Rags to Riches in the Shadow of Financial Armageddon

Would you like to read about an uplifting, prototypical American success story to bring some joy over the weekend while we wait on pins and needles to see what Congress does to avoid the end of the modern world?

I will get to the Reggie Aggarwal / Cvent story in a minute, but for a moment perhaps we should hope for continued gridlock in Washington to see if this current episode of wolf-calling is the real thing.  Given all the pronouncements of doom over the past 3 years by the ruling political class, one wonders what might have happened if gridlock prevailed during the panic of the TARP debate, multiple stimuli, QE1-3, bail outs, etc.  After all, when is the last time we’ve had a President use the term Armageddon as part of their daily lexicon.  Perhaps Roosevelt and Truman had reason to use the A word, but the proliferation of politicians claiming end times is getting more heated than Harold Camping was on the 21st of May.  If the ruling class (Local, State & Federal government) wasn't spending 42% of the GDP, their empty rhetoric would have little relevance.  But this is all a rant for another post.

Here we are four days away from the gears of modern life grinding to a halt due to the lack of fiat money lubricating their rotation,  when lo and behold I get an interesting email (me and 50,000 of his best friends) from Reggie Aggarwal.  Reggie is the CEO of Cvent, a dot com flame out, that rose from the ashes to receive $136 million this week.  He sold a minority stake in his company to fuel their next phase of growth and development.  Here is his story.

How can this be?  In the shadow of financial Armageddon some sharp private equity investors are digging up the gold they buried in the back yard to risk making the largest business software investment so far this year.  Perhaps all this theater in Washington is of the Kabuki variety. 

Does it strike anyone else that all the DEFCON 1 alerts the politicians have been sounding since 2008 are much like Y2K?  Much ado about nothing, no?  Is it possible they are only noisy gongs or clanging cymbals?  Real-life Wizards of Oz, telling us to pay no attention to the man behind the curtain?

As an aside, let me give you an investment tip.  If we were on the brink of a true meltdown my survival investment portfolio would consist of bullets, coffee and cigarettes.  Just think of the market value of those commodities to desperate marauders and caffeine/nicotine addicts.  Sort of like Scrooge McDuck’s brilliant commodity play.

But I digress.

Stories of people like Reggie Aggarwal and his event management software company Cvent are what gives me abiding hope in the county and the prospects of a bright future.  If we could reduce the relevance of the political ruling class by downsizing their spending (see Krauthammer's salient article) and outsourcing/cutting their services, we could ignore their clatter and focus on the great things that are going on in the world of entrepreneurial ambition.

Read Reggie’s rags to riches, near business-death experience.  From what I can tell he sounds like a humble guy who has kept things in perspective and continues to pinch pennies in order to grow his business.  The seven “lessons learned” he outlines are great nuggets of truth earned through the crucible of struggle, and should be copied by all of us.

I wish more in Washington would read his advice about being frugal. Although I did chuckle at his policy of sharing rooms when he and his team travels.  I draw the line due to personal experience.   Early in my career I had one of the most awkward moments of my business life when my boss  insisted we share a room on a trip.  I was young and thought that perhaps this was standard business practice.  It was totally weird saying goodnight to my boss, Walton family style and trying to figure out who got the bathroom first in the morning.  But that is already too much information.  On this digression all I can say to Reggie is book rooms at the local Motel 6 and let each of your team have their own room for $39.99 per night.  Sometimes morale is as important as frugality.
 
Obviously Reggie is of Indian descent.  I don't know his family’s story, but my guess is that he isn’t too many generations removed from life in India.  Spending my first 20 years growing up in Asia (Philippines, Singapore and Japan) I was exposed to the red-hot entrepreneurial DNA of the Indians and Chinese.  Isn't it great that someone who doesn't look like Bill Gates (paraphrasing the words of Obama), or has a "funny sounding name" (Obama – the great unifier again) can achieve such success in a relatively short time in this county.  Apparently Aggarwal doesn’t spend much time talking about the disadvantages he was dealt due to his heritage.

