Pivoting Towards Tech with Aquaa Partners’ Paul Cuatrecasas
Go tech, or go extinct.
Paul Cuatrecasas is the Founder and CEO of Aquaa Partners and author of Go Tech, or Go Extinct: How Acquiring Tech Disruptors is the Key to Survival and Growth for Established Companies.
Aquaa Partners is a London-based boutique M&A and strategic advisory firm that advises established companies on how to manage profound industry shifts. They have developed the proprietary Techquisition™ method (the “Science of Tech Company Acquisition”). Paul specializes in teaching businesses how to grow through tech acquisitions.
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Welcome to The Thoughtful Entrepreneur Show. I'm Josh Elledge, Founder and CEO of UpMyInfluence.com. We turn entrepreneurs into media celebrities, grow their authority, and help them build partnerships with top influencers. We believe that every person has a unique message that can positively impact the world. Stick around to the end of the show; we'll reveal how you can be our next guest on one of the fastest growing daily inspiration podcasts on the planet in 15 to 20 minutes. Let's go.
And with us right now we've got Paul Cuatrecasas and Paul, you are the author of Go Tech or Go Extinct. And you're the founder and CEO of Aquaa Partners and that's A Q U A A, two A's because you know we're tech so Aquaa Partners with two A's. Part, AquaaPartners.com. Thank you so much, Paul for joining us.
Sure, thank you for having me.
So you're a yank that found himself back over in London. And so what what precipitated that decision? That was a while ago? It was.
It was quite a while ago. Yeah. You mentioned that you were nine years ago. Yeah. Yeah. So I was I was working in New York. And we had what I call got the first credit crisis back in. Gosh, this was 1989 1990 91. And in 1990, we basically I was working at GE Capital in New York and leveraged buyout group, and we saw prices getting too high. And they were there were some issues there with the portfolio and so they had a round of redundancies. Locally, I made that but I had an offer to come to London. I thought it was a good time. And I thought we'd be abroad for a year, six months to a year but it's ended up being 29 for nine years and counting.
Wow. So you haven't lost your American accent?
No, I don't think that's going to happen.
survived this long without adopting Michael Jackson so good Anya you know, so interesting trivia maybe you know the answer to this. When did the Americans lose their British accent?
Good question. But I can tell you that if there's a Brit or a kiwi, or a South African, for example, they go to the US, they tend to lose their accent pretty quickly. It doesn't work the other way around. And I think it's just because the American accent is actually quite a lazy accent. So it's easy to acquire. Not so easy to lose. So, yeah, that's the best I can do. I'm afraid so
this might blow your mind. And I you know, and so I googled this some time ago, and I read a very lengthy article on it. So the Americans actually never lost a British accent. It was the Brits who adopted a posh accent in the early 1900s. So we're actually speaking the kind of The original English
dialogue, if that's true, I'm embarrassed. I don't know that
I ever knew that. It's like, honestly, it's like, you know, when someone says share an amazing fact, that's always the one that I share. And so what happened is that early in the early 19 hundred's, everyone in England started adopting this, you know, this kind of, you know, pushy kind of, well, we're going to talk, you know, much more formal because we want to appear sophisticated. And it was interesting because the port towns, just prior to the Industrial Revolution, really started adopting this as well in the United States. So Boston, New York, and you know, and so, when you think of a traditional Boston or New York accent, that's actually kind of a holdover from this, like, where everybody was supposed to adopt this posh accent. You know, of course, it went completely left for Boston in New York. Have you think of a traditional Boston New York accent? But yeah, it's the Queen's English is completely made up as of, you know, just over 100 years ago.
That that that's fascinating. I'll have to check it now with my English wife.
Yeah, right. Right. Okay, so he will be the authority. Yeah, yeah, it's I think it was one of those Mental Floss is where I found the story on it. And maybe maybe
the British maybe over here. They've tried to erase that from history. Maybe
that's what I think so I think when you tell a Brit there are they're awfully offended because it's the Americans who have bastardize, the Queen's English, of course. So, Paul, explain what you do over in London
to know so I run a firm that helps large non tech companies legacy established companies Yeah, to acquire and invest in the right tech companies to be able to become more tech enabled to avoid disruption and to accelerate their own value which was I think given the recent Coronavirus, crisis and so on, it's become more and more important than ever. So no kid I busy at the moment actually.
