Join us for a fascinating conversation with Chirag Patel, leader of EY Foundry, as we explore how this corporate venturing unit is driving transformational growth for one of the world’s largest companies.
Discover how EY Foundry identifies new markets and develops new businesses, with a focus on digital ventures that rely less on human capital. In this episode, we also dive into the success story of EYTaxChat, an on-demand mobile tax preparation service, and learn how EY Foundry integrated an external startup into EY’s services.
Tune in now to discover the challenges of bringing a startup into a large corporation and the strategies for achieving short-term successes that lay the foundation for long-term innovation.
Sean Ammirati 0:55
All right, on this week’s episode of Agile Giants, I’m joined by Chirag Patel, leader of EY Foundry. He’s an experienced venture capitalist, a proven entrepreneur, and a corporate strategist. He currently leads EY Foundry, a corporate venturing unit established to drive growth and transformation through the identification and creation of new digital businesses for EY Tax and other service lines. This is part of a larger series of conversations we’re having on this “season” of Agile Giants, where we’re talking to entrepreneurs and traditional startups working with large corporate partners to deliver transformative innovation together. This conversation today I want to talk about this kind of generally, but also do a deep dive into one of the products they’ve created, which is an on-demand tax preparation service called EY Tax Chat. I hope you enjoyed this week’s conversation with Chirag Patel.
All right, Chirag. So thank you for joining me today. I really appreciate you joining me and taking the time to talk with us here on Agile Aiants. I previewed a little bit about where we’re going in the intro. But if you could start by just giving the elevator pitch for EY Foundry, I think that would be a good place to begin here.
Chirag Patel 2:09
Sure. Well, thanks, first of all, Sean, for having me. I hope to live up to your expectations and your audience’s expectations. I’ve listened to some of your other podcasts, and they’re fantastic. So I’ll do my best. But you did a great job introducing the Foundry. The Foundry is a corporate venturing unit that exists inside one of the largest companies in the world, EY. And our job is to find new businesses that EY can get into that will help drive transformational growth for EY. And that means a lot of things, and it sounds consultative, but it’s really not. It is meant to help EY either penetrate new markets that perhaps we haven’t historically, you know, focused on or, and or develop new businesses that we think will help drive growth in our long-term future, as well as, as extend our delivery capabilities. You know, we are a professional services firm with over 360,000 people, professional services people around the world. And we’d like to think that we can build businesses that will rely less on human capital, but more on digital businesses. And so that’s what we do. And we’re always looking at long-term growth as opposed to the next quarter.
Sean Ammirati 3:31
So on a lot of levels, what you’re saying resonates with me. So obviously, I’m at Carnegie Mellon, at least part of the things I do I’m at Carnegie Mellon, we spend a lot of time talking about automation and making humans 10 or 100 times more professional in their personal and professional lives. But another part of this is this is stepping into a place like EY and helping them drive this transformation, and your background and mine are actually there are lots of overlaps in it. And so maybe you could just talk about how your unique experience intersects with that elevator pitch for EY Foundry.
Chirag Patel 4:12
Yeah, you know, I’ll be perfectly honest: I never thought I’d end up in a large corporation doing what I love to do: building businesses. I started my career in technology. So I was an engineer. And I just loved building software and solving complex problems for whatever I worked for at the time. And that led me to all these great opportunities I’ve had over the course of my career. So on the one hand, I was an entrepreneur. I’ve built businesses, taking ideas and turning them into many cases, very successful businesses.
