"Am I continuing to learn? Am I continuing to create value?”These questions act as pillars for Eric Muhlheim, propelling his expansive career from studying mathematics to leading finance teams at one of the most dynamic tech organizations today.In our first episode of 2024, Eric and host of The Modern CFO, Andrew Seski, explore Eric's formative experiences at Morgan Stanley, his impactful tenure at Disney, and his transition into the world of tech leading him to his current role at Mozilla. Eric shares insights into Mozilla's unique corporate structure, its mission-driven approach, and the challenges and opportunities presented by the AI revolution.Listen in as Eric and Andrew discuss the importance of strategic implementation, the critical role of maintaining a strong, mission-aligned balance sheet, and Eric's personal approaches to leadership and relationship-building in the corporate world.Show LinksConnect with Eric on LinkedInConnect with Andrew on LinkedInCheck out the 2023 State of Mozilla

From investor to public company CFO, BLADE's Will Heyburn shares his path to the selective role of leading a finance team from the private markets through an IPO and beyond.In this episode of The Modern CFO, Will unpacks BLADE's unique evolution from passenger transportation to a leading medical organ transport provider and why they continue to focus on direct communication, data-driven decision-making, and building a customer-centric culture.Will and host Andrew Seski discuss the intricate balance between risk management, client satisfaction, and staying adaptable, especially as a technology platform within the aviation industry.Listen in for more secrets to BLADE's success and valuable lessons for aspiring CFOs navigating the future of technology within their own companies.Want to give BLADLE a try? Listeners can use Will's promo code* available towards the end of the episode! *Terms and conditions may applyShow Links Connect with Will Heyburn on LinkedIn Connect with Andrew Seski on LinkedIn Learn more about BLADE on their website

In today's fast-paced marketplace, distinguishing what is important and impactful is a challenging task, and when a crisis unfolds rapidly, the stakes reach unprecedented heights. Steven Kelly, Associate Director of Research at the Yale Program on Financial Stability, joins us to discuss how navigating the choppy financial waters requires CFOs to possess a keen sense of judgment, as well as a sharp appetite for risk.Our conversation delves deep into financial stability, its critical tools for navigating fast-moving crises, its relationship with technology, and recent dynamics among banks, governments, and international markets.Listen in as we uncover valuable insights on how CFOs can better understand, mitigate, and effectively manage risk, offering a lifeline for those seeking to fortify their financial strategies and bridge the gaps in tomorrow's balance sheets. Show Links Connect with Steven Kelly on LinkedIn and on Twitter/X Connect with Andrew Seski on LinkedIn Learn more about Yale’s program on Financial Stability Discover more with the program’s knowledge base

In this episode, Mark Wilson, former CFO of iconic automotive brands McLaren and Aston Martin, reveals the keys to enduring success in an ever-changing industry. Now CFO at Verge, an electric motorbike company, he shares with us his strategy to marry cutting-edge performance innovations with an authentic human experience.We discuss the fundamental values of financial management, especially in fast-paced environments. Mark emphasizes the importance of discipline, rigor, and transparency in all financial decisions. We also talk about the power of partnerships built on mutual goals, where the sum or parts is far more valuable, while also highlighting strategies he’s used for avoiding one-sided deals.Listen in as we revel in Mark’s experiences at Aston Martin, where he successfully propelled the storied brand into the modern era—navigating great deals while also supporting legacy relationships, like that of the storied James Bond franchiseShow Links Connect with Mark Wilson on LinkedIn Connect with Andrew Seski on LinkedIn Discover Verge Motorcycles on their website

In a world where data reigns supreme, today's leaders need to balance the quantitative with the qualitative to lead, create, and inspire the next generation of CFOs.In his role as CFO at ThoughtSpot, Mohit Daswani leverages his extensive background gained from notable positions at JPMorgan, PayPal, and Square. He passionately champions the company's mission to forge a future grounded in data-driven decision-making. Having had the privilege of learning from industry luminaries such as Bob Swan, Sarah Friar, and John Rainey throughout his career, Mohit envisions an even more profound influence achieved through the power of machine learningListen in as Mohit discusses three core principles shaping his role with host Andrew Seski: building a fact-driven culture, learning from his mentor’s invaluable influence, and discovering the strategic role of a CFO in leveraging data to shape business decisions. He also touches on a commonly underestimated aspect of modern life–the need for genuine human connection.Show Links Connect with Mohit Daswani on LinkedIn Connect with Andrew Seski on LinkedIn  Explore ThoughtSpot's data analytics solutions

Have you ever wondered what the future of car-sharing looks like?Turo CFO Chuck Fisher unpacks this with host Andrew Seski on this episode of The Modern CFO Podcast. Chuck also shares his perspective on the role of trust in car-sharing technology, the economic value created on Turo's platform, and how Turo is bridging the gap in transport insecurity.Listen in as Chuck shares his most memorable pit stops and detours along Turo's journey, including the company's rapid growth in 2021. From the role and impact of his mentors, to scaffolding platforms, hear Chuck’s route to the CFO seat and how Turo is using data-driven decision-making to create a more sustainable and equitable transportation system.Show Links Connect with Chuck Fisher on LinkedIn Connect with Andrew Seski on LinkedIn Find your drive with Turo

Jessica Holscott didn’t always have a clear route to a public-facing C-suite role. She had spent many years in different industries — from lighting to vehicle manufacturing — transitioning through a variety of positions to become the well-rounded businesswoman she is today.Most recently, she served as executive vice president (EVP) and chief financial officer (CFO) of WarnerMedia Studios & Networks. Prior to that, Jessica held several leadership roles, including EVP and CFO at HBO, senior vice president of investor relations at Time Warner, and CFO of NBCUniversal’s TV Stations division, where she brought a wealth of experience and knowledge in financial management, strategic planning, acquisitions, and more.In this episode of The Modern CFO, Jessica talks with host Andrew Seski about the playbooks that guided her throughout her career and how she transitioned into the public-facing media landscape. An avid networker with deep roots in the entertainment industry and blue-chip consumer companies, Jessica also shares invaluable lessons for aspiring CFOs seeking mentorship.Show Links Connect with Jessica Holscott on LinkedIn Connect with Andrew Seski on LinkedIn

For Townsend Search Group, executive search is a highly personalized process—one that requires looking at the market, the competitor environment, and the culture of the client’s organization, and then drawing up a tailored strategy for them. The goal isn’t just to find candidates. Rather, Townsend aims to place change-making leaders that fulfill long-term goals, influence strategic plans, and impact decision making across client organizations.In this episode of The Modern CFO,​​ Dan Ellis, Managing Director at Townsend Search Group, dives into the challenges, strategies, and invaluable lessons for aspiring CFOs and those seeking effective financial leadership. With over a decade’s experience in public accounting and consulting, Dan Explores the diverse personalities, drive, and discipline that define these financial leaders. From the vital role of athletics in shaping their work ethic to the crucial balance between work and personal life, gain valuable insights into what it takes to excel in the competitive world of CFOs.Show Links Check out Townsend Search Group Follow Townsend Search Group on LinkedIn Connect with Dan Ellis on LinkedIn Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.[00:00:00] Andrew Seski: Hello, everyone. Welcome back to another exciting episode of The Modern CFO Podcast. As always, I'm your host, Andrew Seski. Today, we're joined by Dan Ellis, managing director of Townsend Search Group, a search group based in Michigan, my home state. And for just over a decade, Dan shared his career experience in public accounting and consulting and today is connecting private equity groups or portfolio companies with the best talent there is. Dan, thank you so much for joining us today.[00:00:35] Dan Ellis: Andrew, thank you. Happy to be here and excited to chat about some topics about the modern CFO.[00:00:43] Andrew Seski: So one of the reasons I'm so excited that you're on the podcast is that we get all of these incredible insights from CFOs in their fields. And while they're all diverse, I think your perspective should be really unique and valuable to them. It's a somewhat opaque world and I know that market dynamics have severely shifted in the last few years and even last few months. Before we dive into the whole world of CFO placements and Townsend as a search group, I'd love to go back in time and learn a little bit about how you initially became interested in accounting and maybe even earlier days outside of undergrad.[00:01:20] Dan Ellis: Yeah, sure. I appreciate that. I grew up in an entrepreneurial family. My father and grandfather purchased a manufacturing company that they grew and successfully operated. So I always wanted to be a business owner and I saw accounting as a path into that. So went to Western Michigan University, got my accounting degree. After that, spent eight years in public accounting and consulting as a CPA. Towards the tail end of that, I got into M&A advisory, due diligence, transaction support. And really liked that environment, but didn't see myself being a partner in a public accounting firm. I wanted to do something more entrepreneurial where you could eat what you kill. And so I was introduced to my colleague and partner Peter Bridges at Townsend Search Group. And just came into the executive search and recruiting world with a network previously in private equity and consulting and was able to learn the operations and the process of executive recruiting and eventually become very good at executing searches, which ultimately led into more to business development and opportunities like this to meet you. [00:02:31] So our specialty at Townsend has really become working with middle-market companies, lower middle-market companies that are privately owned, most often private equity sponsored. So we do a lot of work in the private equity community, not only at the firm level or within the funds and working with the investment teams, the operating teams. We spend a significant amount of our time working within the portfolio companies, placing accounting, finance, operational executives, and leaders. So I think today, we'll spend most of the time on CFOs. And just to set the context, a lot of our focus is in the middle market with privately owned businesses. [00:03:13] Andrew Seski: Yeah, that's really helpful. Thanks for that. Yeah, I think in my mind when you're going out and engaging with a search firm maybe for the first time, you may have some hesitations and I'm curious as to when and how maybe CFO should begin the process of engaging with the search firm. I feel like the marketplace, maybe the tenure has shortened a bit in a typical amount of turnover in the C-suite in general right now. I'm curious as to when it would be most strategic to engage with search firms, understand the marketplace better, or if you should essentially always have a good pulse on the market.[00:03:51] Dan Ellis: I think it's always important to have a good pulse on the market. And this comes into a little bit of how do you develop into a CFO. And I think earlier in a career as a candidate, as an aspiring CFO, being in contact with the recruiter can really help you be more strategic with developing your skill set to be a CFO. So we can understand your background and experiences and where you want to get and try to align your interests with companies or CFOs that are looking to hire someone in those functional areas. So making sure that you're deliberate and strategic with your career development is something that a recruiter can help counsel or advise. We can give you data points on what the market holds in terms of compensation and really just help make sure that you're aware of what's out there in the market. [00:04:45] Now, if you're a sitting CFO and you're building a team, being in contact with us is very valuable because we're constantly in the market talking with folks. We know what they're making. We know what they're looking for. If we can understand the vision that a CFO is trying to drive in a business, the strategy they're trying to execute, we can find candidates or we may know candidates that align with that strategy and that vision, and therefore it creates a win-win in the fact that we're getting the candidate the technical and the experiences that they need to develop their skillset to be a CFO, but we're also helping that sitting CFO build out their team and drive what they're looking for. So hopefully, that's helpful. [00:05:34] Andrew Seski: Definitely. I mean, so you've been with Townsend for about a decade now. And the world has changed a lot and we've been through a number of economic market cycles and then the last few years have been extremely interesting. I'm curious as to how that impacts — maybe equity becomes more important in a cash-restricted business that needs to ramp up and scale. I'm curious what a search firm market environment is, like what the cycles are in the marketplace for you, maybe what the lag is, and then what it is like in our current market today. You know, we're chatting in April of 2023. And what does the world look like today from your vantage point? What should CFOs think of in terms of the kind of market cycles that ebb and flow throughout their search for maybe a new position?[00:06:22] Dan Ellis: Yeah, great question. I'll try to cover it all. I think that in the last 10 years, we've seen equity participation become more prominent. It's become more visible. And where it used to maybe be only at the C-suite level, we've seen equity participation coming downstream into the business. So as far as manager level, controller level, we're seeing M&A associates and businesses getting equity or carried (profits) interests. And a lot of that is to attract and retain talent, but it's also to counter the increase in cash compensation that we're seeing in the market right now. I think there's been quite an increase, especially in the junior professional through vice president. I think there's been a little bit of compression more at the C-level, but that's been offset by more generous equity participation as well. So I think in general, just thinking about the long term in terms of your earning potentials and just making sure that you gather the experiences and the skill set to put yourself in a position to be in your prime earnings potential. So it's definitely still a candidate market. It has been since I've been in the business. I think it will continue to be a candidate market. So you need to really be in tune with what folks are looking for out there, and a lot of that has to do with compensation but we're seeing quite an increase in the non-economic values and having some flexibility and lifestyle that you can sprinkle in. So there's many different things that kind of surround the market in terms of compensation and yeah.[00:08:14] Andrew Seski: How do you think about conflict resolution in general? You're dealing with private equity folks and high-caliber finance leaders, and typically those are opinionated, successful, maybe a little Type A personalities. And when you've got that elevated level of success and the lofty goals of all of the outcomes, when you think about conflict resolution amongst these two parties with hopefully aligned interest and as an outcome, how do you think broadly about managing expectations?[00:08:48] Dan Ellis: I think first and foremost, really anybody that's ascending to a leadership role in today's market has soft skills, behaviors, leadership skills that include having a high emotional intelligence and being adaptable and being approachable. So I think even in the private equity firms, we're seeing that leadership style. And so they do value their vendors and want your advice. And I think related to the CFO in a private equity-owned business, the CFO interacts with the private equity group more than anybody. They're typically the ones developing the presentations and leading the board, the monthly board meetings, and interacting with the investors. So having a strong relationship with the private equity group is extremely important and sharing and the vision and alignment of the strategy because on one side, you're reporting to the private equity group. You're driving value creation, but you're also dual-reporting to the president or CEO in the business and you're their financial partner, so you've got to be able to balance it all. And so I think that just being deliberate, being communicative, just making sure that you have good behavioral management and leadership skills is super critical, especially in the private equity environment where there's just limited resources. You need to be more of a generalist, so having the humility and ability is critical.[00:10:25] Andrew Seski: We often talk about on the podcast the mix of EQ and IQ needed in the CFO role. People often forget that it's not just a finance job. You're the public face of the finance team, which needs that mix of leadership capacity and a lot of EQ and the scaling amount of IQ and EQ as well. I'm curious as to — it sounds like we're kind of dancing around your definition of what a modern CFO looks like today, and maybe we could expand upon that and talk about what kind of playbooks that you've seen that have been successful and potentially adopted by others.[00:11:01] Dan Ellis: Yeah, happy to help define the modern CFO. And I think breaking it down, we view it as having the technical skill set as well as the soft skills. And the technical skill set is making sure that you're well rounded, making sure that you take all the steps to develop the functional areas that a CFO oversees. And the CFOs that we work with are all very hands-on. They're in the details, but they're able to delegate. So things that we see being critical are developing a sound accounting foundation. It's making sure that you understand that controllership hat and not rushing through the financial reporting stages and making sure that you get involved in financial planning and analysis. And I think very important in private equity-owned business is the treasury function and managing debt and the banking relationships. These are typically highly leveraged companies, and so making sure that you round out your professional technical skill set is super critical, especially in a middle-market business where you have to wear many different hats and you may not have a corporate development function focused on M&A. The CFO is the person doing that, and they are the one leading integration. So making sure that you get as much exposure and not rushing through your progression to CFO, being patient is super critical. [00:12:35] But then on the soft skill side, you know, we're pretty focused on in-person roles. I think there's been a pendulum swing back to being in person and the reality is leaders have been present the whole time. Executives are present. They're on site. They're in person. They're deliberate. That is the best way to develop your leadership skills is being there in person. And I think the CFOs that we see that are highly successful right now, they're adaptable. They're decisive. They know what they're looking for. They know where they're going. They know the story. If they're going to hire, they know what they're looking for and they can move quickly. They're transparent with not only what they're doing, but also the financials and the performance of the business to their team and the metrics that we're trying to drive because a lot of those metrics hinge on how bonuses are calculated and bonus calculations, I think, years ago, discretionary was okay. That's out the window. You can't be discretionary with bonuses anymore. People need to have a target. They need to know where they stand. They need to know. They need that transparency. It's a benefit. [00:13:49] So I think it's really the balance of those behavioral and technical skills that define a modern CFO and just the ability to adapt in different market cycles. Been in a really high growth market with a lot of M&A and that could be changing here. So it could involve a little bit different of a skill set. [00:14:11] Andrew Seski: I'm curious as to how you define success with a placement. We were just — you were just mentioning bonuses being aligned, you know, to certain outcomes. So it sounds like a search firm like Townsend works with a fund or a CFO and it's not just a one-time, you know, help negotiate a contract. It seems like there's more of a partnership over a longer period than I may have understood previously. So how do you define success in a placement that goes well? Or maybe what's a failure of a placement look like maybe not for you personally but just in general?[00:14:49] Dan Ellis: For us, we play the long game. It's all about the relationships. This can be a very transactional business and that's what we want to avoid. So I often describe us as acting like an investment bank. We operate like an investment bank. We understand the story and the vision and the value of the opportunity we're going to market with. And we go out and we sell that and we bring in an audience that we screen and vet and validate and interview, and ultimately negotiate to a final close, hopefully. But I think for us to define success is getting a call from our client saying, "Hey, you placed your CFO a year ago. They're killing it. Now, they need to build out a corporate development team. Can you do that?" Yes, we can. And then from that CFO placement, we placed eight people on their entire accounting and finance team, building out corporate development, building out a business intelligence, FP&A, controllership. And it becomes very effective because we know the organization intimately. We can speak intelligently. These are professionals we're engaging with. So the more that we can speak with them and not just be a recruiter trying to get their resume, that's how you really excite them and get them engaged in the interview process. [00:16:13] So we've been able to generate, I would like to say, repeat business. More than 90% of our business is repeat because we'll do one placement with a PE group. And they know we can perform, so they'll use us again. And it snowballs into working with many different PE groups across the Midwest and nation now. So we've learned to be very disciplined with taking on new clients to make sure that we were both invested in it. We both want to see it to a final solution. And our role is valued because we provide a lot of education through the search process as to what the market holds not only in terms of candidates, but skill sets, experience levels, and related compensation as well that's real time, not what you'll find on a website through some report.[00:17:10] Andrew Seski: I'm thinking about some of the cultural differences between even East Coast, Midwest, Midwest to West Coast, and the investment styles in management styles. And I'm curious if there are things or questions that a CFO should ask search groups and companies that maybe aren't as obvious or mistakes that they can avoid or anything that you've seen not pan out in the way that they had anticipated over something that maybe wouldn't come top of mind when you're interviewing or engaging with a firm. Cultural differences just came to mind off the top of my head, but I'm sure there are a number of others.[00:17:49] Dan Ellis: I think the easiest one to just describe that is I always say it's the airport test, right? With anybody that you're going to be working, with any PE group, with any CFO that you're hiring, if you're the CFO and you're hiring anybody on your team, will this person pass the airport test? And that's if you get stranded at an airport overnight with this person, are you going to want to hang out with them? Are you going to have dinner? Are you going to — are you going to talk? Or are you going to go completely separate ways because you just can't stand each other? And I think private equity can have a little bit of a bad rap in the market, maybe a little misperception, a bad name. Because historically, some have come in and they've made tough decisions and rightsized and made eliminations. And to be frank, we're coming into a distressed market where that skill set is going to be needed. But in reality, they're saving jobs. They're turning businesses around. So there are different approaches and different styles of management or of private equity firms. [00:18:52] I think for us, it's just a — it's finding firms that align with how we like to operate. And I always like to hang my hat on having Midwest values. I grew up in Michigan. Yes, we do work on the East Coast and West Coast. But for me personally, I find a lot of comfort working in the Midwest because the personality is just aligned. We have personal interests, like running and skiing and biking and boating and things of that. So just being able to build the relationship, I think, is really critical — a personal relationship, a bond — to the extent that you can incorporate behavioral interview questions or just casual interview meetings as a stage in the process, I think, can help obtain some comfort around those areas.[00:19:37] Andrew Seski: Yeah, it's a really great one. I haven't thought about the airport test in quite some time, but that's a great example.[00:19:42] Dan Ellis: And sometimes if it's a high level, we'll encourage, hey, why don't you get, you know, bring your significant other, meet for dinner, and make sure that there's comfort. Because if you and I, Andrew, are going to be working together a lot, well, you know, our significants should know one another and know you, and it just helps create a lot of clarity and, I think, a lot of ease going into these high-expectation environments. [00:20:08] Andrew Seski: Yeah, that's a really good way of putting it — a high-expectation environment. Maybe even still an understatement. But, you know, we're going into, you know, an interesting market development. I think the next, you know, I think 20 — end of 23 and 24 will be kind of the time and we'll look back as kind of like the time of austerity. I think it's going to be really important for CFOs. I'm curious as to — with maybe a looming recession ahead, what's top of mind for you right now and how are you thinking about the next 12 months?[00:20:43] Dan Ellis: Great question. We are not seeing any signs of slowdown. In fact, we're becoming more busy because of the supply versus demand. So think of it typically as it's tough to find the executives. You need headhunters, recruiters to go out and find them. We're seeing it hard to find from top to bottom candidates. So people want to retain and engage us to find lower-level junior resources, and it's not always the most effective approach. So we're seeing a lot of demand. Now that being said, we're in the middle market. I think the large corporate environment is seeing some signs of distress. The automotive supply chain is fractured. I think a lot of that has to do with work ethic and cultural issues there. We're seeing signs of trouble in the tech industry, which we don't do a lot of work in, just being based in the Midwest, but we have some exposure to it. [00:21:36] So for us, it's being able to balance. We've been in a highly acquisitive environment. There's been a lot of capital to deploy, to do acquisitions, to execute on these buy-and-build platforms. As that slows, which it's not slowing a ton, let's say it was running at 100% and now it's running at 70, we offset that with turnaround and restructuring or working with distressed companies that may need a treasury expert or someone that understands internal controls and can really strengthen the infrastructure of the business. So where there may have been a need for M&A previously, now there's gonna be a demand for operational consultants and supply chain advisors. And so we're actually seeing an uptick in those boutique firms that provide those operational restructuring and advisory for services, even though the big firms are seeing a slowdown in some areas of those.[00:22:35] So it just depends on the pockets, I think. And overall, still a large amount of capital out there to deploy. If anything, PE groups will come into more distressed deals, turn them around, create value. There's still a lot of demand for the CFO skill set and their team. I think there's fewer people going into accounting and finance these days. You really need to be deliberate with how you develop your team or how you develop your skillset as a CFO to get to where you want 'cause it's a game of chess. You've gotta be strategic. You've gotta be thinking about how you win. But it's gonna take 20 steps to get there and be methodical. I think a lot of these people that want to get into private equity, it's like being a doctor. They knew it from a young age. And if you realize that you want that right out of college, you're already too late.[00:23:28] Andrew Seski: That's a really interesting point. I want to zoom out a little bit and think more broadly about the next three to five years, you know, what's most exciting in the world, in your world. Is it some of the fun things we could do with ChatGPT right now? Or what's most exciting maybe even the next few years for your team and for you?[00:23:49] Dan Ellis: Most exciting thing for us has really been evolving from just really a group of recruiters that collaborate into a firm and having the firm clients and really being collaborative and viewed as not individuals but a firm, so having that a firm approach. And we're coming up at a point of transition and we're working on that, which is really exciting. My colleague Peter would like to spend more time enjoying the things that he likes to do, like flying and traveling. So we want to support that transition, so we're really excited about that. But I think the demand for search is going to continue to increase. You've got to be very proactive with attracting the right candidate right now and go out and knock on people's doors, so really excited for the future there. [00:24:40] I think a little bit longer term, we're kind of curious to see what the remote work environment is going to do in terms of a gap in CFO leadership capabilities. We're seeing a lot of overtitled, overcompensated, underexperienced professionals out there right now. People have been able to jump up quite quickly just because of the demand. But should we hit a recession, should the market decline, there will be a correction to that to those individuals. So I think that goes back to being patient and strategic and deliberate to make sure you don't get ahead of yourself and make sure that you are really good at what you do before you move on to the next thing. So we enjoy counseling. We enjoy providing guidance to CFO candidates, aspiring CFOs, clients. That's what we enjoy the most. So really, really looking forward to continuing to do that and continuing to create value for the clients that we work with by placing effective leaders.[00:25:46] Andrew Seski: That's great. I want to do my favorite question on every podcast and it can be literally about anything that's on your mind. It doesn't have to be related to private equity or placements or your team. But I always love to talk about something that you feel is underestimated in the world today. We've gotten answers from general civility to, you know, the toll that the pandemic took on, you know, their children's education. So we've really seen the full gamut, but I always think it's interesting to talk to, you know, our audience and the guests just to round out our conversations about, you know, what to think about and especially what you feel is underestimated. Maybe we haven't had a chance to take a deep dive on.[00:26:29] Dan Ellis: I love this one. I'm going to have to say work ethic. I think work ethic right now is underestimated. I think the next generations just don't have the same work ethic that our grandparents and our parents had, and it's disrupting some industries. For example, automotive. I know, from what I've heard in the supply chain, that the younger generations, they've seen that they can miss a deadline and the world still operates and things are fine. And the automotive world has never operated like that. You fly by the seat of your pants on thin margins, you deliver on time or early. And so there's been some disruption because of I just say the cultural differences of work ethic and what sacrifices you need to make in order to get to the level of a CFO or a private equity investor. It's not easy. These folks are working their tails off. They're sacrificing families, all for the greater good of their professional career growth. And that is not for everybody, right? I mean, that's one of the reasons I selected out of M&A advisory is just those people really enjoy working a lot, and I value other things. So I think the world needs more work ethic out there. I think, you know, we need some tough love. And I think companies are starting to take a little bit harder stance on working remote and setting the expectations for people going forward and making sure that the tail is not wagging the dog.[00:28:04] Andrew Seski: Right. It's a really interesting conversation because it's not as if — we're not kind of espousing that your values need to change per se. But to be in the C-suite, especially in a CFO position, it is a level of work and work ethic to get to that spot that won't likely change. I mean, there'll be augmentative technologies that make the job more efficient. But we're still talking about a leadership role, so there just are no shortcuts, it sounds like. [00:28:33] Dan Ellis: Great way to put it. You can't take shortcuts. You'll miss an important experience or an important skill to develop. I think there's a lot of entitlement out there right now. I think COVID didn't help that because candidates were able to kind of get what they wanted, working remote, making more money. Well, we're going to have a correction. And for me personally, I graduated college at a time where it was the Great Recession. And I remember getting a pay cut and my friends were losing their jobs and you were grateful to have the experience and have an employer. Well, I think that's swung a little bit too far in the other direction where, you know, candidates are taking advantage of opportunities and we need to bring them back and — Hey, it's great. You're making X, Y, Z cash comp. This is the reality on the market, but we can offset it with this. And it's just — it's helping them to think it through because my colleague always says we're kind of like a priest or a bartender. We're here for counsel. People open up to us. We have a lot of advice. But I think work ethic and less entitlement would be my two comments.[00:29:48] Andrew Seski: Yeah. Well, it's interesting. I think the pandemic just put a bunch of priorities on everyone's plate. And I think a lot of people just reshuffled them, you know, living to work versus working to live, the role of family in their lives, role of hobbies. And it'll be interesting to see what sticks and what comes back. I think, you know, remote work is certainly a really highly debated topic and some functions and some teams work efficiently in different capacities. I think as a leader, you need to be fairly visible just as a general comment, but it will be fascinating in the next few years to see what happens when there are less resources available and you start to need to be there to negotiate, to not just be on a Zoom call, and to drive culture in your own firm. So it'll be an interesting few years for sure. [00:30:40] One of the things I selfishly want to talk about a little bit is just the role of athletics in your life. And we're talking about work ethic. I'm curious, just in general, the personality types you get across all of these CFOs. Are they mostly fairly similar? Are they a really diverse group of people?[00:30:59] Dan Ellis: I'd say they're fairly diverse. However, there's always a drive. They always have the attitude, the edge, the discipline. Discipline to me is always the big one. It's doing the right thing even though it's hard and nobody's asking you to do it, right? You do it because it's good for you. It may not be what you want, but it's for the greater of the good or the business or the others. So I think discipline is important and that, for me, stems from athletics and growing up swimming and I do IRONMANs and marathons and a lot of endurance sports, which I know you share those views as well. So I think having things outside of the professional world that you can set goals and you can accomplish them only makes you a better professional or CFO. And having that competitive drive but also the humility to know that I'm not the fastest out there and there's always someone better or faster that I can be learning from. So you take that and you apply it to business. And there's a lot of different, you know, ways to look at it. But I'd say for the most part, everybody's very goal-driven. They like to achieve results. And so athletics in whatever form or fashion tend to align with that as well.[00:32:19] Andrew Seski: So it sounds like Townsend's got its niche fairly well defined. Are there questions that people who are, you know, even starting to consider making a switch, should they be interviewing their search firms as well?[00:32:31] Dan Ellis: Not every search firm is for every person. You've got to find the one that works for you, and we're a little bit of a hybrid. We're not a contingent firm or a resume mill. But we're not the big boys that fly around and have big offices in big cities. We're right in the middle, and we're very personable. We're very collaborative where we can customize our approach. We've worked intimately with our clients. We don't hand it off to junior resources overseas. It is what you see is what you got. We're a small boutique firm. So that's just the approach that we take and if that aligns with how you operate, then we'd love to talk with you as a client or a candidate. But it is the long-term approach for us. We may have something that we can work on together right now. Great. But our approach is, in reality, it may be five years. It may be 10 years. [00:33:25] In fact, I'm working right now. We have an offer out for a CFO candidate with a middle-market private equity-owned business in Michigan. I've known this candidate for five years. We just haven't had the right opportunity. This person lives in northern Michigan. This is a chance for them to come down to the Southeast Michigan market where they have family. It's manufacturing. It allows equity. Everything really aligned. This is a match made in heaven. We've known this person for years, but we had to run a thorough process as well. We had them interview with eight candidates. This, you know, this person wasn't just, oh, here's the one. It's we did a very thorough job to try to make a difficult decision and outrule that person. But, you know, that is the ultimate decision. So we like to develop relationships and good things happen from doing the right thing when no one's looking so.[00:34:21] Andrew Seski: I love it. I don't know if we could end on a higher note than that. But is there a way for people to get in touch with you or the firm that you want to share on the podcast here?[00:34:29] Dan Ellis: Absolutely. Our website is up and running. You can contact us through there. Got a LinkedIn page. You can follow that. We are actively posting what we're up to. Our placements in LinkedIn profiles are big. We've got contact information on there, so welcome to call, email, text anytime. Always happy to take some time and invest in a conversation to hopefully collaborate in the future with others.[00:34:57] Andrew Seski: Excellent. And we'll make sure to link all of that in the show notes to make it super easy for everybody. But I have to say thank you. I know our audience will be extremely grateful for all of the insights, bringing some transparency to these processes, and for the opportunity to get to know you and the Townsend Group. So thank you so much, Dan. Really appreciate your time today. [00:35:16] Dan Ellis: Andrew, thank you very much. Looking forward to future collaborations. [00:35:21] Andrew Seski: Excellent. This has been another episode of The Modern CFO Podcast. If you enjoyed the conversation today, please take a moment to like and subscribe wherever you're listening.

