CFOs step up as companies look for strategic guidance
Note from the editor
Even though he’s been at Hormel Foods for 43 years, CFO Jim Sheehan hasn’t spent much time looking at the past. “What happened five years ago doesn’t interest me,” he says.
His forward focus helped the 130-year-old company protect its employees during the early Covid months thanks to a system he helped bring in by enabling the company to compare its data against national data to help local health officials identify hotspots.
“These types of analytics were just so impactful for keeping our employees safe and keeping our operations going,” he says.
Sheehan’s many years as a finance leader has helped inform his approach to the CFO seat but not all wisdom takes decades to acquire; Chitra Balasubramanian, CFO of software development platform CircleCI, has been in the seat for less than a year but her data-crunching experience helped her transition the company from subscription pricing to a usage model.
“The subscription in the earlier model was a little bit more like shelfware,” she says. “You’re paying for it, whether you use it or not.”
By the time finance leaders get to the CFO seat, they bring wisdom to the role. Even so, the learning never stops. To help you benefit from the insights of CFOs who are wrestling with problems today, we’ve compiled a handful of pieces from CFO Dive that focus on best practices. We hope the pieces are useful, whether you’re aspiring to the CFO seat or managing through your own challenges as a finance leader.
To become a finance leader, think like one, Slack CFO says
Allen Shim was promoted to CFO once he grasped, and then prioritized, what the position must care about.
By: Robert Freedman• Published June 1, 2021
After helping put Slack on its growth path, Allen Shim was impatient to be named CFO.
The company had only 20 employees in 2014 when he joined as a finance executive, and soon he was overseeing not just finance, analytics and accounting but also IT, legal, facilities and HR, among other function areas.
“On paper, I felt like l was the CFO,” Shim said in a webcast. “I was very troubled by the hesitance, even the resistance to it.”
It wasn’t until he stopped wanting the job so insistently that he understood how he had been impeding himself by his own actions, he said.
“I had a 360 review done in August of 2017,” he said. “You get [feedback] from your peers, your fellow executives, your direct reports, even some board members. They said I was a hard worker, had high integrity, that sort of thing.”
But there was one thing that stood out, he said: his fixation on becoming CFO was taking away from his effectiveness.
“That floored me,” he said. “As someone who wants to earn from my own merit, that made me seem hyper ambitious, someone angling for something that maybe I don’t deserve.”
In response, he changed how he thought about his performance.
“It’s not about, did I do this or did I achieve this or that? It’s more around, am I the one who’s able to help drive this greater company outcome?” he said. “That was a real shift in my mindset and in the way I would think about my own development over time.”
At the same time, he had a key conversation with Sean Aggrawal, CEO of Soar Capital and the chair of Lyft who had played instrumental roles in the growth of PayPal, Amazon, eBay, and Trulia.
“He asked me a really interesting question,” Shim said. “He said, ‘Tell me who reports to you. Tell me your organizational structure. Tell me how much time you’re spending on each of these areas.'”
When Shim considered the question, he realized overseeing no fewer than nine function areas had left him spread too thin and unable to devote the time to the tasks required of an effective CFO — the forward-looking planning and analysis that was core to driving growth.
“If I was going to be CFO, I needed to become excellent in financial planning and analysis (FP&A) and understand what’s going to drive this business forward,” he said. “The time I’m spending in IT vs. facilities is not going to make the most sense for me. That one conversation made it very clear to me I need to think about this in the way a CFO would and design a structure I can support at scale and growth over time.”
His changed mindset didn’t go unnoticed by his team, board members, or Stewart Butterfield, Slack’s founder and CEO.
“The irony of this is, I went into Stuart’s office and I said, ‘Listen, I’m never going to talk about the CFO thing again,’ and he said great,” Shim said. “By December, I was brought into a board meeting and they said, ‘You’re going to be the CFO of the company.’ Not being stuck in this hamster wheel of advancement allowed me to excel in the way I needed to excel.”
