🇺🇸🎉 Happy 4th of July 🥳🎆 with Seth Farbman, Vstock Transfer 📈

Keeping the American Dream Alive

Welcome to the 115th edition of Start-up Society! Check out the previous issue, if you have not already, here!

We hope you are all having a wonderful Fourth of July, spending time with friends and family! What better way to celebrate Independence Day than to highlight an entrepreneur keeping the American Dream alive?

Meet Seth Farbman, Co-Founder, Chairman, & President of Vstock Transfer. This SEC-registered stock transfer agency is revolutionizing the way private companies and IPOs manage their shares.

This article provides a summary of the conversation. For the full details, tap into the podcast here!

‎Meet the Entrepreneur: Meet the Entrepreneur #29 - Seth Farbman, Vstock Transfer on Apple Podcasts

Tell us about your background. Why and how did you start your career in securities law? When did you get interested in starting up your own company in the financial services sector?

Let’s start in 11th grade. I was actually influenced by a teacher that I had. He was actually one of the rabbis in the school. He was just so impressive as he was a part-time teacher and a part-time attorney. I became drawn to it and decided that’s what I want to do when I grow up. I want to be a lawyer.

It didn’t last very long, but it set me down the path to go to law school. I was a securities attorney for a couple of years. Hopefully, nobody will hold that against me. I really focused on IPOs, companies that were raising capital, and companies going on to the NASDAQ and the New York Stock Exchange. That was sort of my forte, which ultimately led me into the business world.

How did you end up founding your first company?

When I was a security attorney, I was helping all these companies draft their filings to go public, and at that point, you had to do something called an EDGAR filing. You had to put the company filing information into a certain format to give it to the SEC. So, you know, a buddy of mine said, hey, why don’t you do it? and, long story short, I ended up learning how to do it and we’d go back to my clients and say, listen, you know, for a fraction of the price I’ll do the EDGAR filings for you since I’m writing the material anyway.

We were in the right place at the right time with a lot of hustle and the right business partner (shout out to my partner Shai Stern who was the driving force on the sales side). Honestly, it was the typical story. I slept on my couch for a couple of months and gave the impression that we were open 24–7. We were so busy that I couldn’t leave my desk. Shai would bring me pizza on deadline days because I couldn’t afford the 15 minutes to go out and grab lunch. Between 2002 and 2007, we grew to about 4,000 public companies and had our first exit when we sold to PR Newswire in 2007.

You have had multiple successful exits, why don’t you elaborate on the process of selling a start-up? Why would a founder look to do a sale instead of going public?

There are three different paths to break down:

1. Do I want to go IPO?
2. Do I want to raise capital through Private Equity or VC?
3. Do I want to sell the company?

That pathway is different for everybody. I’ve sold one company to PR Newswire, one to Wolters Kluwer, and another to Sunstone Partners (a private equity firm). I’d like to make it clear, I never woke up and said, “OK, I’m going to start a company and we’re going to work on it for two years, seven years, nine years, etc., and here’s the strategy to get out.” Anybody that starts a company with the goal to get out may never make it there. For myself and my partners (always surround yourself with great partners), the goal was to wake up every day and push 120% to make as much money as possible and turn the business into a cash cow. If you do that, then chances are pretty good that people are going to come knocking to acquire your business. Once that happens you have the opportunity to assess these different pathways.

If you have an exit strategy on day one, I don’t know if you are going to make it there. It’s an exciting journey to go from idea to development to growth to scale to exit.

If you’re doing it right, most often what happens is you probably even say no the first couple of times. It’s that struggle, “Well, things are going in the right direction. Do I really want to sell? Or do I want to keep pushing and see how far I can get this?” All those questions come up on a daily basis.

What are some of the common pitfalls that an entrepreneur can fall into during the company-building process?

There’s a long, long list of mistakes and challenges that we’ve made over the years. You know, for me, the companies that we’ve always been involved with are companies that we started to plug up a pain point, right? There’s a very big difference between a company or product or service that is a luxury item and one that addresses a major pain point in an industry.

I think that a lot of entrepreneurs are running around trying to come up with this novel idea or something that nobody’s ever thought of and running around trying to come up with patents. At the end of the day, at least for me, the companies that I’ve been involved with and I’ve been able to have some success with are not necessarily luxury items. They’re things that are not sexy and very boring. We could solve the problem better, faster, cheaper, and more effectively than existing solutions. It doesn’t sound so exciting, but sometimes those are the best businesses and just be authentic when you’re going down that path. When you’re doing something that’s novel and new and nobody’s ever done it before, that’s sometimes a huge challenge because what people don’t recognize is that with that comes the entire challenge of educating a whole market. Every bit of your marketing, instead of going into selling, per se, picking up new customers, is educating the market. Saying, “No, no, no, no, but let me explain to you why there’s a need!” That’s a bit of an uphill battle.