It is a real privilege to invite you to listen to this exclusive podcast episode featuring John Nickolas, the esteemed CFO of the Philadelphia Phillies since 2007. With a rich background that includes notable contributions to Philadelphia's business landscape through esteemed firms like KPMG, Safeguard Scientifics, and Internet Capital Group, John's leadership has been instrumental in shaping the success of the city's iconic ventures.In this episode of The Modern CFO, host Andrew Seski engages in a compelling conversation with John, delving into the intricacies of managing a publicly visible yet privately-owned enterprise such as a professional sports franchise. Drawing from his extensive experience, John shares veteran insights that hold relevance for CFOs and aspiring leaders alike. Don't miss this opportunity to gain valuable perspectives from a seasoned industry expert.Show Links Check out the live podcast recording on Nth Round's Youtube Follow The Phillies on Twitter and Instagram Connect with Andrew Seski on LinkedIn

As customer expectations continue to evolve, marketers must adapt by delivering more personalized, timely, and efficient communication. This is where the online marketing platform Customer.io truly shines.Customer.io enables tech-savvy marketers to engage with their customers in a more meaningful way through emails, SMS, push notifications, and more. For the fast-growing SaaS companies that Customer.io serves, this capability could translate into stronger customer relations, higher conversion rates, and increased scalability.In this episode of The Modern CFO, host Andrew Seski talks with Customer.io CFO Zhi Li about his nonlinear career path, the impact Customer.io can have within organizations, how marketers can use AI as a fractional assistant, and more.Show Links Check out Customer.io Follow Customer.io on LinkedIn, Twitter, and Instagram Connect with Zhi Li on LinkedIn Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.[00:00:00] Andrew Seski: Hello, everyone. Welcome back to another episode of The Modern CFO Podcast. As always, I'm your host, Andrew Seski. Today, I'm joined by Zhi Li, CFO of Customer.io. Zhi, thank you so much for being here today. [00:00:21] Zhi Li: Thanks for having me. [00:00:23] Andrew Seski: So I'd love to talk about your career progression, the route to the CFO role, your first time as a CFO in earlier companies. But before we do so, I'd love to hear a little bit of background as to what you were interested even in undergrad and some of the first roles that you had, you know, right out of Penn.[00:00:41] Zhi Li: Yeah, yeah. So maybe just a little bit of myself and then we can probably launch into different topics that would go in there. But so I was born in China and then grew up in the Bay Area and then went to Penn. You and I just chatted about like Philly, which is the city that I really love. But after Penn, I actually started my career in Canada. So I was in finance at a wireless division of a large telco called Bell Canada. And then after that, I moved back to the US. So I worked in investment banking in New York in the tech group of Credit Suisse. So if you follow banking, you know, Credit Suisse might be called UBS or First Boston later on or something like that. So that's the some of the new dynamic there. But I learned a lot during that time in banking. Worked a lot as well but, you know, on many tech M&A and IP financing deals there and also get to interact with a ton of smart, hard-working, talented people. And then after that, I actually moved to Seattle cold turkey. And the backstory to that was my wife and I were both actually in grad school in LA. When I took the job to move to New York, I made a deal with her and say, Hey, you know, we need to transfer your grad school. She's got two more years. You know, whenever you are ready to leave, I'll hold up by end of the bargain. So no questions asked. When you're ready to leave New York, then I'll go. So the time came. This is probably like seven years ago. She says she wants to move to Seattle closer to her family. And then, I picked up and go. I did not know anybody in Seattle going in. But Seattle, I — now, like it's home for me. So I love it. It reminds me of maybe the Bay Area when I was, you know, many, many years ago, you know, back in high school when I kind of grew up in the Bay Area. So but yeah. So now, I'm in Seattle. I focus on helping fast-growing SaaS companies, helping them scale. So, you know, the one of the company was Skytap, which is a Seattle-based enterprise SaaS company. And we did a number of transactions, including a Series E Round led by Goldman Sachs. And then after that, I was with MedBridge. So it was a growth P/E-backed company, and we sold the company from one growth P/E to another growth P/E. And now, I'm at Customer.io. So very happy at the momentum and everything that we have here at the company. So just really, I think, very fortunate to be part of this growing story with Customer.io. Yeah, so that's generally the work background.[00:03:07] Outside of work, I also, you know, spend time doing the alumni interview for the Penn undergrad admission, which I always find super refreshing to see the fresh applicants every year. And I've always been amazed with the quality of the applicants. And then also, I'm on the board of an organization called LCYC — Legal Counsel for Youth and Children. So we're focused on advancing the rights of our youth and children so.[00:03:35] Andrew Seski: That's a pretty incredible resume. I want to — we're gonna pick it all apart, but let's start right at your last and current role right now, Customer.io. And I'm curious to know first, what attracted you to the firm, the leadership, maybe some of the cultural ways that the firm's been building out over the last decade, and also maybe the value add of working together. I know there are a million SaaS solutions out on the marketplace today. The venture world has been in flux over the last few years. So I'd love to learn a little bit more about the firm, how you're delivering value to clients, and what got you most excited. And you've been there for about two years now, so, you know, maybe bring us back two-ish years.[00:04:19] Zhi Li: Yeah, yeah. So just a little bit about Customer.io. So we're a leading multi-product, customer engagement platform. I think today, it's actually super exciting day 'cause we have our new launch of customer data pipeline that we launched today for early access. So, you know, throughout the last 10 years or so, our core product has been the Customer Engagement Platform, where we allow tech-savvy marketers to engage with their customers through emails, SMS, and push notifications, and also in-app messaging. And now, we also allow a new product called the Data Pipelines, so we can leverage first-party data to create more unified view for our customer records. So super exciting. [00:05:00] And I think what really attracted me — with my background, I've looked at a ton of software SaaS companies and looking at like their value and their potential. I was really attracted to number one, it's founder-led. So Colin, our CEO, has been there from day one. He's got this really long-term vision, and I really kind of feel aligned with that vision. And also, we are very horizontal in terms of like our approach to our customers. So we want to partner with early tech companies. So if you're like a VC-backed early company, we want to be partnered with you early on and grow with you, and then just try to be, you know, as you kind of advance and mature as a company, we will be part of that. And so throughout that journey, we were able to provide a lot of value for you to engage with your customer. The company's also fully remote, which I find super refreshing as well. When I joined, it was just right around the COVID time, so people are like definitely warming up to that remote idea. But the company has been remote for a really long time. So the D&A really shows like in terms of the efficiency and how people interact async across the globe. So that's been a really great experience for me. And like I said, just very excited about the future where we continue to roll out a more rich experience for our customers through new products and new solutions. [00:06:19] Andrew Seski: That's really exciting. I appreciate that. I'm sure the audience will appreciate it as well and be able to check out the solutions themselves. [00:06:25] I want to go back to early career and discuss some of your original curiosity across all of the different types of deals that you were seeing. One of the things that's really apparent at this point after I've done so many of these interviews with CFOs tend to be just fearlessly curious, whether it is in learning something new, really being entirely detail-focused as they're reading financial statements, and looking for opportunities to improve constantly. And it tends to then iterate in, you know, Big Four audit, where you've got a ton of different companies to go through or consulting or sometimes even other types of leadership positions. So I'm curious where that initial curiosity came from and if that has augmented your career path, whether it is at Credit Suisse or elsewhere.[00:07:18] Zhi Li: Yeah, and I think it's funny because I think back. Earlier on, I didn't really have a full vision of like, oh, I wanna be this way. So we — I try to figure it out. But consistently, it's always been around like the finance field. So, you know, at the beginning, you know, I was in a just corporate finance role in a wireless division, but which at the time we're talking about like early 2000s, you know, we were kind of like going through this phase from landline telecom to wireless, like cellphones that kind of face. So there's a lot of growth in that area, and I was working from the company side. But I don't know if you recall. Like there was a big LBO kind of trend there — leveraged buyout trend — back in the early 2000s. So the Bell Canada was part of a deal for one of the largest, you know, LBOs at the time, which eventually actually didn't go through. But at the time, it would've been the largest deal in Canada at the time. So I was able to get involved on that deal from the company side, which really kind of opens my eyes and curiosity on like, oh, you know, on the other side of the table, you know, these are the things that are happening. So super interesting. So I kind of used that to craft my way up back to US. Took my MBA, and then I went into banking, and that kind of helped me continue that path to look at — in the tech space, I was part of the, you know, tech and telecom group. So being able to work on a lot of fast-growing companies with cutting, you know, advanced technology with some new trends looking at there. So during that time, able to work on a number of M&A deals, IPOs, and debt financing deals. So that really helps me open my eyes and being able to kind of be comfortable interacting with C-level clients as well as, you know, collaborating with law firms, right, the the teams from the law firms and also accounting teams, to your point, like the big forest on different transactions. So being able to kind of like drive the process forward, giving me that skill set was super valuable. And then at that time, I was really, even up until that time, wasn't really thinking about a CFO path eventually. But, you know, when I moved to Seattle, that was kind of a moment of, okay, I need to figure out how do I reposition myself because there are some banking presence in Seattle, but it's not a, you know, it's not a banking presence in comparison to like New York or San Francisco. So I decided to leverage my background and skill set to, you know, go into a fast-growing like startup companies. Seattle happens to be a very kind of cloud-based software company hub for a lot of like interesting and exciting companies. So I was able to get connected with some of the local VCs that get me connected with Skytap, which is one of the companies that we're preparing to do a round of fundraising. And they had aspiration to go IPO in a relatively short timeframe at the time. Yeah. So that's kind of how I went from banking into startups. And then through there, you know, going into CFO and doing different transactions, whether it's fundraising with the VCs or M&A or other things that we've been doing with Customer.io as well.[00:10:31] Andrew Seski: Yeah, it's really interesting to hear that you've been on both sides of the table. I think that it probably informs a lot of decisions, you know, whether you're communicating across boards or to investors, especially with, you know, expectation management and timelines. [00:10:45] But one of the things I'm curious is to learn a little bit about and share with other CFOs is some of the playbooks that you saw that worked really well either at Credit Suisse or things that other CFOs can do or communicate with founders in today's environment that you saw that were successful in the past.[00:11:05] Zhi Li: Yeah, yeah. I think when it comes to the interaction with the board, ultimately, it depends on the company and also the composition of the board. But yeah. I like to try to make sure that I'm always proactive in terms of the communication and be very transparent with them, laying out the potential, you know, upside or downside, and be pretty conservative about the recommendation and the assessment. And then, one thing that's always helpful is to have always be prepared with a the downside case or be prepared with like a plan B because that always comes up and trip up people. But if you actually had those things think through before the meeting or communication with the board or even, you know, with other investment communities or other partners that you work with, it helps your credibility and also kind of reinforces the confidence there. And I think that's part of that habit was built from my banking days when we would do these, you know, management case upside downside. So there's always the thinking of like how can I get things wrong? Like how wrong will I be and what is the impact if I get it really wrong? So that's always been kind of my mindset and my thinking.[00:12:14] Andrew Seski: Interesting. That's great. I really appreciate when people share frameworks to operate in. I think that's really valuable for the mix of different types of finance leaders. [00:12:23] I'd love to hear what you've learned recently in your new position. Just think about how CFOs of scaling businesses that's probably relevant to a lot of people who you typically have as clients, you know, scaling venture-backed firms. The CFO role typically is, you know, you've got the financial acumen but you also need a ton of EQ and leadership ability because you typically are wearing more than just one hat at any startup. So I'm curious as to how you think about leadership and the mix of IQ-EQ needed to be transparent, communicative, you know, sometimes it's an addition to the culture of the firm, especially as you hire a finance team. So I'm curious if you've learned anything recently or, again, seen successful playbooks as to how to contribute.[00:13:09] Zhi Li: Yeah, yeah. No, that's a really good way to frame it actually. So the way I think about this is I think the mix between IQ and EQ probably shift depending on the individual and also the company stage. So like for example, if you're a earlier stage, when you're like five to 10 people company, everybody is just diving deep. Like they're contributing on their individual, you know, expertise, building things from the ground up. So at that stage, everybody is like a one-person army. So IQ probably takes a higher mix in that scenario so that you can, you know, act very quickly and come up with creative solutions to solve a problem and make trade-off on a timely basis, you know, with very limited resources. Now, as you kind of mature and then your team grows and then the company grows, then you become like, in addition to individual contributor, you are also trying to inspire your team and you're trying to motivate them. You need to be able to relate to them and understand how you can, you know, like paint a picture of success and help them along the way. And that's where the, you know, slowly then the EQ becomes more and more important. And it's not going to be like a one-way direction for you to move just like from here to there. So being a leader, being able to kind of like recognize, you know, having the both IQ and EQ, but the trick maybe one step further to that in my mind and I think I'm still working on that for sure is how do you find the time. Like how do you recognize the moment when you dial like up or down, right? Like in today's environment with, you know, the reason Silicon Valley Bank, you know, chaos there and also like obviously, our market condition is super volatile. You wanna be, when you communicate, you need to dial up the EQ because you want to share and be transparent with employees about what has been going on, what are we going through, how are we preparing for different downside scenarios. Make them understand and paint the provide a context for them so that they understand we are, you know, working for their interests; that we are, you know, leading or partnering with them, you know, in the front line, not just like behind the scenes. So I think EQ is very important in that scenario, especially during the uncertain times, which seems to be always beyond there. So yeah. So it's maybe a long way to explain it, but I feel like it's gonna be a constant dial and that the better you are, you can pick up the moments when you know when it's like when to move it around.[00:15:38] Andrew Seski: Yeah, I really appreciate that. And I always kind of ask audiences and listeners to, you know, hit that 30-second back button and re-listen to a piece of the episode. I think that's really important that I think you might be the first person to say that it's not a static, you know, allocation of when you need to overcommunicate versus when you need to just strictly be heads-down and lead by example in terms of just staying focused, and I really appreciate that. There are different market environments. There are different things that could happen internally within the company where that sliding scale needs to be fluid and dynamic. I think that's a really great answer. [00:16:11] It sounds like we're kind of tiptoeing around your personal definition of what makes a modern CFO, so I'd love to get your take on that.[00:16:20] Zhi Li: Yeah, yeah. So I think of a modern CFO as it's like first and foremost a strategic partner to the CEO and the exec team. And oftentimes, maybe more increasingly, it's a CFO that is a leader leading in the frontline rather than maybe traditionally you might see CFO more like behind the scenes. They're equally effective, but, you know, it's just maybe a different style. And also, with the obligation of building relationships both internally and externally. So internally with like building your finance team, accounting team, and you're wearing multiple hats, but you're also dealing with stakeholders like other employees or even ex-employees if they have like stock option questions, for example. But externally, you're dealing with also, you know, board members, potential investors, you know, you keep a relationship with the capital market folks and vendors and all those people in the ecosystem that you keep in touch with. So being able to maintain the relationship, tell the story about company as well — that's super important. So it's no longer just someone that, you know, just provides the numbers or, you know, like be compliant on things. But someone that can actually be out there, you know, work alongside the rest of the leaders, with the CEO. [00:17:33] Andrew Seski: That's a great definition. [00:17:35] Zhi Li: Yeah. And then, maybe one thing I will say is having said that, I still wanna stress that, you know, that the baseline for you to be a functional, right, like highly functional CFO will still need to be some of the key competencies, like, you know, accounting, you know, making sure that the company's compliant, and the numbers gotta be right, for example. You gotta manage cash. Those are like not something that you'll forget, you know, just because you're trying to be in the front. You still need to make sure these core things are like welded in place. I call it the train's always gonna be on time, and then you can work on the other like things to improve you as a more modern CFO.[00:18:11] Andrew Seski: Got it. So you're the public face of the finance team, but you are the finance team. Finance now is table stakes in terms of, you know, leadership and all of the other things you need to be a great modern CFO.[00:18:21] Zhi Li: Yeah, exactly. [00:18:22] Andrew Seski: Got it. So I'd love to talk about — we've covered a lot of really impressive ways of describing frameworks and playbooks in our conversation already. I'd love to talk about some of the new technologies that are becoming available and how you manage focus and distraction for yourself personally, for your team, and, you know, the trade-offs of investing heavily in the latest technologies versus, as you said, keeping the train on time. [00:18:50] Zhi Li: Yeah, so there's a couple things. Like maybe we can frame it of like the, you know, the company's always trying to look for new tools and softwares to make our employees more productive. So that's always been a constant evaluation and trade-off based on the limited resources that we have. But one thing that's super exciting maybe as the second part to that is like all the new advanced development on AI, which, you know, I'm a finance guy, but like I'm super excited about the AI development that I'm seeing with the pace and innovation. So I feel like there's gonna be a huge potential for us. But obviously, a lot of unknowns still. So yeah. I'm happy to dive into some of those. [00:19:31] But maybe like just to walking back real quick is for technology. So being a modern CFO, my mindset is that we have to be very open-minded and fully embrace technology so that we can try to standardize and, you know, like automate most of the processes so that we can scale. And, you know, I went through the whole learning process where, you know, back in the day, like hardcore Excel in banking. But now over time, I'm like, Hey, you know, Excel plus Google Sheets for collaboration. And now, it's like, hey, cloud-based financial planning tool so that, you know, everything is easier, accessible, and share, and we can like control access and we can build a lot more things in a more kind of quality-controlled way. So it has evolved, like especially for me as well. But that's just one example. But that's happening across like different functions within the company. So a lot of times, it's kind of looking at how many people does it impact, and how does that translate to the company level impact for it, and is it gonna be like a one-time transition thing or long-term impact for us? So, you know, adoption rate assumption type things is really important because I don't want to launch something and then people only use it for like three months and then nobody gets to use it. [00:20:48] One thing that's maybe more timely these days with the volatile market condition is that when I look at vendors or new tools, I also do another layer of diligence just to see like, you know, are they well-funded, you know, or do they have a good track record? If we're gonna commit long-term relationship with them, like are they gonna run out of cash in the next eight months, which is a real concern for a lot of the companies out there. Like there are a lot of great companies that could, you know, get caught up in this environment today. And then, yeah. [00:21:18] So and then going into the AI topic, which, you know, I'm actually very excited about. And I start kind of playing with some of these, you know, use cases out there. One thing I feel that it's like, you know, you can think of AI being a fractional assistant for someone on the engineering team or on the accounting team or finance team where you can you have all the models and things like that, for example, but just ask AI to drill down on, you know, headcount on this month because things were fluctuating. You kind of know the general direction, but, you know, just have the AI to pull that and kind of get you 90% of the way, and then you just kind of like validate it and put in commentary and share with the team and do all that stuff. So that's a very — I think that's a use case that's probably available today or can be perfected really soon, given, you know, I'm looking at some of these developments. You know, it used to be it takes like quarters or a year for like the next version to be available. Now, it's like, oh, two weeks, you're gonna have another thing. So yeah. Like at this pace, it's gonna be hard for me to even keep up with it, but I feel like some of these core, you know, applications is gonna come out and it will be a huge tool for us. [00:22:33] Andrew Seski: Yeah, it's like compound interest. It's snowballing and the pace of innovation's incredible. So yeah. It'd be interesting to me to hear — I mean, sales and marketing are gonna be pretty disrupted. But do you picture — I think right now we all are starting to realize that we can have personal assistants help us individually streamline some of the repeatable and kinda onerous one-off things that we do every day. Do you think about this in terms of individual productivity or kind of market shifting — we don't do marketing or customer engagement in the same way we did in the past? It's a hard thing to predict, but kind of curious as to what you see in the future. [00:23:13] Zhi Li: We look at it from maybe like both angles, like from a customer-facing perspective. And, again, this is probably still changing view. So like, you know, things are changing. But the way we kind of think about it is from a customer-facing view, it's probably gonna be a very commoditized feature to have some kind of AI assistance or interface to product. So we would be probably experimenting — I think some of our competitors are already kind of looking at those as well — where with our product, you know, instead of building these key like workflows or, you know, journeys, we can have AI create templates for you or so we can get you like 50% of the way or maybe 80% of the way eventually or higher, so that, you know, you know, oh, you sign up with Customer.io. You wanna run this campaign. These are the top three, you know, workflows that if you just give me the names of like the data inputs you wanna do it, AI can kind of plug it in for you, and then you can just modify it. I think that's a very feasible thing that, you know, a company can do. So we will be looking at that to make sure that we enrich customer experience and make their, you know, life easier over time with AI. [00:24:26] And then when it comes to like internal, the leverage of each employee has massively increased in such a way that like if you are like, you know, a subject matter expert of something, you know the right questions to ask. So like you're prompting the AI to do certain things for you. AI become an extension of you that your productivity will increase, you know, drastically. So I think of that as maybe from there, the output of that would be we will be able to roll out like, you know, new features or upgrades of like our products and things like that in a much faster pace, similar to some of the stuff you're seeing out there where, oh, maybe like every month or every week, you see some new things because the pace has been just like constant in the background with AI. [00:25:13] So that will — that's probably something that I'm excited to see how that works out. It's hard to predict, right? Like I think you might be able to get to 70% really quickly, but then each incremental percentage from there, it takes much longer. So when it gets from like 95 to 97, it's a much harder thing to do, even for AI so. But yeah. I'm watching. It's super exciting to see. [00:25:38] Andrew Seski: Yeah. You're making me think about how the venture and the private markets in general are probably going to shift pretty aggressively. And we went through this cycle in '21 of just scale at all costs. And if you're reporting to a board and they wanna see where those investors dollars are going, it's typically hiring to generate more output. And now, we're seeing some of that, like you mentioned, some of that reversion and there have been some pretty significant layoffs across the market. So it'll be interesting to see the next, you know, whoever's at Y Combinator a couple of weeks ago how big their teams are gonna be in a few years or if they're not gonna be the giant teams of the past. So it's super interesting. I think the ecosystem's gonna change a lot.[00:26:18] Zhi Li: Yeah. And like the extension of that point, too, right? On a VC level, like maybe you look at a Series A company in the past and maybe it's a 10-people company you're trying to get to a certain scale. With AI, fast-forward maybe many months from there, you probably only need two people. So you're maybe the funding round, the dollar amount has changed, but you can probably get to the same reach of the scale. So what do you do if you have a VC that's, you know, you raise a fund that's based on a certain kind of like deal flow because you're writing a check size at this level, but now it's only like, oh, instead of 10 people, you only need two people or like instead of 200 people, you only need like 50 people. You write a smaller check. You might have a higher return from there. But then, how do you allocate the rest of the dry powder? Yeah, I mean, it's the all new questions that I don't have the answer for, but I can totally see that, you know, the wheel's turning for everybody, looking at, you know, these developments.[00:27:15] Andrew Seski: This might be a tricky one 'cause I'm not sure I thought it through. But I'm thinking about the changing mediums of communication. I don't know how often you hear the cold email is just dead. It's just a flooded medium. I get, you know, hundreds of emails a day or, you know, I don't want a phone call coming into my personal cell or — I'm curious as to how the mediums of communication may change or the routes that are, you know, if we could identify, like you mentioned, an AI puts together, you know, a certain format that is the most effective, I'm really curious to think through what the future of those mediums or cadences may be that we're gonna be able to unearth as all this data becomes available where we know not only the right time to reach out, but how to do so at what medium and at, you know, in what with what messaging. So it's an interesting thing. I'm curious. I think I can see the automations taking place to generate insights. I'm very curious to see if there are gonna be any new types of mediums that arise through some of this.