Article top image credit: Courtesy of Slack
Data helped CircleCI CFO make switch from subscription to usage pricing
Chitra Balasubramanian’s background interpreting data patterns helped her forecast the impact a new model would have on the software company.
By: Robert Freedman• Published Oct. 7, 2021
When CircleCI made the recent switch from a subscription to a usage-based pricing model, it fell to its CFO, Chitra Balasubramanian, to model out the impact the change would have on the business. That was a task she was prepared for; several years earlier, at a previous company, she had led a team whose job was to make sense of huge amounts of data — just the kind of experience she needed to understand the pricing change.
“Forecasting a usage model is more of a data science problem than it is a classic Excel modeling problem,” Balasubramanian told CFO Dive. “Revenue is a backward-looking metric. Subscription values are just fairly standard and fixed units. You can’t necessarily call a usage-based model recurring revenue because it really is re-recurring revenue.”
To model out the impact, she said, she and her team looked for patterns among cohorts, among other things, from which clues could be extrapolated.
“How do cohorts expand over time?” she said. “Is there consistency across them in their motion? While you can’t get precision on every single account, you can look at groups of customers and see how they grow over time.”
Balasubramanian joined CircleCi, a platform for helping companies speed software development, just under five years ago to help it build out its finance and other functions.
“When I joined there were maybe 70 or 80 folks,” she said. “There was no FP&A team in place. There was a small accounting team, one or two folks doing HR related functions, very basic people functions.”
The company today, which recently completed a $100 million Series F round and is valued at about $1.7 billion, is in a very different place. It hosts about 50 million software builds each month.
“The sector has been quite rapidly growing,” she said. “It’s what’s driving software development practices today.”
The company last year named her its first CFO, giving her a chance to grow into a job to which she brought a wide range of experiences but had never held before.
“I feel grateful for being trusted to take on that next level role,” she said. “There was no mention of becoming the CFO when I joined. It was just about going in there, building out the function, focusing on the job. I wasn’t even thinking about growing into the CFO.”
Her experience leading that data team at her previous company, called RetailNext, which culled data to help retailers improve their brick-and-mortar traffic flows and sales, gave her crucial preparation for managing the kind of work expected of her at CircleCI. “I was helping to draw insights out of lots of data,” she said.
But she also brought relevant technology development experience from her early days as a public auditor with PwC. The firm had formed a small group the last year she was there to design tech tools to help it distinguish itself from the other Big Four firms.
“It was essentially an opportunity to be an accounting subject-matter expert wearing a product management hat,” she said. “That year was basically me looking at our audit practices and saying, ‘hey, how can we make this better? How can we avoid just doing a test and then writing out a Word doc about what we did?’”
Balasubramanian said she still thinks about the experience today. “It allowed someone who was otherwise thinking about audit, accounting, day-to-day, to think more operationally in a forward kind of way,” she said. “How can we use technology, change the process flow, to make what we do a lot more scalable, a lot more error-avoiding and a lot less manual?”
At CircleCI, one of the key metrics she looks at is net dollar retention, which shows how the company’s accounts expand and provide more value over time. It’s one of the metrics she relied on to see how changes in cohort use could help predict the impact the switch to usage pricing would have on the business.
It can show, for example, what types of customers tend to have more seasonal usage, a data point that can be plugged into the forecasting model. “We try to break apart our customer base to look at how the usage takes place,” she said.
Like many in the software-as-a-service (SaaS) space, the company brings in customers using a freemium model and then works with them at the enterprise level as the platform becomes integral to their software development process.
“We have a lot of developers who sign up for our product on their own using our freemium model, and then over time, as their needs evolve, and as their companies require, we help get them onto contracts and a logical plan within our suite of offerings,” she said.
It was after tracking how customers were using the platform that company leadership decided to move away from the dominant subscription model.