In some cases, I’ve failed too, but you know, being a successful entrepreneur, you learn how to navigate complex markets. You’ve learned how to navigate complex situations, you build products that consumers want. So I learned a lot about building businesses and running businesses, being an entrepreneur. And from there, that led me to venture capital, which all of a sudden, I had this great insight into what it takes to build great businesses. And I thought I could use that expertise and that knowledge to help others, other startup companies, other founders, grow their business. And so I got into venture capital and started to develop our strategy for what I think is what the future will look like and started to make thoughtful investments. I worked at venture capital firms, as well as ran my venture capital firm. And the same time, my previous company, Highnote Foundry, a venture capital venture services firm, was trying to bring the two together. So we, on the one hand, invested in companies, but we only invested in companies that we felt we could help shape and build and grow. And the companies and the startups that we actually engaged are a combination of startups that came to us and say, “we can really leverage your expertise and knowledge as well as your capital.” But we also did it with large corporations. There are a number of large Fortune 500 companies that are trying to get into new businesses or new markets. And, you know, internally, they needed to have the entrepreneurial know-how or the expertise. And so, we work with them to identify new businesses and launched them together in partnership. All of that experience led me to EY. I met with EY as part of Highnote Foundry and I said, look, why don’t we work together, partner together? See if we can find businesses that will help move the needle on some of your corporate strategy and what you’re trying to do in the long-term that led to well, rather than partner, why don’t you just become part of EY. And so the venture services side of Highnote Foundry became what we know today is EY Foundry. And so today, we combine our entrepreneurial know how, together with our understanding of how large corporations operate, and how to navigate these large complex organizations to be able to take ideas and turn them into businesses. And in the last seven years that we’ve been doing it we’ve been, I’d say, we’ve been, you know, reasonably successful at launching new businesses. And we can get into a little bit of how we actually do it. But I didn’t think I’d last seven years to be perfectly honest, inside of a large corporate we have and that’s mostly because of a great team, and we just love doing what we do.
Sean Ammirati 7:36
Yeah. And so let’s get into the how, not just conceptually, but let’s use this EY Tax Chat as an example. And I should say upfront, like when you and I talk, there were lots of interesting candidates, but rather than I feel like, try to go an inch deep on a lot, we’re going to try to focus on this one, because I think it does, there’s a lot of lessons from it. So start with maybe the motivations to create this, and then talk a little bit about the how you did it as well, which I think will illustrate how you do this in general at EY Foundry.
Chirag Patel 8:08
Yeah, you know, when I first arrived at it, why I said to myself, how are we going to be successful here in this large corporation? How are we going to take what we know how to do from the Highnote days and translate them over into large corporate. And we recognize that, you know, you have to do things a little differently, there’s a lot of constituents you have to partner with inside the organization as well, as well as with our clients. And I always say to folks who are trying to construct or create a venturing capability inside a large corporate that ultimately your strategy and your operating model, it’s going to depend on your ability to drive success in a shorter period of time, right? Because corporates typically look at incremental value or value you can create the shortest period of time. But people like us, who are entrepreneurs and venture people were looking 2, 3, 4 years out. And so how do you actually find something that’s actually going to move the needle on the business, and use that as a case study for how you design your operating model going forward? And so EY Tax Chat was our first one. And I think we were successful with EY Tax Chat partly because of everything I didn’t know about EY. So my naivete, and my sort of passion for making something happen is what got us there. And I’m when I say my I mean, my team and I. So EY Tax Chat is an interesting business because EY for those of you who don’t know who EY is he EY is one of the largest professional services companies in the world. And as I mentioned earlier, we have 180 or so offices or countries that we operate in and we have 365,000 same people, we, we help clients across all kinds of industry sectors, just about every industry sector. And we have all kinds of services that we offer them, to help them with strategy and planning all the way through execution, and even sometimes operating portions of their business. And one of the largest service lines that we have is tax and is a big differentiator for us, it’s in many ways a crown jewel. And tax is a very highly technical discipline. And it requires a lot of subject matter expertise, and our clients rely on us to help them create value for their organization in taxes, a lot of us think of taxes, just compliance, you know, tax reporting, but it’s much more than that, right? Businesses have to plan their, their strategy, a lot of it around, you know, how tax works, not only in their jurisdiction, but around the world. And so we solve complex tax-related problems and help our clients with tax-related solutions. But our clients have always been large, global 1000, global 2000 clients that operate in many ways around the world, right? They’ve really never been, our clients have never been, the mass retail client. Right? It’s not the you and me client, right? It’s the CFO and Head of Tax of a big Fortune 500 company who buys our services. And this