[00:28:18] Zhi Li: Yeah, yeah. And I think that's gonna follow. You're definitely right because that has evolved over time. When, you know, even when customer dial first started, it was a lot of like just primarily email. And then over time, we added to, you know, push notifications. We then also did like SMS, and then we launched in-app messages. So we were trying to also make sure that we reach, you know, the audience through the different ways that they engage with their, you know, customers or their users. So that's continuing to evolve. And then, the mix of that will change over time. And I wouldn't be surprised if like, you know, there will be another element that adds to the lineup. And then, we'll try to make sure that, you know, we'll be part of, you know, like a world-class engagement platform for that median as well. [00:29:07] Andrew Seski: Very cool. Staying on Customer.io for just another moment, I want to bring us up a little bit higher to about 30,000 feet and think about what you're most excited about in the next 12 months, and then maybe expand even further out like three to five years, if you've got any idea as to what you're really excited. It doesn't have to be AI. It could be, you know, internal developments or even something personal. [00:29:30] Zhi Li: So I think we are in the near term for this year, for example, there are a lot of, you know, exciting product that we are we've been kind of cooking in the background and we're excited to roll it out this year. The Data Pipeline that we just we talked about earlier is one of them. And so we're excited to continue to execute on our roadmap to make sure that we provide a rich experience for our customers. And then, as we continue that journey, we know the power of having that, you know, like source of truth as a customer record. And we see it because we, you know, we see our customers using our product and then, you know, integrating with the different data inputs, and then they can drive actions from there. We see that having this as a core customer data record will enable us to add on to other experiences for them. So in addition to campaigns or marketing, we just talked about kind of the data integration. There will be many, many more things that we can explore. So that's what we're very excited about I think in the next three to five years. Continue to add, you know, different add-on features or product experience to that and make it more of a platform experience for the company. So that's the longer-term, you know, journey that we're on.[00:30:49] And then internally, I'm kind of still building out my team. So like I own finance, accounting, data analytics, legal, IT. I'm probably forgetting a couple. So with that team like, you know, I've been super excited about being able to, you know, providing a path for them to grow within the company, and then also kind of adding new talent to the team and seeing how with people now starting to work together and showing their potential and adding more productivity. So mentoring the team and growing that team has also been very, you know, rewarding for me as well. [00:31:23] Andrew Seski: Yeah, very exciting. I want to go expand even further out — my favorite question on the podcast. And this can be about something we've already talked about or completely out of left field. It could be something you're reading or personal opinion. But, you know, what's one thing that you feel is underestimated in the world today?[00:31:41] Zhi Li: Yeah. I think people neglect the value of the power of context. So what I mean by that is — and this is something I'm trying to improve as well. So I think when you provide the right context and, you know, connect the dots for people, it really empowers them to take ownership and really enrich their experience in that, you know, to getting to that success. So in a team environment, you know, instead of me, a lot of companies or other people might just, Hey, think of it as a science. These are the 10 steps in the workflow or the playbook. Like do it. Which has worked fine and, you know, that's totally good. But what I think about is providing the context for them so they understand what we're trying to achieve, and then they can craft their steps to do it. Along the way, we make mistakes, we learn better things, have some good surprises. But I think we all take more ownership that way. And then, the highly talented people I think really thrive when they have that freedom given the right context for any like goals or projects. And then, sometimes when I look at some people who are talented, but then they maybe they fail in a certain task and I kind of take ownership on that and maybe I did not provide the right context for them to really empower them to get to the right path. So that's something that, you know, like maybe people are more focused on in the past about driving the right behavior down to a science step-by-step. I'm kind of of the view that while that is important, let's make sure we, you know, provide the context, tell the story, connect the dots for them to make sure that they are also, you know, a principal, you know, stakeholder rather than just getting the step done.[00:33:20] Andrew Seski: I think that's a really interesting point. I was just reading an article about some of the cultural differences between founders who call their teams a family versus a professional sports team. And you think about a professional sports team, if it's not performing, people are traded. Owners may not invest as much in the next year. They're just harsh realities. In the context of a family, that is going to cause strife. It's just a it's a mix of expectations as well. So I really think it's an interesting concept. And I also think it's really important in terms of basic communications. You could expand that out into almost any conversation that you have in a kind of very politically loaded environment no matter what. If you can provide good context as to where you're coming from and the hope to explain an outcome in the way that you'd like, I think it's a really powerful tool. It also, like you said, it provides accountability to both parties in not just the outcomes, but in the communication levels because you have to both articulate that you understand the same goal.[00:34:26] Zhi Li: Yeah, and it's a very interesting like maybe a transition, too, because I think a lot of the companies when they are going from like a smaller company but they went through a very successful massive growth journey and then they realized that, oh, they're kind of like in between a family environment to a, you know, professional sports team. And there's probably not like a right or wrong either way. And a lot of people are probably trying to figure out in between. But the transition of it and maybe also like depending on the times of the market or like the life stage of the company, then you're trying to communicate the behavior change where — yeah, on certain things, like for us to scale, you know, it needs to be done a different way versus like back in the day, everything, it's, you know, honor system, you know, family-type feel. It's gonna be it's gonna go through some natural progression, and it probably doesn't need to be extreme like the just purely professional sports feel to it. And I think I value Customer.io where even though we've gone — so we're now about 230 people. When I joined, I think it was like a hundred, so like about 18 months ago or something. So we've gone through massive growth and, you know, we were able to keep all the good DNAs. I could be biased but, you know, I think we kept all the good DNAs, you know, as a, you know, fast company, but, you know, still keeping that, you know, closed, fully remote, you know, elements to it while adding new employees like new perspective, new experience into it, but still kind of jiving as a united, you know, force. So that's been, you know, very interesting to see. And we're definitely going through some of those transitions in terms of maybe, you know, policies and things like that for us to really tweak it. But we wanna make sure that we're not sacrificing I think some of the efficiencies or some of the prior experience that people take pride in with the company. We don't wanna water it down with just a bunch of processes and like workflows.[00:36:28] Andrew Seski: Yeah, that's a really good point. And it's a challenge for, you know, to measure growth and cultural consistency so 'cause priorities change, stakeholders sometimes change, ownership sometimes changes. All can have major impacts on culture. And I think it's so important because, you know, you may have a great idea as to what to do, but culture defines how you go about doing it. So I think it's a really important concept. [00:36:53] One of the last things I wanna cover today is some of your advice for aspiring CFOs. You had a nonlinear path, but I think, you know, you've also had a number of moves that you said you picked up and moved across the country a few times and you've lived in a few different places. How did you have some of the — where did the courage come from to make some of those transitions? And if people are thinking about a move for the CFO role for the first time, what would you recommend they start thinking about? [00:37:25] Zhi Li: Yeah, and I always love kind of going through or like chatting with people about, you know, their career journey and like when they make certain choices, right? I think for folks that are, you know, trying to make the move, there's a couple recent learnings, right? One that's fresh in my mind actually it's the Silicon Valley bank situation. So this is a very, maybe a common thing, but like just make sure you don't put all your eggs in one basket. We were exclusively banking with SVB and they're a bunch of great, great guys. We still keep our relationship with them. But when that situation came up, we were just — we are stuck. We couldn't get our things out. So I think just the lesson of that is, you know, try to make sure that you have always diversified your risk, and then don't put all your eggs in one basket. [00:38:15] And then also, this might be a hard thing for, you know, finance people because we like numbers and we like knowing things exactly. But a CFO, especially when you're operating in a fast-growing pace, you have to be comfortable with high degree of uncertainty. In a certain degree, maybe even embrace that. So that's probably a very counterintuitive thing where you go through finance, accounting, training, but like when you look at the numbers, like there's just a lot of variability to it. So I think of that as it's a skill to have — to be comfortable with uncertainty and to embrace that potentially the fear or the anxiety with that uncertainty because we're trying to achieve like some big goals. We're trying to, you know, make a lot of big impact for customers. It's supposed to be pretty nerve-racking. Like if you try to climb Mount Everest, it's supposed to be pretty, pretty tough. Like you shouldn't be like, you know, comfortable around it. So I think having that just accept the fact and just kind of take the challenge and make sure that you have upside downside case to kind of like frame your the ranges as you go through the navigate through the risk. Then, you can kind of really thrive on it. But maybe that's one thing. Like I think conceptually, it's a little bit contrary to people's, you know, by trade. [00:39:34] Andrew Seski: That's a really, really unique perspective because if you have an idea that you're in a high-risk environment and you can account for that level of variability and then you can continue to kind of recapture some of that control that I know most finance people really appreciate. [00:39:48] I want to give you the opportunity. Maybe you'll be back here in Philly talking to Penn students soon. But I wanna give you the opportunity to let people know how to learn more about Customer.io. Maybe if your career page we can link in the show notes if you're actively continuing to expand the team and your team specifically. Would love to know and direct people where to go if you don't mind.[00:40:09] Zhi Li: Yeah, yeah. So we are definitely hiring. So I think the best place to go is Customer.io. That's the address that takes us to the company page. Yeah. So you can do Customer.io and then slash careers, and then you can find all the open spots there. And then, you know, follow us on Twitter, on Instagram, on LinkedIn. And yeah. And I would love to keep in touch with you. And I've been saying that I'm gonna go back and visit Philly for a long time. So now, you're adding another reason for me to go back. My wife and I, we met in freshman year college at Penn, so we were kind of joking that maybe on one of these like anniversary years that, you know, this is like many, many years now that we'll go back to Philly and celebrate.[00:40:50] Andrew Seski: Well, can't wait for that day. There'll be cheesesteaks in the office for you waiting, and I can't wait for that day to come. Zhi, thank you so much for joining The Modern CFO Podcast, and I hope to stay in touch and I'll talk to you again soon. [00:41:04] Zhi Li: Thanks, Andrew.

In the world of wealth and asset management, and the private markets in general, there is a noticeable communication gap between generations. The next generation of owners–people between the ages of 18 and 25–are prolific consumers of digital content, from Reddit threads to Spotify podcasts. For many businesses, that means adopting new technologies, broadening offerings, and finding modern ways to effectively serve clients.In this in-person episode of The Modern CFO, host Andrew Seski visits with Anthony Pastore, Head of Broadcast Communications at UBS, to chat about what his firm is doing to bridge that generation gap in communicating and investing, the role that social media and video plays in staying relevant and ahead of the competition, and the importance of having a digital approach to maintaining the massive amount of wealth transferring to the next generation in the decade to come.Show Links Check out UBS Follow UBS on LinkedIn Listen to UBS Trending on YouTube or your preferred podcast app Connect with Anthony Pastore on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.[00:00:00] Andrew Seski: I'm Andrew Seski and this is The Modern CFO Podcast. I'm thrilled today to be joined by Anthony Pastore, head of broadcasting at UBS. We're in New York. We're here together. It's a rare opportunity for me and I'm thrilled about the conversation that we're gonna have today. Anthony, thank you so much for being here. [00:00:25] Anthony Pastore: Andrew, I'm honored to be here with you and it's very rare for me to be on the other side of the table of, podcast and video interviews. Usually, I'm the one asking the questions so I actually said to my team today as I was preparing to sit with you, I was like, I'm a little nervous. I'm not used to being interviewed. I'm usually the interviewer so I wouldn't be surprised if at some point I start turning the microphone to you and saying, "Andrew, I have a few questions for you as well" so hopefully, you're prepped for that.[00:00:49] Andrew Seski: I'm happy to.[00:00:51] Anthony Pastore: Anyway, I'm really happy to be with you. This is great. [00:00:53] Andrew Seski: Excellent. Well, I think the beginning of our conversation should probably start around your early career and why we're talking today. There's a huge gap in the wealth management and asset management world between generations. We are all consuming media in a different way, which is why I'm glad to be using this medium. And I'd love to learn from you as the head of broadcasting at UBS to explain what some of the brightest minds in the world are doing to bridge that gap. So, we have a ton to cover and I hope that it's a useful lesson for a bunch of CFOs who also have to communicate across a bunch of different cohorts of people. Whether they're investors or they're your C-suite or they're part of your team, having strong communication flows in a really technical way or a technical area like finance is just invaluable when it comes to senior leadership so. [00:01:44] Anthony Pastore: Yeah, I agree with that, by the way. And it's interesting because, and once we get into it, I'll talk more about it, but I think one of the interesting things about a job like what you and I do is we have to always be thinking, you know, five steps ahead of everybody else but it's really hard to do considering the competition in the media space. But what I think is interesting is we're talking about it, like I'm sitting in a wealth management firm at UBS and that's unique to our industry specifically — to have content like podcasts and virtual events and videos and internally for our employees and externally for anybody who wants to get a glimpse of what's going on and the thought leadership from this the UBS side. But, yeah. I know I'm going off on tangents here but I know you and I are both thinking similarly like what how much competition there isn't. How do you keep on top of it and stay relevant, especially for somebody who's sitting in a CFO seat? [00:02:37] Andrew Seski: Right. And the CFO doesn't typically get called upon for many any of the — I always say on the podcast, if you want to hear the vision of the company, you go watch the Bloomberg interview with the CEO. If you want to hear how finance is actually, you know, a key role in how that innovation is created, you come back to the podcast and listen to The Modern CFO and you listen to people like Anthony who are able to share insights from, you know, unique people who have a lot of sway into how companies are financed. So, strategic finance can take forms and a lot of different ways. We were just laughing about how both of us found ourselves in this building but neither came from purely financial roles like at wealth management firms.[00:03:20] Anthony Pastore: That's right. Yeah. And I guess that's a sort of a good segue. So and as you were asking, my background is pretty colorful. I kind of came up and I say this to all the younger people who start now. I'm in my late forties. I consider myself a true Gen X-er listening to grunge music because I was depressed and sad wearing my flannels in the nineties. But coming out of college, I went to school for I was a bit of a Renaissance man, as I always say. I studied theater, I studied business administration, and I also studied speech and communications. And my father looked at me and said, "What are you gonna do with that?" I said, "I don't know but I'll figure it out." And back in those days, you know, I was starting to look for full-time work in, say, 1997. It was the tech boom was just starting. Companies were hiring and, as we know with Gen X, there were fewer of us on the planet so there were a lot more jobs than there were people to fill them. So, I got a job working early days at Smith Barney. RIP Smith Barney. What a great firm and I still obviously work with a lot of people from those days who are now here at UBS and other firms. But Smith Barney hired me to work on a stock plan services desk, and I was helping Bank of America employees exercise stock options that they were granted by being full-time employees. And I learned a lot about the business but somewhere along the way, I met a woman who said, "You'd be really good for our radio station." I said, "You have a radio station here?" And she said, "We do." And it was called at the time "Radio FCN," which stand stood for Radio Financial Consultant Network — before we started calling them financial advisors. I interviewed and the my guy who the gentleman who became my boss for the next decade said to me, "Do you have any experience with talking about finance on any kind of a medium like this?" and it was only internal content just to the employees. I said, "No." I said, "But I have a theater background and I can talk about anything." He said, "You're hired." So, it got me in the door and I said, "Dad, thanks for paying for my education." But boy, did I learn a lot. And then through the course of that, I left I went to Morgan Stanley through the joint venture after the financial crisis after they acquired the Smith Barney Division. And long story short, I got an opportunity to come to UBS to build out their podcast infrastructure, which we had going since I started here in 2012. And then fast forward to during the pandemic and I started building out a video platform, which I'm sure we'll get into in a minute. But so my background is really interesting but, you know, by osmosis, I've learned an intense amount of information by sitting across the table from some of the smartest men and women in the industry.[00:05:47] Andrew Seski: So, I want to dive into that. One of the commonalities that we definitely share from an expertise level and from a podcasting level is I joined finance companies early on, now technology, and my competencies have been very disparate. And becoming a generalist or an expertise, there are roles for you in firms with cultures that you align with. So, I think that's gonna be something really important to the next generation. And we're gonna jump into generational wealth in the next segment here in just a moment but. [00:06:20] Anthony Pastore: Huge topic. Huge topic. [00:06:21] Andrew Seski: Alignment of interest right now is really important, so it's nice to know that, you know, whether you're Gen X through Gen Z, there is some place for your expertise. And I think it's a really powerful notion, especially when the world seems more black and white. There is a ton of gray when it comes to leveraging your skill sets at a firm that you align with and you're gonna be happy working for.[00:06:43] Anthony Pastore: I think that's one of the more surprising things. It certainly surprised me but I think it surprised a lot of younger people coming into this industry 'cause a lot of them went to school for econ or for finance pure play. They realize when they come in all the wealth of different kinds of talent that it takes to run a company of this size. Anything in this kind of bulge bracket, you've got people who are marketing people. You've got people who come from agency side where they're running, you know, all kinds of ads for advisors for the firm. They're doing animations for videos, they're doing graphics, they're doing podcasts. They're doing all kinds of really interesting, very creative stuff. And I think that's something that became that has become very surprising for a lot of people who come into the firm or the industry at a college who think it's gonna be all, you know, CPI, PPI, and, you know, and unemployment data the first Friday of every month. So, I think that's been a sort of a nice surprise for them is like, wow, look at all the diversity that we have of talent at a firm this size.[00:07:42] Andrew Seski: Back to your career for a moment. So, you started, you know, a theater major, then your first job was Morgan Stanley.[00:07:50] Anthony Pastore: Smith Barney. [00:07:51] Andrew Seski: Smith Barney. [00:07:51] Anthony Pastore: Stock plant services.[00:07:53] Andrew Seski: Stock plant services.[00:07:54] Anthony Pastore: That's right. [00:07:54] Andrew Seski: And then take me through that iteration to UBS. [00:07:57] Anthony Pastore: Sure. Yeah. So, as I said, my first job doing stock plant services. I did that for about six months and then I moved over to do more of a job where I was talking directly to clients. Smith Barney had a checking account that they called the FMA, the financial management account. And what I did was take calls from clients. I gave them account balances. I told them what was going on in their accounts. I gave them stock quotes. Okay. For those listening in who are under the age of 40, you couldn't just get a stock like you sitting across from me. You couldn't just get a stock quote by going to a computer or a phone. You had to literally look at the newspaper at the end of the day so we would get them on the computer and give them to the clients over the phone so that was really fun. [00:08:35] Andrew Seski: In my defense, I get a physical Wall Street Journal still every day. [00:08:39] Anthony Pastore: Wow. You're old school. That's a rare thing. I don't even have that anymore. But then when as I said, one of the women that I was working with, I sort of skipped a job. I wound up working on a sales desk where we were creating SmithBarney.com, which was our first website. This is going back. This is like maybe around 2000, year 2000. And that's where I really got to know financial advisors in a great way because I was talking to them directly when the previous role, I was talking to their clients. Now, I was working directly with advisors and I got to learn a lot about what goes into the day-to-day of an advisor's business? It is not for the faint of heart. You know, you're talking to clients who may be happy or not happy on a, you know, from call to call, sometimes the same call. So, you're always having to be on your game as an FA so I always thanked them for what they do. I remember one of my jobs in when I was working there, my boss put a sign up and said "The advisors pay the bills" and that was a constant reminder to me being a home office person to say, I would not be sitting here if the advisors weren't out there working their tails off, you know, to generate clients and assets and things like that. So, but then from there, one of my closest friends saw an opening in the podcast studio at Smith Barney and said, "This is perfect for you." So, it was really a perfect evolution for me. But most of my years in the business have been on this side of the microphone, you know, on the media side. [00:10:04] Andrew Seski: So, what have you seen that has been successful that CFOs could leverage to talk to different — like you said that you got really involved with the financial advisors. That gave you a certain level of respect. And then, leadership said this is where the bills are paid and that influenced you. [00:10:21] Anthony Pastore: It did. [00:10:22] Andrew Seski: How have you seen that, you know, that same lesson iterated across different types of people that you talk to every single day? Because I've seen some amazing clips of UBS content that you interview experts in a ton of different arenas and I highly recommend that everyone check out.[00:10:39] Anthony Pastore: Thank you for that. [00:10:40] Andrew Seski: All the content that Anthony does 'cause it's really these interviews are fantastic. [00:10:43] Anthony Pastore: Thank you. I'm learning a lot even today.[00:10:45] Andrew Seski: But what are some of the lessons that you've learned across maybe even just the last decade of how to communicate with different types of people? Because I think that's a huge challenge for CFOs today.[00:10:54] Anthony Pastore: Yeah, it is. You know, and that's and that — you know what, Andrew? That's such a really good and I think it's a really important question. I think it's just a matter of — you know, I do a lot of prep for any show so our show is called UBS Trending. That's our public-facing show where we interview — they're 10 minute shows by design and we're gonna talk about why we think that's helpful for the younger generation in a little bit. But I think, you know, it's a good way to get somebody sitting at the table with me for a 10-minute show where we could talk about a topic, whether it's talking about inflation and we're talking about small-cap stocks, we're talking about our CIO thought leadership, whatever the case may be. But part of my prep is to not only look at something that they either they've written that I can glean some factoids out of — I do my own prep from, you know, various websites — but I also talk to them if I'd never met them before to understand maybe a little bit more about how they tick. What's their cadence? What are they thinking? I ask them really pointed questions and they're just personal questions. How was your day? Where do you live? What's going on in your life these days? You know, and they're not like heavy, deep conversations but it's like, oh, I live in Florida. The weather's great. And I get a sense of, okay, they're super friendly. We can have a great conversation. What makes you tick? Do you have kids, grandkids? Are you married? Are you not married? You know? And I don't delve into the personal without them opening the door to that, if that makes any sense. You try to be reallyccareful about that. But I think for CFOs it's a tricky game to kind of find out who a person is to learn the best ways to communicate with them. And sometimes, it takes more than one or two meetings. You just kind of have to really sit down with the person and understand their worldview, if that makes any sense. What makes them tick? What's important to them? You know? What is it about their job that they love or that they would change? And that really tells you so much about a person.[00:12:36] Andrew Seski: I think that might be the perfect segue into a personal definition of a modern CFO because it sounds like you're saying the difference between somebody on the financial team versus the chief financial officer is somebody who's got a really healthy mix of IQ and EQ.