Fast Company

Talent Bank

Thomas Weisel turned his former firm, Montgomery Securities, into an investment-banking powerhouse. Now he's building a new firm -- and gaining ground on some of the most established names on Wall Street.

Walk onto a business-school campus during recruiting season, and you will see lots of junior executives from banks, consulting firms, and the like -- all trying to woo candidates. But Thomas Weisel Partners LLC, one of the fastest-growing investment banks, does things differently. Its founder and CEO, 59-year-old Thomas Weisel -- the founder and the former chairman and CEO of Montgomery Securities -- comes to campus himself and dines with potential recruits. Yes, there are lots of things that a powerful CEO like Weisel could be doing back at the office instead. But in the long run, he says, there's nothing more important than attracting good talent to his firm.

So far, that hands-on approach has paid off spectacularly. Although Weisel Partners is just two years old, the San Francisco merchant bank has grown to nearly 800 employees and boasts a steadily rising profile in the hotly competitive world of high-tech investment banking. It has participated in public offerings for such fast-growing firms as Akamai Technologies, Art Technology Group, and RealNetworks. In the first nine months of 2000, it broke into Wall Street's top-10 rankings for high-tech merger advice -- displacing a flurry of much older firms.

Most striking of all, in the money-mad world of investment banking, Weisel Partners has recruited top talent without throwing its cash around. "We aren't looking for people who are just trying to take the last nickel when they come in the door," Weisel says. His firm's biggest selling points: a fast-growth culture, potent teamwork, and the chance for people at his firm to be part-owners in both the investment bank itself and in some of the most promising young high-tech companies that Thomas Weisel Partners advises.

That package is alluring enough that the firm's partners work for guaranteed salaries of only $60,000 a year -- with the expectation that if they turn in a good year, their compensation can rocket to $500,000 or more. In an interview with Fast Company, Weisel talked about his firm's approach to recruiting and about what it takes to get the best people in your industry working on your team.

Who's responsible for recruiting at your firm?

Everyone is. You're only as good as your people, and the war for talent is intense. It's in everybody's interest to recruit the absolute best. And that's why, at all levels of our organization, people are expected to go out on the front lines and identify the people who should be working here.

The best way to make that attitude stick is to lead by example. I visit the Harvard and Stanford campuses every year. I initiate our presentations to students -- but I make sure that other partners are involved too. It's important for candidates to see more than one person from the firm. Then I'll do an awful lot of recruiting, either dinners or cocktail hours or lunches, with smaller groups of students. Once candidates come here, and come back for second, third, and fourth rounds of interviews, then I'll sit down with them one-on-one.

Isn't it easier to let headhunters do the work for you?

We didn't use any headhunters at all during this firm's first two years. Most of us know who the quality people are. We've been around the business for 35 years, so it shouldn't be too difficult. And if you don't know who the top people are, then you should at least know how to find them. Say you're looking to hire a research analyst in a certain industry. The best way to do that is to pick up the phone and call five of your smartest clients -- portfolio managers that invest in that space. Just ask them for the top-three analysts in their area. Then go out and get those analysts. And keep your eyes open as you compete with other firms.

In this competitive job market, where talented people can get job offers from a dozen companies, why should the good ones decide to work for you? What are your best selling points?

We've got a very clear strategic position in the marketplace. We specialize in the hypergrowth areas of transformation in this economy. Having a clear mission statement -- and having a track record that backs it up -- counts for a lot. We've got strong leadership and a positive culture. People generally have fun working here.

We're competitive on current compensation, but what really makes us stand out are our equity-incentive programs. If you come in as a partner, you'll be part of a group that owns much of the firm. We also have allocated roughly 10% of the enterprise for all employees below partner level. In our opinion, you build real wealth by getting a stake in the enterprise. You pay very high tax rates on ordinary income, and after you've paid your living expenses, there isn't a lot left over.

