Entrepreneurs of YU: Leveraging Talent, The Quantum Way

About Entrepreneurs of YU: ‘Entrepreneurs of YU’ serves as a forum for sharing the ideas, struggles, vision and success of current and former YU students who have entrepreneurial ventures.The series focuses on one unique story at a time to provide readers with a focused understanding of the passionate entrepreneurship that exists throughout the YU community.If you, or someone you know, would like to be featured in this column please email raymond.cohen@mail.yu.edu.

In the early 1990s, valuations of US companies were based primarily on the worth of their tangible assets, with PP&E (property, plant, and equipment) composing the majority share of their market value. Due to such a straightforward method of valuation, there were hardly any discrepancies between the book value and market value of many US manufacturing-based companies such as Chevron, Chrysler, and Reliance Steel & Aluminum.

Nowadays, however, it doesn't take much financial discipline to comprehend that the value of companies like Facebook, LinkedIn and Twitter have practically nothing to do with the value of their tangible assets. Unlike their 20th century counterparts, these companies’ intangible assets comprise the vast majority of their market value. In light of these changes, the following question begs to be asked: What justifies the significant difference between the market value and the book value commonly found in these companies?

The answer to this question lies in the most valuable component of intangible assets – the creativity of the human mind that is expected to create future value for a business. The intangible assets most commonly used today are knowledgeable workers and their intellectual capacity, as opposed to the old manufacturing model of hard assets over talent. Take Snapchat for example – and notice how little tangible value it actually has.

As the advanced technology and marketing worlds collide with more traditional areas of business, Talent Acquisition has moved towards becoming an integral element of businesses. Talent Acquisition will move beyond simply hiring employees who satisfy a job description and concentrate more on locating inventive workers who can directly contribute significant value towards a company’s bottom line. This shift will fuel more technically-oriented job opportunities to those who can offer a more inventive and collaborative mindset. As a result, employees will receive recognition for the importance of their role within the company which will, in turn, motivate them to drive the company towards success.

The quintessential example of a company capitalizing on human creativity is Quantum Networks (Quantum), a New York City-based e-commerce company that, according to its website, “specializes in marketing and selling niche next generation communication devices,” including items such as “cell phone amplifiers, 3G and 4G routers, GPS tracking devices, and mobile hotspot gear.”

The company expanded from a startup driving $300,000 in revenue in 2008 to a multimillion-dollar company the very next year. They not only expanded considerably, but also catapulted into record breaking numbers. To this day, it remains among a short list of companies that saw a 1,000% increase in revenue in Year 1, a rise deemed unprecedented in the industry. The company has maintained it’s place on the Inc. 5000 list since it’s founding in 2008, among the fastest growing companies in the United States. The visionary co-founders of this skyrocketing startup are Eytan Wiener (YC ‘05) and Ari Zoldan (SSSB ‘99), proud Yeshiva University alumni that speak very highly of the institution and their time on campus.

At the time, market expectations, competitive pressures, and the rapid pace of change steered Quantum’s founders to explore Talent Acquisition coupled with a unique company culture as their pathway towards success. Most companies in the industry were hiring talented people; however, those companies primarily concentrated on investing in technology to gain an “edge up.” Even then, no company had placed nearly as much emphasis on Company Culture and Talent Acquisition as Quantum Networks. Rather than following the pack, Wiener and Zoldan believed that the antithesis of traditional practices -- that is, placing a stronger emphasis on human resources and company culture than on technology -- was a more effective approach.

To that end, all employees at Quantum Networks are told to adhere to the “open-door policy,” stressing the importance of maintaining communication with senior management. Forgoing the need to schedule appointments is one of the strategies they use to encourage more collaboration. CEO and founder Ari Zoldan said, "It’s imperative that companies start moving from a competitive to a collaborative landscape to compete in today’s environment."

Quantum has now evolved focus on building and developing next-generation products and services for the rapidly growing broadband market. “We are excited about our new products, but we are even more excited to select and retain talent– especially since our company is greatly reliant on the talent that we will hire. If we hire a poor performer, the cash flow generated by these assets will be less than if we hire a superstar,” said Zoldan.

More recently, companies have decided to acquire smaller companies in order to leverage that talent for other vertical services or products they offer. In 2009, Facebook bought FriendFeed, a service to help people track the online activities of their friends. Tech insiders thought it was trying to compete more effectively with Twitter, but Facebook was really interested in FriendFeed’s dozen well-regarded product managers and engineers, including two of its founders, Bret Taylor and Paul Buchheit, who had previously worked at Google. Zoldan thinks this acquisition is representative of an emerging trend. "We are going to start seeing a trend of larger companies acquiring smaller companies strictly for the talent… [T]he product and service in the company is secondary…"

This trend will likely continue to gain momentum in 2015 as companies hone their talent management processes to acquire specific types of candidates while consolidating recruitment processes to become more streamlined. Zoldan explained, “Today more than ever, companies need to put serious emphasis and capital on identifying and retaining top talent; that's how companies will differentiate themselves in the ‘new economy’ and truly maximize their potential."