is just us engaging startups, we were always out in the marketplace. We’re always talking entrepreneurs. And I ran into an old friend of mine, who read the press release that I am now EY Foundry. And he contacted me and and we sat down for lunch. And he said, he said, “Chirag, what are you doing in tax?” And I said, well, you know, this is kind of what we’re trying to do. And so what are you doing? He said, “well, I’m building the Uber for tax.” And I said, Really, that’s interesting. And we’re both ended up in the tax world. And so he explained to me what it was that he was doing. And essentially, it was Uber for tax, it was connecting tax preparers who are looking for additional revenue and additional work with retail customers who are looking for a better tax experience. And I looked at what he had, and I looked at the technology that they had developed, and I was thoroughly impressed. And it was my naivete. That led me to say, well, let me take this to EY and see what they think of it. It took it to our leadership team, our board, particularly our vice chair of tax. And I asked her, I said, “Hey, Kate, you know, what do you think of this idea? This this Uber for tax idea, it’s something that would interest EY.” Again, it was my naivete that led me to have the courage to have that question, you know, in front of my vice chair. And she looked at me and said, “Wow, that’s a really interesting technology. And I love the experience that it’s creating for the consumer. And it was a world class design that they had put together.” And I said, “Yeah, me too. But we don’t service, the mass retail market.” But in my little analysis, it’s a $17 billion market in the US. And I don’t even know what it is globally. But it’s a massive market. And it’s highly concentrated around one or two providers like an H&R block, and folks that everybody’s heard of, I’ll say, why couldn’t we think about the tapping into that market? Right, and grabbing some market share? Because what it will do, it’ll force our organization to think about how do we leverage technology to service our clients better, even if they are retail clients? And could we use that technology over time to move it upstream to larger clients, right, and we do serve retail clients, but they’re usually the mass affluent, that super high net worth clients. Right? Right. So she really liked this idea on two fronts. One, this idea of entering the retail market, because that’s a big play. It’s like, you know, these large investment banks who ended up creating retail banking, like, you know, JP Morgan, JP Morgan Chase, right? And why can’t EY Tax do the same, and enter the retail market. And so, so we started to formulate our thesis in our business plan around how we would go about doing because it’s going to be hard, right? This is something you’ve never done before. And I went back to the entrepreneur and we started talking and do we partner together? Or do we do something more tightly coupled, right? And in my conversation with him, and all the work that we were doing on the front end of this strategy, we realized that in order for this entrepreneur and I won’t mention his name, to get from where he was in his business, to a reasonable size, it’s going to be a long haul, it’s going to be incredibly risky, and he’s going to have to raise a ton of capital, which is going to be hard to come by, like who’s really investing in, you know, an H&R Block competitor, just armed with better tack better technology and Uber-like business model. And we started, quite frankly, I think he got nervous. And he said, you know, you might be right, maybe I’m wasting my time, maybe this should become part of EY. So we ultimately ended up acquiring the technology from him. We brought it into the EY Foundry, I constructed a, what we call a venture team, with a venture leader on that business. And we took that idea from what it was back then, which is simply a kind of, you know, let’s try and penetrate the retail market into what is today an incredibly successful global business, right? So we’re in the US, we’re in parts of Latin America, we’re in parts of Europe, we’re in Canada, whenother places around the world, something that I never thought, you know, I thought and I hoped, but I never thought would happen, right? So now EY is in the retail tax services market and a very successful businesses. And it’s powered by our expertise, right. So it’s generations of EY expertise and knowledge that has now been embedded into the service offerings. So our customers are our clients are getting best of class services through EY Tax Chat. But they’re getting it through an incredibly beautiful experience, it’s hard for me to say that when it comes to taxes, nobody really has a beautiful tax experience. But the reality is, we’re delivering an incredibly beautiful experience for the consumer. So that’s a success story of one of our portfolio businesses, which led to the formation of EY Foundry’s operating model and business model. So what we realized about ourselves is, we can actually do it, number one, right? It’s completely possible. It’s not easy. But it’s possible to incubate a business. In this case, we acquired something. And then we kind of built it out and incubated and grew it, our operating model today is we’ll acquire startups where we see opportunities to move the needle on our business, we will take existing assets that we have that we think are under-leveraged inside of EY and transform that so we did that for a an employee financial wellness business, called that EY Navigate. We also partner with startupsto see how we might be able to create value for both parties by partnering and/or investing. And we do all of those things. But all of it with the mindset, that we’re not venture capitalists, right, they’re not traditional venture capitalists, we are corporate venturing people. So everything we do has to align with where our market is going, and where our firm needs to be. And we start to formulate our strategy and our thesis around that and then figure out where and how we would do it. Do we buy something? Do we build something? Do we invest or partner in something?
