You’re working 100+ hours a week, but you’re seeing company after company, public-listed companies, private companies, whatever. You have to learn about them really fast, understand their industry, understand what they do. If it’s an M&A deal, understand how Company A and Company B add up to more value than the two of them together or separately. I thought that was awesome. It was a great way to broaden your horizons and see everything. When you’re 18, music is like the world. Then, you’re like, “Oh, okay, but there’s a much bigger world out here. So I did that for a couple of years. I did it from 2001 to 2008, so 2007 was [6:20] Enterprises. We were super busy doing lots of deals and financial engineering and stuff like that. 2008 was depressing—lots of pitching, nothing closing. I was really fascinated by that, too, because I was perplexed. There were a lot of people that were calling for the crisis for a couple of years prior with pretty good evidence of what was going to happen. I looked around me, and there were actually weren’t too many people—maybe a couple of people that preferred my work deck that saw it coming, but definitely very few. Most people were blind-sighted by it. I was like, “Why is that the case, and who are the people that actually got this right?” By and large, it was micro asset managers that got it right. Those were the only people that made money in 2008, people like Peter Thiel and [7:05]. Those guys are legends. Peter was running his hedge fund at the time. I was like, “I want to know more about that. I want to figure out what those guys know and how they think about the world because it’s very different than the people I’m sitting around the table with today.” I embarked on a journey, and I thought it would be two or three years. It ended up being ten because I really loved it. I love markets; I love trading. It is one of the most entrepreneurial jobs other than actually building a company. You basically have to think two steps ahead of the market, think two steps ahead of the competition—the most competitive job in the world, in my opinion. It’s like a constant game of chess, which is cool. Parts of those are transferable startups, in my opinion. Parts of them are not, for sure.

    Alejandro: Yeah.

    Everett Cook: You’re not building a people organization, and you’re not building something that’s bigger than your—like, trailing PNL. But it definitely teaches you how to think about risk and figure out what other people are missing because, ultimately, it’s maybe not totally as some game, but there are winners and losers, for sure. So I spent about ten years doing that. I was an analyst at SAC Capital for a little bit, which is now Point72. I worked at a couple of other funds, helped with research, and then ran a small portfolio, and then realized that, for me, it was like, “I’m still missing that feeling that I had when I was 18 when I was starting these little companies that were two friends and me.

    Alejandro: What was the feeling?

    Everett Cook: It was the feeling of achievement in the building of something and giving something back. It’s like making something. Inevitably, I always talk to our team, and in general, it was like creating distracting values which are not that hard. What’s hard is creating value—creating value for people, building a product of service and something that people love. I really wanted to do that with my life. I left that world. I didn’t know what I was going to do. I knew I wanted to build something in the tech world and was fortunate enough to meet my co-founder, Alex, around the same time. He was leaving a two-product officer role at a pretty large tech company in the UK. He had done that a couple of times. He had built and sold several businesses, and it was fortunate timing because basically, he was like, “Fintech is really the thing. It’s really interesting. There’s so much to do here. This feels like it was AdTech ten years ago when there was this wide, open world of opportunity and ability to make a huge impact on the market.” I was like, “I don’t necessarily know a ton about building product organizations, but I do know a lot about finance.” The two of us basically teamed up and started going. That was three years ago. Fast-forward to today, Rho continues to scale, and we’ve been able to deliver that product and experience that we dreamed of, which was roughly commercial banking and payment management for companies.

    Alejandro: How did you guys land on that because, obviously, you guys really knew that fintech was an area where you could have an impact, but obviously, the word fintech can really group so many different things together, so why, out of all things, did you land on the banking aspect of it?