[00:12:50] Anthony Pastore: Exactly. Exactly. I think that's a, yeah, please expand more on that because I know we talked about this just a couple days ago on the phone and I was really intrigued by that idea of the two — they don't necessarily have to oppose each other. They can work together. [00:13:02] Andrew Seski: Yeah. A lot of my episodes have covered the fact that there's a hypervigilance on how teams collaborate really effectively. We've had guests who have been, you know, served, you know, they've served us in a military or naval capacity where their entire job was focused on team-based collaboration and that can be really powerful. And it's a nice kind of way or a framework to view the chief financial officer job in general because it feels like you are just managing different types of people but in reality, it's how different cogs of teams work together, which you have to be, you know, very understanding on the individual level. But because of that, then you have to also have the next level up, which is how those people are gonna interact with each other then, the acumen of the entire world of finance and then from there, you have to be able to direct to those types of people, which I'm not sure if you've noticed this there occasionally is an ego or two. [00:14:05] Anthony Pastore: Every once in a while you come across one and then when I say that facetiously. Of course, there has to be some level of it, right? I think there's —[00:14:12] Andrew Seski: But if you think of that skillset, that is —[00:14:14] Anthony Pastore: That's right. [00:14:14] Andrew Seski: It's pretty multifaceted. [00:14:16] Anthony Pastore: It is. You know, and one of the things I think that has helped me in — you know, for many years it was just myself and one other gentleman, Dan Cassidy, who runs our podcast studio and it was just the two of us for a really long time just doing podcasts and we were a small little team. But as the video started to become a reality, we had to expand the team because you have to bring on producers and directors and technical people who can run video side of the business. And all of a sudden, my team was going from two people to three to all of a sudden we had, you know, seven or eight of us and I was really nervous at first, thinking, "Oh my gosh! I've never run a team of this size. What do I do?" And I said, you know, "I'm just gonna do what I continue to do. I'm gonna just be a human being. I'm gonna check in with them, have a little humor." I think humor is so important, not yuck-yuck humor, and you don't wanna be obviously inappropriate in your humor. But having a little fun talking about a TV show that everybody's been watching, you know, if there's a Netflix show that's really popular. Hey, everybody watching Wednesday on Netflix or some great documentary or The Last of Us or something? They'll go, "Oh, yeah." And then everybody starts talking and it becomes this collaborative team feeling. And just those little moments, they don't have to be these long, drawn-out planned things, just those little moments. They humanize you as the leader or in this case as the CFO and they see you as a real person but they still have respect for you 'cause they see that you're trying to connect with them and then you show your leadership skills when it comes to getting the job done and they look to you to do that. But I do think being a human being means everything and never condescend to people ever, ever, ever. Even if they've done the worst thing in the world, you figure out how can we make this better? Because I've had bosses that just kind of come at you and it just strips you of your confidence and then you feel like you have to build it again and it takes a long time. Just be there for them. That's what our jobs are.[00:16:04] Andrew Seski: Let's focus on humor because I think we're talking to kind of almost workplace culture, which will segue into how we think about multi-generational family wealth. And then, what I am really interested to hear is about the one thing you feel is underestimated in the world today. But I know that we can kind of merge all of these topics together but.[00:16:27] Anthony Pastore: I think we can. [00:16:27] Andrew Seski: So, I mean, the idea that humor has a place in the workplace in general is not horribly unique but it sounds like humanizing your workforce is a 2023 requirement.[00:16:41] Anthony Pastore: I think so. You know, and look. I come from a generation where — and I was just literally talking about this with a friend of mine who's not in finance but in my age range. I said I remember coming up when you were just expected to do things. Nobody ever really held your hand and took you to a place. They just said, "Do it" and you sink or swim on your own. And I remember thinking, that's not really good for me. I want somebody to just kind of at least kind of be there for me if I need help. Not just like, oh, it's fail pass or fail but your choice, however you make that happen. I think there's a nice — and then obviously there's people who now complain that the younger generations all they have is handholding and everybody's like coddling them. I think finding that middle of the ground, the, you know, like middle-ground approach is the right way to do it in my personal experience because being thrown into the deep end of the pool, I learned a lot but I was also scared to death and I hated the idea of having to make mistakes. I was afraid to ask questions 'cause I thought they were gonna look down on me. I should know more. But I never wanted anybody to feel that I'm gonna just hold their hand and walk them through their day. Like you gotta also figure some things out on your own. But that's being a really, I think, effective leader is finding that blend and throwing humor in there is just one way again I think I'll just repeat this and I'll probably say this a lot, it's the humanizing factor, showing them that you're a real person, too. You're not just somebody who's, you know, running a team or running a company as the case may be. But, you know, it's a really, really tough place, especially for those of us who've come up in the older days when we were made to sink or swim completely on our own. I think there's probably a lot of people out there listening to this who might be nodding their heads and saying, yeah, I had similar experience to that myself. But when we were talking in our prep, you said, what's the one, what's the question again? What's the one thing that we should be doing more of? [00:18:30] Andrew Seski: Underestimated in the world today. [00:18:31] Anthony Pastore: Underestimated in the world. I think it's compassion. That's always my answer. I find myself being sort of empathetic towards people's journeys. And I use the word "worldview." I think understanding where people are coming from and it's not just at work. It's in life, too. You know, you meet new people all the time who are not necessarily sitting in the cubicle next to you. They are sitting in a bar next to you or in a restaurant or at a museum or, you know, you're meeting people through friends or whatever the case may be. You have to have compassion for people. You have no idea what their day was like or what their life was like and you can't assume anything. Nobody's like you or me, Andrew. We are two individual people who just happen to come together for this great podcast that you're doing and we have found I think a good rapport and energy between us. But it doesn't mean I know who you are or what your experiences are. Just be compassionate and just be open to learning who people are. I think there's not enough of that in the world and that's not politicizing anything. That's a whole other discussion that we're gonna leave out of this podcast. But I think in the world, if we had more compassion, I think you'd see more understanding and people seeing, feeling like they're being heard and just understood, you know? And then I think people could succeed more. [00:19:36] Andrew Seski: Well, I mean, that's why I wanted to do this podcast in general because from the CFO seat, compassion during market cycles that are very easy, you can see it in the private markets with the benefits of the types of things that coddle what I think entrepreneurs who have been through multiple market cycles would say, you know, that is just a result of a time of feast, you know? This is not reality. We go through market cycles and CFOs, you know, today, every headline that we see about major layoffs it's, you know, humanizing everyone. And having compassion and empathy in the world of finance is a hugely underappreciated conversation so that's why I wanna have it. [00:20:15] Anthony Pastore: Hundred percent agree, yeah. [00:20:17] Andrew Seski: And it the same operates in succession planning as you were describing that kind of compassionate yet humorous yet needing to be respected mindset, I was thinking of some of the patriarchal people who I know who run family businesses or are just heads of family or matriarchal and it's the same thing. It's a level of respect but also an acumen for understanding how to communicate, especially around things that are horribly complex like ownership around equities or, you know, alternatives, which actually I think is an interesting point for UBS, which I think the one of the things that I think UBS personally does really, really well is communicate on complex topics, especially to advisors. And I know that we have a lot of advised a lot of family offices who look to the street for a lot of advice, trying to get a good pulse. And this is another reason why these mediums are so important 'cauwe we can do deeper dives on all of this too, which is awesome. [00:21:15] Anthony Pastore: That's right. One of the things that I think is one of the many things I think I really I'm a personally I'm a big fan of the culture here at UBS. You know, back in the days at when I was at Smith Barney, the culture there was, I mean, it was the older days. It was pre — let's talk about it — it was pre-9/11. It was pre-financial crisis. It was kind of a different time. We were looking for different things. They called the advisors financial consultants, not advisors. It wasn't about wealth management as an advice business. It was about, you know, selling products to clients, not that that was a bad thing. That's just what we were doing at the time. Well, not me, but that's what our business was about. Then, we moved into this idea of holistic wealth management and that's what we continue to do today, which I think is a really important thing to do. We have, you know, our advisors here at UBS are given this framework called UBS Wealth Way and it gives them five questions to ask instead of saying to your client, "Hey, what mutual fund are you interested in?" They might be a doctor or a lawyer sitting there. I don't know. But we ask them questions like what's important to you? Who's in your family? What do you wanna leave behind? What do you wanna do with your money? You know, do you have any particular charities that interest you? Who are you gonna go grab an ice cream with when you're, you know, 75 years old? So, things that make them think. And then, our advisors go, "Okay, great. Now, I can put your portfolio together." But I think that's the changing business. And one of the things I like about the culture here is it comes from that side of thinking more about the client and his or her life or their family's lives from different angles. And it's not just about what, you know, what ETFs do you want in your portfolio. And I think that's what I feel really passionate about in the business and especially the UBS culture. It is very collaborative here. My colleagues are great. Everybody works together. It's that's how you get things done more effectively, too, and that's a powerful thing. [00:22:57] Andrew Seski: So, it sounds like there are evergreen values. But one of the topics I wanted to cover today, too, is the role of technology at the firm. We have all been playing with ChatGPT and all of the modern AI tools. It's been exciting but the world of wealth management, which is slightly different than asset management. Wealth management is more of the holistic picture of not just your assets but liability. The full picture of philanthropy as well.[00:23:24] Anthony Pastore: Absolutely. Yep. [00:23:25] Andrew Seski: This is slightly separate from being just a fiduciary. But the interesting aspect is that there's been one of the podcast guests I had was David Magerman, who was one of the early engineers at Renaissance Technologies. And, you know, the idea of using AI and machine learning in algorithmic trading has been around for a decent amount of time and algorithms get refined and refined. But and there are only a subset of people on the planet who can do it really, really well consistently. One of the things I'm interested in is just where you see the future of technology from every aspect of the firm because, you know, we're in a modern studio today. The video aspect of communicating effectively is massive in this space. Drives a lot of, you know, a lot of views and it's easier to engage with people today than ever before. But also, we need to probably think about how tech could integrate across every business sector. So, curious from your perspective what that looks like. What it looks like for the future of your role and maybe what it looks like across some of the different areas across all of these different floors in this building at UBS here. [00:24:35] Anthony Pastore: Yeah. You know, I think, Andrew, probably I'll say something that most people will agree with is that the pandemic really taught us a lot about the importance of technology. That was evident in sales of computers and devices that people needed to outfit in their homes but also the infrastructure that firms like ours and yours and everybody else's had or needed to upgrade to make sure that people could log on remotely and have a seamless experience. And I think we learned so much from that about how important technology really is in our day-to-day lives. And especially for, and again, speaking from a wealth management perspective, for advisors who were all of a sudden working in their home offices, which they'd probably never done before. Everything was in an office. Clients were in front of you as close as you and I are sitting right now. They knew that they had to figure out how to do a business from home and they had to have access to all their systems, their trading systems, all of the ways to get client information, portfolio account values, etc., households. And, you know, thankfully, it worked. And, you know, they had been already as a firm UBS was thinking about the technology component and how can we make it better just in the in-office experience. And thankfully, they had foresight to say we should have a remote experience as well so by the time the pandemic happened, they were ready, which was welcome because if all of a sudden the firm just had to shut down because you couldn't log on from home, that's a game changer, you know, and that could put anybody out of business. So, I think that alone, just like the idea of remote and virtual working and seamless ways to do that from the office to home, is a game changer. On my side, on the media side, the video side of my business only really came about in earnest because of the pandemic. We knew as a firm if we're gonna reach people during this time, we need to have video. We need to have a steady stream of videos being created and not just Zoom webcast. We're gonna elevate this on a level that no one is doing. And so, we're lucky that we had people who I was reporting to at the time who had the foresight to say, yes. What's the vision? Let's build a beautiful newsroom studio. No other firms are doing this. Let's blow it out of the water. And I remember during the pandemic and I was home when we were working with our particular vendor, while they were building our physical studio here in our offices in Midtown, they set up a virtual studio for me in my New York City apartment in my second bedroom, which, you know, anybody who lives in New York City knows a second bedroom is either a guest room, an office, a storage room, or all the above, or the gym. So, I had — and it was all the above for me. And they put in a green screen and cameras and lights and I was remotely working with a director who was sitting in Washington, DC and a producer who was in Chicago and a, you know, an engineer who was sitting in Las Vegas. And that for me was the start of us migrating into the new level of technology when it came to media. And now, shooting in a studio and doing shows like that, now we're looking to what's the social media aspect here? How much can we be doing there? TikTok is everywhere. Every single person in — certainly under the age of 25, between the ages of 18 and 25, are on TikTok or at least viewing it so how do we reach that audience? And it's continually looking to see where that technology should go. Now, of course, in financial services, we have a lot of regulations and there's a lot of people who say, yeah, you can't do that just yet, you know? So, would I love to be on TikTok doing three minute videos with our best, smartest thought leaders and our chief investment officer? Yes, of course. But we'll find ways around that. But I think technology never stops. It's always continually, you know, evolving and so, it's a matter of us keeping up or at least finding ways to, you know, to chase after it.[00:28:08] Andrew Seski: So, the CFOs who are listening have to then just decide that there are different mediums. Yes, they have to learn them. They have to be communicative in different mediums that they're gonna be pushed outside their comfort zone to do. [00:28:22] Anthony Pastore: For sure. [00:28:22] Andrew Seski: And it can be a huge part of a strategy because you need the right people to deploy the right strategies no matter what seat you're in.[00:28:30] Anthony Pastore: A hundred percent. And for a CFO who's also looking at the bottom line, if you're a, you know, in a company who wants to really ramp up media content, whether it's videos or podcasts or both, having an in-house team like we've developed here is a huge cost savings because third-party vendors to do production are very expensive. I mean, they do a lot of work. Let's not mince words. But it's an expensive venture. And just by having our video studio opened last year, we saved the firm, you know, millions of dollars just by not having to outsource, you know, the work to someone else. We were able to do it all in house with our in-house staff. So, that's, you know, from a financial perspective, it's a really smart thing to do and, I mean, you know, imagine if you had to outsource your podcast every single time by using somebody else's studio or someone else's equipment. It doesn't pay. You know you're doing it all in your own office that you built with your own equipment and you're able to produce at your own on your own schedule and not have to pay someone to produce it for you 'cause it's pretty costly.[00:29:31] Andrew Seski: Yeah, it can be a real cost savings to just have normal conversations that you're having in the office, record them, and be transparent about the way that you're building.[00:29:40] Anthony Pastore: That's right.[00:29:40] Andrew Seski: I think that's one of the trends of some of the more successful companies in the last few years. They have built their firms in public so that their audience, their customers, and the way that sales are generated are because of the loyalty to the brand because they've been a part of the journey the whole time because of the transparency that social media's given us. And a big piece of that can come from just having open and honest conversations about how things are actually built, not to very clearly rip off how I built this by accident but.[00:30:10] Anthony Pastore: It's all fair, right? Imitation is the sincerest form of flattery, they say. But I think, you know, you were talking about multi, you know, the next generation of wealth, and I think if you really want to attract that generation from all the research we know and from talking to people who are in that age bracket, this is the way to go. They want quick. They want pithy. They want video or podcasts but they want engaging, they want conversational. Nobody's reading 40-page research reports anymore. We all know that. I think that's a pretty much it's it still happens but everybody knows — alright, if I'm gonna write a 40-page equity preference list on industrials, I also better accompany that with a 10-minute video and a 20-minute podcast just so people can say, you know what? I don't really wanna read this. I just wanna listen to it. Let me hear what the analyst has to say. That's the thing that we've learned so much of in the last few years is the importance of having a multimedia approach, you know? Articles, blogs, reports, videos, podcasts, all coming from the same firm. That's what we do here at UBS and it's I think it's been a game changer because our clients and our advisors and, of course, their prospects, they can consume it however they want, no matter what age they are. That's I think the secret sauce is just knowing that you can create content that could be, you know, interesting to any age, any demographic, as long as you're telling the story in different ways.[00:31:33] Andrew Seski: Right. I mean, that's one of the reasons for being of Nth Round in general. We are this modern interface with, you know, private assets, which are difficult to value, difficult to communicate the value but, you know, get an easy portal to sign in with a click and you could use your iPhone to do so. It's I think what's gonna happen in probably the alternatives, whether it's, you know, any of the bulge brackets or not, this is all gonna come into meeting people where they currently are. But also, there's gonna be value from great grandpa having, you know, hosting a Jeffersonian dinner explaining why the family office was created and somebody wanting to know that one of the portfolio companies exited and they're gonna get a distribution in the K-1 and if they can get that in an email with one click and look at the total dollar number and be able to send it off to an accountant, they're gonna be way happier than, you know, whatever the family retreat is or anything like that. So, it's how do you introduce some of those tools and communication method across generations to go? Your great-grandfather had, you know, he sat with you over dinner. That's where this came from. Now, we've got a round table. Now, we've got our event. This is what it's gonna look like and how we're gonna iterate a future for the rest of these generations. [00:32:46] Anthony Pastore: I'm still laughing about a Jeffersonian dinner. That's a great great line. I'm gonna have to use that more often. You know, and I was gonna bring up. You were talking about, you know, we talk about multi-generational wealth. We have a group here at the firm that focuses on the a multi-generational wealth and they did some research before they launched the segment last year and it says something like 83% of investors are concerned about transferring their assets smoothly. So, I mean, it's a big issue for a lot of people. Having these Jeffersonian dinners but then having every generation at the table, they don't know how to do it wisely. And then, it's like another stat that came up with that six and 10 heirs and benefactors agree that the parents have to bring up the topic. It would help break down those barriers to talking about that inheritance. The kids don't want to go to the elders. They want them to go to them — the elders to go to the kids 'cause they're like, Hey grandpa, how much money do you have and when am I getting it? That's what it sounds like in grandpa's ears perhaps. So, it's a lot of like people are just aren't talking to each other about transfer of wealth. And then, you know, what happens? These kids go to smaller shops and they or they do everything online or they ask ChatGPT where they should be investing their money and it'll give 'em some crazy answer.[00:33:59] Andrew Seski: Right. And that's actually an interesting idea too just in the fact that I think one of the issues around CFOs trying to communicate effectively in general is the control of information and where it's coming from. And I feel as if the financial reporting is it almost mirrors this conversation right now where, you know, the father and son, all the stakeholders, all the siblings and cousins. It's like almost as if that there needs to be one very strong voice communicating about how, you know, a mandate is around the family selling assets or what that agreement looks like for whatever the cash generating business actually looks like. Could there ever be a place in time where somebody needs excess liquidity and is the agreement malleable enough to accommodate that? But if you don't know how to ask because it's not being communicated down, you lose control of everything. You may lose control of the actual asset that's generating the wealth in itself if you get pushed into some sort of exit scenario you're not, you know, prepared for.[00:35:02] Anthony Pastore: That's right. [00:35:02] Andrew Seski: So, it's a really interesting issue. I love the fact that you brought statistics here because, I mean, it's fascinating to know what's working and what's not. [00:35:09] Anthony Pastore: I've got tons. I mean, you know, our we also have our family office who does a ton of research and the and that's part of our private wealth management division run by John Mathews, who is a great leader and a good friend. But you know, he said there's $71 trillion wealth opportunity out there right now globally. It's incredible to think and from a family office perspective what's really out there and how much has changed because of COVID, digital disruptions, geopolitical developments — it all matters to family offices when they're thinking about what they want to do and how they want to invest and what they want to pass down to their heirs. It's a really important and hot topic right now to think about the evolution of a family office.[00:35:47] Andrew Seski: I'd love to learn a little bit more about UBS' family office services before we start to wrap up here, especially because I think the back when I first heard the term "family office," it meant something really different than it does today and I'm not sure that most people looking to think about multi-generational wealth or passing down businesses really understand a lot of those basic definitions. [00:36:12] Anthony Pastore: That's right. [00:36:12] Andrew Seski: But when I first started my journey, I thought that a family office was created by handpicking some incredible investment bankers and then they worked for just the family. Today, there is such an impossibly large spread of types of services where that's still the case for single family offices where they could still outsource the CIO role to one of the major shops or outsource just any of the different aspects of what running, you know, basically a small asset management firm for your personal wealth management, what that actually looks like.[00:36:50] Anthony Pastore: That's right.[00:36:51] Andrew Seski: So, I'd love to learn a little bit more about how UBS thinks in terms of where their services could be thoughtful to some of those multi-family offices or RRAs. [00:37:00] Anthony Pastore: Yeah, and like a full disclosure. I'm certainly not in the family office but I work with them quite often and what they're, you know, what they're talking about is that they are the best representative for a family — so if a family office comes to UBS and they work with one of our advisors, they also have the backing of our family office team within the private wealth team and they get, as you just said, they have a financial analyst who can work with them. They work with somebody who helps them with their philanthropy goals. They have experts at their disposal to really help them transform the way that they're investing the money that's part of the family office, not just keeping the money someplace and having outside people run it. It's all in-house so they get it's like a full service experience for a family office when they work with our advisors here 'cause then our advisors work directly with the family office team in the home office area. So, it's a it's really it's a one-stop shop. [00:37:52] Andrew Seski: Yeah. It used to be that you had to go out and just go try to create your own and whether you've done that, you know, UBS or another competitor to, you know, round out the services or if you wanna start your family office and wealth management services from day one.[00:38:06] Anthony Pastore: That's exactly right. And, you know, and just for a color, the top three markets for family offices $14.6 trillion in North America, Europe has $10.5 trillion, and then Asia has $11.8 trillion. So, there's a lot of assets out there and, you know, we are trying to explain to these family offices how we can help them holistically with managing their business, managing their family money, and, you know, and keeping it by passing it to the next generation, having those family meetings, and doing the family love letters and having everybody sit around the table with their advisor as sort of the mediator in the room, you know, so the kids don't have to ask the embarrassing questions of the grandparents and the parents.[00:38:52] Andrew Seski: I think one of the things that I'm fortunate enough to have a seat at the table is kind of a perspective into alternatives. All of Nth Round's clients are privately held companies. They're really, really interesting folks and just having a well-diversified strategy is obviously a huge portion of the wealth management services here and I think that the next generations can be highly focused on the private markets. They've seen what happens in the venture world. They're raising their own funds for the first time. They're highly proactive. Whether they're trying to be activists, shareholders, trying to trade Robinhood accounts, or try to figure out how to become micro LPs, I think that's gonna be a huge piece of this and to have that be respected and understood as a piece of a well-diversified portfolio I think is gonna be really powerful. [00:39:40] Anthony Pastore: I agree. And even private equity is something that more and more family offices are interested in these days. It's also one of the preferred methods of investing for this year from our chief investment office at UBS is looking at private markets as, you know, as an opportunity within any and even an individual's portfolio. But certainly for a family office, it's a great avenue to be looking into for sure. [00:40:03] Andrew Seski: Yeah, and family offices are unique too as investors just from a standpoint of while it's nice to think about becoming a micro LP, the success rate is just the amount of risk that you're taking on to make the investments is extremely high.[00:40:16] Anthony Pastore: Exactly. [00:40:17] Andrew Seski: So, having the experience of another firm with, you know, your formalized structure makes all of those little pieces fit into place a lot more. [00:40:26] Anthony Pastore: That's exactly right. By the way, my team would kill me if I didn't tell everybody where our videos are located so I hope you'll allow me to do that.[00:40:33] Andrew Seski: Please do.[00:40:34] Anthony Pastore: UBS.com/studios and also on the UBS YouTube channel. That's our UBS Trending episode. And for the podcasts, it's all over iTunes and Spotify and everywhere, probably where your podcast sits so we can work in conjunction with each other.[00:40:47] Andrew Seski: Is there any way that somebody can get in contact with you if they're interested in any other media?[00:40:52] Anthony Pastore: 100%. They can email me directly. It's my name — anthony.pastore@ubs.com. Please feel free to reach out or you can link in with me. I'm also on LinkedIn and, you know, other social media things but LinkedIn's probably the best bet. So, please direct message me there. Happy to talk to anybody who might wanna chat a little bit more.[00:41:12] Andrew Seski: This has been another episode of The Modern CFO Podcast. Thank you so much, Anthony. I hope we have the opportunity to speak again. [00:41:18] Anthony Pastore: I hope so too, Andrew. Thanks for being a fantastic host. I really appreciate it. This was a lot of fun. [00:41:22] Andrew Seski: Welcome to the other side of the table. [00:41:24] Anthony Pastore: I still don't like it so much but I'll do it for you. Thanks, Andrew.

