The Role of the CFO with Chris Dier and Eric Hall (FLG Partners)
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- Опубликовано: 16 июн 2011
- The Wharton Entrepreneurs Workshop, developed jointly by Wharton | San Francisco and Wilson Sonsini Goodrich & Rosati, features Chris Dier and Eric Hall from FLG Partners speaking about the role of the CFO, which includes providing direction to the CEO and the executive team when facing technology challenges, competitive forces and supply chain issues.
More information about the Wharton Entrepreneurs Workshops:
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17:53 Earnings you can manipulate. Earnings are an accounting number. Cash doesn’t lie, what’s in the bank account is in the bank account. Armies run on food, companies run on cash. Companies go out of business because they can’t pay their bills - not because they have negative earnings.
18:40 Focus on the cash. If you know what the cash burn is, that’ll keep you going in a startup environment.
19:35 The CFO’s role in a startup is to make sure the cash is there. If you get 12 mo’s worth of funding, make it last 18 mo’s.
22:30 Learn how to do waterfalls for any revenue, balance sheet item. Vett it with your CEO.
24:24 Finance can be very controversial and cause a lot of angst.
33:18 Today a CFO has to understand all the facets of the company, you can’t just be a numbers person and focus on the accounting. When you talk to a bank, VC or PE you need to be able to describe the biz to them down to the details.
34:05 If you don’t design it, make it or sell it, you better find a way to add value in finance or you’re not going to have a job. How to get people the money they need. What’s the financing plan? Access to capital markets.
37:18 GAAP is necessary if you’re raising bank debt or external debt - you have to be GAAP compliant. More important is management reporting.
38:38 Rising China
47:20 Seqouia (Mike Moritz) doesn’t want a CFO for the first couple of rounds. Put all the money into product, people, and markets but not into infrastructure. If proof of concept, product market fit, right technology, then we’ll build infrastructure. The first ideas are a throwaway. To from an auditor at early stages doesn’t even matter. Don’t need a full time CFO in the first two rounds.
48:20 Quickbooks, outsourcing HR, consultants and legal, hire fractional/part time CFO to build business model, strategy and stress test the cash. Then waits to get closer to revenue stage to develop the systems and accounting to get biz leader the resources he needs.
50:45 Put the money into the people, products and technology. Build infrastructure later. Quick books can be used for data reporting and grow with later.
52:40 Seed stage Co. can bring someone on as an advisor. Hire a great controller on a part-time basis. Classically trained musicians make the best accountants because they have a high attention to detail & accuracy.
53:45 Cap table, stock option accounting, valuations are the “hygiene things,” that if you ignore and be painful for the next round of financing. Hire a controller or senior accounting manager who’s had startup experience.
54:50 CPA vs MBA level knowledge of accounting for CFO. CPA is very deep, specialized & technical knowledge, MBA is more general / holistic. Don’t need unless you’re doing limited partnerships and very balance sheet intensive things.
58:50 All big 4 financial firms have offices in China. Speaking Cantonese or Mandarin is a huge advantage. The US isn’t the market it used to be; the rest of the world is catching up. There’s lots of opportunities for startups to sell outside of the US.
1:00:14 For fundraising, the CEO is who the investors really want to hear from vs the CFO. Early A-C series are more CEO driven. Investors have to believe in that person & team, they have to believe in that person as the asset they’re buying (and the technology).
1:01:45 Debt vs Equity funding. Debt financing needs strong cash flows. Debt and later stage need CFO vs equity. It’s stage dependent. Government R&D loans in Clean Tech.
1:04:45 A CFO has to know the business model really well, domain knowledge, predictability (most important after going public), prepping analysts. The analysts are the most important team on the investment banking side, not the investment bankers. IB’s just go on the road show and that’s it. The analysts sell the institutional investors on your company and keeps the market growing after you’ve gone public. Better if they’ve had a year to grow with you, the #1 criteria for hiring analysts is the ones that are really enthusiastic, love you, and are on your side. That takes time to cultivate.
1:07:30 Have an audit in place before an IPO. 2-3 mo. process.
1:09:30 Having good processes, procedures and controls in place is the best thing to do, regardless of what size company you are.
1:10:28 Expenses are the easiest part of finance. The revenue side is all over the map. Spend a lot of time on the revenue side - marketing and sales hooks. Those folks should learn finance too, because if you can speak the language you’ll be a lot more efficient.
1:11:30 Important to spend the time understanding what the business model is, how you can make money and how you can change it, pricing, distribution. Crossing the Chasm is the No.1 problem. New technologies can always find early adopters and people who like to try new things and willing to take a risk, but turning that into a sustainable revenue stream takes time. People underestimate the time and effort and money to do that and fall into a cash hole during the crossing.
1:12:00 You have to be flexible and able turn on a time, because if the competition or market changes it can kill you overnight.
1:12:20 Re-budget every 6 months. 12 mo’s is too long.
1:12:40 CFO magazine
1:13:00 Fundraising is a time consuming process, even if doing it well can take many months from start to finish - so build into your cash flow.
1:14:00 Multinational businesses is the biggest future trend. Surround yourself with the right technical experts in law and accounting to make sure you don’t trip over landmines.
This was very insightful 🥂
Thank you so much for this video. Super helpful and well-presented. Your time and effort is most appreciated!
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