What's more, our firm has some internal funds that invest in private equities, particularly in promising young companies at the venture-capital stage, before they go public. We have a very attractive co-investment program, where, if people put in 4% of their income, we will lend them four times that amount, so that they can make a much bigger investment in those funds. And when we explain that to people, their eyes light up. Private-equity returns have been extremely strong during the past few years. And we have one of the most aggressive programs around.

Wall Street is known for its feast-and-famine cycles. How would you want to manage your people through a recession -- or through a stock-market downturn?

We're set up structurally to withstand both major boom and major bust periods. The partners are guaranteed just $60,000 a year here. Everything after that comes in the form of compensation tied to our bottom-line results. If there's no bottom line, there's no extra compensation. So we don't have a middle-management group that has to get paid regardless of the circumstances. This whole thing acts like an accordion. Our revenue could be cut in half tomorrow, and we'd still make a profit. If the whole world disintegrates on us, well, you won't have to pay quite the same bonuses that better times demand. People's alternatives aren't going to be that great.

What's more, the pursuit of excellence within our industry is something that drives many, if not most, of the professionals here. We're in a highly cyclical industry, and if your clients' stocks are way down or if the industries that you cover as an investment banker are doing poorly, then being motivated by greed isn't going to get you anywhere. People need to believe in the social attributes of this firm. They need to be charged up about coming to work every day and working the hours that this industry requires.

When you hire, what kinds of attributes do you look for in people?

Integrity, of course, is number one. A history of proven success would be number two. People have to show a strong track record at their previous employer. For younger people, raw intellect and raw communication skills matter. A lot of times you try to get really phenomenal athletes right at the beginning of their careers. You look at where they are today and then try to extrapolate what they could become. If they're fully proven and have done everything already, obviously, the price of that person is really high.

We're in the business of handicapping athletes -- at times it's almost like horse racing. But we only want people who either are world-class or have the potential of getting there. We're not interested in people that are going from a D grade to a C grade. That doesn't necessarily mean that everybody who works here went to Andover, Exeter, Harvard, or Yale. In fact, some of our most successful people come from what I would call nontraditional educational or business backgrounds.

Elaborate on that a bit. If they don't always need immaculate diplomas, what kinds of people thrive at Thomas Weisel Partners?

Flexibility is important. We're operating at the leading edge of the economy, where change is the greatest. So we ask all of our people to be very adaptive. Stock traders shouldn't plan on trading the same names forever. They might be trading an entirely new pad of stocks in six months. A research analyst who follows Microsoft might be redeployed to cover other companies where the value of his or her input might be greater. It's the same thing with our investment bankers and our salespeople.

In a growth company like ours, you're always going to have greater and newer needs. So we'll continue to take people from one area of expertise and move them to another. We want people who are willing to take on new challenges.

We also want people who thrive in an entrepreneurial culture. If people come to management and say, "Hey, I'd like to do this or that," we give them the authority -- and then we get out of their way. We don't have a lot of paper shufflers here. Hopefully, young people see that. Rather than spending a lot of time talking and thinking about doing things, people should be doing things.

You really had to scramble to get this firm started. You spent most of your career at Montgomery Securities, serving as CEO of that firm before it was sold to NationsBank in 1997. Then NationsBank merged with Bank of America. Soon after that, in late 1998, you quit and decided to set up your own firm. What helped you build Thomas Weisel Partners from a one-man sketch to a substantial firm?

We had a very close family over at Montgomery. And we all went into the NationsBank merger optimistic that it was going to work out well. But it didn't take more than a few months before signs of substantial friction began to show up. Dozens of Montgomery people kept coming up to me and saying, "Look, it doesn't look like this thing is working the way that we thought it would. If you're thinking about anything else, just make sure that you keep me in mind when you do it."

