Mark Higgins of Beacon Platform On 5 Things You Need To Succeed In The Modern World Of Finance & Fintech
An Interview With Jason Hartman
Manage your professional reputation. Our industry isn’t that big, and a short-term gain you get in your career by stepping on someone else almost always leads to a long-term loss because you get a reputation as someone who can’t be trusted. People move around between companies, between the buy and sell sides, from managers to peers to employees to clients to partners, and you’ll keep meeting and working with the same folks through your long career. Be someone people want to work with.
As part of my series about the “How to Navigate and Succeed in the Modern World of Finance”, I had the pleasure of interviewing Mark Higgins.
Mark Higgins, a quant developer with extensive cross asset experience in risk management and research analytics, is the co-founder and Chief Analytics Officer at Beacon Platform, Inc., responsible for driving the company’s market-leading data analytics strategy into its innovative business model. Before launching Beacon in May 2014, he spent eight years as Managing Director at JPMorgan, where he launched the Athena project, co-headed the Quantitative Research group for the JPMorgan’s Investment Bank, and ran the electronic market-making business for currency options. Mark also spent eight years at Goldman Sachs, running the Foreign Exchange and NY Interest Rate Strategies teams.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
I’m a quant, who came out of physics. I finished grad school right when the derivatives markets were exploding and Wall Street needed physicists for the complex math involved. My first job was actually with an electric utility building a trading and risk system for power and natural gas trading.
I later moved to New York and joined Goldman Sachs as a quant on the foreign exchange desk.
My cofounder Kirat Singh and I were both working on SecDB, which is an internal technology platform that Goldman built initially for its FX and commodities businesses, but then expanded it across all of its trading businesses. It was an interesting combination of a derivatives focused trading and risk management system where you can view your portfolios and test them against different risk scenarios, and a development platform that let us quants build stuff quickly and safely and let us really be part of the business.
Then we built JPMorgan’s architecture, Athena, which shared many of the architectural ideas of SecDB but had the advantage of both a much more modern technology foundation and hindsight into what worked and what didn’t in SecDB. Kirat later joined Bank of America and built another similar in-house platform, called Quartz. When he left Bank of America, we met up for a beer and said, “Look, we’ve built this thing three times now, why not start a company and offer it to other financial institutions so that they can focus on their competitive edge instead of foundations and infrastructure?”
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
We made the same mistake as a lot of enterprise technology startups, in massively underestimating how hard it is for institutions to bet on a little company with only a few people and no money! Fortunately, our first consulting client, Global Atlantic, ended up being our first enterprise license deal. Global Atlantic is a life insurance company that started life as Goldman’s internal reinsurance business in New York, and was spun out. We helped them manage their technology transition and gave them some comfort that we knew what we were talking about, and they made that bet on us as a startup and became our first enterprise license client. They ended up being investors in Beacon and have been amazing partners to us through the years.
Are you working on any exciting new projects now? How do you think that will help people?
We recently launched our Beacon App Store, which lets third party developers — or our clients themselves — build apps and modules and sell them across the Beacon ecosystem. An App Store has been our vision since the start, and we’re now at the scale where we’ve got a large enough base of clients and users that it becomes attractive to those third party developers to use us as a sales channel. And it lets us at Beacon focus on building an amazing platform while the community continues to build out exciting new verticals of functionality on top of that base.
Thank you for that. Let’s now shift to the central focus of our discussion. Extensive research suggests that “purpose driven businesses” are more successful in many areas. When your company started what was its WHY, its purpose?
We set up Beacon to build the future of the financial industry on the cloud, and especially the future of quant trading on the cloud. We did it because it seemed like the logical thing to do, yet no one else was doing it nearly as efficiently as we knew was possible. And the capital markets are only getting more dependent on analytics and technology, and need tools like Beacon to execute their ideas at the speed of the market. Quant developers have some unique needs: they must link their own algorithms, which are usually proprietary, to market data, some of which is not publicly available, and to run through countless scenarios with enormous speed. Some of the big investment banks such as Goldman Sachs and JPMorgan are making inroads into that, but their systems are not really built to easily provide secure access to market tools and data to independent developers. Our platform addresses that.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
Clients come first. Our company has been successful because we sell a product that genuinely makes our clients work better, whether it’s through powerful trading and risk applications, or cloud-based enterprise technology tools for developers in those businesses. We always keep that North Star in mind when making decisions about the business, because ultimately happy clients are our best marketers!
If a fellow business leader would ask you for advice about whether to bootstrap or to look for VC capital, how would you help them weigh the pros and cons of that decision?
It depends on the kind of business. For a high growth SaaS-style business like ours, it’s quite hard to get to the scale where you matter to the market without taking outside capital, because you need to invest in growing both the product and the teams to support the incoming business faster than your current revenue can pay for that growth.