Sean Ammirati 18:17
So take a minute and and talk about sort of how you make that choice between those three things. And I’m particularly interested in it as someone who was an entrepreneur, was a VC, now doing this. This sort of buy-build-partner choice for you, I think like you have kind of domain expertise in all three categories. So I think that allows you to be, completely intellectually honest about the best route. So how do you think about the trade off between those three approaches?
Chirag Patel 18:45
Yeah, it’s it’s a great question. There’s always, we’re very strategy-driven, Sean. So we always start with some level of a hypothesis that we think XYZ is going to happen in this market. And we think if that XYZ thing happens in the market, EY is going to have to do so and so in order to capitalize on the opportunity. So give you an example. Several years ago, all of the crypto craze started to happen. Forget about where we are today. But there was clearly a lot of activity in the crypto markets, Bitcoin, cryptocurrencies, blockchain, all of the above. And when you think about EY and what we provide and think about our audit business, you think about again, I’ll go back to tax our tax business. We formed to formulate a hypothesis that whether or not cryptocurrency is going to be regulated, which we always think it will be in it. I think it will be eventually blockchain technology and crypto or digital currencies are here to stay. It’s technology. Technology doesn’t just evaporate doesn’t go away. It’s going to happen, what shape and form it If we don’t know, and if it does, and when it does, and there is a digital dollar, if you will, if not Bitcoin, a digital dollar, the need for a lot of our services within EY, where we do a lot of data collection, data reconciliation, all of those services are at risk. And that’s all people base, right, it’s all our time right now that we charge. And if these digital assets start to sit on the books of our largest corporate clients, they’re going to need a way to manage those assets. So on one hand, they’re going to need a way to do tax and manage those assets. On the other hand, they need, they’re gonna need a way to calculate their tax obligations around those assets. And this was very early on. So we had this hypothesis that maybe now’s the time for us to look into that market, to see if we can get ahead of it. Or not experiment. I’m not a huge believer on experimenting, we got to do something, try to turn it into a real product or a real revenue stream. Right? We’ll turn it off if it’s not going to work, but we’ll do it. And so again, it was one of those situations where we ended up talking to startups, because we learned we learned from entrepreneurs, entrepreneurs are fantastic at seeing ahead of the curve, right? And so we learn from them. And we build relationships with them. And through that process, we’ll make the determination. Is there a there there for us to pursue? And if there is, should we partner with this startup? Should we acquired the startup or is there nothing out there for us to partner with or acquire, we should build it on our own. And in the crypto case, we ended up, I ended up running into another entrepreneur who actually was building a cryptocurrency asset management platform. So he was much more on the trading side of cryptocurrency. And I looked at it and I said, Well, geez, this is an interesting technology, I’m that I’m never going to be able to get into the trading business, because I’m EY. And I’m regulated. And I can’t get into that business. But I love the way you’re able to connect with all the exchanges, collect all the data, due to the calculations you need to do to drive trading, what if I use the same technology to drive tax calculations? Right automated tax calculation. And so we did a deal, where he sold the technology to it, it allows him to go and continue to do he’ll never get into tax. And I’ll never get into trading, we did a deal where I was able to buy the asset from him the technology asset and use it to launch the first ever automated tax calculation engine for crypto. And we use that across, you know, our businesses today, because many of our clients that that are ugly, own digital assets. And many of our retail clients now talk shop have cryptocurrency trades. So for us that technology became a really important part of what we do in our tax practice. And so again, the decision to back to your question, the decision to buy, build or acquire, a lot of it comes down to our strategy, our business plan, and what’s going to be the fastest path to getting to an outcome. And sometimes it’s a talent based decision, as you know, I mean, you meet incredibly talented individuals out there building businesses, and if I can convince them to come to Ey and work for the Foundry, they still have the passion, you know, bring that passion with them to build businesses, but you’ll have the all the assets and all the value that EY can deliver, right, which is capital, brand, distribution, all the benefits of working for a large corporate, and you’ll still get a chance to do what you love to do is to build businesses.