Many small and medium-sized businesses in the country rely on a disparate range of financial services to help manage their accounts, expenses, and payments. Unfortunately, this system lends itself to time-consuming processes and inefficiencies that get in the way of growth.That’s why Rho is integrating all the financial services businesses need into one easy platform. With Rho, finance teams can view everything in one spot, scrap inefficient processes, and focus on driving value and growth.In today’s episode of The Modern CFO, host Andrew Seski talks with Rho CFO Jeremy Klaperman about how to 1) organize information systems, 2) build out an integrated data infrastructure from day one, and 3) embrace cultures of integrity from the CFO position. With decades of experience at elite financial organizations such as Goldman Sachs, D.E. Shaw, and Citadel, Jeremy expertly navigates his role as Chief Financial Officer.Show Links Check out Rho Follow Rho on LinkedIn Connect with Jeremy Klaperman on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.[00:00:00] Andrew Seski: Hello, everyone. Welcome back to another episode of The Modern CFO Podcast. As always, I'm your host, Andrew Seski. Today, I'm thrilled to be joined by Jeremy Klaperman, CFO of Rho. Jeremy, thank you so much for joining me today. I'm excited to talk. [00:00:23] Jeremy Klaperman: Thanks so much for having me. Really excited to be here. [00:00:26] Andrew Seski: So, Jeremy, you've spent most of your career across some of the most storied investment firms, from Goldman to D. E. Shaw to Citadel. But this is your first foray into the CFO role. I'd love to hear a little bit about what it's been like over the last six months crossing this chasm. [00:00:45] Jeremy Klaperman: It's been great. It's something that I've been looking forward to doing and planning for a while. And I think of my 20 years in investment banking and investment management as training for this because I either advised or invested in companies from all regions, from all industries, many different market cycles, whether it's the original tech bubble burst of the early 2000s to the global financial crisis to COVID. And I've had so many reps speaking with CFOs and CEOs. I've built up a great playbook of what I think best practices are and also pitfalls to avoid from everything from high level strategy to accounting to operations. And what I try to do with that is bring that to bear in my current role. And so, I view the last 20 years as kind of giving me the best practices and building up to what I'm doing now.[00:01:40] Andrew Seski: So, can you tell us what Rho is and what the future of frictionless finance means to you? [00:01:47] Jeremy Klaperman: Absolutely. So, Rho provides a wide range of financial services as well as spend management software to small and medium businesses. And a lot of our clients, almost all the small and medium businesses in the country have a disparate range of providers currently that give them all these things. They might have a bank, a credit card company, an investment firm that helps them manage their treasury and their cash. They might even have a FX transfer provider if they do a lot of international business. So, they could have two, three, or four providers of financial services. Increasingly, companies are using software on the spend management side for things like tracking expenses or automating bill pay and accounts payable. So, they could have one, two, three providers on the software side. They have all these disparate systems that don't work well, don't talk to each other, and it creates a lot of manual processes, errors, inefficiency. And the finance teams end up spending a huge amount of time just trying to do basic tasks rather than controlling their finances well, gaining strategic insights, running the business. So, what we do is we take out the entire stack on the financial side and the software side with one integrated all-in-one solution that's very easy to use and the entire finance team can centrally control and command the finances. [00:03:10] Andrew Seski: So, was this something that was important to you prior to joining? Were these inefficiencies something that you were able to identify, you know, on the other side of the table as an investor as well?[00:03:20] Jeremy Klaperman: Well, you can often identify the output or the symptoms of these, which is you're speaking to a CFO or CEO, you ask them what a key question is on the business, and they don't clearly have at their fingertips what you would think would be an important insight or just an important piece of knowledge. And that often comes from the data and the systems in the company not being well configured. So, having your key financial services and software services all-in-one integrated solution is one step, but not the only step you need to provide your management with the right information to run the business well.[00:03:57] Andrew Seski: So, I wanna talk a little bit about, you know, using some of these tools yourself as a CFO for the first time now and sort of what that foray looks like. I am so lucky to have a really, really unique subset and cohort of guests on the show. Some come from banking. Some come from, you know, Big Four and audit. Some, you know, were in the Navy or the military. And it's really interesting to see, you know, kind of a career progression that lands somebody in this financial leadership role. And would love to discuss, you know, you said your entire career was basically training for this opportunity. Did you always see it that way? Or is this new role something that you took a long time to consider, kinda a different risk profile and really different environment? Or has it been kind of a natural progression of your career? [00:04:46] Jeremy Klaperman: Over the last decade, I've become more and more interested in it. At least for me, when I graduated from school, I didn't know exactly what I wanted to be. I knew the kind of skills I wanted to learn and what I enjoyed doing, so I went down this path. And I think it's, after working with companies for so long, what I wanna do was not be an outsider or an advisor or an investor for a portfolio, but really get in on the inside; have a portfolio of one company where I'm on the team that's driving the growth, creating the value. So, it was really a natural evolution over the last 10 years where I determined that this is what I want to do.[00:05:20] Andrew Seski: I'm curious to know if you have kind of a definition of what you'd consider a modern CFO. I think everyone is really interested in general in some of the firms that you've worked at. I mean, they're, you know, the household names of Citadel or Goldman. It must be really interesting to have some of those unique experiences and learning from some of the brightest, you know, financial minds, you know, on the planet. So, kinda curious to see if you've got anything — you mentioned being able to put together a playbook of pitfalls to avoid or, you know, things that are more aspirational as maybe some leadership skills. But, yeah. Curious if you've got a definition of a modern CFO and maybe some of those unique lessons that you've learned over the years.[00:05:57] Jeremy Klaperman: Absolutely. Well, first I do feel very fortunate for having been able to work at these places and learn from all the brilliant people there. And in addition, I had another component of learning, which is being able to speak with the CEOs and CFOs of many successful companies and learning how they think about all the things that a CFO would. So, when I think of the modern CFO, I think of using data and analysis holistically to make better decisions, data-driven decisions, that will improve outcomes for the business. The CFO that you think of as the classic CFO in the sixties or seventies just reported the numbers. They had an accounting system. They told you at the end of the month or the quarter what happened. But the modern CFO tells you not only what's going to happen, which is a capability focused on really with the rise of FP&A in the last 20 years, but what we want to happen and how we're going to make it happen. Or at least they have a voice in that discussion. And I view the CFO as a curator of not just financial information but operating information — all data in an integrated way — providing it to all the leaders of the business and having conversations with everyone on what is this data telling us. What are we doing well that we could do more of? What are we doing badly that we need to do better? And if you're, you know, the greatest companies in my experience are ones that are always reviewing the data, monitoring and analyzing everything, and then using it to make better decisions and drive better outcomes. That's something that I've observed in all the companies I've had the good fortune of interacting with. But also really, really seeing that at work well at the firms that I've worked at. Goldman Sachs, the Citadel are excellent at monitoring, measuring, analyzing, and using the data to drive outcomes. [00:07:51] Andrew Seski: That's excellent. That's really helpful. I'm curious as to — I get really different responses on some of the many hats that CFOs are wearing these days, whether it's, you know, a unique function in HR trying to acquire the right talent in this kind of unique market environment where there's a lot of churn or if it's how difficult fundraising can be. I'm kind of curious in your first six months here. Have there been any surprises of hats that you've maybe you've put on for the very first time, like I mentioned, you know, finding talent and maybe actively raising and doing all of these kind of, you know, disparate tasks or maybe even just managing a relationship with, you know, your board and your CEO? Have there been any major surprises or anything that you are happy to continue to kind of nurture the skillset of for the first time? [00:08:37] Jeremy Klaperman: I'd say no major surprises, but you've hit on one of the characteristics of the CFO job that appeals to me, which is that it's a multidisciplinary role. That's why you have people coming into it from all those different backgrounds you mentioned before that are successful. And it also varies greatly depending on what company you're at. It's very heterogeneous. The CFO of one company could be completely different than another. And so, I think the ability to wear all these hats without them all falling off your head is key to being a good CFO. And I'm fortunate here because I have a broad-based role. So, not only accounting and FP&A, but also providing data overall; getting involved in discussions with our investors and capital partners in all aspects of the business. And it's just been a great experience. So, when I think of all the CFO roles that are out there in the market, I feel fortunate to have this one at this company.[00:09:36] Andrew Seski: Very cool. I wanna dive into some of the things that are happening right now to kind of, you know, timestamp this podcast into history. I think we've kind of shifted over, and correct me if you've got a different vantage point, but at least in the venture-backed world just recently kind of gone from growth at all costs to, you know, maybe being a little bit more conservative in runway and maybe thinking with maybe a bit more long term of a view. And I'm curious as to what you're thinking about in 2023 in terms of strategic growth and how you're thinking about investing Rho's assets and kind of how you're thinking about scaling just in kind of a unique market environment where it feels, you know, somewhat volatile and maybe has, you know, some rising interest rates. But just given your probably ability over your decades of investing, just having a really good understanding of what growth looks like in consideration of a lot of macro-economic and global and geopolitical instability as well. [00:10:34] Jeremy Klaperman: All good questions. We are fortunate here in that our product, the demand for it is relatively acyclical. So, a product that helps you save money, boost income, better control your finances, is in demand as much during bad times, if not more than good times. I think actually what we're seeing is that people like our product equally, whether in good times or bad times. So, the demand function is somewhat acyclical. So, our growth engine, therefore, is much more within our control as opposed to a kind of demand-taker based on the current market environment. And in fact, our growth has been accelerating. So, we are looking forward to the coming year. And just like everyone in the market, we are balancing growth with burn and capital availability. And I think what I've seen successful companies do and successful investors do is be aware of cycles. At different points in time, growth at all costs and infinite burn will be acceptable. And then at other times, the pendulum will swing to the other side. And so, from a planning perspective, what we try to do is consider paths that we can adjust and will be effective in all environments. And more generally, when we're considering things, don't only focus on a discrete outcome. Rather, consider a range of outcomes. Consider in advance what would happen if this external factor moved or this market-based factor moved or demand was different, etc. And then come up with a plan in advance. So, we'll never be surprised. We should never just focus on one particular outcome and have one particular set of assumptions and then be shocked when the world changes. I think that's another thing from my background that's helped a lot. I've seen, you know, massive swings in just the space of a year between, you know, a company with tens of billions of dollars and one going bankrupt when, you know, when the Minsky moment occurs. So, just keeping in mind that things can change drastically and being able to have plan or plans for all different weather environments is something important to us. [00:12:39] Andrew Seski: Yeah. It sounds like you've got a really healthy consideration for market cycles. I think that's really important as you're, you know, we're all at the end of the year here, and we're all planning and in planning mode, so I think it's a healthy thing to have in the back of all of our minds. One of the themes I want to touch on is communication and transparency in your — I think there's kind of this stereotype of CFOs who get to, you know, hide behind Excel. And, you know, we're on a podcast right now and the role of a CFO has to be, you know, the financial leader in the kind of the face of the finance team. And I'm kind of curious as to, you know, the — and we could probably tie it into how Rho probably creates some more transparency around, you know, consolidated data, too, which is probably helpful for communicating with investors in general. But really curious to hear how you think about communication in your role and, you know, what the goal is of transparency with the rest of the team to communicate the decisions and those strategies and that breadth of, you know, potential outcomes.[00:13:36] Jeremy Klaperman: Those are great points. I think that we can observe in many successful companies the characteristics of integrity, excellence, transparency, both in terms of internal communications as well as external with investors. And those, not surprisingly, are highly correlated to and always go hand-in-hand with excellent operational and financial performance, almost always. You can have — what we also sometimes observe is a company that doesn't have those things but is in the right place at the right time and it's really hot and it catches a wave, but then when the tide goes out, if you don't have those core principles and modes of operation, then everything falls apart. We can always, we kind of see those scattered across the corporate graveyard. [00:14:23] One reason I like this company is the founders and the company, more generally, really operate with those principles of excellence, integrity, and transparency. So, the company in my mind was really in the top decile for its size, scale, and age in terms of those characteristics and other characteristics. And I could come in and build on that rather than cleaning up a mess, to use the colloquial terms that some of my counterparts use in other situations. So, I really love that aspect. And what the founders talk about here, they actually lay out specific qualities, characteristics that they want people's behavior and interaction to have. And they use it in all different ways. So, when you're giving feedback to someone, like, great job on this project, people often list like, hey, you embodied characteristic a, b, and c from our principles. I always loved the principled approach and focus the team on integrity, excellence, best practices, but they had a better implementation of it here. They had a way of kind of getting it out and having everyone do it day in and day out if in your communications, if you're doing a large task or a small task and it's been great internally. Externally, what we do is try to overcommunicate with very clear disclosure. And again, just in the last 20 years, I so often see companies that have excellent disclosure often have excellent performance 'cause it's kind of like a sign of their internal logic or thinking. If you can explain something really clearly, it means you've thought it through. You understand it well. And that's the analogy I see in companies' corporate disclosure. So, what we — we have great investors, we're thrilled to have them and an excellent relationship with them. And part of that is getting all this data in front of them regularly in an efficient way very transparently and that I think is, again, a key aspect of the function.[00:16:18] Andrew Seski: Yeah, I completely understand. I think that overcommunicating and being really concise with those communications, it not only creates a better bond of trust, but also can, you know, maybe even create more patient capital if there are CFOs listening about, you know, concerned a little bit about burn. I think overcommunicating creates a little bit more patience just because you don't have to pick up the phone and call a CFO wondering, you know, where financials are or what's the latest at the firm. So, I think that's a really, really good point and probably increasingly important as, you know, if the markets were to start to melt down a bit as everyone thinks about their valuations and fundraising in a tricky environment. [00:16:57] I did want to kind of cover an idea around some of the positive externalities it sounds like Rho can provide as well. So, I'm thinking about, we're talking about transparency and communication. When you have all these disparate systems, it must be pretty difficult to be accurate in reporting in some of these data and all the spend management if it's across all these different systems. It could probably be a pretty onerous task to be able to communicate what's going on. Are there other positive externalities that maybe aren't as clear that you've seen that companies have been, you know, some of your clients are working with have kind of realized?[00:17:33] Jeremy Klaperman: I think one of the benefits is, as you say, if you have a simple all-in-one platform that allows you to view everything in one spot, you then obviously will have a better understanding of the information and can further communicate it or using it for your own analysis. But the other thing we provide is the ability to automate your workflows and remove all these manual processes, which require a lot of time or inefficiency or create a lot of error, and have a very efficient, high-quality process. So, whatever you were doing before, whether it's, you know, collecting employee receipts or paying your bills or monitoring credit card usage, you can cut the amount of time you're spending on that depending on what you're doing by, you know, 90%. And that is a huge gain because then you can use that time instead of, you know, running around chasing receipts and opening up, you know, four different websites from different companies to try to figure out what's going on to drive value in the business. What, where are we off budget? Where are we ahead of budget? What adjustments should we make? That's where we want the team spending the time. You don't want them emailing people to ask for, you know, receipts from lunch two weeks ago.[00:18:36] Andrew Seski: Right. And then you're kind of hitting on the point of how you define a modern CFO who can, you know, be more strategic, be more forward-looking than backwards-reporting. It seems like a lot of this is a, part of this role is being, you know, slowly automated. And if you can put all of that into the same platform, you can focus on where you can actually have the most amount of leverage and, you know, impact. [00:18:58] Jeremy Klaperman: You're right. You know, if I was going into a new company, the first thing I wanna do is organize the information systems. Make them all consistent and easily accessible in an automated self-serve manner. That means whoever should get some piece of information can get it by themselves when they want at any time in some simple manner. I pull it up on your, you know, business intelligence tool or whatever website is relevant. So, our software and our platform in terms of financial services and spend management would be the first thing I would do. That's a very easy decision to make. How you build out a data warehouse and data infrastructure outside of that is very, is an art just as much of a science and is very company-specific. And that is a whole undertaking. But just getting your stack of financial and spend management software providers, you know, taking out eight providers, putting in one, that's an easy thing to do off the bat. [00:19:51] Andrew Seski: So, I wanna segue a little bit. I feel like I don't normally have the opportunity to ask 'cause I've only had a handful of first-time CFOs on the show. But maybe for some of the, you know, people thinking about, you know, aspiring into the role, how did you actually go and meet the founders? I mean, for somebody who's evaluated probably tens of thousands of companies over decades, you know, what was the thing that was really exciting and how did you get in touch with the founders for the first time? I feel like that piece of the story is always really interesting and maybe a little bit nerve-racking for people considering it for the first time.[00:20:24] Jeremy Klaperman: Absolutely. So, what I tried to do was just run a very thorough, systematic process where I reached out to all my contacts, you know, former colleagues, friends from school, people I had met in business and learned about potential opportunities. And I wanted to spend more time rather than less and meet many more companies rather than fewer. So, literally had hundreds of conversations with many different companies. Often, I would know personally some of the people involved — maybe a founder, maybe someone who works there. And that's important to me because I don't only wanna work at a place with a successful business, but also a place with the right culture and personalities and character, which gets back to the principles we had talked about before. So, I feel like I'm very lucky because in the case of Rho, I had known one of the founders for 15 years from the financial industry and I knew that he was a very high-integrity standup person. And as I learned more and more about the company, I saw that he, you know, it often comes from the top-down. So, I saw that the way he thinks about things is the way that he infused the culture here and that's how it's working. So, I feel like if like you consider the two-by-two matrix of successful business and great culture, I feel I got very lucky 'cause we are in the top-right quadrant for both of those. And it's very fortunate. [00:21:47] Andrew Seski: Yeah, I really appreciate that. That's awesome. I feel like those who are trying to consider making the leap, you know, maybe they don't have the right school ties or think that their background may not be relevant. But it sounds like your kind of systematic approach to talking to as many people as possible was really, really valuable and you landed kind of exactly where you wanted to, which is a great story.[00:22:08] Jeremy Klaperman: The one advice I give people is some people have an approach of reviewing some number of opportunities and if they don't work out, then get some more in the hopper. But that won't lead you to necessarily find the best one in the whole universe of opportunities. You wanna get everything in there possible and consider it all for a long period of time and then you'll be able to find the best one if you just have like the all-in parallel. If you do like an incremental or serial approach, you might take one of the first 10 you get, but you'll never get till, you know, 120 on the list, which might be awesome, so. [00:22:43] Andrew Seski: That's really good advice. That's a really practical way to think about it, too. I'm curious if there's anything — I really like kind of breaking up some of these episodes with talking about big ideas of things that you may feel underestimated in the world or, you know, we're in a really interesting medium, too. I think podcasting is pretty fun for, you know, having long-form conversations. So, always curious to know what CFOs are reading, what they're listening to. I still am a classic Wall Street Journal person and love my podcast and all of that. But always interesting to know what kind of information and what resources are out there that CFOs are reading and listening to and kind of what, you know, what's informing their opinion in what's kind of underestimated in the world today.[00:23:24] Jeremy Klaperman: The thing I think about most is the role of increasing sophistication of automation. Artificial intelligence is one example of that, probably on the more sophisticated end. But just the increasing sophistication of automation is it can be applied to our everyday tasks or what we're focused on as CFOs. So, one very tangible trend or theme in this area is 10 years ago, everyone's model for forecast in the business was in Excel for small and medium businesses. And increasingly, there's purpose-built software that will do that for you and automates a lot of tasks. So, when you do your monthly close, instead of you or the FP&A person typing in all the numbers for the most recent month of the Excel model, there are tools that will populate that all and do all the monthly updates for you and tools that will configure your or speak to your payroll provider, your HR software, your recruiting software. So, everything's completely integrated, which is really just something that's happened in the last few years. And that's not even the cutting edge of it. That's really just gluing together some existing technologies that aren't very sophisticated to make your life easier. And then you have things like GPT-3 for which the implications I think are still quite unknown, but you can just see how applying that to certain areas of your business could have tremendous impact. And so, in some ways, the finance I think the finance field has not fully embraced or remotely embraced a lot of the technological advances that we are seeing in other areas. It's still quite backwards in many ways. [00:25:01] Andrew Seski: That's right. I always laugh at the idea of the image of Atlas holding up the world. And I always think of Excel holding up the world of the finance in that way, which, you know, CFOs tend to love their spreadsheets, so completely understand. But it's pretty exciting. I think we're at a really important crux of technology. It seems like Rho is sitting right at that intersection, which is really exciting.[00:25:23] Jeremy Klaperman: Yeah, I mean, Excel has a lot of positive qualities. We love it. There will always be a place for it. But there's so many additional capabilities you can add on or supplement with that. [00:25:33] Andrew Seski: Totally. I'm curious, as a CFO I think a lot of the finance team looks to you for direction. I'm curious at some of the characteristics — sounds like the founders have really strong core values. As you are getting situated, do you still talk to mentors from previous firms or who do you look to when you're looking for advice and, you know, some of the maybe just maybe other CFOs or other mentors from the past to kind of guide through some of these transitions? Because it's obviously you're very well qualified for your role today, but it's definitely a transition still, right? So. [00:26:11] Jeremy Klaperman: I think that the CFO role and all my roles are always a progression where there's always more you can be doing; more you can be learning. So, every morning when I wake up, I think, what don't I know? I'm always thinking about what I don't know, what I'm doing badly, how can I learn, how can I try to improve it. I'm always more worried about what I could fall behind on or not do well. And so, what I do to consider that more in addition to just assessing it myself is I ask the same question: What makes an excellent CFO? Tell me some of the characteristics that you've seen in the CFOs you've dealt with that make an excellent CFO. And I've asked this of all the CEOs and CFOs I've met with for many years now. And if I meet someone from a venture capital firm or private equity firm, I ask them that. If I meet so another CFO or a controller or an FP&A person, I ask them that. And I just love polling people on that because you're getting all these feedback from all these different sources, all of which have a good view on what makes a great CFO. And so, I don't just have a few mentors or people that I have a personal relationship that I rely on. I always like to be asking everyone. And one thing I do internally is I shoot a message out every three months, not only to my own team, but to the rest of the company, saying, "What can I do a better job on? What can the finance team do a better job on?" Maybe it has nothing to do with me. What can the team do a better job on? And I just love always getting people's feedback and taking all the little pieces of it to build a mosaic that you can extract some insights from. [00:27:44] Andrew Seski: Yeah. It's funny that level of humility and openness to take feedback and have all that other opinion. It's funny, it probably has rocket-shift your learning and being able to fill in all of that blank space that would be just the unknown. So, that's a really interesting approach. I think it probably also kind of drives some really healthy culture internally because people know that you are accessible. And I don't know that that's always the case with the C-suite, especially as the firm gets bigger. [00:28:13] Jeremy Klaperman: It's funny you say that 'cause one, you know, like I have a diary where I write down what everyone told me, which sounds kind of silly, but, you know, you'll remember it at the time, but you might not remember something someone said to you eight years ago. So, it's funny to just go back over time and read all the advice. So, one piece of advice on that topic that I received was be very approachable. You want people to come to you. You don't want to be rude to them or reject the idea. So, I'm always concerned, not concerned, but I always want everyone to be able to come to me with whatever their ideas are. And if I say an idea and it's bad, I want everyone to reject it and tell me, "No, we should do it. We should do it that way instead." Again, I've observed that the best companies not the culture of some person who's, you know, been there for a while or has some title says something and then everyone, you know, hustles to do it. But rather, someone comes up with an idea and other people say, "Well, that's okay, but let's add on this" or, "No, that's not good. Let's do it that way." So, it's super important to me that everyone in the organization overrules me, counterargues with me, or just more generally always gives their opinion and and shares their ideas. And that way the best will bubble to the top.[00:29:23] Andrew Seski: And that's something that the world of finance takes super seriously as well. I know that Bridgewater, and I think maybe Citadel probably does too, the way that you evaluate decisions and communicate with your team is all highly measured. Is that where some of that stems from or just kind of really consistent across what you've viewed from successful companies?