    Everett Cook: It’s a really big space, for sure, and you can see the amount of venture capital dollars going into this space. Yet, still, how small a percentage of the overall financial services market is actually managed by companies, people that call it fintech. We landed on this because we believed that there were two things. One was going to give away the way I think about stuff top-down. Alex thinks about stuff bottom-up, and it’s important to have both. Both are equally important. We saw all of these consumer fintech startups over the previous ten years, and I would say like 2008 to 2018 or so, it was all consumer. It was companies like Chime, PayPal, some B2B stuff like Square, but it was primarily applications, and they were for consumers. We believed that there were a couple of reasons why that was the case. We believed those reasons were not necessarily valid going forward, so we believed that some of the financial, regulatory, and tech models that companies like Chime used had good applications in B2B, and people had not explored those yet. We also knew from Alex’s personal experience, as well as discussing with the market, that there was a tremendous pent-up demand. Companies needed better solutions. Everybody was tearing their hair out because of how difficult it was to manage their employees’ spending, how many products these companies were stacking to accomplish relatively simple goals. All of these companies that we talked to are all stacking 4, 5, 7 products to allow their team to spend money safely, store it somewhere, and account for it. We understood why that was the case because the previous ten years were all about unbundling banking, but fundamentally, we knew that people wanted a single-user experience, and we knew that they wanted an easier solution. My partner had always dealt with Certified Bank as his bank in all of his previous companies. That in and of itself created a lot of issues, and we could solve them.

    Alejandro: What ended up being the business model of Rho—R-h-o for those that are listening.

    Everett Cook: That’s right. The h is silent.

    Alejandro: How do you guys make money here? How does it work?

    Everett Cook: We work with companies, primarily with 20-300 employees. Generally, we’re not their first bank account. We’re not like a startup bank, but we do work with high-growth companies. Because we serve companies that are doing large scale and large volume, we’re able to offer a no-fee product to those customers and back it up with phenomenal service, support, pricing, and technology that helps them move faster. We monetize that product in a couple of different ways. All those ways are interacting with the customer, but primarily through net interchange in a couple of their spaces.

    Alejandro: When you are in a regulated space like this one, it costs a lot of money to get started, so how much capital have you guys raised to date?

    Everett Cook: We’ve raised $30 million to date in equity and another $100 million in debt. It is intensive. We have a lot of wires. We try to do things right. I think we have a compliance team of five or six right now, and that’s growing really fast. It is a highly regulated space. There are a lot of things that are confusing about the space. Anybody that is starting in this space, I recommend them getting legal counsel early on. It will save you time and headaches later on. But there are also established models at this point, and we feel that there is a right way to do this, and we believe we’re doing it.

    Alejandro: Why that approach of equity and debt? Why did you guys go that route, and what’s the difference between one another, and how do you blend both to make it work?

    Everett Cook: Equity funds are operating business, our team, our employees, and all of that stuff. Debt is what goes behind our charge card. When you spend on a Rho card, a couple of days later, that winds up in a special group’s vehicle, which is a warehouse facility. This is fairly standard for the credit card industry. It wouldn’t make sense to finance that on a balance sheet. It would not be a use of equity capital but investor capital. It allows you to scale much faster and gain access to infinite capacity, which is what we did.

    Alejandro: Got it. So, basically, equity is for having people in the long run, supporting the vision, and realizing. The debt is more for the operations and for making the business have the lights on. That’s amazing. In this case, you both were very sophisticated. Obviously, your co-founder had done a bunch of business before; you’ve done investment banking and also investing in companies, so you had a good idea of what to do and what not to do when it came to raising money, so why did you choose the people that you chose when it came to bringing them on as equity partners, and what was that journey like?

    Everett Cook: Very early on, we learned a lot about it, and I’m happy that we got really lucky, frankly, with phenomenal investors. The things we look for, and again when people ask me—I apologize about the noise. We’re based here in Soho, New York. I’m on the sixth floor of our building, but New York is loud.

    Alejandro: Oh, yeah. New York City is loud. You know what, people come to terms with noise in New York City, and it’s funny because when you get out, and you start hearing the birds singing and stuff like that, it’s so weird.

    Everett Cook: Yeah, that’s right.

    Alejandro: So for people that are tuning in, this city is very loud. Obviously, you have great investors. Why don’t you give us the three that you think people are going to recognize the most? Even though you have great ones, who would you say are the most recognized three ones?