When I left in 1999, I had to get this firm cranked up fast. We mapped out a strategy to put the basic infrastructure in first. Then we had to cut an agreement with NationsBank to allow certain people to leave and come here. David Readerman, our top Internet analyst (and a former Montgomery colleague), was one of those people, and he has been incredibly helpful right from the beginning. He has mapped the entire Internet space from an investment-research perspective. But he also has Web-ified many of our analysts who were in the old economy rather than in the new economy, so that they could make the transition to doing much more of their own business via the Internet and email.

So you had a core of Montgomery colleagues that you could draw on. But to build up the new firm, you still needed to recruit from the likes of Merrill Lynch, Morgan Stanley, and Salomon Smith Barney. How did you persuade talented people at such big and established firms to join your upstart team?

Mark Shafir, our coleader of investment banking, is a good example of the approach we've used. We'd known him for quite a while, and we regarded him as one of the great talents in the mergers-and-acquisition business. He was very intrigued with our model, especially our private-equity program. He was in charge of global-technology investment banking at Merrill Lynch, and he was enjoying that responsibility. But he continued to be fascinated by our entrepreneurial approach.

We almost had him at the end of last year. Then Merrill kept raising his pay and giving him more responsibility. It was a tradeoff. Finally, by the second quarter, he could see that we were pulling way ahead of our original business plan for that year. He just couldn't stand it anymore. Mark felt as if "the train is leaving the station, and I'm not on it."

In Mark's case, his wife -- who works on Wall Street too -- is very much his equal. She was a Goldman Sachs investment banker. So we had to convince both of them that it made sense for him to come here. And she was the tougher of the two. They both came to my house for dinner -- the whole nine yards. And if you talk to Mark today, he'll tell you that this situation has worked out far better than he ever thought it would.

How much does turmoil at other firms help you recruit?

A lot of the people who came here were caught in the crossfire of our industry's consolidation during the past three years. Obviously, that's true for all the Montgomery people. We also attracted many talented people from Robertson Stephens after it was sold to BankAmerica and then to BankBoston. And we attracted people from Hambrecht & Quist after it was sold to Chase, and so on.

Tim Heekin, our head of trading, was a by-product of the Smith Barney - Salomon merger. Tim had been running Salomon Brothers's global-equity trading in London. But when Smith Barney took over Salomon Brothers, he got caught in the crossfire. Well, I'd been trying for 10 years to recruit him when I was at Montgomery. The day that I saw the merger announcement, I called him in London. I said, "The bad news, Timmy, is that I know you just moved over to London, and now you've got to look at your strategic alternatives. The good news is that you're going to come to San Francisco, and you're going to work with us."

Tim was a very careful guy. It took him a little while to get to "yes." He had just gotten married, had just moved to London, and he was very happy living there. But he had the ability to do exactly what we needed: build a world-class trading operation. And since he's joined the firm, he's done that for us.

Who are your models for hiring and recruiting?

In investment banking, Goldman Sachs and Morgan Stanley have always done a very good job of attracting and maintaining high-quality talent. They're good role models. And in the high-tech sector, we would love to emulate a number of companies in terms of how they attract great people and how they build a culture. Cisco and Yahoo! come to mind. Siebel Systems comes to mind too. It's a tough culture, and you're not deluded about where you stand. But Tom Siebel and his people deliver.

Who wouldn't you hire?

We wouldn't hire anybody with a questionable background, but that's pretty obvious. Beyond that, we aren't looking for people who want to make a name for themselves as an individual star and who don't want to cooperate with the other people here. The team approach is very important to us. We're trying to build sustainable, long-term franchises with our clients.

Finally, we're not looking for people who are just trying to take the last nickel as soon as they walk in the door. Your best deal here is going to be made in your second or third year -- after you perform. This is an entrepreneurial place, and if you produce good results here, the system will respond. But you've got to prove it here before that can happen.

George Anders (ganders@fastcompany.com) is a Fast Company senior editor. contact Thomas Weisel by email (info@tweisel.com), or Learn more about Thomas Weisel Partners on the Web (www.tweisel.com).

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