Instead of worrying about equality of outcomes he pursued his passion with a vision of America’s framework in mind... equality of opportunity.  He worked like a dog (e.g. entrepreneur years: each one equals seven politician years), put everything on the line (eliminating his law career fallback position), added value to his customers and never gave up.  His reward?  Hopefully great financial gain (who knows how much ownership was retained over the years).  But more importantly the satisfaction of a job well done, and a business that provides a great return for its investors plus solid jobs for hundreds of people.  And the good news?  It still sounds like he has a lot of fire left in his belly.  Unlike all those other "millionaires and billionaires" who only work up a sweat fighting for lower taxes.

Those of us who are around the entrepreneurial/creator class (or are entrepreneurs) know how hard they work.  We see up close all the risk they take and all the sacrifices they and their families endure...both financially and relationally.  The average politician only sees the glory years when the entrepreneur has made it and is "loafing" clipping coupons and paying a lower percentage in taxes than their secretary (see why Warren Buffet is wrong on taxes).  For every Reggie Aggarwal there are hundreds of entrepreneurs who sacrifice just as much and never see the Promised Land.

Rather than create animosity and envy, we should do everything we can to herald people like Reggie and hold them up as examples of American Exceptionalism and the type of opportunities our system provides.  If we shift our attention from rubber-necking at the fabricated train wreck of Washington, we see clearly that America is among a handful of countries where guys with "funny" names can dream big and grow up to be successful CEOs and Presidents.

I have no idea what Reggie's political slant it, but unfortunately for him, he is now in the class of "millionaires and billionaires" that aren’t paying their fair share or pulling their weight.  Based on this article Reggie sounds like a guy who eschews corporate jets.  Although as a sharp businessman he probably has done the cost-benefit analysis and realized that for purposes of visiting five key clients in four different cities in one day (with his entire executive team in tow), flying Southwest (web fares even!) can’t touch the ROI of chartering a corporate jet.  Of course it is the President that flies around in the ultimate corporate jet.   And speaking of jets (uh oh, I'm pontificating again), I mentioned Warren Buffet earlier.  Isn’t it funny that he is an advocate of increasing taxes until it is his ox getting (Al) gored.

Rather than vilify "millionaires and billionaires" and corporate jetters, forcing them to suck up and get distracted playing defense, why don't we create real incentives for the job creators like Reggie?  After all, don't we need a lot more indomitable entrepreneurs like him to get us to a "real" unemployment rate that doesn’t take all of our fingers and most of our toes to count to?

How about this approach Mr. Obama and Mr. Reid?  Why not pass a bill that says for every job an entrepreneur creates in a year he gets his taxes cut by 2%.  No, not a 2% deduction, a 2% reduction.  If Reggie is now in the top tax bracket of 36%, he will pay zero in taxes if he creates 18 new jobs.  My guess is the Federal government would see greater revenue (and spend less) if Cvent added 18 new workers and Reggie paid zero.  Talk about getting the doers, creators and risk takers back in the game in a big way. 

Let's stop pointing fingers at "millionaires and billionaires" saying they need to pay more.  Create a lottery incentive scenario...create enough jobs and you are handed a get-out-of-jail-free card.  Besides a guy like Reggie (and most entrepreneurs) have sacrificed so much to get to where they are, they should get a huge reward. We want to create incentives for more people to go down Reggie’s path, not less.

You may ask why I have brought such a political slant into a blog about business and growth.  It is because clearly we have a governmental spending problem that has been compounding for years.  Obama is just the icing on the cake (although it is a really thick layer of super rich cream-cheese frosting).  This spending problem (not revenue problem) is what has created a no-growth, jobless economy.  Read Amity Shlaes, "The Forgotten Man" to see history repeating itself.  I certainly don't want to grind through another seven years of this economy!

My work helping companies grow can only make so much of an impact when the politicians keep dumping wet cement on top of us.  Sure there will be those breakout success stories such a Cvent, and those shoots of growth are encouraging in tough times.  However, the overall economy is being handicapped to such a degree by poor policy that large numbers of Americans are struggling to make things work.  We all know that American Works, literally and figuratively.  We need politicians to free us of their imposed shackles in order to get back to our traditional animal spirits.

As an alternative, if we can't get a pro-business, pro-growth, low spending government maybe we can hope they leave us alone and stay in perpetual gridlock while guys like Reggie defy the odds and create jobs and wealth under the clouds of Mordor.