“The subscription in the earlier model was a little bit more like shelfware,” she said. “You’re paying for it, whether you use it or not.”
The usage model, by contrast, better aligns revenue with how much value customers are getting out of the platform.
“We just felt that was more of the right way of servicing our end customers versus having gaps that come about when it's a fixed subscription model,” she said.
To help big users manage the cost increases that would result from the switch, the company devised a bonus credit system.
“You purchase a bundle of credits,” she said. “The more you purchase, the more bonus credits you get, so it’s an implied discount. If they’re preparing for a product release or what have you, then they’ll end up using a lot. But then during the holidays, when they don’t need as much, that’s when they probably preserve some of these credits. So, it ends up balancing in a much more organic, natural way.”
You sit atop a mighty finance department in an even mightier corporation, and while being at the top of your game is good place to be, the game is changing. CFOs are being asked to bring more to the table and drive more to the bottom line – to step beyond finance and help turn your massive organization into a flexible operation.
But if you can transform your finance department and change how your company spends, manages, and saves money, you can transform your entire company.
It starts with a permanent finance revolution.
Okay, those words might sound bold, but we're not talking about storming into AP and demanding change. We're talking about continuous transformation within finance – imbedding innovation in every decision and delivering processes that are always on, always improving, and always ready to drive even further innovation in your business. And there’s only one way to make these real-world changes real: Embracing modern, intelligent technology. We’re talking about tech that combines continuous improvement with the speed and flexibility to:
Make real-time a reality – shiftingperiodic processes and workflows to fit the always-on reality of modern business. As a result, you can go from calendar closes to continuous accounting, you can build planning models on the fly, and you can stay ahead of risk.
Create flexibility that scales – enabling you to reinvent business and billing models in an instant, build sustainable disciplines into your processes, and quickly adapt to language and regulatory requirements all over the world. When you do, expansion isn’t an all-consuming process, and your finance function will be ready to take your business wherever it needs to go.
Do all your work in one place – closing data gaps that slow you down. By connecting all your financial functions in one solution, you can efficiently direct liquidity and working capital, you can capitalize on innovation faster, and you can connect finance to the rest of your company.
Which brings us to our next point: Transforming finance across your company.
Today the company, tomorrow the world.
Once you've automated your processes, imbedded intelligent tech in your procedures, and moved your finance organization to the cloud, it’s time to take on your entire organization.
Company-wide digital transformations such as these take more than your average accountant, however. They do, of course, require strong accounting and finance skills, but your transformation team also needs data experts fluent in modern apps that can improve both efficiency and effectiveness.
That's not all you'll need, though. Requirements for successful business-wide transformation also include:
Top-Down, Cross-Functional Collaboration Your job isn't to oversee the company’s money, it's to bring the company together to inform how it uses money. So climb out of your silo and reach out.
A Transformation Team with a Variety of Capabilities We touched on this earlier, but a great team blends multiple skills – from analytics to automation – into a unit focused on solving problems, not merely cutting costs.
A Finance Function that has Its Ducks in a Row and Knows How to Follow Through If you expect the company to follow your lead, you need to be running a trusted and efficient finance operation. (Having proven this, in part, by successfully rolling out any new tech or solutions in your own department before deploying cross-company.) And finally, you want to stay on top of your transformation every day, every week, and whenever your KPIs show things are slipping.
These are no small tasks, to be sure, but no great change is easy. When you've got the right tools in hand and people who’ve done it a thousand times standing by you, however, changing an organization like yours isn't as herculean a task as it sounds.
Rough GE acquisition helped Twilio CFO learn resilience
Two companies "bred to hate each other" don’t make promising merger candidates, but the deal came together and provided key lessons, Khozema Shipchandler says.
By: Robert Freedman• Published Nov. 8, 2021
When Khozema Shipchandler was head of FP&A at GE’s aviation business in 2006, he was asked to become CFO of a spinoff that had just acquired a rival. By the time he had moved on from that role a year later, he had reduced the workforce by 2,000 people and endured threats to his safety and still the new company wasn’t producing the results GE had hoped.