Well, that's it, you know, even things like me, where you wouldn't normally think about meat not being available in your supermarket, for example, at normal prices, but this crisis has cut through the meat processing factories, you've probably read about it, and people are struggling to keep the plants open and so and so now, meats becoming more difficult to find prices are going up. And the fact is that that plant based protein meat has been under development for many years. And you may have seen in the market the company called beyond me did an IPO last year. It's currently worth about seven or 8 billion. dollars, there are other companies like impossible foods that are doing it. And there's also and this is what most people aren't so aware of lab meat or cultured based meat companies, which are growing meat that is perfectly clean from a single cell of a cow, for example, or a pig or a sheep or fish. And I really think that is going to be the way forward. I thought that beforehand, and I refer to it in my book, but I think now people are realizing that actually, there are problems with the current supply chain and with meat and just an example of the kind of things that will that will happen.
Yeah, growing a cow is pretty inefficient. You know, we've certainly over the past 200 years, we've, you know, really, you know, with the factory farming of it, we've made some improvements on that. But, you know, along comes technology. And so I guess, Paul, you know, the issue is why do legacy companies have a difficult time or not a difficult time, but why does small nimble tech startups have a way of innovating, that maybe legacy companies just aren't able to.
It's just it's such a great question. I mean, that is that is the question and through all of our work and our research that started about three or four years ago with the large non tech companies, and through all of the meetings and the work and the, the one on one sessions we've had now with senior executives at over 400 companies. I've concluded that is that is the one thing which is which is mindset, which is the the lack of believing that it's possible, whether that's cultural or it's something that is developed in the company's DNA that we're not a tech company I was just reading today I won't name names. The CEO of a large European company was quoted in Fortune magazine by saying just said, we're not a tech company. And so it starts with that, you know, if you believe you're not a tech company, you're not going to be and that trickles down throughout the entire organization. It starts to develop its own belief system, whereas companies like Walmart, or GM, or Prudential financial new us, they They haven't said that. They said we are going to do what it takes to lead. And to remain a leader despite the the attacks from, in this case, Amazon or Tesla, that, well, we've always been a leader in this industry, we're going to continue to be a leader, we'll do whatever it takes. And it looks like the center of gravity and the puck is moving to tech, and I could talk about it all day long. That's what we have to do. And so that really is that's the answer. It's, it starts with mindset with belief, and a and making a decision to do it.
Do you think that for a legacy company, it's better for them to create this, you know, like a skunkworks Division where they can, you know, they can innovate? Or is it best to just kind of watch what's going on in the market, let the free market you know, kind of decide, you know, who's doing really great stuff, and then, you know, pay the bigger price to pay for winners? Basically,
it's a great question. And the answer is every company is different. Just like every person is different. In a way we all have our own DNA. So does every company have it? So DNA, and it really is different. So some companies, depending on the size, or the industry or their growth stage might decide to set up an incubator and make small investments or contributions to companies that are small and emerging so that they can learn and develop skills and talents. But other companies might say, look, we need to move the needle fast, like Walmart did with acquiring jet comm in 2016. We've got to move the needle fast, things are changing faster than we thought. And we need to make a big move. And if they do it, right, the big move that they make, doesn't have to be as risky as most companies think that it is. I mean, it's sometimes a simple question of they add one plus one and they think it's too it's, well, you know, we're not Google. So we can't do this. But the companies that said no, we can and are willing and able to make the big move. That's the right move for them. So it really does depend. In the end. I want to say that, in our research, what we have found quite clear Really is that the leading companies, the ones who are truly increasing stakeholder value are the ones that have done all three key things. So one, they are innovating organically with their own people. They're recruiting good people, they've got centers of excellence, doing their own innovation, r&d, etc. They're also investing in and said, investing in tech companies and setting up incubators and accelerators. So they're doing the small company investment where they need to, and they're also acquiring so taking full control of selected digital tech software companies are doing all three of those things holistically, essentially, to become either a tech company or to become technology enabled.
