Fredrick D Scott: 5 Things You Should Do To Become a Thought Leader In Your Industry
No successful person can say they achieved success without first failing repeatedly and growing from their failures! In truth, the most powerful, memorable, and lasting lessons are the ones that are born from failure!
As part of our series about how to become known as a thought leader in your industry, I had the pleasure of interviewing Fredrick D. Scott.
Fredrick D. Scott, FMVA® is the CEO of The Scott Family Office Intl. A single-family office structure from which Fredrick stewards his family’s assets. He is also the Chairman of the Board for the New York City–based foundation, The Scott Family Foundation Intl., a Civil Society Organization (CSO) and member of the United Nations Global Compact. Fredrick is a PE/VC Investor, Business Consultant, Philanthropist, Author, Contributing Writer for Entrepreneur Magazine, Business Mentor for the MIT-Solve Program, Gener8tor and Defy Ventures. He formerly mentored at the Bronze Valley Accelerator and The Northwestern Mutual Black Founder Accelerator. Fredrick is also the host of the #GetRealWoke Podcast.
Named one of Ebony magazine’s “Top 30 Under 30” in May 2010 at the age of 25, Scott was, at the time, the youngest African American hedge fund founder in history. The former Wall Street wunderkind is now ready to revolutionize the economic development landscape in the minority community.
A sought-after financial expert, Fredrick has appeared on TVOne’s “Washington Watch” with Roland Martin, New York’s Hot 97-FM and the Warren Ballentine Show. He’s spoken at the annual conferences for the National Action Network, the National Bankers Association, the Jackie Robinson Foundation, and the renowned Eagle Academy. Fredrick is the quintessential definition of “failing your way to success”. Though never indicted, due to unfortunate and perplexing circumstances, Fredrick plead guilty to a “white collar” crime and spent nearly 5 years of his life inside the Federal Prison system in the United States. That experience changed his life and gave him an eye-opening realization of what it truly means to be “Black in America”.
Fredrick is a strong proponent for the advancement of financial literacy initiatives in disadvantaged communities and teaches financial literacy and business development concepts through his Podcast. He provides information, answers questions and supplies resources free of charge, as well, gives away a minimum of $1,000.00 every month. As a Contributing Writer for Entrepreneur Magazine, Fredrick writes on business development and finance topics. An advocate for better race relations in the United States and the ending of policing and incarceration tactics which disproportionately effect communities of color; Fredrick candidly discusses the implicit cognitive biases in the Justice and Correctional Systems and enumerates factual, data driven conclusions on its effects on the sociological and economic constructs of the United States.
In 2009, he served as the Founder and CEO of ACI Capital Group, LLC, an S.E.C. registered Investment Advisory Firm that, according to regulatory filings, had 3.7 billion dollars in assets under management. Here he was responsible for all investment banking, advisory, and operational matters. A Muslim by faith, Scott has lived and traveled extensively abroad and is fluent in Italian. Fredrick sits on the Board of Directors for Our Women In Politics and is the Vice Chairman of The National Action Network Second Chance Committee (NYC Chapter).
Fredrick received his education from Harvard University (via edx.org), he holds the Financial Modeling & Valuation Analyst (FMVA) Certification, Capital Markets & Securities Analyst (CMSA) Certification and the Commercial Banking & Credit Analyst (CBCA) Certification all of which he received from the Corporate Finance Institute (CFI). He also received his Diploma in Islamic Finance from the Chartered Institute of Management Accountants (CIMA).
You are a successful business leader. Which three character traits do you think were most instrumental to your success? Can you please share a story or example for each?
I think the first would be waking up to the reality that money doesn’t make the world go around, people do (something I had to learn the hard way); that money is a byproduct of quality relationships, and so if I wanted to get as far as I could possibly get, I needed to become a master at developing, cultivating, managing, and protecting my relationships above all else!
Second, I realized that I needed to be a student of knowledge. I have always been open-minded to learning something new daily and viewing previously learned concepts from different perspectives and angles to be constantly sharpened to the point of expert precision. (There are several books that I read over and over again, and each time I read them, I learn a new thing or take away a new perspective that makes me better, more proficient). I had to temper my arrogance enough to not only become consistently coachable but coachable to the speed of instruction!
Third, I had the courage to fail big, fast, and often! I could never let failures and setbacks outweigh my determination to overcome those failures and setbacks, learn and apply the lessons I learned from them and continue moving forward beyond the failures and over the obstacles.
Are you able to identify a “tipping point” in your career when you started to see success? Did you start doing anything different? Are there takeaways or lessons that others can learn from that?
