Mike Persico grew the waning financial industry telecommunications company Tekom to a $15 million a year network firm after buying it from Gary Kemp and Harris Brumfield. He then went on to found SMG Holdings, a parent company to various technology and financial service providers including Anova Technologies and AlgoTrade. Persico sat down with JLN’s Jessica Titlebaum to discuss how he started his own company, what he learned from the experience and what entrepreneurs should keep in mind as they take on new ventures.

Q: How did you get into this industry?

A: I graduated with a degree in marketing in 1992. Due to the glut of business people coming out back then, I ended up in the research department at Blue Cross Blue Shield. There I started taking the computer on my desk apart and putting it back together. I also started learning the old DOS programs; Lotus 123, Excel for DOS – all of the classics. It was at that time I realized that I was wired for this type of thing. Over the next six years, I took jobs that offered more and more exposure to technology, including managing the Global WAN at Kirkland and Ellis.

In 1999, I joined Tekom, a telecommunications company founded by Gary Kemp and Harris Brumfield, of Trading Technologies. The majority of Tekom’s business was from managing the 400-circuit Eurex network and access points in the U.S. When Eurex went to the [now defunct] a/c/e platform, they gave Tekom notice they were not going to renew their contract. The owners of the firm at that time decided it would be easiest to wind the firm down at the end of the contract term.

Instead, I took the waning revenue from Eurex and started a consulting division of Tekom. We were the first of our kind to provide information technology for trading firms. I started to build the industry’s inaugural trading arcades and networks for firms like TransMarket Group, O’Connor and many others. We also built out the trading floor for Kent State University, we brought the Sydney Futures Exchange here and even built a hub for MATIF, which was the precursor for Euronext.

By 2004, I had replaced the revenue from Eurex contract and then some. In 2005, I executed an MBO to take 100 percent ownership of the firm.

Q: Did you take any business classes?

A: No. Between 1992-1999, I taught myself technology. I leaned very heavily on my background from college but in the end, had to learn things on the fly.

Your first business is like your child. The lines of ownership get blurred. I made mistakes but you have to make mistakes to grow. Part of it was the market though; a lot of people were spending money on building their technology platforms, mostly only as a hedge to their floor business though – people weren’t fully convinced electronic trading would become what it is today. Back then, people didn’t have wiring, computer systems, COMS rooms – it was a true green field for a technology firm like us.

They say that luck is about being in the right place at the right time and we were able to capitalize on it …success is equal parts hard work, intelligence and being in the right place at the right time.

In 2006, I sold Tekom to a larger entity for three times what I paid for it. By this time, 7Ticks had started, YJT had started, GuavaTech had started…they were trying to catch up to our services because we were the 800 pound gorilla. Many of these firms were founded by people that came from Tekom or were offering services sets that were very similar to ours.

Q: What mistakes did you make with Tekom?

A: The mistakes you make when you first run a business are typically how to manage people, on the client side and employee side. People are not numbers on a spreadsheet, they aren’t a CISCO router – everything is very dynamic and fluid. Becoming a better personnel manager can only happen over time.

You can take a management class in college but it won’t tell you how to manage people. This is a skill you need to refine and master as a successful entrepreneur. Whether you have a technical solution or a platform or a brokerage service, people do business with you because of the relationships. At the end of the day, you sit across the table from someone and look them in the eye and shake their hand and that is how business relationships are built.

Q: What did you do after Tekom?

A: I took a year off and went to Europe. After 8 years, I had to de-couple because you get very burnt around the edges.

Something often happens to many people when running their first company – they find it incredibly difficult to balance the work and life responsibilities. I ran Tekom but was married to my work. We were successful but it came at a personal cost. I should have taken time off…I should have taken a breather…I should have hired someone so I didn’t do all of this myself. But it’s hard to do when you are in the thick of it. It is easy to get consumed in all of that …it is only something you see after time and experience.

Q: What made you realize this? Was there something that changed your mindset?

A: If something consumes a 100 percent of your time and that something is removed, then you have no other choice but to reflect on everything that was missing. If I don’t have to think of work what do I think about? It was more or less addition through subtraction.

Q: When did you decide to get back into the industry?

A: A couple of things transpired to re-pique my interest in founding another company. In 2007, I was asked to be on the board of advisors at OptionsCity. I was also in the midst of some consulting jobs for previous clients to see how the industry had changed. I started evaluating where the holes were in terms of need. What did the industry require in terms of services? Anyone that starts the company, you need to be selling something that you yourself would buy.

Tekom always had an issue because their customers wanted a more comprehensive service. For example, they wanted staffing but we did not offer those services and we would refer that business to a third party vendor.

Eventually, I recognized four areas of need and started four wholly owned subsidiaries under a single parent company umbrella. The common ownership at the top ensures we can maintain quality for larger projects by bonding together the service sets.

I wanted individual companies that were subject matter experts. If there is something one firm doesn’t do, they can refer to a sister company. Some of the firms are product firms, some are consulting firms, some are internal staffing agencies– they were meant to balance each other out depending on the industry trends like buy versus build.

Q: How has this been a successful venture?

A: Most everyone is familiar with the “business idea on a napkin” concept. In 2007 when I first thought of this, the structure didn’t fit on a napkin so I sketched it out on a paper towel! The over-arching premise was if I was I could run one company, why not four?

What I found out is that, ultimately, you build multiple businesses in a serial fashion. In a perfect world, I wanted to wave my wand and there would be four firms. I was incorrect. We had to seed, staff, brand/launch and acquire anchor customers. You cannot do that all at once across all firms; you have to do it for one company at a time. The first firm we launched was The Sidus Group. It took about 6-9 months, and then we moved on to Orion Recruiting, then AlgoTrade and then finally we setup Anova Technologies, which interestingly enough is sort of a modernized Tekom II. All in, it took about two and a half years to set this financial services consortium up the right way.

The challenge here was timing. I was doing this during a recession, one that some people said was the worst economic time since The Great Depression. In 2008, everything down was across the board; people were really a bit shell-shocked. Fortunately, we had a good business plan, were well-capitalized and had good people. Over the course of the last year, one by one, each one of the companies broke even and then became profitable. Now, all four firms are in the black – all hiring with multiple openings – and that is why I consider it a success. In the end, it was a much greater challenge than I ever thought it would be. Timing was not in my favor but we were still able to execute and deliver.

Q: Did you have any mentors?

A: No, I did not. Back then, it would have nice to have a sounding board for ideas and initiatives. We’ve alleviated this issue by setting up a Board of Advisors for our current endeavor, which is different from a Board of Directors. The typical scenario is to find very tenured, seasoned people in the industry. These are people that you can trust and typically do not require a salary; they are willing to participate for a small amount of equity in the firm and the cachet of sitting of other firm’s boards. It’s a win-win for everyone. These are the people you can ask for help and they can mentor you. This is an invaluable tool for anyone starting out, one that many entrepreneurs neglect with their first firms.

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