Last week, we hosted our second annual Finance Flight School, a half-day filled with presentations and thought leadership from key industry leaders. The room was filled with finance leaders from across the High Alpha portfolio, from Toronto to right here in Indianapolis, representing the full spectrum of stages of company growth. We also welcomed experts from Duo Security, Silicon Valley Bank, and Carta.
I broke down a few of the major takeaways from each of the Finance Flight School presentations:
Build Processes Today, For Tomorrow
Erin Howe, Director of Worldwide Sales Operations at Duo Security, discussed how pivotal it was for a rapidly growing company like Duo to think ahead of its current stage. She specifically layered this idea into the process of building out your sales ops team. A few of her practicals in this area included:
- Make the right first hire — Find an “athletic” sales ops leader. At the onset, your sales ops first hire should be someone who can act as a “utility knife,” being able to switch gears quickly and form strong, cross-functional relationships to best build out the team’s structure.
- Plan systems with the future in mind — It can be very easy in the early stages of revenue growth to simply handle each task at hand in the quickest way possible, rather than spending the time to build out systems/reports/processes that will make life easier in the long run, something that Erin referred to as going into “technical debt.” The earlier you can think about how you want your CRM or other platforms to optimize information, the easier it is to scale when growth rates pick up.
- Build “rules of engagement” that work for a $100M ARR business — A company with $1M in ARR and one or two AEs doesn’t have to think about how to divide up sales territories and market coverage in the same way that a $100M ARR company with a 50 person sales team does. But by building out a detailed market/territory segmentation roadmap (AKA rules of engagement) early on, you’re prepared to communicate to your sales staff as territories begin to shrink and shift down the road.
You really need a sales ops leader who can be a utility knife and build cross-functional trust with the finance team.” #HAFlightSchool
HR & Finance Collaboration is Pivotal for Early Stage Companies
Blake and Julia each highlighted the importance of planning out and analyzing what a total compensation package looks like over time. In today’s competitive employment environment, salary alone isn’t the sole factor impacting talent’s offer decisions. Benefits such as a 401(k), office perks, health insurance, and various stipends all play a part in the overall compensation package, and it’s imperative that top job candidates walk away with a clear understanding of all of the benefits being offered to them. Since you’ve probably spent a great deal of time thinking about and negotiating these benefits, don’t be afraid to emphasize them!
At the same time, prudent financial planning is always necessary when looking at additional benefits — it’s always easier to add in a new perk than to take one away. Though a 401(k) match may be a staple benefit at large organizations, these plans can be quite expensive to implement and maintain and are usually not advisable for start-ups.
A key topic discussed during the Q&A portion of the chat surrounded employee stock option grants. Major points of discussion included:
- When issuing options to new or existing employees, how much context/information do you share?
- Do you provide the total amount of shares in the plan, allowing for the calculation of % ownership?
- Do you go a step further and give an implied value of those shares based on expected company performance?
Blake and Julia both emphasized that the amount of information you share should ultimately align with your company’s culture and values. If your company historically has preferred to keep specific information protected, don’t make equity grants an exception. In the same light, if your company values transparency, don’t be afraid to give employees a context of what their options could be worth depending on certain exit multiples. Equity grants in early stage SaaS companies are often a key part of comp plans, so don’t hesitate to provide some measure of potential upside.
Venture Debt Can Complement Fundraising
Dennis Grunt and Garon Patterson of Silicon Valley Bank explained the ins and outs of venture debt financing. While venture debt isn’t a perfect solution in all situations, certain companies may see the benefits of this financing vehicle when used correctly.
Venture debt is typically issued right after a fundraising round and usually represents between 20–40% of funds raised. The additional cash acts as an operational runway extension, pushing out the time until the next funding round (usually around three to six months on average). If a business is able to use this extra runway to grow, it can result in a higher valuation… and in turn lower dilution (hopefully around 10% dilution savings). Venture debt is usually issued as a three- to four-year term loan, so make sure to model out debt amortization and interest payments into your cash burn figures when figuring out whether or not this vehicle makes sense.
Know When to Think Small and When to Go Big Picture
Charly Kevers, CFO of Carta, provided the keynote presentation at the end of the day. Carta has seen the top-line hypergrowth that all SaaS startups strive for. But with such a rapidly evolving business come many challenges, especially in the CFO seat. Charly provided some key takeaways of how to manage through hypergrowth as a CFO:
- Prioritize as much as possible. Along with significant top-line growth comes significant growth in CFO tasks. Charly emphasized that the best finance leaders know how to focus in on the most important tasks at hand while “letting the other fires burn.” Manage what you can manage, and know what is most important for you to focus on at all times.
- Lead with curiosity. Don’t be a “VP of No.” Set the precedent that you, as the CFO, are always looking to grow and adapt. The company shouldn’t see you as someone who sits behind a spreadsheet and only says yes to things that save money. The best CFOs are able to challenge ideas and ways of thinking, while also being seen as a strategic and innovative leader.
- Don’t wait too long to invest in your tech stack. Paying a premium for the right software that allows your company to scale is worth it in many cases. Ask yourself: could you use your current software/systems to successfully run your business if your business was twice as large as it is today? Charly takes this even a step further. Before signing off on any new hire, he first asks the question, “Can this role be filled by software?” If employees haven’t first answered that question, they can’t make the hire.
- Have a pulse on everything, but know what details are most important. Similar to the CEO, the CFO is one of the few roles that has insight into all areas of the business. The CFO should have close enough cross-functional relationships that they can speak to each business unit and its resource needs. At the same time, they shouldn’t be so high-level as to lose sight of certain details in the business that can be potential liability concerns if overlooked. Smaller details such as real estate negotiations, vendor contracts, and sales/payroll tax changes are all areas that Charly watches closely.
Managing through all this growth is about the small wins. The small wins get me to a better outcome and get your team thinking about how we can improve. Anything that requires a ton of change management is going to be messy." @CKevers #HAFlightSchool
Thank you to all of our speakers and attendees for making the second annual Finance Flight School a huge success! We hope to see you next year!