Sean Ammirati 23:42
Yeah, I want to get to talent in just a minute as we transition up. But before that, I just feel like there are a lot of people in the audience right now who need and who want to do the same thing. They want to have these collaborations with these startups. They may even have some ways to come up with these kinds of theses, like you do. Maybe they have the strategy, but won’t be as good. So if you were to speak to somebody who’s not at EY Foundry, but is trying to do something similar to have these conversations with startups, maybe just, you know, a minute or two of advice on how actually to start those conversations with startups.
Chirag Patel 24:31
Yeah, I think the first thing you have to do is, and this will sound controversial, perhaps, but get outside of the innovation theater realm of large corporates who are notorious for creating innovation theater, right? They want all the buzzwords, we’re engaging startups, and EY was guilty of that too. Okay. And then you got to focus on what is it that you want as an outcome, and then work your way back to what kind of startups do you want to talk to, why do you want to start to them, what kind of value can you actually deliver that startup. Because it’s hard being a startup founder, as you know, right? I mean, you can easily be a founder of a startup and get sucked into a large corporate. So you really, as a corporate, have to have a clear idea of what you want to accomplish. And by when and why it makes sense for that startup to want to work with you. Like, what do you bring to the table for that startup? How are you going to engage startups that can be successful and work with you to get to the same shared outcome? And if you don’t have that already, in the back of your mind, or on a piece of paper or strategy deck, you need to create that before you start scouring and going to startup events and talking about how great your corporation is, you need to really think about what you want to accomplish at the end.
Sean Ammirati 25:59
Yeah, that’s gold. That’s absolute gold. Thank you. So to wrap this up, I do want to step back, and I do want to talk about how do you think about talent at a place like EY Foundry, because I also, you know, I know some of the people who who work at your place, one of my former students is there. She’s, she’s incredible. But just in general, like I think part of the magic of EY Foundry is the team that you’ve assembled as well. So how do you think about, you know, talent at a place like EY Foundry?
Chirag Patel 26:28
Like in any business, great people attract other great people, right? And so the good news for us is we’ve been able to folks, we’ve also hired four or five people from the ITAM program at Carnegie Mellon, right? I teach there, and I love the school and everything you guys do. And, it’s a great source of great talent, right? But great people attract great people no matter what business you run. And so we started with a core team. When we first got started at EY, then we grew from there. And we grew with the size of our portfolio. We didn’t just decide to hire a bunch of people who are interested or enthusiastic about being an entrepreneur. We hired highly skilled people that we needed for the businesses and ventures we would pursue. Okay, so it’s like running a real business thqt just happen to have a portfolio of businesses underneath it. We treat it like a business. And so, in any business, you want to hire the absolute best people for the job you’re trying to accomplish. And talent is everything again, in every business. But in a large corporation like EY, we have terrific talent, we have expertise across lots of different disciplines. But we only have a few successful proven entrepreneurs that you can point to and say, Hey, I’ve done three businesses. I was a venture cap. So we have to hire in many ways from the outside to bring that kind of DNA into the organization. So once you have that critical mass, you can grow that and they’re just going to attract other great people.
Sean Ammirati 28:11
That’s awesome. Okay, that’s a great note to end on. I really do appreciate you joining us today. To our listeners, make sure you check out both Chirag and EY Foundry’s social media platforms. To learn more about the work that they do. We’ll put links in the show notes for that. But what’s the best way for our audience to stay aware of the work that you’re doing?
Chirag Patel 28:31
Well, we have a website. You can go to EYFoundry.com. And that’s all part of the EY corporate website, but you can find us there. You can always contact us. You know, we’re always looking for great ideas, great people, great collaborations, email is the best way to do it at firstname.lastname@example.org.
Sean Ammirati 28:52
All right. Well, thank you so much. Really appreciate the time, Chirag, and have a great rest of your day.
Chirag Patel 28:57
Thank you so much and take care.