Mark Volchek of Higher One

Mark Volchek shares how he built Higher One from startup to IPO, explains the difference between public vs. private company, and answers how to approach investors.
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Mark Volchek,

founder of Higher One – Startup Exits Podcast – StartupSoft

Listen to the founder of Higher One, Mark Volchek, an entrepreneur turned VC, share his journey from startup to IPO and explain how to approach investors for seed funding correctly.

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Guest bio

Mark Volchek is an entrepreneur turned VC. While still an Ivy League student, he started Higher One, a company that aimed to simplify student payments and make them electronic. The company was an enormous success, and in 2010, Higher One went public with a valuation of $600 million on NYSE. Later, in 2016, it was acquired by Blackboard and was made private again. Now, Volchek is investing in other prominent startups via Las Olas, an early-stage VC firm with a mission to find and support extraordinary people in “non-obvious places.”
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In this episode

ANDREW VASYLYK SPEAKS WITH MARK VOLCHEK, A FOUNDER OF HIGHER ONE, ABOUT HOW HE:

  • Built a product to solve a problem he experienced himself while still in college;
  • Realized that his company has found a perfect B2B product-market fit;
  • Went public with Higher One and then back private when acquired by Blackboard, and what differences he sees in running a public company vs. a private company;
  • Raised their first capital from angels and now shares professional fundraising advice on how to approach angel investors;
  • Explains what startups he finds “extraordinary” and what “non-obvious places” they turn to when looking for investment opportunities.

Top moments:

How to find a perfect B2B product-market fit

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Mark Volchek was still a senior at Yale when he first started Higher One, a company that provides higher education institutions with simplified ways to electronically facilitate financial disbursements. Back in 2000, when it was founded, this was quite an ambitious goal. Back then colleges handled all things financial on paper and were reluctant to go electronic.

However, within the first couple of years, they landed a dozen customers, even though it was very difficult to get their foot in the door with educational institutions. And thanks to several thought-through moves and a 100% retention rate, from 2002 all the way through 2008, the company experienced exponential growth.

Volchek says they first realized that they had found a product-market fit when they landed that first dozen customers with a 100% retention rate. He believes that a product-market fit isn’t just about the number of customers you have but also their retention rate. And in that sense, Higher One seemed to have found a sweet spot.

B2B enterprise sales

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In the early days, Volchek and his two other co-founders believed that to land their first client and ensure good adoption and integration, they needed to get the universities on board. They did a small-scale pilot but didn’t see much fruit. 

So, they used the angel money they had raised to hire a VP of Sales with a background in selling to universities. A professional they hired already had connections in the industry and, thus, could get a meeting with CFOs and bursars who run university business offices.

“When going into a business of an old-line industry, it’s very important to have somebody who can open those doors and get those meetings,” says Volchek. He adds that the VP of Sales still needed the founders’ team to go with him and explain both the product and the technology behind it. But his contacts helped them get their foot in the door, and that was priceless!

Public vs. private company: pros and cons

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Higher One went public in 2010 with a valuation of $600 million on NYSE. However, in 2016 a part of it was acquired by Blackboard and, thus, turned private again. (So, if you were wondering, “Can a company go back to being private after going public?” Higher One has proven it to be possible.)

Volchek explains that running a public company vs. a private company are two rather different experiences. Thus, he says public companies focus on results, reports, and numbers within each quarter. And it certainly was a change for them at Higher One. 

Among other downsides of going public was that a company had to restrict certain data not only from the public but also from their employees. Finally, he adds that there are hard and soft costs associated with running a public company entrepreneurs can’t afford to overlook. With Higher One, hard costs on insurance, audits, and filings alone reached around one million dollars. “The soft costs can run you in the millions in terms of management time, management distraction, and issues around internal communications,” he mentions.

How to approach investors

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In this episode, Volchek, who has been both an entrepreneur and an investor, shares his insights and recommendations on how to approach investors for a startup.

As with enterprise B2B sales, it’s always a good idea to use connections to get in touch with investors. It can be a great idea to ask one of your angel investors, if you already had a “friends and family” round, to introduce you to VCs they trust. But don’t fret: the good news is that VCs do read all of your emails. So, even without connections, with the right product and a strong presentation, you’re likely to draw their attention to what you have to offer.

Among other important recommendations on how to approach investors for funding, Volchek emphasizes that founders need to be very upfront about the stage they are in since VCs make decisions on where to move based on this information.

At Las Olas, they focus on early-stage startups. But it can mean different things. Thus, they had experience with investing in a startup both before and after they started monetization. The key is in presenting the pain your product is solving and explaining what makes you believe you have found your perfect product-market fit and your go-to-market strategy.

Wrap up
Listen to a new episode of Startup Exits with Mark Volchek as he talks about B2B product market fit, shares professional fundraising advice, and explains the difference between working for a private vs. public company.
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host bio

This podcast is brought to you by Andrew Vasylyk, a host of Startup Exits Podcast and a founder of StartupSoft, your reliable partner in hiring, managing & retaining remote employees. Andrew is passionate about startups, technology, and Ukraine.

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