Our first round of financing was a “strategic” round, where our clients invested in us to help give us scale and growth. That was a huge step forward in the company and showed a lot of faith in us as a startup. Our second and third rounds were led by financial investors. They may not know the market as well as our clients do, but they do know how to quickly and sustainably grow a company, which was something Kirat and I were new to. We really liked that balance between strategic and financial investors as we grew.
What measure do you use to determine the value of a company? What advice would you give to other leaders about how to get an optimal evaluation of their business?
A quick and dirty estimate of valuation for a company like ours is a multiple of our annual recurring revenue. Recurring revenue comes from subscription fees that clients keep paying year after year, as opposed to non-recurring revenue — like consulting fees — that start at zero each new year. So the first thing is to focus on recurring over non-recurring revenue, to the extent that your business can support it. The multiple on recurring revenue is a function mostly of the growth rate of your recurring revenue, higher for higher growth, so making sure that we’re sustainably growing the pie is the second priority when it comes to valuation.
What would you advise to a founder who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?
Get outside help! One of the best things about running a company today is that the private equity industry has really beefed up the science behind how best to run companies of different kinds. And it’s hard to do! For example, maybe that founder’s company has stalled because she doesn’t have experience building and managing a SaaS sales team. Not many people do! But many investors today have really specific and detailed models for how to best run that go-to-market function, plus consultants who can help implement those models, and recruiters who can help you find the right people, and often that’s what can restart the corporate engine when it stalls.
What are the most common finance mistakes you have seen other businesses make? What should one keep in mind to avoid that?
The classic financial mistake that dooms a lot of high growth startups, who spend more than they make for years while they build their machines, is running out of cash. Early in Beacon’s life we came close to a cash crunch and it was the one time in my career that I’d wake up in the middle of the night worrying. Those crunches happen because founders always — always — underestimate how long it will take to get new cash in the door, and there are a lot of other fun product things to focus on rather than cash management. If I could leave a new founder with any piece of advice, it would be this: be a pessimist when estimating how much cash you need, and then give yourself a bit more buffer than that..
Ok, here is the main question of our discussion. Based on your experience and success, what are the five most important things one should know in order to succeed in the modern finance industry? Please share a story or an example for each.
Deliver. This is the most important thing for anyone to do in any kind of job, but it’s especially important in the finance industry because timelines are so short. If you don’t walk the walk, you’ll get found out really quickly. And people who deliver are the ones that everyone else wants to work with.
Be honest with yourself. Whether you’re managing risk in a portfolio or managing a company, it’s easy to sell yourself on narratives that make your life easier. You have to step back and try to look at your situation as a disinterested outsider, listen to others who are critical of your narrative, and then maybe you’ll get part way to objectivity.
Be prepared for career volatility. Many parts of the finance industry are boom/bust-style businesses. When the money is flowing in, work is amazing, bonuses are high, and everyone is happy and wants to work where you are. When it flows out, you’re stuck getting paid less — sometimes a lot less — than you were the year before. And it’s hard to get a job anywhere else. One thing that I learned working through the credit crisis is that the people who came through that cleanly were people who could be relied on when times are tough (and also were lucky).
Manage your professional reputation. Our industry isn’t that big, and a short-term gain you get in your career by stepping on someone else almost always leads to a long-term loss because you get a reputation as someone who can’t be trusted. People move around between companies, between the buy and sell sides, from managers to peers to employees to clients to partners, and you’ll keep meeting and working with the same folks through your long career. Be someone people want to work with.
Analytics and technology keep getting more important. When I started on Goldman’s FX desk in 1998, foreign exchange spot traders had almost no use for quants and technologists — their day to day tasks were done by voice over phone lines and they could keep track of their trades and positions on a napkin if they wanted. Now all those tasks are automated, with quants owning the pricing and hedging algorithms and technologists building the applications and pipes to handle the volume. Today that FX spot business is generally run by the quants. That kind of transition has happened and is happening all across capital markets, and the people who succeed are the people who understand the technology.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
Everyone talks about work/life balance, and like a lot of cliches, there’s truth to it. Having that balance is key to not burning out. The “life” part might be family, or hobbies, or spending time with friends, but having a comfortable social environment independent of work attachments does help you keep perspective on what happens at work. At Beacon we have always valued work/life balance and view that as one of the things that sets our company apart from some of our peers.
You are a person of great influence. If you could start 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 love that nakedly utilitarian question! As long as we’re careful to avoid an AI apocalypse, I think we should keep on pushing with the amazing advances in machine learning that we’ve seen in the last decade. I can now ask my computer to play any song that has ever been recorded, it does it right away, and then goes on to play other songs like it which it thinks I might enjoy. It’s hard to even imagine all the tasks that might be automated twenty or thirty years from now, but all that productivity goes ultimately into wealth in the world, which raises all the boats. So I think that’s what I’d aim at to maximize global goodness.
How can our readers further follow your work online?
LinkedIn, Beacon’s web page
This was very inspiring. Thank you so much for joining us!