So it you know, if I am a tech, so we're, we're a tech company. So I mean, and that's kind of how I see where we're a tech company first and we use you know, again, you know, our, our one of our missions is to challenge the status quo with everything that we do and if the market is asked For something, and you know, traditional PR, for example, would say, Oh, well, we can't do that, or we can't guarantee results or no, you have to have a 12 month contract to work with us. You know, it's like, you know, that's ridiculous. No, you don't. And so, you know, I, so I created this as a consumer saying, Why doesn't this exist? I need this, I need something that's much more user friendly to use. And, you know, I don't want to just pay for introductions, I want to pay for results. And so that was been our that's been our approach. So so we see ourselves as a tech company. And so to my fellow kind of tech company owners, yeah, should they be thinking about in terms of, yeah, I'm going to create this disruptive technology and I'm totally open to an exit at some point down the road, because we're going to keep doing what the old dinosaurs refused to do. Any considerations that those tech companies should keep in mind just in terms of have, you know if they're like, you know, they're open to that opportunity down the road?
Yeah, again, great question. So we have been advising tech company entrepreneurs and CEOs and founders for? Well, certainly I have for 2829 years now, every single day on exactly these, these topics, and it's what gave us our own experience and confidence and accumulated understanding before we were confident enough to go to large non tech companies and talk about all this. So my advice to them to them today is to keep on doing what they are doing so to, to maintain that spirit, that vision, that passion, of what being an entrepreneur is all about and believe that you can do it. So the mindset applies equally to an entrepreneur, of course, in fact, it's very hard to set up a company and have any kind of mission without really having that that right mindset. So that's number one. And then I'd say, while you may feel that you're disruptive and you want to disrupt that's always the temptation for an entrepreneur, isn't it? Gonna be the champion and the hero And certainly that that's important, right. But at the same time, the most successful tech companies, in my experience have found a way to work with the existing ecosystem to work with the existing, larger established companies all along the value chain or in different parts of the ecosystem. In fact, Amazon did that. And many people don't know that Amazon actually partnered with borders, borders bookstore, you may remember if you live long enough, was was one of the major to bookstores, booksellers along with Barnes and Noble. And as borders was realizing the world was moving to e commerce. They thought, well, it's better to partner with this new e commerce company Amazon rather than try and do it ourselves. And they partnered for, I don't know, five or six years before border said, Okay, we got it now. Okay, that's fine. You can, you know, you can go Amazon, we're going to do it on our own. And I think four years after that borders would bankrupt and we know we're in Illinois today. So tech companies like like Amazon. They were smart. They acquired other smaller companies along the way. As a very entrepreneurial mindset, Jeff Bezos and his team, but they also partner with some of the larger players. And so I think you can do both. I think you can have the mindset of disruption, not expecting it to happen overnight, it's going to take years. But there's nothing wrong with that. That's why you become an entrepreneur, you want to build something over the long term. So as you're building that, with that disruptive mindset, you know, where you're giving a better experience to customers. That's what it's about at the end of the day, right? It's, that's what an entrepreneur does is give a great experience to customers. But while you're doing that, think also how can you be attractive to an existing player who has access to thousands or hundreds of thousands or millions of customers, and offer them something that they don't have, but that would really be valuable for them? And then you cut a deal and that that can very often be, you know, a key breakthrough for the growth of an entrepreneurial company.
Hmm. You know, I think again, you know, just you know, the importance of continuing to innovate and being open not just to You know, the fact that we can let our own egos get in our way. And you know, I was just talking with someone who, you know, they had a sass platform, and they put it out on product on, and they put it out on appsumo. And he said, you know, we don't do it, because, you know, we're gonna make a lot of money off those sales, you know, directly from that. But one thing we get is all a lot of feedback. And sometimes it's really painful. Sometimes it's, you know, it's hard to hear, but if you're not, you know, it, you know, so if you're a legacy company, and you think that well, we can just rest on our laurels. And because we own, you know, 80% of the market, you know, I'm sure that we could look at history and see other other providers that owned a big chair of the market that no longer own a big share of the market.