“I think we should not have bought it with the benefit of hindsight,” Shipchandler, today CFO of cloud communications platform company Twilio, said in a webcast. “It just wasn’t additive to what we were trying to do and in fact turned out to be revenue growth destructive, dilutive.”
GE Aviation’s main business at the time was competing with Rolls Royce and Pratt & Whitney for contracts selling airplane engines to the big commercial airlines. The spinoff was intended to move the company into landing gears and avionics, but although the businesses were adjacent to one another, they proved to be more different than the company’s leadership expected.
“The entire management team that we were buying was ex-Rolls Royce,” said Shipchandler. “These are two cultures and companies [GE and Rolls Royce] effectively bred to hate each other.”
More than the cultural clash, the businesses were just very different, he said.
“Our customer we knew clearly was airlines and all of a sudden we were thrust in the position of selling to air framers [who had] effectively unlimited change-order contracts,” he said. “That puts you in a pretty tough spot when it comes to costs if you don’t underwrite the plan appropriately.”
The company emerged stronger despite the rocky restructuring and it gave Shipchandler the kind of experience he benefited from throughout his 22-year career at GE, first in the company’s internal audit program, then in its aviation business and then in its digital business, where he served as CFO and then chief commercial officer.
“GE grew finance leaders to be strong operating leaders,” he said. “As long as you had a point of view and were willing to do the work, those opportunities were given to you.”
Shipchandler credited GE’s internal audit program, widely regarded as one of the best financial training programs in business, for giving him the tools to become a leader.
The program moves business school graduates through different finance roles in different types of businesses and in different geographic areas every four months over a two-year period. By the time they’re done, participants have the ability to adapt to novel environments quickly.
“The idea was, in four-month bursts, how do we change every variable that was present in the first four months, and then change them again in that third four-month period, so the individuals in the program became deeply familiar with ambiguity?” he said. “There’s a certain fortitude, grit, if you will, that you develop in going through experiences like that.”
At Twilio, a $52-billion company with $1.6 billion in annual revenue that enables developers to use application programming interfaces (APIs) to make programmatic cloud-based calls and send texts, Shipchandler is bringing his big-company experience to a hot technology company.
“The metrics are different, obviously, and the products are different, but the language of business is the same,” he said. “I actually found it to be not a large transition.”
The main shortcoming he brought to Twilio, when he was hired as CFO, is with investor relations (IR) — one area he had no exposure to at GE.
“I knew that for areas like tax and treasury I’d be okay because I would hire experts,” he said. “These tend to be high expertise jobs, so as long as you know which questions to ask, you’re okay. But IR, until you’re faced with buy-side investors, who own your company, and you’re on the firing line, you really don’t know what that experience is like.”
The IR function also comes with its own vernacular, which isn’t shared by the rest of the company, he said.
“There’s just, like, a certain language to IR that’s quite different from just normal business language, or even normal day-to-day language, and you have to learn it,” he said.
Shipchandler’s other focus has been on strategy, with the goal of using finance as a lens through which he can help the CEO make decisions.
“I wanted to be his trusted advisor, not his CFO,” Shipchandler said of his relationship with the company’s co-founder and CEO, Jeff Lawson. “I started from a position I thought I would have strength, ie., finance, and better help him understand just the economics of the business.”
As he gained confidence and learned more about go-to market and product strategies, he pivoted to corporate development as another area where he thought he could drive additional value.
“I was never shy about sharing my opinions, good, bad or ugly,” he said. “I wouldn’t undervalue the basics of having lunch or dinner or a beer because it does take the temperature down sometimes when you have to have a tougher professional conversation.”
Shipchandler called Twilio a really good company that can grow into one of the world’s great companies if it can learn to focus on execution as much as innovation.