The “tipping point” for me came the day I realized that I was no longer questioning. Rather, I was just “getting lucky” or if someone else was pulling strings behind the scenes to ensure my success. Funny enough, it was because someone very close to me shared with me that their company had grown to the place it had was because of the advice and guidance that I have provided them every step of the way. They have a gross of 12 million in revenue annually now. It was at that moment that everything hit me at once; I stopped questioning my skillset and intellect, I moved from a place of doubt to a place of certainty. I accepted that everything I knew to be true was true, and the moment that happened, EVERYTHING changed! Well-placed certainty provides access to opportunities that are unfathomably hard to comprehend without it!
None of us are able to achieve success without some help along the way. Is there a particular person or mentor to whom you are grateful helped get you to where you are? Can you share a story about that?
There are a number of people to whom I can attribute my success… Not only those who contributed positively and imparted valuable lessons and tools into my life in an effort to help me grow but also those who came to destroy and break me, the lessons I learned from them were also invaluable because they taught me to be careful who I gave access to and that my reservoir of determination to fight and overcome was far deeper than I ever imagined.
My first mentor, Al Hundley, stands out not because he taught me how to make six figures and believed in me at a time that I needed someone to believe in me the most, but because he was honest enough to tell me that he couldn’t teach me how to make seven figures because he had never done it himself. His candid honesty and unselfish encouragement (he fired me) to force me out to find the path to get where I wanted to be will always be appreciated because with the level of trust I placed in him, he could have stunted my growth by keeping me with him. Instead, he breathed life into the next chapter of my journey by letting me go because he saw early on what I could become! He is like family to this day, and I would gladly give that man the shirt off of my back if he needed it!
Finally, one of the key reasons why I am where I am today is because someone who was once very close to me was used as a vessel to instill courage and curiosity in me to get up and try again at one of the lowest points of my life! It was in the latter part of 2007. I had just failed my first company; I felt worthless, like a complete failure, like everything people had said about me when I was a child was accurate! I was very close to re-enlisting in the Army! She came to me with a vision of the future she’d seen the night before. She told me that she had spoken to me, I was much older (I looked like I was in my mid to late ‘30s), she explained what was going on, that I was going to quit, and that she needed to know what to say to get me to get back up! She told me that I looked off and responded, “I remember that time,” she asked me what to do, and she said I responded, “Tell him that everything he knows to be true is true, and the moment he accepts that, everything will change!” I had no clue what that meant at that time but, I got up and tried again because I wanted to see if she was right. Today, at 37 years old, I can confirm that she was spot on. I would not be where I am today had it not been for that vision, and there is no way around that fact!
You have been blessed with great success in a career path that many have attempted but eventually gave up on. Do you have any words of advice for others who may want to embark on this career path but are afraid of the prospect of failure?
Before we address the fear of failure, I believe we should first address the importance of passion. Most people in today’s society are in jobs and careers that they are not passionate about! As a result, for most people, employment is where dreams go to die! Being passionate about what you do makes going the distance and weathering the storms on the journey to achieving the level of success you desire a lot easier. It also makes you naturally good at what you do and naturally able to achieve the highest level of expertise and precision your mental capacity will allow you to. When passion is the driving force, success is inevitable, and when that level of success is achieved, you don’t have to worry about finding the money because it will most certainly find you!
Regarding the fear of failure, the fear of failure can NEVER be the key driver in your decision-making process. Fear is the crippling handicap that prevents you from reaching your fullest potential, and accomplishing is realistically possible, attainable, and achievable! We are, ALL OF US, products of our failures; success in itself is the finished product of failure! The key to success is to embrace failure fully and fail big, fast, and often because it is the lessons you learn and apply from failure that enable you to succeed at the end (something I teach my children). No successful person can say they achieved success without first failing repeatedly and growing from their failures! In truth, the most powerful, memorable, and lasting lessons are the ones that are born from failure! The courage to fail is what breeds success, and I share this with founders all of the time!
Finally, it is important to understand that you must separate failing at something from being a failure yourself. Failing to achieve a goal, a desire, a business doesn’t mean that you, personally, are a failure; it simply means that at that time, you didn’t possess the requisite knowledge, experience, and execution abilities to succeed at your objective and that is ok to Get up and continue failing, you will fail each time differently. With each failure, if you reflect to gain the valuable lessons from those failures, in time, You WILL fail your way into success, in the same way that all of us have! Success is not a game of being more intellectually gifted or talented than the average person. It is a game of attrition! Believe me, after 15 ½ years of doing the same thing day in and day out. I still find ways to fail and learn, and I share this with you to illustrate an important fact. Successful people aren’t successful because they no longer fail. They are successful because their failures no longer overtake their successes!
Ok, thank you for that. Let’s now jump to the main part of our discussion. Can you share a story with us about your most successful Angel or V.C. investment? Or an investment that you are most proud of? What was its lesson?