Yeah, yeah, that's exactly it. So, look, all these things take time and things change. They change all that and they're changing faster than they would have. So one thing we talk a lot about, is, we say that today's business world is business as exponential It's not business as usual. Its business is exponential, because every industry now is being infiltrated by tech companies. So you hear about FinTech, right? Financial tech, health, tech, travel tech, you know, take any industry, put tech at the end of it, you'll probably find thousands of companies. And that's really what's happening here is that every industry is being infiltrated by tech, because every industry is changing exponentially fast, some faster than others, but they're all moving in that direction. Again, now more than ever, given this recent disruption we've had. So it's, it's it's a question for entrepreneurs to constantly monitor how things are changing and shifting the landscape to always be in front, not behind, and to be able to anticipate, okay, we we assume that this was the case, six months ago, a year ago, we did our plan, but things have shifted. And now we've got to, we've got to do some scenario planning because there's been a big shift. It's been a new competitor who's entered or there's been, you know, some new regulation or whatever it might be, but you've got to be ready for everything, and it's One thing I tell all, while I certainly have been saying this quite frequently, for the last five or six years, to all entrepreneurs and tech companies have a plan B, you know, always have a plan B. And mainly, the reason to have a plan B, in the past has been for the next market crash. And we could be looking at that now Time will tell how much worse this gets. But having a plan B, where you, you know what you have to do, so you don't get emotional about it. And you just do it can be a real advantage, because you can move more quickly when you have that.
Yeah. So you know, personality wise, I tend to be a, you know, pretty glass house kind of company, like I don't mind, you know, pushing for things that I think are important in the market. And I know one thing that you'd urge tech companies to do is make alliances, make friendships with the larger companies and and try to be helpful. One concern that someone might have, as I say, Well, listen, what happens if I give them all my ideas, they just say, heck with those guys rule just thanks for the thanks for the great ideas. We'll go ahead Do it ourselves. Does that happen often is that a concern? Is there you know, if you're a tech company, should you protect yourself in that regard? Or how Yes,
answer that concern, it can happen.
It can happen. So, again, every company, every situation is different, it probably depends on who the counterparty is. So who is a large company? how you've got to be able to sniff them out to a certain extent? How realistic is it that they're going to actually execute on your ideas? Some companies will absolutely will. If they have been looking at your particular, you know, industry area or niche for a long, long time, and you know, they've invested money in it, they, there's a good chance they could take advantage of your intellectual property or your skills, know our ideas. But if they haven't, and they're just fishing around, then you've got to make a judgment call. And this is assuming that whatever NDA you signed may not be enforceable, and you're going to be the small guy anyway. So you just have to make a judgment call and, you know, if you believe that they're they're generally trying to learn and figure things out, but they're not Strong enough from an execution point of view to actually take your idea and launch it, or at least not be able to go faster than you then you could probably be a bit more open. I mean, I, I'm reminded of the story I just read yesterday today about Okada, which in the UK is, is now one of the most valuable supermarket operators even though it's one of the smallest because it's essentially a technology company. And they were founded 20 years ago, they did an IPO on the London Stock Exchange 10 years ago, for about a $1.2 billion. Today, it's worth 12 billion pounds, or $16 billion. So they've really, really grown in value terms. But the CTO was saying in the early days, they had a lot of approaches from larger supermarket operators and they were questioning do we share our ideas on this and and in the early days, they were much more secretive. They didn't really want to share because they had developed something special, unique, different that nobody else had developed, and they had spent years Yours in huge amounts of money, incurring losses for years developing that intellectual property and they just as you can imagine wanting to protect it. But then they, as many companies do along along this journey, realize that actually, it's an opportunity for us to be able to partner with the supermarket's because they're not gonna be able to do what we do. They they can't overnight or in a year to develop, but we've done over 10 years, and they don't have the team, they don't have the know how highly unlikely so we might as well license our technology to them, which is what what they've done very successfully.
