By Sanford Bragg April 24, 2020
The following is an interview with Stuart Lewtan, a two-time entrepreneur who is founder & CEO of Boston-based Zintro, one of the first expert networks to heavily utilize matching algorithms to supplement human recruiters for sourcing experts.
SB: The tagline for your company is ‘disrupting the expert network industry’. What is it about expert networks you are looking to disrupt?
Lewtan: The industry is epitomized by Gerson Lehrman Group (GLG), currently the largest expert network. Clients typically pay GLG around $1,200 for a 40 – 60 minute expert call. The “honorarium” paid to the expert averages around $200 leaving a gross margin of $1,000 per call for GLG. The highly attractive economics of the industry compelled approximately fifty GLG competitors to enter the space over the last twenty years. However, GLG along with many of the other large expert network providers, have saddled themselves with a very high fixed cost structure that necessitates they maintain fat margins in order to remain profitable.
To me, this high-margin low-tech industry seems ripe for disruption. I conceived of Zintro while serving as an executive-in-residence at a prominent Boston VC/PE firm. At that time, I was using GLG to source experts and I was blown away by GLG’s pricing. I hypothesized that if someone could bring technology to bear on this problem set, they could bring the cost down and serve a much larger universe of clients and experts.
SB: How did that play out?
Lewtan: Not exactly as I first envisioned. The original strategy when I launched Zintro ten years ago was to build a self-service platform where clients and experts could perform all of the functions of an expert network without any requiring any human interaction by Zintro employees. The technology worked extremely well.
However, we quickly learned that we were building a product that our clients didn’t necessarily want. The clients appreciated the unique alpha-generating experts the platform matched them with, but they also wanted a higher service level to help them further qualify experts, schedule calls, perform compliance and pay experts. So we pivoted. We recruited high quality teams in the Philippines and India and gave them extensive training to deliver comparable or even better service than our competitors at a much lower price point. These remote teams have flawless English (and/or other languages) and leverage Zintro’s proprietary technology to provide a seamless experience to both clients and experts.
SB: So, your service isn’t that different from other expert networks?
Lewtan: I wouldn’t say that. Zintro delivers the same or better experts as other expert networks for 30-75% lower cost and we give clients a choice of service levels. Those clients who want the absolute lowest price use the Zintro platform on a self-service basis. Those who want comparable service levels to GLG, Alphasights or Guidepoint use Zintro on a full-service basis. In addition to a lower price, Zintro also provides complete price transparency by itemizing the experts’ fees (which averages around $200) and Zintro’s gross margins which typically range from $300 to 400 per call, compared to the $1,000 standard in the industry. Margins can be even lower for high volume self-service plans.
SB: Are expert network clients really that price-sensitive?
Lewtan: We’re finding that large expert network clients, even those firms with long-standing relationships with the largest providers, have opened the door to lower cost vendors. They are saying, “Why should I pay more for the exact same experts delivered with the exact same service levels?” We are either replacing the incumbent vendor or being added as a supplemental vendor in most of the direct ‘bake-offs’ with GLG, Alphasights, Guidepoint and other vendors. We also have identified a large market of clients who simply couldn’t afford the high prices of the large expert networks, but find Zintro to be cost-effective. Zintro has over 300+ clients including PE/VC firms, investment managers, family offices, management consultancies, market research firms, and companies ranging from startups to Global 1000 enterprises.
SB: How do you expect the large expert networks to react?
Lewtan: We expect the margin compression to continue in the coming years and for the industry to ultimately head toward commoditization as Zintro and other lower-margin vendors gobble up market share. It can be very challenging for firms with a culture built around high profitability to react to margin compression. During the first quarter, Glassdoor reviews recently written by GLG employees mentioned rounds of layoffs and a quick search on LinkedIn confirms a large exodus of employees in the last 3 months – which may be indicative of the disruption. For providers like Zintro who have leveraged technology and global remote teams, this trend is very good news.
SB: There are a growing number of new expert networks touting their AI capabilities. As an early adopter of a technology-driven approach, what is your view on the importance of AI to the expert network industry?
It is true that several companies are starting to tout their use of AI as a differentiator. Having been a tech entrepreneur for over three decades, I recognize the familiar pattern of incorporating buzz words into pitch books in order to help secure funding and/or source new clients. What I believe to be most important is the efficacy of a new technology in providing benefits to the client. For example, Zintro’s proprietary matching algorithms intelligently understand relationships between key words. As a simple example, the algorithm correctly matches clients looking for “securitization specialists” with experts that have a concentration of related keywords like “MBS” or “structured finance” on their profiles and distills the results into a single coefficient that can be used to intelligently force rank experts. In addition to lowering the cost of sourcing and vetting experts, this technology also has the benefit of occasionally identifying alpha-generating experts that might be missed by a human recruiter biased by his/her search habits. Those are real benefits to the client. That said, I believe we have only scratched the surface of utilizing AI to support expert networks. I expect innovative technology to continue to play an important role in compressing margins and accelerating the commoditization of the industry.