    Everett Cook: We definitely don’t pick favorites. We have a number of phenomenal investors. They all bring amazing skills and assets to the table in terms, and they’re all dedicated toward helping us scale our business. A couple of the ones that people know well are Inspired Capital, Torch Capital, M13, and then there are a lot more that I probably don’t need to go into a longer list. But overall, our whole cap table and all of our investors have been great. Some of them are ex-operators. Some of them are peer investors. They all look at the market differently, but they all deeply understand that this is a space that is very large. It is in very early innings, and there’s a tremendous amount of innovation that we can deliver to this market that we believe will substantially help the trajectories of the companies that we work with. That’s the only thing we care about is how do we make ourselves most helpful and most useful to the companies that are on Rho, from technology down to everything else, so that they can build phenomenal businesses themselves.

    Alejandro: In this case, when you’re doing the A round, it is, without a doubt, probably the toughest one right now because it is when you are going into the institutional world when it comes to accepting money.

    Everett Cook: Right.

    Alejandro: So what was that process like of securing that lead investor. I’m sure it was quite painful.

    Everett Cook: It wasn’t painful, but we learned a few things, for sure, and I’m happy with the way it turned out. I think we have phenomenal partners that share our vision and are backing us in the long run. I think in terms of that process, we did learn a few things. Number one, even if it’s COVID (this is last year, about a year ago), don’t try to raise a round in August. Everyone has told me that. We’re like, “Well, maybe this year will be different. People go on vacation.” Nobody is going on vacation. Nobody is traveling. They’re just at home, so why would August be different than July or June? Don’t raise a round in August. We spent a month of just wasting our time. Then in September, it was like, “Let’s go.” That was a learning. The other thing was, we had a lot of conversations that our existing investors were phenomenal in terms of helping us introduce us to some of the right people that were interested. The best conversations that we had came from our founder friends and people that said, “I have this fund on my cap table. They’re one of my favorite investors. I think they would be great for you. Personal relationships matter, building those relationships with your peers as well as with investors. Even if you’re not pitching, don’t pitch before you’re ready to pitch, but get to know people. That was something that I think was really valuable so we could come in and have context and tell our story. Those were the three things for us that I told the founders when they asked me. Yeah, A is a turnkey phase, for sure, because you have a business that is working, but you’re still fundamentally subscale, and you now need to put the people around it. Founders are still doing too much at that phase. Everybody has too many jobs, so it’s like, “We need to raise a fairly substantial round so that we can take what is a product and build an organization and a company around it. That requires some vision from the other side. They have to understand what that can look like and what that will look like. I’m really happy with the investors that we got, and we’ve been able to achieve that, which is awesome. Today, we’re around 70 people and continuing to grow really fast.

    Alejandro: In that regard, as we’re thinking about Rho, and then also where the trends are heading. The other day, I read that in 10-15 years, banks, the way that we know them, they’re not going to exist anymore. It’s like all types of innovation hitting everywhere. Where do you think things are heading as a whole?

    Everett Cook: I think that’s right. I think that the banking world is starting to understand that, and I think that there is a lot of ability to partner with great financial institutions. We’ve had great bank partners. I think the ones that get that realize that they don’t have to compete with us. They can partner with us, and we can win together. I think the second thing is, and I think everybody realizes this, and it’s true not just in fintech, but in every business. The buyer and the customer, what they care about first and foremost is working with great technology, working with products that make their lives easier. They don’t want to be taken out to lunch once or twice a year or get a bunch of airline miles that are not that useful. They just want products that help them get on with their day and build their companies. The only way you do that is by delivering great technology that is smart, that is thoughtful, that is simple, that helps them do that. As companies scale, these problems compound. You have more people that don’t know what they’re doing. You don’t know where they’re spending, but you don’t want to slow them down. You don’t want to build a company of 100 with a finance team of 20, necessarily. So how do you do more with less? I think that job sits with financial services. I think, historically, there’s been a lot of pier software solutions that have done parts of this lifting. I don’t think you can truly solve the problem unless you are top-to-bottom. That’s what we’ve tried to achieve.