Well, as it relates to Venture Capital, I would like to share the story of Freeman Capital and its CEO Calvin Williams. Calvin was a recent graduate of the Northwestern Mutual Black Founder Accelerator when I met him. I have been mentoring him since I met him, and his own words tell the tale of the impact that I’ve been able to make there:
“Few can make an immediate impact in someone’s life and business in the way that Fredrick can. Many people claim to be able to do great things; Fredrick just does them and lets his work speak for itself. He has the capacity to advise or handle the nitty-gritty details while at the same time seeing the full field of play while providing a strategy to succeed. He is one of the sharpest, smartest, kindest, giving people that I have met in my life. It is rare to meet someone who can do so much but still works to do so much for others. If you get a chance to work with Fredrick, do so; not only will your business change, but so will your life.” — Calvin Williams, CEO — Freeman Capital.
I am very proud of Calvin and how far he’s come since we’ve met and honored that I, as well, our family brand of companies and network of relationships, have been able to add measurable value and impact to his firm that has driven enterprise value and placed him and his firm in an even better position to continue to grow, scale and succeed. Currently, Freeman Capital has a 6-million-dollar valuation and is closing a 1.5-million-dollar seed round!
The lesson from this story is clear; there is no substitution for the proper command of subject matter that is gained only from a willingness to fail, learn and grow. The success you find from failure is what opens the door to what, in my opinion, is the greatest measure of success. The ability to teach others how to succeed and do so without expecting anything in return because you can afford to focus on making a real impact!
Can you share a story of an Angel or V.C. funding failure of yours? What was its lesson?
Our family office’s foray into the venture capital space is a recent decision that my team and I have made; as such, we have not experienced a funding failure yet. With that said, I will say something very bold. We don’t expect to have very many (if any) funding failures because, unlike a lot of venture capital firms in today’s market, we are not interested in throwing capital around recklessly hoping to get lucky enough to have one “unicorn” deal make up for all of the poor deals we’ve done!
We are cognizant of the fact that 97% of start-up businesses fail and more than roughly 94% of venture capital-backed start-up businesses fail. Therefore, we will not deviate from the fundamental principles that have allowed us to achieve the level of success we have achieved in other investment areas we have chosen to participate in. We will take a cautious, measured, fundamentally sound, logical, and rational approach to our participation in early-stage venture capital investing; we will not focus on the number of deals we do, rather, the quality of the deals we do and while we will be appreciative of any home runs we hit, we will remain diligently focused on consistent base hits and focus on the long term view of investing, rather than short-term, speculative, emotionally driven hyperbole of irrational exuberance that plagues a lot of venture capital firms today. We believe that the flight from sound fundamentals and reason that seems to be quickly becoming an epidemic in the venture capital space will find many firms relegated to the halls of extinction in times to come.
Super. Here is the main question of this interview. Let’s imagine that a young founder comes to you and asks your advice about whether Fundraising or Bootstrapping is best for them? What would you advise them? Can you kindly share “5 things a founder should look at to determine if fundraising or bootstrapping is the right choice”? If you can, please share a story or example for each.
I think we should first define with bootstrapping is and then go from there:
“Bootstrapping describes a situation in which an entrepreneur starts a company with little capital, relying on money other than outside investments. An individual is said to be bootstrapping when they attempt to found and build a company from personal finances or the operating revenues of the new company. Bootstrapping also describes a procedure used to calculate the zero-coupon yield curve from market figures.” — Investopedia.
My take on bootstrapping is that the majority of start-up founders will not be able to do this with any chance of success. Why? For starters, bootstrapping requires that the founder have significant cash reserves personally to enable them to support themselves and make the capital investments into the business necessary to gain traction. Most start-up founders lack sufficient capital reserves to be able to do that!
Moreover, for companies that are in industry verticals that have low barriers to entry (meaning it is easy and cost-effective to start a business in that industry), the ease of entry, in general, makes that industry vertical highly competitive, which means that in order to gain any measurable traction will require a significant deployment of capital into marketing, which would need to be funded by the founder. Because everyone is on the internet, this means that you would have to be strategic and savvy in developing marketing campaigns that have above-average click-through and conversion rates. Campaigns that can consistently perform at an above-average rate are expensive to implement and generally require an astute digital marketing firm to develop. Those types of firms do not come cheap!
If you are a product-based business, you now also have to deploy capital into inventory costs on top of marketing costs. All of these expenses are taken on by the founder from their personal capital reserves. Even if you can run a model where you are taking pre-orders for a product, if you gain any real traction and brand recognition, your demand will begin to exceed the supply you have available, and if you are unwilling to take outside capital, you will have a difficult time meeting the demand. This can result in a degradation of the quality of service your company provides and places the business at risk of eroding brand value which will affect customer retention rates and place you at a much higher risk of failure!