At the same time, I’m the first to admit there’s a reason I’m not in an investment bank or a venture capital firm. I had a guy come to us maybe 10, 15 years ago by now. He’s like, “Oh, I’ve got this great company. I’ve got flavoring and I’m going to put it into my seltzer,” and I was like, “No, no, no, I’ve got my Starbucks and I’ve got my Diet Pepsi and I think your idea is miserable!” Fast forward, he was the CEO of SodaStream, now a billion-dollar company! You’ve got to know your strengths and weaknesses. I know that I cannot tell what company is going to be a hero and a zero. Because for me, that was a new concept and the education part is sometimes the failure of some entrepreneurs.

In regards to Direct Listings, IPOs, SPACs, etc. what are some trends you’ve noticed in how companies go public and what are your thoughts on these changing dynamics?

I do feel like I’m sitting in a unique position where I get a sense of the pulse of the market. At Vstock Transfer (working as a transfer agent), we work with about 800 issuers and our core focus is on IPOs. Here’s the inside scoop. I’ve spent a tremendous amount of time over the last four months in particular on foreign issuers. We have Zoom’s early morning, late night, Malaysia, Hong Kong, Singapore, Vietnam, you know, it’s something I never really had prior to that. My 10 p.m. and my 11 p.m. were mine up until recently, but not anymore. I feel like that element is brewing and we just sponsored a conference actually in Singapore. I’m appreciative to Dave Mansbach from our office who did the 19-hour trip. But that’s where I think the next part of the industry is going to be hot!

What’s with the sign behind you that says, “The First Reg A+ to List on the NYSE”?

Myomo was the first Reg A+ listed on the New York Stock Exchange. Thank you to Mark Elenowitz for giving me that as the deal gift!

We also did ShiftPixy, one of the first Reg A+ to list on the NASDAQ. So that was a big deal at the time; when people wanted to raise small amounts of money from a lot of different people instead of, you know, one $75–100 million transaction from the investment banking firms themselves.

The challenge with that is you’re dealing with a lot of mom-and-pops, who this is maybe their first time investing. As a transfer agent, we now need to educate these investors who are not already familiar with the process. One of our clients had 22,000 individual mom-and-pop investors!

What are some habits/hobbies outside of work that you maintain or that you think are important for entrepreneurs to maintain in order to be successful?

I think that probably comes down to each person’s why like why are you doing this? Why are you building the company? Why are you working so hard or not working so hard? The day we sold Vcheck Global, the next morning, I was at a conference and I was putting together the booth for Vstock trying to figure out how to put the banner and the skirt up. I was like, “I can’t believe I just had an exit yesterday and I’m doing this myself trying to figure it out.” I was there because I love what I do. I still love what I do. I’m not going to say my why isn’t going after financial gain, but at the end of the day, if you love what you do, as cliche as it sounds, you’re not working a day in your life — you’re having fun!

You always want to make sure you still have time for family and time to exercise. Anybody who knows me knows that I try to play basketball two to three times a week. If you can even call it playing basketball anymore, I’m happy if I hit a couple of shots!

I’ve got kids, that’s why I got to work so hard, to pay for tuition. I also just love marketing, media, storytelling, and hearing other people’s journeys. So if you mix it all into one big basket, then you’re just doing what you love day and night and hopefully that’s the incentive to keep down the path.

Any role models, public figures, authors, or inspirational people you think our audience should go and check out?

First and foremost, an appreciation shout-out goes to my partner, Shai Stern, with whom I had some of these exits and started my first company, Vintage Filings.

Another shout-out to Yoel Goldfeder. He is my current partner who puts up with me and I put up with him, but it’s the zig and the zag and the yin and the yang. I couldn’t do what he does and he couldn’t do what I do.

I regret not having more mentors in my life where I could have just gone over to them and say, “Hey, I’m struggling with this. What do you think would be the best thing?” I think that’s super, super important, so learn from my mistakes of not having had that.

There’s a book called The Go-Giver by Bob Burg and John David Mann. You should definitely go out and read that. That book definitely changed my life, just in terms of the way I conduct business, that it’s all about giving to others and offering value. You know, whether it’s in business, whether it’s with clients, whether it’s social media, or providing valuable content, The Go-Giver definitely changed the way I do business!

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Authored by Arteen Zahiri & Rumeer Keshwani