“The difference between being a really good company and an actual great company is execution,” he said. “What are the things from an operational execution perspective that we absolutely need to nail at our size today so when we imagine ourselves to be multiple billions of dollars larger down the road it’s just easy to do business with us, easy for employees to work here, and easy for us to run the business day-to-day. Sometimes it feels like we’re all making diving catches.”
It’s that gap between where the company is and where it could be that’s the biggest challenge for him as he looks ahead at Twilio.
“When you showed up to work every day [at GE] things just worked,” he said. “With a lot of us at high-growth tech companies, when you show up to work, you’re like, ‘Man, why doesn’t this work? It should work. I know it can work.’”
Making things work is the operational task he’s embarking on. “The substance of my job I enjoy tremendously,” he said. “The organizations within my remit I enjoy tremendously. It’s just the annoyance of knowing how it could be and if we could just get there faster.”
Ansys CFO reaches back to early lessons to tackle challenges
After helping a storied company spin off legacy businesses, Nicole Anasenes brings an operational mindset to finance transformation.
By: Robert Freedman• Published Nov. 11, 2021
Since she joined engineering simulation company Ansys earlier this year as its CFO, Nicole Anasenes has been assessing what, if any, transformation is needed to its finance and accounting processes. It’s a task she comes well-prepared for, having helped transform those functions at other technology companies but also having cut her teeth as part of the team that, some would say, saved IBM from becoming a relic of history.
It was the late 1980s and IBM was relying on its corporate development team, of which Anasenes was a junior member, to help it find its way after suffering major financial problems.
“The decision was not to break up the company [but] we started to basically sell all of the commodity businesses and reinvest in high-growth businesses,” Anasenes told CFO Dive. “We were very vertically integrated from a manufacturing standpoint for all of our hardware business, so it was pulling out the value layers … and selling all the things that contract manufacturers could get more leverage out of that didn’t add as much value to us because they were more monetized. Some other selected assets like the global network and the PC division eventually came after the printer division [was sold].”
Starting with that role and then moving into other operational and finance roles over her 15 years at the company, she amassed a set of experiences that enabled her in 2013 to jump into a CFO role at cloud-based ERP software company Infor as her first job away from IBM.
“It was a natural evolution for me because it was putting all of these ingredients I had built in a non-linear, organic way — multiple business models, new business creation, transforming existing, more mature businesses — and applying it to the first be-on-your-own-with-no-net CFO job,” she said.
Although Infor was private-equity backed, it had tapped the public bond markets years earlier to acquire another ERP company, Lawson Software, which required her to manage the finance and accounting functions as if it were a publicly traded company.
“You have public filings,” she said. “You have to do lender calls. You have to do cadences. The only difference is your constituents are bond investors, high-yield investors, vs. equity buy-side and sell-side investors.”
When she left there to head up finance at Squarespace, a software-as-a-service (SaaS) website development company, she inherited an accounting operation which had a soft close of its books every 45 days — “which was not closing the books at all,” she said.
One of her priorities there was transforming that process in part by automating manual tasks.
“How do you instrument the transactional structure, connect the dots, connect the processes, so that you can have the least amount of manual intervention and the most amount of velocity?” she said.
The challenge is very different at Ansys, a company that has had 50 years of dominance in the engineering simulation space to iron out its internal processes.
“We’re a really well-run organization with a lot of automation,” she said.
Her goal is to help the $32 billion company, which generates about $2 billion a year in revenue, improve internal processes and speed access to performance data.
“There’s been some good work done,” she said. “We implemented RPA [robotic process automation] technology to automate manual tasks, we’re implementing some automation around indirect tax software, so, on a tactical basis, we’ve done a lot to improve the level of automation. What we’re looking at is all of the core sub-processes within finance and saying, ‘How do we optimize the system of finance?’”
Answering that question, she said, is different than answering the question of how to, say, reduce the time it takes to close.