    Alejandro: When we’re thinking about where things are heading and the future, imagine that you were to go to sleep tonight and you wake up in a world five years later—a tremendous snooze, and you wake up in a world where the vision of Rho is fully realized. What does that world look like?

    Everett Cook: I don’t know if we’re ready to share the full vision, but I think what parts of that will look like is we continue to have every app phone in the world is using Rho, and we think that fundamentally, what does that allow companies to do? It allows them to take their finance teams all the way up to CFOs and remove them from lower repetitive-type work, checking, controls, and stuff like that and lets them focus on what they’re hired to do, which is to think about the strategy of that business, to think about where are we going to raise our next round, what KPIs we need to hit, and stuff that those folks are paid to do. We think, today, a substantial amount of their time, and in some instances, almost all of their time in the company is spent doing work that can be simplified. That is a forever goal. It is a job that will never be done, but it maybe keeps chasing and make tons of progress so that those companies can apply their resources smarter, and as a result, grow faster.

    Alejandro: Nice. Imagine that I put you in a time machine, now, and I’m bringing you back in time to that moment where you were discussing with your buddy doing something and doing the event at the Lincoln Center or starting a company of your own. You’re able to go back in time and sit that younger Everett down and say, “Hold on. Here’s one piece of advice before launching your company.” What would that be and why based on what you know now?

    Everett Cook: I think I probably would have started earlier, but I think it’s like: don’t be afraid of stuff. As long as you’re not stubborn, if something isn’t working, don’t keep doing it. But the upside is so much bigger than the downside, and you can figure stuff out. It’s about that. It’s about constant experimentation, constantly trying stuff. Build more stuff. Launch more things even if they don’t work; just keep going. I think the earlier we started that, the more later in life, chances you’ll have of building a truly scaled and phenomenal organization. That’s probably it.

    Alejandro: You were mentioning there, Everett, that you wish you would have started sooner, so in that regard to follow course, what would you say is a book that you wish you would have read sooner?

    Everett Cook: I read a bunch of good books. I think I really enjoyed my journey, but I do think just trying more stuff earlier would have always been good. In terms of books that I recommend, there are a couple that I loved about entrepreneurship. I love the Richard Branson story. He’s always been an inspiring figure to me. Losing My Virginity talks about him starting at age 16 and not looking back, and that was inspiring to me reading that around that age. I also find some of these stories about industrial and telecommunication founders that maybe are not as high profile as the tech vendors of today, which build really interesting and phenomenal businesses. I like the John Malone book, Cable Cowboy. It’s interesting to think that it’s such a static business. You think about spectrum and all the other cable companies. These companies feel like they’ve been here for a thousand years and are gargantuan. You realize that in the 1970s and ‘80s, it was just a couple of guys out there, small businesses that grew up and then bought each other and scaled up, and that’s now considered utility, but back then, it was an entrepreneurial business for guys that took crazy risks and built incredible legacies. That was a cool one. I like books about shooting for peak performance. I read a lot of sports psychology books, and that was true when I was on Wall Street, as well, because it was very applicable. There’s a book called The Inner Game of Tennis that I think is a great read thinking about the mastery of self and how do I find where I’m excellent and push that further. It’s about 100 pages. It’s a pretty easy read, but it’s really profound.

    Alejandro: That’s amazing, and I think that’s very true. First and foremost, I think that biographies are great because I find that even though it’s probably a different point in time, history repeats to a certain degree, and it’s important to see who people really are in terms of leadership with whatever they have in front of them. Then, to what you’re saying now, it reminded me a little bit of the documentary of Michael Jordan, ‘The Last Dance,’ and the leadership approach—

    Everett Cook: Yeah, that’s great.

    Alejandro: —and how that can also be applied to business. So, really good stuff, Everett. For people that are listening, what is the best way for them to reach out and say hi?

    Everett Cook: Come visit at Rho.co. We’d love to help you, especially if you’re a growing business. You can chat with our team, and we can tell you more.

    Alejandro: Amazing. Well, Everett, thank you so much for being on the DealMakers show today.

    Everett Cook: Thank you so much.

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