Lessons from Finance Flight School 2018

This week we hosted our first “Finance Flight School” (keeping with our aeronautical theme here at High Alpha). Finance leaders from across our portfolio of SaaS companies, from Toronto to San Francisco, came to Indianapolis for an afternoon of SaaS finance learning. Here are our top take-aways from the day.

1. There are four characteristics of a great CFO.

Scott Dorsey, co-founder of ExactTarget and Managing Partner of High Alpha, sat down with Blake Koriath, CFO of High Alpha, to discuss the CEO/CFO relationship. Scott said that the four characteristics he looks for in a CFO are:

  1. Trust — CFOs should be held to the highest standard.

2. A balance of accounting and FP&A knowledge.

3. The ability to easily build relationships — they need to work with all leaders throughout the business.

4. The ability to not only report the data, but also pull out insights from the data.

He also mentioned that the CFO is one of the only leaders besides the CEO who has a full view into the organization. The CFO should coordinate and communicate with all other functions of the business, and help qualitative leaders find quantitative metrics to measure progress.

Blake Koriath and Scott Dorsey discussing the CEO/CFO relationship.

2. It’s a good time to start a cloud-based SaaS business.

Byron Deeter and Anna Khan of Bessemer Venture Partners were our keynote presenters for the afternoon, highlighting key insights from their State of the Cloud report.

Notably, tech companies are staying private longer, private valuation multiples are 2.5 times higher than public company valuations due to higher growth rates, and software is securing 50% of all venture funding in recent years.

I was particularly intrigued to learn how Byron and Anna think about certain SaaS KPIs. For efficiency scoring, they recommended keeping it simple by measuring Net New ARR divided by Net Cash burn (aiming for >1). In investor updates and board slides, they noted that giving context around metrics is important; show what the metric is currently, but also what it was trailing twelve months and what it will be forecasted out a year.

3. Annual upfront payments are Benioff’s religion.

Jason Leet, Senior Vice President of Finance at Salesforce, described the finance foundation an organization needs to build for the company to successfully scale. He shared with our group a number of learnings from his experiences at ExactTarget through their IPO as well as insights from companies he currently works with as part of Salesforce’s M&A and integration team.

He emphasized a focus on three things: people, systems, and processes. Recruiting smart & motivated people, then giving them space to work will drive positive outcomes and job satisfaction. The effort to move “from spreadsheets to systems” from an early stage will reduce growing pains that come with scaling. Processes help ensure company alignment. As an example, Jason talked about Salesforce and Marc Benioff’s incredible focus on up-front annual payments in sales deals, driving improved cash flows. Jason advised not to use the “small company” and “lack of leverage” excuse as a crutch for bad payment terms. And through his experience seeing many M&A deals while at Salesforce, he advised companies on the path to being acquired to be conservative with realistic financials projections.

4. To go public, you need differentiation.

Ashley Vukovits, former CFO of Interactive Intelligence (acquired by Genesys), outlined what a company needs to IPO, namely a product that has differentiation from what is currently in the market—or as Ashley calls it, “sex appeal”. She stressed the need for consistency and predictability in a company’s financials before going public, and the benefits of a SaaS model in this context with its naturally more predictable subscription revenue stream. Ashley spoke to the value of building trust and maintaining relationships with bankers and analysts in the market. She also stressed the importance of communicating with employees and stakeholders in advance of an IPO, as a lot of sensitive information becomes accessible as a public company.

Thanks to The Alexander Hotel for hosting us!

A common theme I noticed throughout the afternoon was trust. Jason stated that trust was his guiding principal and stressed the need to focus on trust when building a finance team. Ashley emphasized the trust needed between a CFO and analysts when going public. And Scott also mentioned that a CFO builds trust by being extraordinarily reliable — being prepared, on-time, thorough, and the rock that everyone can count on.

The key takeaway: a finance leader must have an exceptional ability to build and maintain trust with others.

A huge thanks to our speakers and attendees for our first Finance Flight School, and we hope to see you next year!

Special thanks to Jen Edmonds for her help in summarizing the content from this fantastic event!

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