“If we want to deliver insights to the business in 10 days or five days or seven days, that’s a different optimization question across many sub-processes of finance than to get the accounting close down,” she said.
Once the strategic question has been answered, she and her team will look at tactical changes.
“Does the tool set we have today adequately meet our needs or do we need to swap things out?” she said. “Are we looking at full upgrades of the general ledger or are there really improvements around the edges?”
She’s optimizing the finance and accounting functions from a talent perspective as well, adding the kind of skill sets that can help the company leverage its data.
“There are some areas that the strategic direction of the business is going to require some incremental investment in the areas we haven’t historically needed, like strategic pricing,” she said.
Talent recruitment is one area she tries to keep rigidly competitive, she said.
“I have a good network and there are people I would like to bring in but in order to have a truly diverse, inclusive team, it’s really important to have every single process be a competitive process,” she said. “It is one of the more rigid rules I have. That’s not to say I would never bring someone in from my network, but as a default, I would bring them in in the context of a robust process rather than just say, 10 people I know I’m just going to bring them over.”
The company doesn’t just benefit from a diversity standpoint, she said. The function areas benefit because skill sets don’t always translate from one organization to the next.
“Someone who is a strong FP&A leader in a certain type of business, who’s been in a certain type of business for a certain period of time to solve certain problems, may not be the best fit for, say, Squarespace vs. Infor vs. Ansys,” she said. “So, it’s being nuanced and thoughtful about the problem you’re trying to solve and the hard and soft skill set people need to solve it.”
Article top image credit: Courtesy of Ansys
CFO on why Bright Machines is going public via SPAC
Given the manufacturing automation company's capex-heavy model and its ability to help today's supply chain problems, merging with a blank-check company was seen as the way to go, says Michael Keogh.
By: Robert Freedman• Published Oct. 28, 2021
Manufacturing automation company Bright Machines is going public through a special purpose acquisition company (SPAC) merger with its sights set on two goals — raising money quickly to fuel its capital expenditure-heavy business model and broadening its reach at a time when companies are struggling with supply chain issues, something it can help them with.
“There's a nice alignment with the forces at play in the market today that makes the timing right for us to go public,” says Michael Keogh, the company’s CFO since August. “Companies are reshoring. Separate from reshoring, look at the [problems] in the supply chain. People have to come up with a different supply chain solution, so they’re looking to distribute some manufacturing to new locations.”
Bright Machines launched in 2018 by a former executive of contract manufacturer Flextronics (now Flex) and others to help manufacturing companies increase cost efficiencies by using artificial intelligence and machine learning to replace manual processes.
The company integrates the hardware side with the software side of the business through a micro-factory setup, which can make it easier for companies that are working through supply chain issues to replicate their operations elsewhere.
“Especially with what we’re seeing now with some reshoring and moving around supply chains, it’s hard to replicate that model anywhere else,” Keogh told CFO Dive.
Investors see the potential. The company, which generates about $35 million a year in sales to some two dozen customers, including medical diagnostics company DRW, attracted a $1.6 billion valuation in the spring when the merger was announced. It’s expecting to generate $435 million in cash through the merger, split almost evenly between the money held by the SPAC, SCVX Corp., and capital from a private investment in public equity (PIPE).
“I think we have a very aligned vision with our partner,” said Keogh. “They understand the business and help make the right connections, so there’s support from that perspective.”
The deal could close by the end of the year. Keogh submitted the company’s S-4 to the Securities and Exchange Commission (SEC) in mid-October.
“We’re just waiting for how many rounds of SEC commentary, how much they’re going to come back with questions on what we’ve submitted to them,” he said. “That’s the last piece that has to fall into place. Some people are seeing two rounds of comments, some are seeing four rounds.”
A SPAC merger was seen as the best route for the company given its capex-heavy business model and its goal to expand quickly to take advantage of market dynamics.
“I’ve come from some pretty capex-intensive businesses, so one of the elegant features of a SPAC is it allows you to raise a lot of money in one felled swoop,” Keogh said.
