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This CEO Developed a Cadence to Profiting with Tech Startups

By Adrienne Burke | Small Business

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You don’t need to spend more than a few minutes speaking with Yonatan Stern to know that he’s not your usual tech company leader. A computer scientist and serial entrepreneur based in Israel, he presides as CEO and chief scientist over the B2B contact and account information company ZoomInfo, headquartered in Waltham, Mass. In the 30 years since completing military service in Israel and graduating from Technion - Israel Institute of Technology, he has built several companies based on his computing smarts. And he approaches entrepreneurship with the mind of a scientist.

CardScan, a technology company that digitizes business cards, and Bizo, a business data management company, are among startup successes that led him to adopt a business philosophy that puts profits first and avoids risk.  

He says his approach is contrary to many tech startup founders who are pressured by “venture capitalists to grow fast and spend as much money as possible.” But to him, putting profits first is common sense. In fact, he says, when he started his second business, CardScan, he set out to make it profitable as fast as possible. When he succeeded (this story tells how), he spun off ZoomInfo, which also became profitable, and Bizo. “We did all of that without ever raising money, and we sold Bizo to LinkedIn in 2014 for a nice amount,” he says.  

Stern says the focus has served his businesses well. “When you go out to raise money, you think about how to sell the company to investors. But when you set out to be profitable, you think about what your customers are willing to pay money for,” he says. “You quickly realize what is worth doing or not because they are willing to pay for it.”

Striving for profitability also forces a CEO to evaluate every expenditure, he says. If he expected to make $3 million in a year, for instance, he would limit his spending to well less than that, and spend only on things that could enable him to make $6 million the following year. “It forces you to look at reality, to ask, ‘What is it that I need to do for customers?’ and 'What should we invest in to continue to grow?’" 

Look for the optimal outcome before dedicating any resources, he advises. "It’s simple things, like not spending on advertising when you’re not ready to sell. It’s not genius, but it’s very difficult to keep that discipline on an ongoing basis.” Of every initiative, Stern says he asks, “What are we trying to accomplish? How can we do it better?”

He also asks employees to evaluate new ideas against two criteria. “First, if you are successful in what you do, what impact will it have on the company? Many times the answer is, if we are successful we will make another $500 in sales.” He says 80 percent of ideas die right there. He’d rather hear: “If we do this, we will open up a $10 billion market.”

Second, he asks, “If you fail, will it ruin the company?” He prefers ideas with big returns and low risks. “Posing these two opposite questions keeps people experimenting all the time.”

He uses body language to demonstrate that the key to sustainable growth is to walk, not leap. “I show people in company meetings how I walk—one foot forward at a time. It’s the same with a company. You can’t move everything forward at once. There’s a cadence to how you run a company if you want to be profitable.”

His approach to building a company, in fact, could be compared to the way an engineer develops a piece of software: “Make incremental improvements, and keep fine-tuning everything you do. You can jump, but it would just waste money. Iterate until you get it done correctly,” he says. 

“Take a deep breath and I can assure you that you will find ways to do it better, faster, or cheaper. That’s the kind of thinking you have to have to grow at the pace at which it is rational to grow.”

Follow Adrienne Jane Burke at @adajane
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