You think from a trend perspective that economies or businesses have become more cooperative, so you know, I'm kind of a partner at all costs kind of guy, like I, you know, I just assume stay in my lane and do my lane better than anybody or anything else in the world and continue to improve what I do. But do you think that people are, I guess, you know, I it seems to me, like 10 years ago, it could have just been my environment, but I felt like people were a lot more protective and not as collaborative. Maybe this again, I'm just only talking about my own perception. But I wonder if there's been any trends in you know, openness or collaboration or kind of open sourcing ideas and
yeah, absolutely, things have opened up and again, technology has allowed that the internet cloud API's, the the spirit of partnering now joint venturing affiliates working together is is completely normal unnatural in most companies. So one always has to be protective. But there's no doubt that there's there's, you know, huge amounts of partnering and one of the guys that I I read quite a lot about in new promoted joint venturing with Jay Abraham. So Jay Burnham is you know, marketing guru and he he talks a huge amount about how early Stage growth companies, tech companies and small companies can really create those breakthroughs through partnering. And I think now more than ever were established companies are under threat. I mean, they are really under threat now in many, many industries. They they need to partner. I mean, they have to I don't, I don't see how any company today can do everything in house. In the old days, we had ma bell. And you might remember the Bell Labs. And so many of the larger companies did most of their r&d in house or they did it with universities, and that still exists but the amount of partnering on ideas today's it's just everywhere, so you have to do it. I think you just you just have to do it, the more the better.
So your book, go tech or go extinct, which of course you can walk into borders bookstore and buy it, I'm sure.
yeah, so tell me about telling just a bit about the book.
Well, the book was inspired by frankly, Walmart's acquisition of jet comm in August 2016 I mean, I literally did fall off my chair I could not believe it. I mean, we we had a client where that that had Walmart as its largest customer or channel the markets we knew quite a bit about it very conservative company totally bricks and mortar they had tried kicking off walmart.com failed. I don't know how much they spent how many hundreds of millions but the jet deal was was paid for them 3 billion cash 13 times revenue multiple compared to Walmart's own revenue multiple which would have been point 3.4 at the time, just astounding to me. And so that began that journey of Wow, maybe we finally have reached the point where these large non tech companies that we've been trying to take our tech deals to are finally waking up. And so we spent three months researching it and we realized that this was actually starting across many different industries. And after about another six months of talking to some of the companies I decided I got to write about this. I just have to write a book. And and as we were engaging in discussions Through our marketing efforts and just being you know, ourselves as in myself as an entrepreneur, very aggressive in exploring this, I thought, well, the discussions that I'm having with C suite executives at the fortune 1000 companies are so interesting. And, and revealing in many ways that that I thought I will add the context of those discussions to the book. And, and the book really is meant to, to help educate, to help give some sense of, you know, to the average business person of what's really happening before our eyes, you know, it's a, it's happening slowly enough that we don't realize it, but fast enough that oh my gosh, what just happened is also reality and, and it is truly exponential. Now the change and we're seeing more and more company failures, or at least, companies are struggling. Big, established companies are struggling to go perhaps as fast as they used to. And many of the largest English companies frankly, in the last 10 years, we've had very low interest rates in the US and I Europe we've had zero and even negative interest rates, institutional investors have been quite happy, for the most part, to keep their shares in a large company that's been flat, but paying dividends and where the dividend yield has been higher than the yield, they could get on bonds. And so that's propped up a lot of the established companies I believe, over the last 10 years and the result has been to a large degree complacency I think a lot of large corporates have fallen into the trap or because the board hasn't been overly you know, activist in in their influence on management because their shareholders institutions haven't been overly active this because they've been relatively happy with it with a dividend yield. I think that's had an impact on management's as I call it feeling paranoid like Andy Grove was all about you know, it's it's, you know, you must be paranoid even if you're by far the number one leader. Kodak should have been paranoid Intel was in, you know, Andy Grove took the Intel kept from, I don't know, a few billion to 200 billion by being paranoid. So I think that's really important. I think it's really, really important that any leaders, any company, large companies that are leading have to be paranoid today about their own position because nothing is safe. Nothing is safe in any industry.
Now fantastic. So the book again, go tag, go extinct. Paul Cuatrecasas, living with American accent in London, the original accent. And your website again, is, well, there's Aquaa Partners, and then of course, specific to the book. Good luck in spelling this but Paul Cuatrecasas My recommendation is go to AquaaPartners.com and again, that's Aqua, A Q U A A Partners.com and or you could just search for the book on Amazon Go Tech or Go Extinct. Paul, thank you so much. Any other things that we missed?
Uh, how much time do you have? Yeah. Right
now for five other shows, that's what we measure.
Now. That's great. Yeah.
Thank you so much for joining us.
Thank you. Thank you.
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