[00:29:43] Jeremy Klaperman: I've observed that at successful companies. And certainly, it's part of those firms that you mentioned. You know, Bridgewater is known for the radical transparency movement. But I think more generally when you're an investor, your hit rate isn't 100%. You have a lot of failures and flops. And maybe as a CFO you can do a great job on some high percentage of whatever you're working on. But as an investor, you'll have huge failures and flops. So, I've always found the best people study the flops more than the success. You would rather review with your team at the end of the year everything that went wrong than everything that went right. So, being an investor is a humbling profession because you're always surrounded by things that could have been done better, more so than other professions. What I've tried to do is always learn from all the mistakes. And if you asked me five years ago "What things do you look for in an investment?" or "What things make a great company?" or any important question, my response would've been influence or would've been the aggregate of all the observations I made over the previous 10 years. So, 15 years ago I thought this was a great idea or this was a great company or that was a good analysis. Then at some point, it went wrong. It wasn't perfect. Maybe it wasn't a financial crisis. Maybe it was, could be for any number of factors. So, by just the way you improve any complex system, you observe when it is making an error or something's going wrong, and then you tweak it, you add it, you augment it. My approach always tries to be the aggregation over time of all the feedback, correcting mistakes, improving what's good. I think that's quite prevalent in the investing area, maybe more so than in general corporate America, but the best companies often have that.[00:31:29] Andrew Seski: Yeah, absolutely. That's a really interesting point. I appreciate that perspective a lot. I wanna spend a minute kind of zooming out and thinking about, well, we're very end of the year here. Well, for me, a couple weeks of selling left here at Nth, but really curious as to what you're looking forward to in 2023. What's really exciting? Maybe even, you know, just in the next 12 months, what's top of mind right now?[00:31:51] Jeremy Klaperman: I think the thing we're most passionate at Rho is helping our clients better control and command their finances. So, we have a ton of cool features we rolled out in the last few months. We have a ton more shipping in the coming months. And I'm just excited to hear the feedback of everyone implementing these. I think the favorite thing of people here is when we get a quote from the client, like, oh, you know, we cut down our monthly close by a week or, oh, we, you know, we saved 40 hours because of this or, oh, we finally know how to control this spend for this reason. We love that and we're just trying to do it more and more with all the new things we're shipping. And so, I'm looking forward to hearing the output from that. [00:32:29] Andrew Seski: Yeah, that's always really, client feedback is so much fun, so valuable. Yeah, it's gonna be an exciting year for Rho, I'm sure. So, is the team starting to take form? So, how many employees are there now?[00:32:40] Jeremy Klaperman: We have about 215. [00:32:42] Andrew Seski: Wow. Okay. That's awesome. And the company's only been around for — [00:32:46] Jeremy Klaperman: Five years. [00:32:47] Andrew Seski: Five years. Got it. And is this space is fairly competitive, right? I'm kind of curious as to what are some of the defining, are you tackling a certain subset of the market that's still being underserved? Or how do you think about competition in the next year?[00:33:06] Jeremy Klaperman: Well, from our perspective, we provide a very wide range of both financial services and spend management software. So, while we have competitors for any particular feature or product — you know, for example, a well-known credit card company would be a competitor for our credit card; well-known expense management software company would be a competitor for that component of our software — there's no competitor we think that provides the entire range of everything like we do. There are certainly companies that do one or two financial products and maybe a software product, maybe do a software and one financial product. There's different combos here and there, but we think that we really provide the whole spectrum of what the overwhelming majority of small and medium businesses need. The other thing is we're purpose-built for the small and medium businesses in this country. Some companies target enterprise, S&P 500, you know, super large companies or multinational companies. We are really designed for those small and medium businesses, of which there are a few hundred thousand that are the core of business in our country. So, we have this huge market that we think we provide the comprehensive solution for. [00:34:17] Andrew Seski: Got it. That's really helpful. That provides a lot of color for, I think, how people can think about where Rho sits. That's awesome. I really appreciate that. I think we should probably spend just a minute. I'm kind of curious still on in your decades of investing and you've traveled extensively and we're just talking about, you know, purpose-built for US small and medium-sized businesses. I'm kinda curious just to hear a little bit about your background just in travel and experiencing, you know, whether or not Rho's gonna go into more merging or global markets. The world of frictionless payments I think is going to increasingly become more global and it might be fun to hear about, you know, early days of traveling to Asia or anything that you'd like to share. [00:34:59] Jeremy Klaperman: Sure. Well, from my background, I was really fortunate to not only get jobs at great companies, but also work in interesting areas. And when I was growing up, when I was in middle school and high school, I always wanted to not just live around the world, but work around the world. So, not be a traveler, but work in business in the different regions. So, I spent about half of my time, about 10 years, living in Asia and/or Europe. And I've been fortunate enough to work or live in many of those different countries and have companies or clients in many of those different countries. So, all the major companies of Asia and Europe. And it's been, again, great for my education because I saw what the best companies in Asia do, what the best companies in Europe do, etc. For Rho, we feel our market is so big focusing solely on these hundreds of thousands of US small and medium businesses, we don't have any overseas aspirations at the moment. We just feel like it's, we're at the tip of the iceberg for our home, our core market. We have such a small amount of share. It's unlikely that we would look overseas, at least in the near term.[00:36:04] Andrew Seski: Got it. Yeah, it's just really fun to hear that there's so much opportunity because it just means that the American dream and entrepreneurial spirit is still very much alive if there's, you know, that huge addressable market here. So, I'm sure that's gonna be fun for some of the feedback that you're gonna hear just in being supportive of entrepreneurs. So, you get to do that by coming in, you know, serving as a CFO, but also actually supporting these small businesses where, you know, maybe these tools would be more institutional grade and maybe less accessible., But now just having the kind of ease of spread of the technology, it's gonna be really valuable and hopefully, you know, continues to support, you know, the backbone of the country.[00:36:41] Jeremy Klaperman: We hope and look forward to that. So, that's a great way of saying it. And, you know, if you think about, five years ago, if you had laid out this plan to build what they've built here, which I'm kind of the beneficiary of having joined this year, it would be a very ambitious plan to build almost all the financial services that a middle-market company uses, almost all of the spend management software in one offering. There are many companies that built just one of those pillars that took several years and they've built the whole thing in five years. And just getting that right in the US was an ambitious and impressive undertaking. Adding additional countries or expanding is a whole another level of complexity. So, we really wanna take this platform that they've built over the last five years, which is really right for the US, and maximize its full potential here. [00:37:28] Andrew Seski: So, I guess the last question I have on Rho probably just the onus to get it started. What was the founders' kind of dream when they first got this idea and went out and raised capital for it?[00:37:42] Jeremy Klaperman: I don't wanna speak for them, but I think their thought was there's, they looked at areas where technology still hasn't had its impact or there was still a lot of disruption to be had or efficiencies to be gained; places where there's still a lot of friction or pain points but also had a huge market. And having reviewed all, you know, the intersection, if you think about the Venn diagram of these two things, they came up with middle-market finances, financial services, and financial management. That was a huge area that, as we've discussed before, was really behind, really backwards. Logging onto different websites, chasing pieces of paper around, you know, sending checks to the mail all day. Same thing. Other than the use of websites from your bank, you know, nothing's changed in decades. So, they thought, here's an area where we can use technology to make significant improvements, reduce all the pain points for the customer. But there's hundreds of thousands of customers. And that is generally a great thing to look at for FinTech companies. It's something that not only has a great market, but also has a great value proposition for the customer and then also has great unit economics or really makes sense for the people who are providing that service as us.[00:38:54] Andrew Seski: Yeah, I love that. 'Cause there's, it's also probably relatively easy to measure the impact of time saved and money saved, and I think that's really, really valuable. Since we talked about accessibility and being able to be able to contact you, is there any way for people to reach out maybe via LinkedIn or how should people go and learn more about Rho themselves or if it's a good fit for them? [00:39:18] Jeremy Klaperman: Absolutely. Well, they should follow Rho on all social platforms. LinkedIn, we're very active. And they're welcome to reach out to the Rho page on LinkedIn and/or me as well. Would love to have them follow us. [00:39:31] Andrew Seski: Awesome. Well, Jeremy, I have loved speaking today. I'm excited to circle back soon because I know Rho's gonna continue to expand and really appreciate all of your time today.[00:39:40] Jeremy Klaperman: We really appreciate you having us on it. On behalf of everyone from the company, we were super excited when we found out I was invited to join and I'm here on behalf of everyone at the company who's made this dream happen. So, thank you to all them and thank you to you for having us today. We really appreciate it.[00:39:54] Andrew Seski: Excellent. This has been another episode of The Modern CFO Podcast with Jeremy Klaperman. Thanks again.

So much of the purchasing for tech startups and small businesses is online. Yet they often struggle to pay for the services and platforms they need because they don’t have business credit cards.This problem is especially acute for startups that lack credit as they’re more likely to have a hard time securing financing from banks than startups with good credit scores. FinTech giant Brex seeks to address this problem by supplying startups with the banking stack they need to scale.In today’s episode of The Modern CFO, host Andrew Seski talks with Brex COO & CFO Michael Tannenbaum about how Brex empowers startups, the global nature of startups, how he thinks about growth in different market cycles, and more.Show Links Check out Brex Connect with Michael Tannenbaum on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.[00:00:00] Andrew Seski: Hello, everyone. Welcome back to another exciting episode of The Modern CFO Podcast. As always, I'm your host, Andrew Seski. Today, I'm thrilled to be joined by Michael Tannenbaum, CFO of Brex. Michael, thank you so much for being here. [00:00:21] Michael Tannenbaum: Thank you for having me.[00:00:23] Andrew Seski: So, today, I'm excited to talk about a myriad of topics, including leadership, rise to the CFO, what excited you about Brex. So, we've got a ton to cover today and I kind of want go back in time to leaving undergrad and kind of your first roles. It's always interesting to hear kind of how people cut their teeth, whether it's in finance. We've had a number of CFOs who actually went into, you know, service first and others who started in, you know, the typical Big Four. So, I'd love to go kind of hear about your early career and, you know, walk us through the rise to your position today.[00:00:58] Michael Tannenbaum: Sure. Thank you for having me. I actually wanted to be an economist when I was in college. But my thesis advisor at school thought that academia would be not a good fit because I was too commercial and I enjoyed working a lot and, you know, in that profession, not that they don't work a lot, but, you know, you have summers off and there's a lot of lifestyle benefits to being part of university and he didn't think that those would resonate with me as much. So, he had pointed me into investment banking, which obviously was something I was aware of. And my research was heavily on like housing markets and mortgage. And I went into the Financial Institutions Group at JPMorgan in investment banking. So, banks, insurance, mortgages, all those kind of companies. And it was an interesting time 'cause I graduated from college during the GFC and, you know, banks were going under or being bought and sold. And so, I started in regulated financial services, M&A. And then I worked in a private equity company out in San Francisco where I focused largely on financial services also. And then, I went to a company called SoFi, which is now a public company, and I joined there relatively early, about 75th employee. And I kind of worked my way up through that company, starting in the capital markets team, and then took on additional roles, ran the mortgage business, which was kind of a nice round trip from my undergrad. And then, I was the chief revenue officer there. I met Henrique and Pedro at Brex. They were just coming up with an idea at the time. They were, I think 20 years old, and I was 29 or so, maybe 28. And they compelled me to come and join them as the first employee of Brex. So, that's how I got here. And I started as a CFO, and I always say this, but since it's a podcast about CFOs, I think it's even more relevant. My dad, who's also a CFO, always said to me when I joined, you know, "You're the CFO of a three-person company. It's kind of like being the CFO of nothing. So, you can call yourself chief if you want but." So.[00:03:05] Andrew Seski: Before we go back into Brex, I'm kind of curious. Do you think that sitting across the other side of the table on the investment side was informative or, you know, gave you some perspective as to what it's like to be, you know, more of an operator on the private company side?[00:03:18] Michael Tannenbaum: I think when you're just starting in your career, you look at the senior-most people that you see, at least I did. So, for me, that would be like the heads of the groups that I worked for or some of the senior people and the clients. And you ask yourself like, do I want to be that person, you know? Is that a role model for me? And I think, for me, I definitely gravitated more towards, I was always excited by, you know, the banker that had gone and became a CFO. I think that was a path that I wanted pretty quickly. And I, you know, as I mentioned, I kind of grew up with that, so it seemed very natural and attractive to me. [00:03:57] Andrew Seski: So, for everyone who doesn't know, I mean, I know I remember earlier days of learning about Brex, but, you know, now, I think you've got an incredible brand and it's very well known. But for those who are just learning about Brex for the first time, can you give us a bit of a summary of what was exciting to you first to make the leap to be that early?[00:04:15] Michael Tannenbaum: I think like a lot of good companies, you know, you start in a very specific niche and then expand out. There's a lot of, I didn't go to business school, but there's a lot of, you know, academic textbooks about business that talk about that, you know, crossing the chasm, etc. concept. And I think Brex when I joined it was really focused on startups and this need in the market for a credit solution and really a payment solution for startups. So much of the purchasing for technology companies is online, right? You can't buy Google Ads, for example, or Amazon Web Services without a credit card. They don't give small companies net 30 payment terms. You just have to pay on card. But at the same time, you have all these, you know, certainly at least 50% foreign entrepreneurs that are trying to start tech companies with a couple million dollars in the bank and can't get a credit card. And so, that was like a very hair on fire problem for that segment. And we really doubled down. And that was the Brex that I joined. [00:05:17] But the promise that I signed up for was always that credit card and expense management together would be more powerful than them separate, meaning that, you know, at SoFi when I was responsible for determining who got credit cards for example and expense management reporting as part of being the VP of Finance, it was such a challenge to wrangle everybody and get these receipts and ensure that there was spending controls. And so, with the broader promise that I think Brex has now realized, which is that you can combine expense management software and corporate card payment services in a way that is more powerful than either of them separate has proven to be true. And I think that's where, you know, Brex has moved and really defined this category of corporate payment.[00:06:11] Andrew Seski: Yeah. And this has been an incredible solution because it really empowered, like you mentioned, the international community as well. And I think I'm seeing, you know, in the venture world especially, a lot of focus on emerging markets now, which I think is great for innovation. It's great for, it's good I think for the world, in my opinion. But I do want to focus a little bit now to, you know, you've continued to innovate and one of the current focuses we were just chatting about before. I would love to hear a little bit about the Empower solution and kind of how maybe you're addressing an even larger market today than that first, you know, really bold innovation years ago.[00:06:49] Michael Tannenbaum: Yeah. I think we followed our customer in some way because these startups, one of the unique thing about startups relative to most small businesses is that for a lot of them, if you come back a year later, they're significantly larger and more complex with a lot more employees and more revenue and business systems and the way that they grow and the rate is much faster. And so, our startups that maybe joined us in 2017 or '18 started to get larger and have more sophisticated expense management needs, budgeting controls, vendor-specific controls. And so, with that, we decided, which was, is a little bit contrary to what most companies do, which is they add features incrementally as they move upmarket. Instead, we decided to actually work with DoorDash, which is public. Could just, you know, a very large tech company, wasn't an existing Brex company customer and bring the product all the way up to be able to serve a company like DoorDash and to then make that the reference point for the expense management and then, of course, modify some of the features for smaller companies, but rather than kind of incrementally grow to support customers, which is, you know, what is the kind of typical path, we took the product all the way up. I think because we realize there's something unique about the tech market that we serve, where those companies, they want to be DoorDash, right? If you go to a standard, you know, bakery, that company's likely not, oh, I wish I could be Hostess, right? Or whatever the premier bakery is Pepperidge Farm. I think that in the startup land, they do look up at those companies and the solutions that they use. [00:08:41] And so, for us it's very valuable to have this, you know, product embedded in some of the world's most impressive technology companies. And it also gets to a comment about remote work and the financial tools that are enabling that, which you reference with kind of the global nature of startups. I think because you have so many entrepreneurs that are, and executives in startup and tech, now with remote work, there's a lot more focus on global hiring and, you know, Brex and Empower in particular is helping enable the financial needs of remote workers, in particular, those outside of the US that are interacting with US companies and need to be able to purchase and get reimbursed and have expense management work and integrate with the ERP and all of those geographies. And that's a very, that's a very new tailwind to credit cards, right? If you think like, let's just take off-sites for example, which are much more common now, historically in corporate payments land or credit card land like at SoFi, only executives and traveling salespeople would interact with expense management. Now, pretty much everyone needs to because they get work-from-home stipends or they go on off-sites. And so, and in particular people, you know, in a remote, international office. So, I think Brex is rising to the moment and particularly Empower of this kind of new distributed workforce. [00:10:15] Andrew Seski: Yeah. Thanks for sharing that. I mean, it's really interesting to hear about sort of the aspirational nature of some of these firms and how that's led you to innovate. I'm really curious as how you think about, we might be dancing around your definition of a modern CFO, but it sounds like you went slightly against the grain in terms of strategy as you were mentioning how most firms here slowly go upmarket, slowly add features. How do you think a CFO should think about, you know, strategic finance as opposed to, you know, maybe more traditional roles? You know, I'd love your kind of definition of a modern CFO and kind of that explanation of how you think about it.[00:10:48] Michael Tannenbaum: Yeah. I think that you've gotta support the growth of the business in a financially sustainable way. I think a CFO often, and sometimes I embrace this too probably to my detriment, can be curmudgeonly, right? That's sort of the caricature and there is a role for that, you know? There's a reason that that exists. But I think ultimately, a modern CFO is supporting the growth of the business but doing so with appropriate financial guardrails. And those guardrails change, you know, as the market changes and we've seen that dramatically certainly over the past year. I also think a modern CFO has to acknowledge his or her role in risk management. Typically, the CFO is the senior-most person in the organization focused on risk or caring about risk. And whether that's included in the job description or not, it is part of the job. And I think ultimately, CFOs are seen as risk managers and judged by their boards and by ultimately the stock price on their ability to do that. And that's increasingly so in the world that we're in.[00:11:58] Andrew Seski: That's a really good point, especially in the momentum of some of these firms in their growth. There are certainly corners that can be skipped if you're raising just outsized rounds of financing. And I think we saw some of the detriments of maybe going too fast and bringing things too quickly and aggressively over the last few years. So, it'll be interesting to learn and see how the role of strategic finance will kind of continue to expand upon, you know, a different market cycle, which we may be approaching right now. How are you thinking about continuing scale and growth in, you know, different market cycles? I mean, you said you started your career during the Great Financial Recession and it must be a really interesting time to start your career and have that perspective. It'd be interesting to hear about how you think about growth in different market cycles.[00:12:49] Michael Tannenbaum: Yeah. I think, you know, growth is still what sets you free, right? They always say growth solves a lot of problems. And that's true. And so, you need to, at least if you are in the environment that I'm in, which is, you know, venture-backed technology, growth is still the thing that is ultimately gonna be what rewards your company and the share price. But that said, I think the resource environment and allocation has to change with the market. Here, it's actually much simpler today because rise in interest rates just has increased the cost of capital, right? So, it has raised the bar for projects that you might wanna pursue because the returns need to be higher when an investor or a company can keep their money in for, you know, risk-free for 4%, right? That's very different environment than zero. I mean, if you just think about, you know, if you've got a million dollars and you can earn $40,000 doing nothing, that's sort of compelling, right? You divide 40,000 by 12, you know, you're talking about $3,500 bucks a month, right? It's kind of a lot. So, I think that really changes the way that you should be thinking about investment. The opportunity cost is different. I mean, you know, individuals, not that everybody has a million dollars, not even close, but everybody's making their own version of decisions across the economy that I just mentioned in a way that they weren't for many years. But at the same time, I think we have to remember, you know, interest rates are still historically low and the things can change very quickly and have over the past 10 years as well, not just with COVID, but, you know, these environments do change and I think that interest rates were also rising at least until in 2019 in the beginning. And so, you don't want to overcorrect and just try to eke out every last dollar profitability at the expense of growth either. [00:15:06] And I think that, you know, the perspective at least I had coming out of the financial crisis, I joined JPMorgan in the summer of '10. So, at that point was sort of the phase where a lot of people like my parents' friends were like, oh, why would, you know, they refer to me as "Mikey," why would Mikey join investment banking now? It's such a horrible time. And I think what people don't remember and this is true of companies as well is like the performance that you're seeing at that point is reflecting an environment from a year ago. And so, that's also true today, you know? In many ways that's true of a lot of things in finance and the way companies work is that what you're working on today is gonna show up in the financial results in the future. And that's why, you know, when a public company misses earnings, there's so much concern because, you know, smart money knows that that means that's problems from a year ago showing up now.[00:16:08] Andrew Seski: Right. So, there's been a pretty significant turnover and churn in employment in the world. We've talked about kind of the changing globalization of workforces. I'm always curious as to know how you've seen your role develop and change in terms of what is, what are kind of like. I think there's not a single CFO I've had on who knows that they've gotta be data-driven and strategic, but it's always interesting to hear something that they've seen that's really changed in the needs of their role, whether that's, you know, really supporting human resources and hiring the finance team themselves or, you know. Is there an area that has changed drastically in the last few years or one that you think maybe slightly outside of what is perceived as the scope? [00:16:51] Michael Tannenbaum: Yeah. Well, one we talked about is risk management. I think risk management, you know, there's gonna be some companies that have, like I'm head of risk. That's less common. I mean outside of financial services, I think that isn't necessarily there. But just like within financial services and outside, the same risk still exists, right? You have the liquidity in capital markets risk, you have operational risk, you have enterprise risk. You have all of these product-specific and brand and reputational risks. And I think that that, at least from my experience, that risk management is a big part of the CFO. I'm not sure if other CFOs even some probably don't realize that that's part of their job. But I do think it's the expectation that they manage that. [00:17:41] To your point around data, I think what I have found is that the finance role, of course, is to be data-driven, like you said. That's almost a buzzword at this point or assumed, but I think it's the context around the data that a lot, you know, very rarely and probably and shouldn't finance does data report to finance, right? It's not if you're a data scientist, you don't dream of being someone like me. If you do, you should change your job. But I think the point is that you, but the context around the data, whether it be, you know, financial metrics or just the importance of having clean data that is universally understood and agreed upon within the company, which is a challenge, that is the domain of finance. And so, providing like they need to provide the metrics and the KPIs that people are focused on and ensure that those are well-defined and promulgated in the company. And that's definitely a big part of the CFO job. That's also probably not in the job description. [00:18:47] Andrew Seski: Right. No, I really appreciate that. That's a great point. So, let's take a step back and think about Brex and markets again but in terms of, you know, we're recording this at the very end of 2022, coming up on the new year. What are you thinking about, what's top of mind for the next 12 months? And then, if we could zoom out even further, I know it's difficult and kind of the volatile way of the world at this exact moment, but, you know, maybe something that you're really excited about coming up in the next maybe three to five years. Just to pull us out above 30,000 feet. [00:19:18] Michael Tannenbaum: Yeah. I think that this planning cycle, this time, this moment in, I guess, macroeconomic history is a time where finance leaders rise to the occasion or don't. And I think there's historically a long wishlist that, you know, a good finance person has, and many of those things have been ignored because, you know, finance doesn't drive the company nor should it. But now, in these kind of environments where there is more focus on cost and profitability, there is more focus on risk management. These are the opportunities for finance teams to kind of step up and go further down their wishlist and implement the things that they've wanted that have not been priority for a while and to get more financial discipline within the company, teach the company about return on investment and what this interest rate environment means and what investor expectations are not in like a heavy-handed, I will seize my power way, but that's how you rise to the moment as a CFO at this time. And that's true of risk management as well. I think if you've been a good risk manager, you know, you will sort of naturally show the company the value of that. And if you've been a poor risk manager, you know, now's the time where you learn from your mistakes and change things. [00:20:45] Andrew Seski: Yeah, I appreciate that. I think one of the interesting conversations that I've had from some of the more fractional CFOs that I've had on the show who just have kind of chosen a point in time in a company stage where they feel like they are the most aggressive value add has been that growing along the pains of cycles and different stages of firms can be a lot of complexity and sometimes you have to go straight through those experiences to just have a track record of learning how to do them. I'm kind of curious from your perspective because you have had to grow alongside like SoFi, you were early, actually extremely early. What is the change of the role across, you know, stages of venture, you know, taking on some of these more specific risk management challenges? You know, it's interesting to hear the difference between some CFOs who have been there since the very beginning versus, you know, CFOs that are hired just for IPOs, you know, amongst those small group of CFOs who have done so.