Because of the longer time frame and restrictions on forward-looking statements of a traditional IPO, the other alternative to a SPAC was to stay private, but that would have required multiple rounds of capital raises, which the company wanted to avoid.
“The organizational focus that goes into those rounds of private fund raising vs. being able to do it once is a nice feature of a SPAC,” he said.
Bright Machines is primarily a software company, but until it fully fleshes out its business model, it's operating as an integrated software-hardware company, which means it’s buying the hardware its customers use in tandem with its software. It’s that part of the business that adds costs to its model.
“Right now, the best way to highlight the benefits to what that software provides is through this integrated solution with the hardware,” he said. “We are buying someone else’s vision system, someone else’s robotic arm. So, we’re going to be in the hardware business for some period of time.”
Once it evolves away from that model, it can cut its capex to focus on the software side. “Over time, we’ll get to where we’ll be agnostic as to what type of hardware someone has,” he said. “They won’t have to buy our integrated solution. Today, that is our best way in, and it’s the quickest value proposition for the customer.”
Supply chain experience
To help the company prepare for going public, Keogh has been adding talent and getting systems in place to meet Sarbanes-Oxley and SEC reporting requirements.
“I’ve been bringing in some VP-level type folks that have been through IPOs before and that have also been in companies that have scaled from small to big really fast,” he said. “There’s one element of knowing what a well-oiled machine looks like; there’s another element of knowing what it takes to get there. That’s super important.”
The new help will be key for Keogh, who hasn’t taken a company public before. “This will be my first time through the process,” he said.
His background has focused largely on the supply chain side, helping manufacturing giants like Stanley Black & Decker, Intel and Apple manage their operational finances.
At Apple, in his initial role, he was based in China to manage the finance side of its push to triple production of the iPhone.
“My responsibility there was to negotiate all of the assembly contracts for 150 million iPhones that were going to be built in the next year,” he said. “What was our rate for assembly? How were we going to manage inventory holding costs? What do we do when we get those components we’re procuring from other customers?”
Adding to the challenge was the outsourcing, since Apple didn’t own any of the factories that were involved.
“We had to figure out the right incentive structure,” he said. “How do we ensure they have the capacity to never gate demand? So, a big part of it was how to create these rate structures. To what extent do we invest in that infrastructure? How do we ensure we aren’t just capacitizing for a peak? [Otherwise], you immediately thereafter have unused factory capacity.”
That background will be helpful since supply-chain issues are likely to drive an important part of the company’s business going forward.
“When you talk about market timing, there’s an element of that,” he said about timing the SPAC. “It feels like your traditional IPO would take longer and this feels like it’s a great opportunity for us. We chose the partner to merge with and things fell into place pretty well.”
Article top image credit: Courtesy of Bright Machines
Capital raise helped Iterable CFO see functions needing a boost
The customer engagement company had data but not the system to give leaders everything they needed from it, said Will Johnson.
By: Robert Freedman• Published Oct. 20, 2021
When Will Johnson was pulling together data to share with potential investors about a Series D capital raise two years ago, it became clear the high-flying startup he had just joined as CFO was lagging in one key area: its support infrastructure.
Iterable, a cloud-based marketing software company launched in 2013 by a former Twitter engineer, was poised to command a big share of the $20 billion customer engagement market, but in its rush to grow it had under-invested in the kind of back-office capabilities it needed to scale adequately.
“In parallel with the capital raise, which was the first strategic project I worked on, I thought we could be [managing and interpreting] our data much better than we were,” said Johnson, who joined Iterable in mid-2019 after serving as CFO of two other software-as-a-service (SaaS) companies.
To improve its use of data, Johnson worked with the company’s CEO and COO to add a business intelligence platform and a team to go along with it to work side-by-side with his financial planning and analysis (FP&A) team.
