Do You Want To Have Dinner With The Guy You Want To Hire? Christos Cotsakos, Founder Of ETrade And CEO Of EndPlay (Part 3)

Sramana: What was it about E*Trade that made you consider that job?

Christos Cotsakos: There were a lot of jobs that I was looking at. The first thing that struck me was that it was a David versus Goliath story, and I have always liked those types of stories. It was a little upstart against the financial service industry.

The second key aspect was that it was a transformative technology that would change the way the consumer did business. Third, it was a way to take a price point that was as $300 per transaction and drop it down to $19.95, which nobody thought was possible.

The final aspect I found intriguing was that it was a technical solution in the marketplace that nobody had thought of that addressed how you would be able to democratize information to get it out to the consumer in a way that was inexpensive yet reliable and conducted in real time.  All of that was very appealing. I had a finance background at that time that I really enjoyed. Mathematics and technology go together very well, and it all came together very well at E*Trade.

Sramana: What year did you join E*Trade?

Christos Cotsakos: I joined in 1996. We took the company public seven months later.

Sramana: Did the $10 million handshake investment occur in 1996 as well?

Christos Cotsakos: Yes. Once E*Trade was public, we again looked at the risk model. Just because we were one of the few Internet companies that was profitable at the time, we could not be reckless. We saw another market opportunity but knew that it would take the company into a nonprofitable position for at least two years, so we needed more funding to make that happen. I again turned to SoftBank to receive that $400 million of funding.

What people do not understand is that E*Trade had to build its category and then establish itself as the number one brand in that category. The amount of money we had to spend on marketing was enormous. We had to be one of the few that went to the top. There were 150 companies that tried to jump into online trading at that time, and we had to blow through all that noise to emerge as the best.

Sramana: How did you do that?

Christos Cotsakos: There are two things, really. We were not concentrating on financial services because we believed that E*Trade was an information company that leveraged information through an all-electronic business model. We ended up making sure that everything we did used technology as a way to give consumers an edge in the marketplace. We never lost sight of that. Right before I left, we were building a digital media platform because we calculated that once broadband reached 30 million to 40 million homes, our personalized financial media platform would be the way to go. After E*Trade bought a bank and evolved into more of a financial services company, I think they lost some of the edge they could have had by focusing on remaining a technology company.

Sramana: How did you communicate your emphasis as a technology-focused company to a market that was inundated with 150 other startups trying to do the same thing?

Christos Cotsakos: We did everything that was counter culture. We knew the big financial services companies would not give us credit for who we were or what we were trying to accomplish because we were trying to take the magic black box and expose it to consumers. We were reducing their commissions tremendously.

We devised an expensive, in-your-face marketing campaign that made fun of everything. At that time, there was a very serious tone to financial services marketing. We pioneered ‘Boot your Broker,’ which became water-cooler talk and the forerunner of virtual marketing today. We created a big buzz with full-page advertisements in the Wall Street Journal because we had very little money. We also took a big leap and did several advertisements during the Super Bowl to reach large audiences. That was a huge differentiator in building the brand. It took guts by our board, investors, and team.

This segment is part 3 in the series : Do You Want To Have Dinner With The Guy You Want To Hire? Christos Cotsakos, Founder Of ETrade And CEO Of EndPlay
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