[00:21:42] Michael Tannenbaum: Yeah. I mean, at a really early stage company as I kind of began with, the title of CFO almost feels ridiculous, right? Because there's no finance to be chief of. But, so at that point, while my title was CFO, I was really just doing whatever it takes and that's part of being at a very early stage startup. You know, roles and responsibilities are very fluid and you tend to have a lot of principles of comparative advantage. And, you know, whoever has the comparative advantage in something will do that. And that caused me at some point to run marketing, which lasted two years. It caused me to run PR, a bunch of things. It caused me to do a bunch of things where I might have had a comparative advantage relative to the people that were at the company at that stage. And then, I think when you get past the early stage and you're in the finance department, you're functioning, you know, it's sort of like this, if you're familiar with like the hierarchy of needs, Maslow, psychological concept, you're kind of go from like life or death to just more fundraising, which is close to life or death. And then, you move up into like, you know, KPIs and performance, you know, company performance management and strategy and all these things, you know, as the company scales. And so, you kind of work your way up that hierarchy of needs. And I think at the same time, similar to any role, not unique to finance, you're transitioning from being an IC to a manager, right, and then to being a manager of managers. And then, when you're at the stage and I think like risk management, to your point, that's always that you're always being a risk manager. Because in the beginning of a company, you have nothing. So, there's not much risk to manage, right? And whereas you have nothing to protect, right? You have only to gain. And so, you really are talking about existential risk only. And as you get larger, you have more of a brand and more of a franchise and investor relationships and equity and all these things that you wanna protect. And then, you need to start to be more judicious about those. And then, when you get even larger to the point where you can focus on strategy, you actually define your risks and your risk tolerance and your approach. And, you know, you put thresholds and you do board reporting. And so, that's sort of at the stage that Brex is at. And that evolves alongside the same financial management.[00:24:18] Andrew Seski: I love the hierarchy of needs. We should map that out at some point. [00:24:22] Michael Tannenbaum: Yeah, it'd be fun. [00:24:23] Andrew Seski: Yeah. That's awesome. I love that. I always say that, you know, listeners should go back and hit that back 30-second button and relisten to a part of the podcast. I think that would be a really good one for people to consider and just have some awareness about where they are in that hierarchy of needs and really just be super accountable in terms of, you know, where the priorities are, right? So, one of my favorite parts of this entire podcast and one of the things that I love is the diversity of people and experiences of the guests on the show. And Michael, I'd love to hear a little bit about what you feel maybe underestimated in the world today, if there's anyone actively addressing it. Of course, it doesn't have to be about finance or markets. Welcome to make it so. But I would love to hear your thoughts from a unique vantage point.[00:25:09] Michael Tannenbaum: Yeah. I think one thing that really has caught my attention is DALL-E, you know, from OpenAI. I'm not sure if you're familiar with what I'm talking about. But basically, some of these new AI-enabled models and how they can produce images, for example, with a few keywords entered that are, you know, very accurate. And I think there's a lot of implications for that also with text, right? They can write articles and the implications for that in professional services, which I think finance is a part of, are really big because there's so much work that you do within accounting and finance that can be automated and that's been a promise for so many years, and it's not totally happened. You know, of course there's BPOs and there's definitely financial software that makes the close easier and there's financial software that helps with FP&A. But, you know, there's still a lot of manual processes involved and I think that what you're starting to see with some of these intelligent AI models is gonna change a lot of white-collar work, particularly in accounting and finance. So, that's definitely something. [00:26:29] The other thing I'd say is, you know, we talked a bit about remote work. I do think that the impact of remote work on collaboration, even on the built environment, my wife's an architect and so I always think about, you know, if you think about like what highways did or what the air conditioner did for the built environment around the world. Imagine, you know, this concept of remote work when so much of our housing and our way of life has been tied to commute. And if even 20% of the world, which I know is a huge amount, but let's say 20% of the world is or at least the country is working remotely 50% of the time, you know, that's just traumatic. And I think that that's, we haven't even seen the impacts of these yet.[00:27:13] Andrew Seski: That's really interesting. I mean, you're right. The promise of AI has been something we've been talking about for quite a long time. Actually, it kind of makes me wonder if you had, you know, the magic wand of operational efficiency, what problems would you be trying to actively solve, you know, maybe for you or maybe a thing that you're seeing coming, you know, down the road? [00:27:33] Michael Tannenbaum: I'd probably say on that, just I guess switching gears a little bit, would be, you know, performance compensation and management. I think it's so hard to have performance comp because, at least in my experience, there's so much overhead. There's so much debate. It's so hard to do properly that a lot of good companies, including Brex, just say like, we're not gonna do it, right? Like we are just gonna try to pay, you know, we'll pay you right. We'll promote you, but we're not gonna do bonuses. We're not gonna go through that cycle. And I think, of course, that naturally hurts the top performers as well. You know, that solves for the middle. It is a strategy, but I think if I could wave a magic wand, I would get that right. [00:28:16] Andrew Seski: Yeah, I think it's really important too. I mean, the world I operate in and you do as well as private company stock is pretty difficult to grant out efficiently. The IRS has made that kind of complicated. I know that most of the world of venture kind of relies on options, but it'd be really interesting to watch the future of kind of the equity management piece of all of that as well 'Cause I think it is a space that's moving really quickly. Now, if all that were based on, you know, a new form of compensation management that was run by something, you know, more compelling than the two of us, that'd be very, very cool. I think it might be down the path. So, that's really exciting.[00:28:53] So, I want to take one more opportunity to kind of run through anything that's kind of upcoming at Brex and anything that you're more excited about maybe a little bit longer out into the next few years. I know you said you've got kind of your planning for the next year pretty much sorted through, but just kinda wanna refocus one more time on Brex here while we've got you.[00:29:14] Michael Tannenbaum: Yeah, I think for Brex and it gets to this increasingly global and remote workforce, but I think that what you're starting to see is companies much earlier in their life cycle hiring outside the United States. It used to be that maybe after a thousand people, you think about an outsourced operation site in a lower-cost country or an R&D center in a certain country or a specific office to sell in a new market. Whereas now, the workforce and the skill sets are increasingly global at least but at the same time where we have a world that is in some ways deglobalizing with China and Russia, too. So, that's sort of an interesting time. But at least for the sphere that the United States operates in, the workforce particularly in technology is becoming more global. And I think that means that financial tools will have to adapt. And, you know, Brex is trying to meet that moment and offer companies that are operating across multiple geographies and require complicated expense management the ability to do that seamlessly in a way that really empowers employees to get their job done. And I think that is something that's very exciting for the future for us. [00:30:31] Andrew Seski: Yeah, that's incredible. I'm looking forward to that. Well, Michael, if there's a way for anyone who's interested in learning more about Brex or maybe getting in contact with you, what would, what's the best way to do so? [00:30:42] Michael Tannenbaum: I'm just Michael at Brex, so that's one of the perks of being an early employee, your first name at the company. And I'm not giving that up, so you'll have to pry that from my dead lifeless grip.[00:30:55] Andrew Seski: Alright, great. Thank you so much, Michael, for joining The Modern CFO Podcast. I know we'll have an opportunity to speak again in the near future, but thank you again for making the time.[00:31:03] Michael Tannenbaum: Thanks, Andrew. Appreciate it.

Private assets have traditionally been accessible only to large institutional investors and venture capitalistsBut that’s quickly changing, thanks to investment platforms like Fundrise.Fundrise is an online real estate investment platform with over 300,000 active users. Through Fundrise, everyday investors can access real estate markets and deals that they normally would not have been able to invest in on their own.In today’s episode of The Modern CFO, host Andrew Seski speaks with Fundrise CFO Alison Staloch about the democratization of private markets, alternative asset management, investor communications and transparency, and more.Show Links Check out Fundrise Listen to Onward, a Fundrise Production Subscribe to The Distance Newsletter, a Fundrise Publication Connect with Alison Staloch on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.[00:00:00] Andrew Seski: Hello everyone and welcome back to another episode of The Modern CFO Podcast. I'm your host, Andrew Seski. Today's episode highlights one of my favorite topics again: thoughtful democratization and access to alternative investments. I know you've heard me discuss secondaries and venture funds with Aman and Andrea, regulating accreditation and the history of Reg CF with Woodie, even angel investing with Oslene. But today, I'm thrilled to take another approach at this topic, which is so important and so critical at this time, with Alison Staloch, the CFO of Fundrise. Alison, thank you so much for being here. [00:00:43] Alison Staloch: Thanks for having me, Andrew. Super excited for the conversation. [00:00:45] Andrew Seski: So could you give us a quick overview of Fundrise? I know it's actually the largest direct-to-investor real estate platform in the US today. Is that right? [00:00:54] Alison Staloch: Yeah, that's right. So Fundrise is a FinTech company with a mission, a really broad mission, of building a better financial system for individuals. But today, that means alternative asset management, primarily focused in real estate, really with the idea of giving everyday people access to the private markets that they were historically excluded from whether due to lack of scale, lack of wealth. And in that mission, we've built a capital-raising machine founded in regulatory excellence that allows us to scale thousands of individuals' investments to then utilize capital deployment technology to compete for alternative assets with the Blackstones and Starwoods. And with the launch of our venture capital fund and now with the Sequoias of the world, we have about three and a quarter billion in equity AUM offered exclusively through diversified portfolios. And our goal right now is to disrupt the private markets by using technology and new approaches on old industries to give outsized returns back to investors. [00:01:52] Andrew Seski: So I really like this approach and we're gonna go into the nuances of risk/reward investment profile for the differences between institutional investing and retail. But I'd like to go back in time first because you are a relatively recent CFO and in this industry. So I know you cut your teeth in the world of finance at KPMG, so Big Four experience. I want to take a minute to discuss your early career. And I think that sometimes people think that Big Four audit or accounting background is a qualification for a direct route to a CFO position, but you also worked at the SEC. So I want to kind of balance some of these, the regulatory knowledge that you have and some of the experiences that you had that are gonna make you and continue to allow you to be a really successful impact engine at Fundrise. [00:02:41] Alison Staloch: Yeah, so I joined Fundrise as CFO last year, so 18 months in the making. I've been a CFO for a whole 18 months. Like you said, prior to that, I was in audit, I was at the SEC. I was in a policy-oriented regulatory role as the chief accountant for the Division of Investment Management, which is the division that regulates registered investment companies and registered investment advisors and sets policy for them. And I think that that background has been particularly important for Fundrise. We have kind of a business built on regulatory discipline and that's been a huge differentiator for us, really has set us apart. I always joke like, oh, we literally chose to play in like, all of the securities laws, not just like one of them. And whether that's Regulation A+ or the 40 Acts, I think the structure that we've built requires a ton of regulatory compliance and discipline for a company of our size and for really kind of a startup to deal with. And we've focused on that regulatory excellence within the organization since the beginning, innovating within the regulatory requirements. I think within Regulation A+ we're, I think we're the biggest user and the most successful operator in that regulation. [00:03:53] And so, that comfort with the compliance and the regulatory discipline was one reason that I felt comfortable moving to Fundrise from the SEC. But obviously, my background is heavily, heavily accounting. And when you think about finance, it's obviously much broader than that. I think it makes sense for Fundrise and where we are. But certainly as we look to the future, we'll want to focus on hiring finance team members with different backgrounds that complement my background.[00:04:23] Andrew Seski: Yeah, it almost seems like we're teasing out your definition of a modern CFO, so we could really, we could start there as well. I think that we get an overwhelming amount of guests who just argue that CFOs, the new breadth of responsibilities has really changed, especially today, whether it's, like you just mentioned, hiring, human resources, being a leader that attracts other team members from more diverse backgrounds and keeping them engaged. The retention I think is a huge issue right now in the churn of employment. So, really curious as to what you think. Even though it's been 18 months, these have been a pretty volatile and unique 18 months to take on this leadership position. So, really curious to hear it from your perspective. [00:05:05] Alison Staloch: Yeah, so I think there's two things I'd mention. Maybe one more kind of like a mantra or approach to being a CFO today. And second, what I think is really important for a mission-oriented business like Fundrise to consider when hiring a CFO. So the first one, I think it's that you have to be constantly evolving. The CFO role is constantly changing, but what I mean is that as a modern CFO you must be constantly evolving as an individual and as a professional. Like you said, like any C-suite or senior leadership role, there's a really broad spectrum of knowledge and disciplines underlying the role and especially when you're in a high-growth environment of a tech company. So you can't possibly know everything, but you need to be agile and responsive to the needs of the business. And I think on top of that, being the CFO of a startup is very different than that of a late-stage kind of pre-IPO business is very different than that of a matured, institutionalized business. Obviously, my lens at Fundrise is kind of mid- to late-stage. We're a mission-oriented business and, again, my first CFO role, so take this all with a grain of salt. But I think what that has meant for me is really being able to flex as an individual, as a professional, and relying on resources, whether that's internal team members or external consultants to kind of help you have that breadth of knowledge. [00:06:21] I remember, the SEC is a regulator. Whenever you are engaging with the public, you share this disclaimer, I'm sure you've heard it: the views I express today do not reflect those of the commission and commissioners, my colleagues, and staff. And I'm thrilled to be on the other side of that and to not have to watch what I say so closely. But I still have a disclaimer, which is, I think every day I want people to know I reserve the right to get smarter. And I think that's been true my entire career. When you ask people if they have a five-year plan, I would always laugh at that because I had a 50-year plan . But that 50-year plan did not point me with the expectation of landing in a CFO role. It did not point me to working at the SEC nonetheless as the chief accountant of a major operating division. It didn't even actually point me to being an accountant in the first place. I was pre-med in undergrad. I was a psychology major. That knowledge has actually like, really, really been incredibly useful in leadership roles. But I think it's the ability to pivot, to embrace discomfort in doing things you've never done before, and then again to constantly evolve. That has served me so well in my first 18 months as CFO. I want to say ask me again in five years, I might have a different answer.[00:07:33] Andrew Seski: Right. Well, we'll do that. I'll mark it on my calendar now. I want to ask; point to something that you sort of teased a second ago on the complexity of the security environment and regulatory environment in general here. And I'm curious as to what you think about investor relations and investor communications and transparency because you have your own investors and stakeholders of Fundrise itself. Yet you also have thousands, I think I saw 150,000 investors since 2012 come through the platform. [00:08:07] Alison Staloch: 380,000, I think. [00:08:09] Andrew Seski: Okay, alright. So, that posits a unique challenge in ensuring transparency because I think that the compromise of understanding risk can be, it's a hard thing to help people go point them to the right resources just because of the breadth of the variety of background and education in alternative investments, understanding liquidity risk, understanding risk in general, and understanding alternatives and what opportunity cost of capital they have elsewhere. So all of that to say, I'm curious as to how you think about investor communications and transparency for Fundrise's stakeholders and how maybe that standard that you have to set in terms of transparency and communication with 300,000 plus investors, maybe those translate across, maybe you've created this really high bar for the rest of us to learn from in terms of managing our own stakeholders. Our firm here does not have 300,000 shareholders, yet we feel a very powerful need to be really transparent with them. So, kind of curious as to how those interact with each other and the standard that you set.[00:09:22] Alison Staloch: Yeah, so it's interesting you asked that. I think because of the technology, because of the apps that we work through and how we engage with our investors directly, not through any intermediaries, we have a tool handy to communicate with them as often as we want really. And so, it's funny sometimes when I ask our auditors for feedback, they always say, you disclose a lot. And that's actually really rare, right? That you over-disclose. But we put out emails to our investor base every time we acquire a property or some major update happens that information is readily available in the app. You can go find it. We think that there are investors that don't care and they don't want to know every minute detail. But we think there are a lot of investors who also are interested in learning about that. And making that all available in the app gives them a tool at their disposal to go research anything that they want. We also have an investor relations team that handles incoming inquiries and certainly a lot of time in engaging with investors that have questions. [00:10:31] And then in terms of understanding risk, I think something that's obviously, well, I think it's obviously unique about our platform, is that because of our incentive alignment, we're endeavoring to cut out the middleman. We don't work with sponsors of real estate anymore. For example, don't charge a 2 and 20. We don't have a promoter carry. And so, our incentives we think are therefore more aligned with investors to not have huge, huge risk because we don't need home runs 'cause we're not getting a carrier promote. And so, I think that also makes our platform a little bit interesting in communicating the risk and volatility of our returns to investors. [00:11:13] Andrew Seski: Yeah, that's a really good point. I think that understanding all of the stakeholders in any sort of investment's really important just to ensure incentive alignment. And also, you point to a huge trend that we're gonna see in the venture world where maybe scaling at all costs and growth at all costs isn't the best for the entire industry, and maybe momentum in the venture world will be less of a strategy and maybe those dollars will switch. I think we're already starting to see growth at all costs, which to extending runway and being more protective over that runway. If we have more of a market turndown, I think we're gonna end up seeing a lot of consolidation of talent, a lot of consolidation of venture dollars. I think deal flow might slow a little bit. I think rounds might stay pretty large, but I think it's gonna be really competitive in the next few years. So, I think finding allocations into those environments is also really tough. [00:12:07] We hosted, we actually hosted an event last year called Bridging the Gap in Private Equity. And we had a multifamily office investor, private equity investor, VC, and a small-cap hedge fund all get out on stage and talk about access and liquidity. And in the real estate world, I think about, there's a firm called Cadre. There are a couple of people who are really trying to hammer this point home that even extremely wealthy individuals, even family offices, RAAs, have an incredibly difficult time competing with institutional dollars because it's far easier for an investment firm to manage one to two pension relationships or endowments or any other institutional dollars than it is 300,000 individuals. And a lot of that can be solved through reporting efficiencies like technology. But even getting access to in a competitive environment like alternatives is really difficult. KKR just listed one of their healthcare funds on Securitize, trying to see if they could democratize some access, but I still think those were all qualified purchasers, qualified buyers. [00:13:20] So there's a huge conversation here around access. I'm really curious to know. Obviously, Fundrise is really unique in terms of way, way smaller investment size minimums, right? And I just don't know that that exists elsewhere. There are fundraising platforms out there, but I worry that those have sort of a Costco-effect of startups and everything. I like the fact that Fundrise does a really great job of communicating and showcasing exactly what the offering is. And I really like the competition of fees. I think that's healthy for the environment altogether. I think you should be able to prove your value in competing in this space. So, that was kind of a small diatribe on my part, but it's really interesting.[00:14:03] Alison Staloch: Yeah, no. I mean, to answer, I think you alluded to this. But, yeah. Our investment minimum is $10. I don't think that there's anyone else out there offering investments in institutional quality real estate for a $10 minimum. And that obviously requires a ton of technology. Like you said, in some ways, it is easier to manage bespoke needs of a couple of institutions. But I think we think that that's where technology is the differentiator. We have salespeople on staff and that's because salespeople salivate over the institutional investor over the $10 million, $20 million, $100 million investor, right? But our software doesn't care. It doesn't care if you're a $10 investor or if you're a thousand dollar investor or if you have millions to bring to the platform. I think that's where we're able to reach scale. And then now, we've been able to source institutional quality real estate and we are competing with the Blackstones and the Starwoods for real estate. That took some time to build up, but I think those are the reasons that we've been able to do that.[00:15:10] Andrew Seski: So I actually learned about…I want to move a little bit away from the traditional real estate offerings because the Innovation Fund is really interesting to me as well. I think there have been a few swings attempting to do this elsewhere that I'm not positive have gone as well. I suppose out there, I'm trying to think if there are a handful of public entities that are venture firms that maybe you could buy the GP stake in but pretty rare. I want to talk about the innovation fund, and I want to share, I probably shouldn't be promoting another podcast on The Modern CFO, but I learned about the Innovation Fund from the Acquired Podcast. There was a Fundrise advertisement throughout it. And I immediately went over to the site and I was actually pretty fascinated by some of the data and the deck that is out there. So I'd love to learn a little bit more about it and if it is the same access to retail or how that fund is gonna be structured.[00:16:05] Alison Staloch: Yeah, yeah. Absolutely. So, the Acquired guys are good colleagues and we love being able to advertise on, that's just an amazing podcast. So, glad you mentioned it. But yeah, so the Innovation Fund, we launched in July, taking a really slow approach to fundraising there. But I think there's really two reasons why we think this fund is so important. So, one, we want to give individuals access to investment opportunities they've been closed out of. This will be the same situation as our real estate funds, low dollar requirement minimum. And we think a low fee structure will allow them to get into pre-public companies, the private market equity, in the same way that they've been able to access real estate through our platform. But secondarily, we also want to offer founders an alternative to venture capital. We've avoided venture capital as a pre-IPO company. And that's been, it's been really unique. It's really allowed us to control our own destiny. [00:17:04] And so, we think that founders, I guess I would say we think we're reaching an inflection point in private company financing. Not only do founders and leaders want different sources of capital, I think they're going to require it after the insolvency that probably will stem from this coming crisis. And so, we think our timing has come together perfectly there. It's a massive opportunity to fund the next public companies while they build. And because of that exponential growth that you see in private companies today, you really can't be successful if you're not built on some massive technology-enabled solution, in our opinion. We think the outcomes are non-linear. So, price matters less than quality. We want great companies at good prices, not good companies at great prices. And we think that will really speak to founders. [00:17:51] I also think, you and I were hitting on this before we got started, the FTX Exchange meltdown. I think that's been really interesting, too. When you think about VC, I think there's so many venture firms that dumped their investors' money into something that it seems pretty clear they didn't understand or fully vet, whether it was fraud or lack of disclosure, I think the related party relationship, I just don't see how that didn't raise any red flags. And I think it's possibly part of a longer-term meltdown of trust in venture capital from both investors and founders. They've spent too long riding the coattails of their last successes. What do they say? Being successful in venture comes from being successful in venture, right?[00:18:33] Andrew Seski: Right. I haven't heard that one, but I like it.[00:18:36] Alison Staloch: And we think that's not enough anymore, at least in tech. And I think part of that is that venture has had a lot of power over founders, over entrepreneurs. The power to fund at like really insane pricing was their advantage. And we think the ability to truly evaluate the quality and sophistication of the technology will become the driver for successful venture investing instead. And you kind of see this already with venture firms, like they might have an engineer or two on staff or maybe one of their partners is a former engineer. But I think we would say, what if you had 150 technologists on your team who are currently and actively in the practice of building technology, something that changes literally every day, who could evaluate the technology of a portfolio company? And so, that's what we're doing. We think the ability to evaluate the fundamentals of the technology, which is the exponential growth driver of tech companies, is gonna be so much more important than the pricing power over capital that flows to pre-IPO companies. [00:19:34] Andrew Seski: That's fascinating. I really love the fact that there are differentiated approaches arising because it is a reflection of a pretty crying need. Is there gonna be a full-time venture team on the Fundrise staff that's coming? Or are there existing investors that are really passionate about the space, is it gonna be industry-specific or relatively vague? Is it gonna be, are there gonna be multiple funds or is there just gonna be one target, really large fund? Really curious about some of the dynamics here. [00:20:03] Alison Staloch: Yeah. So we already have a small team built out that has worked through the analysis of our buy box. And taking all of the like pre-public tech companies and narrowing them down to here are the ones that we think are probably good. And then starting to have conversations with those founders and leadership teams and then where there's interest, mutual interest, then starting to bring in our team of engineers to look at the technology and see what they think about the quality. Right now, I think the intent is to just have the one fund. We want to take a slow start to getting it up and running. We've started fundraising, but very, very slowly. And it won't open to all cohorts until probably sometime next year. But yeah, I think the plan for now is just the one fund and let's see where we can get traction and how we can engage with founders that, again, have an interest in an alternative source of capital.