Before you can even burn your personal funds on marketing (and if necessary) inventory expenses, if you are building a business the right way, there will be a lot of data and research that will need to happen to be able to access:
- If you have a good business idea that can achieve traction, scale, and (eventually) profitability.
- What is the ideal customer profile for your product or service (target customer demographics)
- Will your product or service be able to be developed to achieve product-market fit?
- What are the most ideal execution methodologies to bring your product or service to market?
Gaining access to good, reliable data, surveys, historicals, projections, comparables (i.e., IBISWorld, Pitchbook, etc.) is not cheap, and neither are the firms that you might hire that have access to that type of data. Nevertheless, you will need to burn your personal capital here first (or at least, you should)!
There is also a high cost for the bootstrapping founder in the loss of opportunity they face. Let’s say you have a well-funded 401K plan that is performing at around 10–12% per annum (year), and you decide that you want to use the funds there to start your business. First, if you are pre-retirement age, in order to do that, you will face penalties to access those funds. In the event that you decide to take a policy loan, you will pay a premium to do so. If you have decided to do that in conjunction with personal loans, you now have a recurring interest payment for the borrowed money that must be paid every month.
Essentially, you are depleting your retirement savings, significantly reducing your asset growth rate, and potentially running the risk of destroying your credit to start a business that, based on statistics, has a 3% chance of succeeding. In my expert opinion, the downside risks do not outweigh the potential upside gain, and therefore (again, in my expert opinion), I do not think bootstrapping is wise for 99+% of founders in today’s rapidly moving, global economic landscape!
To cap this portion of the discussion off, let’s be clear, 98–99% of start-up businesses don’t bootstrap anyway! They usually raise a family & friends round of capital (at minimum). Because they don’t have a true understanding of the definition of bootstrapping (which is why I provided it), they think they bootstrapped because they didn’t take angel or V.C. money. To be clear, any outside money raised (even if it’s only family & friends) takes you out of the realm of bootstrapping, period! It is highly advantageous for founders to raise capital to start and scale their businesses.
First, it lowers the amount of capital the founder has to deploy to get started personally; this significantly reduces the downside risk of personal financial ruin if the business fails!
Second, because the founder has to invest less of their own capital, it allows them to keep that more of their personal capital in places where it is already growing and seeing a return. This level of capital diversification acts as an additional hedge in the event of business failure. The factors are present even if you are only raised by family & friends.
Third, if you seek and attain angel or venture capital, you gain the added benefit of having people on your board. Who has a vested interest in your success, knows your industry, and can add significant value to your business. By providing guidance, strategic expertise, relationships, and their presence on your board and in association with your company makes the company far more qualitatively sound and puts the company in a better position to gain traction and succeed in the near and long term.
Fourth, because of the qualitative strength of your board and the backing of an angel or venture capital, you are now able to afford, attract and retain higher quality talent in your employee pool. Since the success of a company is dependent on the quality of talent available in the employee pool and senior executive positions, you again give your company a better chance of succeeding. The chance to attain these added benefits is significantly reduced for a founder that bootstraps! In summation, I am a firm believer that raising capital to start and grow a business is far and away better than bootstrapping!
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
I am already working diligently on doing just that… For starters, I mentor at a number of different accelerators and incubators to help guide start-up businesses on their journey towards success. Additionally, I teach free financial literacy and business development every week and give away a minimum of $1,000.00 every month on my Podcast, the #GetRealWoke Podcast on YouTube. Our family foundation, The Scott Family Foundation Intl. is a Civil Society Organization with the Economic & Social Council of the United Nations and a United Nations Global Compact member. We focus on working within the Stated Development Goals (SDGs) of the U.N. to bring about and advance long-term, sustainable socio-economic growth and development here in the United States and abroad. I am also a staunch advocate for social and criminal justice reform in the United States. I am the Vice-Chair of the National Action Network’s Second Chance Committee, a committee dedicated to helping formerly incarcerated persons re-integrate into society by providing them the resources, tools, job training, and job placement services necessary to do so. We also work to advance criminal justice reform legislation across the United States.
My overreaching goal is to show people, by example, that you can live good by doing good and that failure is never final unless you fail to get back up! Everything is overcomeable if you are willing, diligent, and focused on continuing to move forward by putting one foot in front of the other. My hope is to leave a better world for my children than I inherited by providing better access to resources and opportunities that will enable our community to achieve long-term, sustainable gains protected through legislative action!
How can our readers further follow your work online?
You can reach me on my personal website at: https://fredrickdscott.com, my Instagram page: @fredrickdscott, on Twitter: @fredrickdscott, on Facebook at: https://www.facebook.com/fredrickdscott on LinkedIn at: https://www.linkedin.com/in/fredrickdscott/ or on the #GetRealWoke Podcast at: https://www.youtube.com/getrealwokepodcast
Thank you so much for your insights. This was very insightful and meaningful.