“The Series D financing process for me was an eye-opener,” Johnson told CFO Dive. “Here’s a real opportunity for our business to better leverage the data that we already had within our four walls but in some areas was not easily accessible. We wanted to make sure the data ultimately flowed to a single source of truth, and that we, both in the finance team and the management team at large, could easily access and interpret that data and then use it to make decisions around our business plan.”
The Series D generated $60 million and within another year Johnson was back in the market to take advantage of investor interest and raise an additional $200 million in a Series E, which closed in mid-June.
The additional funding, along with the company hitting $100 million in annual recurring revenue (ARR), considered a SaaS benchmark, raised the company’s valuation to $2 billion, setting the stage for it to go public in another year or two should it decide to do that.
“The customer engagement market that we’re in is a massive addressable market,” said Johnson. “We have strong execution and a great product, but that market dynamic really is one of the key elements I would attribute to why our investors have the high expectations that they do for our business.”
Johnson, who invested in tech startups on the venture capital side for a decade before moving to the operational side half a dozen years ago, sees the job of CFO in strategic terms.
“I’m not an accountant by training,” he said. “I’m more business focused than an accountant. I certainly know enough accounting to be dangerous but I rely on my controller and his expertise from an accounting standpoint. That’s becoming more the case for CFO roles.”
In this strategic capacity, Johnson sees his role as the executive who brings a long-term view — “looking beyond the headlights,” as he puts it — and as the chief collaborator, the one who helps ensure the CEO, COO and the function heads have the resources, data and analysis they need to do their jobs. He also sees his role as a storyteller, but in a different way than the CEO.
“The story is infused with numbers and metrics,” he said.
It’s in that storytelling role that, he said, he learned why the availability of data is so important.
“In addition to selling investors on the opportunity, you’ve got to be able to back it up in a data room and a diligence process,” he said.
Although investors are a CFO’s key audience, internal audiences are just as important, because talent is the backbone of any SaaS business.
“A lot of people [in the business] are not numbers folks, generally speaking,” he said. “So, I see my role as making sure that my peers on the management team [and our employees] are well informed through data and then we can collectively act on that data.”
One way this translates internally is in helping the HR team succeed as it competes for talent in the tight labor market.
“If we need to hire 50 people, how many company interviews do we need and how many offers do we need to make to people to ultimately net 50 hires?” he said.
In addition to the two capital raises, Johnson last year tapped his market experience to restructure the company’s venture debt, a reserve it had in place for years but that wasn’t serving the business in the best way it could.
“I felt like the lender that we had on the books when I joined wasn’t paying the attention to us as I thought they should,” he said.
Based on the term sheets that equity investors presented to the company during its last two capital raises, Johnson saw the market was valuing Iterable as a top quartile company, which made clear he could get a better deal with a different lender.
“We’ve been fortunate in each of our capital raises to have at least five term sheets to work from,” he said. “Those other offers, those other term sheets, opened my eyes. I saw that, yes, we can do much better than the structure we had in place, so that was the key driver.”
The deal included an equity component, which the company tapped to give staff a chance to boost their income by liquidating some of their shares in an employee tender.
“They had an opportunity to have a choice as to whether to take a small amount of liquidity off the table,” he said.
Johnson said his work on behalf of the company in the capital markets — the two capital raises along with the debt restructuring and the employee tender — are first among the efforts he thinks has created strategic value to the business. They not only gave the company the means to extend its runway until leadership decides its next move, possibly including a public offering, but they gave the company a chance to recognise its most important asset, its talent.
“It’s a culmination of those things that I’m proud of in the first couple of years I’ve been here,” he said.
Article top image credit: Fotolia
Best practices for the CFO
By the time finance leaders get to the CFO seat, they bring wisdom to the role. Even so, the learning never stops. To help you benefit from the insights of CFOs who are wrestling with problems today, we’ve compiled a handful of pieces from CFO Dive that focus on best practices.
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Davide SavenijeEditor-in-Chief at Industry Dive.