[00:21:02] Andrew Seski: Yeah, I think it's really interesting to think about the dynamics of growth where I think the venture scenario still forces binary outcomes and they want them fast because a handful of companies are going to return the entirety of the fund. And I don't know if that's a really healthy environment for founders. It sort of promotes just some sort of reckless business behaviors I think that aren't necessarily very healthy whereas if you've got family office investors and more patient capital, or it sounds like this new Fundrise innovation fund could be a new participant in building out that ecosystem. It's really interesting to see. There's a Stanford professor that I follow really closely who puts out the average SaaS route to, typical timing to IPO. And there are a handful of firms in the last few years that are one to three years. It's pretty incredible to see how the typical timeline from seven to 10. And it also forces the question: is all this value creation synthetic when the public markets get to evaluate? There has been, I mean, there was a huge bump in IPOs in technology and then the public market sort started to dry up again in terms of IPOs 'cause it's a little rockier and more volatile at the moment. But it's really interesting to see the public evaluate these companies that are not profitable and public. [00:22:29] So, there are some success stories still. There are the Ubers out there in the world and, but it's really interesting to see what's synthetic growth on paper and if there's going to be more liquidity solutions that are available for founders that can relieve that pressure valve a bit. I think that there's a more likely scenario that we have richer companies that take their time to grow properly. And I think that'll end up being great for the ecosystem. Also, probably better for investors over the long term. So, really, really interested to see that competition grow outside of the institutional dollars that are back in the VCs.[00:23:06] Alison Staloch: Yeah. And especially for those investors that get to have access to that when founders choose that alternative source. I think what you said is super interesting. I would think about this from a CFO perspective, too; a mercenary CFO, one who isn't focused on your mission can be as bad for you as a company as the wrong venture firm because they'll get you to the next milestone. I mean, you might be falling over the finish line, but you'll make it. But the future of your business will no longer be their opportunity because they're so focused on that like shortsighted milestone that they're trying to reach. And in the process of doing that, it can destroy your team, it can destroy your culture, it can destroy your mission, and maybe even ultimately the actual benefit that you're trying to create for your customer. So I think it's like super, super important that private companies are getting an alternative source to protect that. [00:24:02] Andrew Seski: Yeah. At the very least, it should be competitive. I think that's just healthy for the ecosystem as well. So we're making some pretty bold claims here. I want to also think about how we think this is gonna play out. So one of the things I really like to talk about is sort of short term, 12 month versus three to five year goals, priorities, and what you're thinking about in terms of what I think is gonna be a pretty aggressive shakeup in both public and private markets, which may actually be an interesting time to build the things that you're building. So I want to take a step back and think a little bit more broadly about the space. [00:24:37] Alison Staloch: Yeah. So I think we spend a ton of time right now talking about what the next 12 months will bring. In our minds, we think this crisis is likely to be a slow, long, drawn out one over the next 24 months and really thinking about what does that mean for the business and what challenges will that bring up but also what opportunities will that bring up for us and for our investors. And so, we think that the only place to be at the moment is on the sidelines, kind of hoarding capital, waiting for the opportunistic rescue money plays to those opportunities to come up. [00:25:14] I think longer term, one of the things, I'll say even longer, longer than three to five years, I think the technological developments that are coming and how they will impact both health and wealth preservation are really interesting. I think there's going to be massive shifts in how we think about that over the near term and then what tools are available to us. I'm gonna sound a little bit like a futurist, but I think we're living at a time when life expectancy has the opportunity to really change. I think many Gen X and millennials will easily see their hundreds. I think Gen Z will see that as an average. If you look back 25 years ago, we barely had the internet. 15 years ago, we finally got smartphones. A lot has happened even in the last two years during the pandemic. And I think we're gonna see an exponentially different world in 20 to 30 years. [00:26:05] And so, what we'll see over the next three to five that will make that possible from a health perspective I can't really predict. That's not my area of expertise. But I think the healthier you remain, the more you'll be able to capture benefit from those technological advantages. But from a wealth perspective, I think it'll require you to step outside the traditional approach to retirement and investing. 60/40 stock bond allocation won't cut it anymore and private market investments really need will grow. And those who don't access it will be left behind. But I think that combined with a lot of the other paradigm shifts happening in the world right now — conversion to remote work environments, the wealth accumulation of millennials and Gen Z, death of the pensions, shift to self-management, and even like the distrust in institutions, the embracing of autonomy in individuals, network effects — all of those things. These coming years, we'll see individuals really owning their investment choices. It's really exciting I think for us because it means there's gonna be a lot of unsupervised capital out there from asset managers, old line asset managers who aren't thinking about individuals.[00:27:10] Andrew Seski: Yeah, you can already see some of this happening, consolidation of the RA space. The interesting way that Gen Z is choosing more nontraditional career paths and creating wealth in really unique ways. So, I think you're right. I think all of this is taking hold today and we'll definitely see indications of the next three to five years. [00:27:27] I think I've got a unique opportunity here also to discuss with you what you think the future of accreditation may look like. It's hard to speculate given the sort of more responsive nature of the SEC. It's hard to proactively regulate. I understand that it's a very, very challenging job to protect investors yet also democratize access to a space while educating on risk. And I think it's, like you mentioned, just a different world today, though, given the amount of access to complex investment theses and strategies. And if you take the time, I think you can be fairly sophisticated. I think it's a hard industry to cut your teeth in no matter what, given the risk associated with any highly illiquid investment. But as the world becomes more sophisticated and more comfortable with investing online, doing proper diligence and comparing that to the diligence of some of the best firms, I think it's fair to say that if you can gamble away at a casino, there's a good point that investors are who you can demonstrate education. Actually, I know Jason Calacanis is working really hard to create some sort of standard. I think he's raising a new fund, I'm not sure. But I think he's working very hard on that as well. And I know a lot of the regulators want to provide some more clarity on. I think maybe some of this will come, I hope not as a backlash from the crypto space in terms of investor protection. I hope we don't get set back too far. But curious as to your perspective on what the future of accreditation may look like and qualified purchase definitions and all that fun stuff.[00:29:06] Alison Staloch: Yeah, no. I mean, I could be wrong, definitely could be wrong. I don't know that we'll see anything in this administration doesn't seem to be a top priority for them. But I think that's the challenge of being on the staff. Like there's people, I met so many people when I was on the staff who are interested in learning from people out in practice, people out in industry, what makes sense, what do you think. But they have the challenge of, they're oscillating between these politically appointed leaderships. At different times, wants you to engage, wants you to talk to people. And other times, they won't allow it. But I think they are smart enough to meet you where you are. I know, like my former colleagues on, when I was on the staff, like, we read your tweets, they view your Reddit posts. They're watching your TikTok videos. And so, I think keep speaking to them, engaging with them. But have the patience to understand that I think regulatory processes is so complex. There's limited resources. People can only focus on so much. I do hope that, like you said, because of the advancements and the way people are accessing investments, some future version of the staff will see that and think about unique ways to modify the definition and the requirements to meet accredited investor status.[00:30:26] Andrew Seski: Well, maybe we'll see the advancement in, I think, well, the JOBS Act actually came out through the desire for more engagement from the public. Maybe it's a more cyclical thing that we discuss more proactively in market cycles. So maybe there's a way that that goes forward or if capital gains tax increases, maybe there will be more private investment exposure to drive revenue in the government.[00:30:53] But I really want to segue into my favorite part of the podcast which is always the question, do you feel that there's anything underestimated in the world today? Whether it's something in the world of finance or something completely unrelated. It's my favorite thing to learn from. CFOs think, very unique vantage points and perspectives as to an area that maybe we're not thinking about but that you feel we should draw some attention to. [00:31:21] Alison Staloch: Yeah. I love, I mean, I love this question. It's so big and broad. So, I'll maybe go big and broad but mention a few different things. To me, it's the power of the individual. And I think the dominance of the individual, rise of the individual, and the exponential value of scale that can come from empowered individuals. And we hear this a lot, right? Like, your vote matters, your wallet matters. But I think people really have a lot of agency over their future right now and including how you build wealth. I think that's super important. Obviously, that plays to our strategy, right? We believe that small but many is less fragile than large and few.And so, that's why we've targeted an individual investor. I think we think smart money won't be the big money, but the collective sentiments of the smaller dollars that aggregate to large effects and accrue benefits to the individual as well, which, again, puts the power back in the individual.[00:32:15] And I think that change is really underestimated by institutions today. And most importantly in wealth management, I think they still devote the broad swath of their resources to other institutions. And I think that's gonna continue to work for them for some time. Like, that's not changing immediately, but I think the switch is happening now. And you don't want to be behind on that work of engaging with the individual. And then I think from an individual perspective, I think that's where you have to focus on constantly evolving, constantly adapting to the resources and the opportunities that become available to you and taking advantage of those. [00:32:50] Andrew Seski: I really like that. I always say in these episodes that people should go back and just hit that back 30-second button and re-listen to a piece of the podcast. I really think that's an important trend that's already taking place, already capturing a lot of attention. And maybe we're seeing the rise of the next Blackstone as we speak right now. So that, I think that's really powerful; that the collective maybe the next institution just in a different way that we think about it. [00:33:17] One of the things that we didn't cover that I really wanted to was the transition to Fundrise. I think that you mentioned briefly the really formal institutional background of the Big Four of government. I'm kind of curious as to maybe for some of the other aspiring CFOs or CFOs who are relatively new in their position, how is that risk profile in your mind, has it changed since in the last 18 months? And what was the onus and catalyst for that for you?[00:33:50] Alison Staloch: Yeah. It's honestly been like such a big transition. In a lot of ways I was going from, I said this recently, like I was just judging what other people were doing from an auditor regulator perspective and not actually doing the work. And, man is doing the work a lot harder than you think when you're on the other side judging. But I think that transition from institutionalized organizations to a startup is just complex and challenging for so many reasons. I think a big piece of it is the mindset of technical specialization, right? Like when you work at a big institution, being very narrow and deep is super important. But then coming to a company like Fundrise earlier stage, then certainly where I've been in the past, you have to be able to step outside of that perspective of this very narrow accounting standard is so important and think about what does this mean more broadly for the organization? What's best for the company as a whole? And balancing all of those things. And I think that's, it's really challenging. I think I was prepared for it, but I don't think I was prepared for how difficult it would be. I'm really lucky to have a leadership team that appreciates that; that understands what a big transition that was gonna be. And so, they've like taken, they've brought me along on this journey so far. But I think if you're not prepared for that, that will be a struggle. [00:35:18] Andrew Seski: Yeah, no. I really appreciate it. I think that's a great comment on the mindset shift that needs to take place for those thinking about making the leap to a similar company of size to Fundrise. [00:35:29] The last thing I'll mention is kind of fun. We were chatting about, it seems like we're both voracious consumers of articles and information. And for those listening, Alison's got a pretty full bookshelf behind her. And it's always funny to say we're chatting about the Newsfeed that Nth Round has and just curious if there are any that standout. We talked about the Acquired Podcast. That's really great for deep dives. And me personally, I'm very lucky I get to have conversations like this. Is there any sort of your favorite outlet? It's very hard to curate your social media to get all the information and data that you want but curious if you do anything interesting or have read anything that we should all take a look at. Let's put you on the spot. [00:36:09] Alison Staloch: Yeah. No, no, no. I love the question. It's so true. I always, like I keep hoping for some curated outlet that will — it for me so I don't have to. I think one of my favorite things to read — do you read Matt Levine Bloomberg? [00:36:22] Andrew Seski: Yep. Sure.[00:36:24] Alison Staloch: Yeah. So like I would highly, highly recommend him.I think it obviously speaks to my background. He focuses a lot on securities laws and. I'll tell an interesting story about him. I've kind of always, always read him. He recently, this is maybe in the last year, picked up on a nuance of like the accounting standards that don't work, particularly as it relates to digital assets. So with digital assets, if you're an operating company, you're in intangible accounting, and so it's impairment accounting. And so, you can never actually write it up. You can only write it down. If you think about huge companies like Tesla and Micro Strategies that have so much Bitcoin on their books, it's held at like the lowest price, the lowest market value that's been out there since they purchased it, which is just insane, right? And Matt Levine picked up on this and I just, I love that like somehow he was able to find that. But we used to joke that we should have a trigger as regulators or standard-setters that if Matt Levine picks up on complexity as a result of regulatory standards, then we should probably be looking at that. But he's, I mean, I highly recommend. So entertaining and so much fun to read. [00:37:33] Andrew Seski: Oh, thanks so much for that. I really appreciate it, Alison. And I should probably mention we've covered a lot of topics around alternative investing. Obviously, none of this is investment advice. Everyone should spend a lot of time managing their assets, talking to their advisors, and making really informed decisions. But I do have to say that Fundrise also puts out a lot of really great educational resources that I've had the opportunity to explore recently and I can definitely vouch to their quality. So, highly recommend checking out the website. Alison, is there a way for people to get in touch with you if they'd like to learn more, or is the website the best way to explore the new, all the new things that are happening at the firm?[00:38:15] Alison Staloch: Yeah. I think I'd say like Fundrise in general, our website, our app, sign up for our email. You don't have to be an investor to get information about the acquisitions we're making and our portfolio and our strategy and our letters. And then check out our podcast. It's called Onward. Not to mention another podcast but that we're slowly building that up. We also have a newsletter called The Distance, where we talk about long-term thinking broadly, not just as it relates to an investment strategy. And then for me, LinkedIn is probably the best. I'm on Twitter. I read a lot of it, but I'm a lurker. I don't actually tweet so. [00:38:52] Andrew Seski: Excellent. Alright. Thank you so much, Alison. It's been another episode of The Modern CFO Podcast and I hope you have a chance to circle back in five years.[00:39:05] Alison Staloch: It's great. Thank you so much, Andrew. I appreciate it.

Crypto investors have seen their fair share of sudden market meltdowns this year. This week, all eyes were on FTX, formerly one of the world’s largest cryptocurrency derivative exchange platforms.This latest turmoil has sent shockwaves throughout the industry. Yet historically, cryptocurrencies have rebounded following each crisis. What doesn’t wipe out the blockchain becomes a hard lesson for crypto ventures, turning them into fortified iterations of themselves.For Brett Royer, CFO of Fidelity Digital Assets, the recent unraveling of FTX underscored hard lessons that are not unique to crypto. An expert in high-level financial planning, Brett says those lessons point to fundamental business principles that have long existed.In this episode of The Modern CFO, Brett talks with host Andrew Seski about decentralized finance, the role of trust within the increasingly digital world of finance, how he thinks about risk, and more.Show Links Explore crypto careers at Fidelity! Browse Open Positions Check out Fidelity Digital Assets Connect with Brett Royer on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.‍[00:00:00] Andrew Seski: Hello everyone and welcome back to The Modern CFO Podcast. As always, I'm your host, Andrew Seski. I'm thrilled for the episode today because we are joined by Brett Royer, who's head of finance at Fidelity Digital Assets. Brett, thank you so much for being here today. [00:00:19] Brett Royer: Andrew, thank you for having me. [00:00:21] Andrew Seski: So, we're going to dive right in. The world of crypto and the world of digital assets has evolved in a unique way, down to literally the hour, especially this week. So, I want to kick off not just on the current event side, but we're going to have plenty of time to go through those current events, I want to start today actually with your career and then kind of the history of Fidelity Digital Assets, which I know spans back farther than most institutional groups had even considered labs themselves. So, we'd love to kick off with maybe some of your educational background, sort of the rise to this position, and then we'll segue in and out of how Fidelity Digital Assets is positioned today and what you're thinking about today. So, we have a lot to cover. [00:01:08] Brett Royer: Yeah, sure. Great. So, I'll start with a little bit of career history. Prior to business school, I'd say one of my more substantial roles was working in the Merrill Lynch Private Banking and Investment Group. So, there I was working with a former Chicago Board of Trade trader who had sold a business, a trading business, for a substantial sum, thought he was going to retire and ride off into the sunset. I spent some time doing some personal things and then realized that he got bored. And so, went back into business as a wealth manager and he ran his own proprietary trading strategy for a lot of the clients that he served. And so, I joined his team as sort of a mini fund analyst of sorts that supported the portfolio analysis and trading decisions behind the proprietary strategy that he used on behalf of his clients. And so, that was a really great experience. I think there, I kind of developed my first set of background and skills in capital markets, gained a pretty good understanding of how the markets work, traded in some illiquid securities and got a sense for what that was like. And had a pretty interest, I was there at a relatively interesting time. [00:02:33] So, I was probably in my second or third year, I can't remember exactly which, when things started to go wrong in Wall Street in financial services, right? So, the history is Lehman goes bankrupt and then Bear Stearns comes about as close as you can get to bankruptcy. And then I remember distinctly going into the weekend, Merrill Lynch was next up as a potential firm that was looking at having liquidity challenges and potentially could go under. And I'm sitting there as a junior analyst and just sort of watching this from an interested perspective, but also from the perspective of like, my job was on the line. But at that point in time, I didn't have as much to lose. Obviously pretty early in my career. But nonetheless, I think it was a strenuous time for everybody. And I distinctly remember sort of being glued to the TV all weekend just waiting to see what would happen. And then, sure enough, Bank of America, acquires Merrill Lynch on Sunday and I was really lucky to have a team that supported me, and I was able to maintain my role throughout then. But learned a lot of hard lessons around what bear markets feel like and look like. And I think that's in part educated some of what I've seen and felt in crypto markets as well. And I think just giving me a little bit of perspective on not getting too lost in the moment, either up or down, right, and having an understanding that these things tend to be cyclical, right? And there are going to be ups and downs and you don't want to get too over indexed on either side of the equation while you're in the moment, which is really hard.[00:04:08] But from there, I decided I didn't want to be a financial advisor. I think that would've been the next move if I stayed there. And that group worked with $10 billion clients and above. And so particularly difficult prospecting or particularly difficult segment to prospect in a serious way if you're a 25-year-old. So decided anyway that I wanted to be on more of an analytical track and more of a CFO track anyway, so made sense to go back to business school and sort of pivot. And so, I went to the University of North Carolina, got my MBA there. And around that time, Fidelity had just started recruiting at the University of North Carolina for a financial leadership rotational program. And I'm from Massachusetts originally, so familiar with Fidelity. Really wanted the chance to get back to the Northeast and so jumped at the opportunity to join a program that is tagging itself as developing the next future CFOs of Fidelity business units. [00:05:05] So did that. And the idea is you get broad exposure to the firm in relatively short order, right? You do six-month rotations in four different parts of the firm. And then you graduate, and you come out and Fidelity really has a sort of continuous career rotational program aspect to it, even after you're out of that traditional rotational program as well. So after I graduated, I spent the majority of my time, five years or so, in a role in our Fidelity institutional business. So, it's a really interesting business for Fidelity. They provide custody for registered investment advisors and then clearing for correspondent broker-dealers as well. And I worked on the broker-dealer side of the business. And up until 2008 or so, Fidelity was the clearing provider for a couple of large firms, JPMorgan and Bank of America. And around that time, they lost both in a year as a result of JP Morgan buying Bear Stearns and then Merrill, Bank of America buying Merrill Lynch. And so, both had self-clearing capabilities that sort of made them take away the need for a clearing provider like Fidelity. So, I don't know what percentage of the business those two represented. But needless to say, they were pretty considerable at that point in time. And I think there were a lot of hard discussions around whether the business could even survive. But kudos to the leadership at the time. They continued to invest in that business and grew it back even larger than it was prior to having those two big clearing firms. [00:06:45] And so I had an interesting experience there. Went through an acquisition of a smaller clearing firm. So, JP Morgan Clearing exited the business and we sort of did a non-typical acquisition, which was a purchase of the client book versus the purchase of the actual business itself. And then went through the process of trying to renegotiate those deals anyway and how that impacts sort of the valuation of that deal was challenging and unique. So really great experience there. And then also experiencing sort of waves of regulation. Around the time that I was in that group, we had DOL was coming in with a new set of rules that were really going to force a convergence of sort of the advisory model and bring together sort of the broker-dealer and RIA models under something that looked more like across the board fiduciary standard. And that was just a massive change for anybody who was running a broker-dealer business at the time. So a ton of strategic discussions and preparations for what the impact of that could be. And then, sure enough, we changed administrations and all that goes away anyway. So this is the nature of different administrations is you've got ebbs and flows in terms of regulatory tightness and ethos around what's important. And you got to adjust to those over time and find ways to still meet client demands.[00:08:15] Andrew Seski: Just a quick comment before we continue on to your segmentation and move into the Digital Assets arm. And another, there's some really interesting projects that were incubated there, too. But before we hop in there, do you think that there was an aspect of your personal risk aversion or how you think about risk? With your first foray into the world of finance being the global recession, not just the global recession but one that had a lot of dominoes stacked that people are still studying today. The over securitization, how we think about collateral, how you think about personal risk. You think that guided some of your career? I know that you moved kind of away from being a financial advisor just because it's a challenging role to go, like you mentioned, go prospect those types of potential clients as a 25-year-old. So, I mean, it sounds like that was a big piece of it. But how do you think that shaped how you thought about your career and risk in the world of finance? [00:09:17] Brett Royer: Yeah, I mean, it certainly had a big impact looking back, right? I think what brought down some of those large financial services institutions were risk management practices that were not fully up to par or sort of interconnectedness of exposure across the financial ecosystem that wasn't fully understood. And I think there are a lot of corollaries to be drawn to some of the things that have happened in the crypto market now, right? I think there are lessons that traditional capital markets and financial services have learned the hard way over time. Not to say that it's ever fully solved, right, even though the broker-dealer and capital markets business have been around for a long time, but we were still learning hard lessons all the way through 2008, right? [00:10:08] But I think the interesting thing from the perspective of the crypto ecosystem is just the acceleration of that learning curve of the hard lessons that have been learned, right? I think there's a lot of similar stories that you could draw parallels to that have happened in the past and financial services around under-collateralized loans and contagion effect from exposure cascading across multiple counterparties and people not really understanding the true risk profile of the firms that they're interacting with. I think those are all things that are not unique to crypto. I think they're fundamental business principles that have existed and caused problems for financial services for a long time. I just think that what we've seen unfold is just a really accelerated learning curve again for crypto, which has been hard because it's happened all at once and it's been painful. And that's how these things tend to work. But I would hope that in the backside, right, that we get some better business practices. Perhaps we get some more comprehensive regulation that looks at this in a thoughtful way from a consumer protection perspective but also from the perspective of not stifling innovation and not putting the US in a position where we're behind other countries in terms of having the ability to use crypto in ways that can benefit consumers over time. So that's the balance.[00:11:42] But I think one of the things that strikes me as pretty clear from this, there have been lots of folks in the crypto industry who I think are hesitant to have any sort of regulation come into play. And I think the thought is we can figure it out on our own or these things can be handled via the blockchain or there's lots of different thoughts on how or why regulation is bad or good. My perspective is that I think unfortunately what we've seen play out is that when you combine sort of relatively nascent ecosystem and business models with greed, that it tends to err on a path where you get these problems where there's a mismatch in sort of risk-reward philosophies. And then in some cases, that risk has been passed along to consumers who are just unknowing of the type of risk that they're taking on for a given situation, right? And so, you look at all that and you say that's where regulation is good. Because I think everybody in the ecosystem would agree that we don't want to put consumers at risk of holding the bag on some of these scenarios where things go wrong. And so, I think that's where you look, and you say that regulation has been pretty good over time of finding ways to ensure consumer protection. [00:13:02] Andrew Seski: It's a little tricky. I mean, I feel like the SEC actually gets kind of a bad rap, but they can't really regulate proactively so they have to then retroactively. And you're seeing a lot of this, DOJ, too. I mean, there's tons of money flowing into the government to start going back through some of these issues that have been kind of plaguing this system for a while. But it's not that well received either because of the sort of libertarian tint that a lot of this started in. If you go all the way back to reading the Bitcoin Whitepaper, you can realize that decentralized finance was that first iteration using the tech. And then, yeah, it's just interesting to think about, especially going back through time and how these different winters have sort of formed the next waves of all the projects and all the exchanges that have come out and kind of what those goals are. [00:13:57] I think Adam Draper, Tim Draper's son, put out kind of an interesting article where he said he had met Brian Armstrong from Coinbase and had discussed kind of what one global financial infrastructure would look like and that it would probably be built in these next few iterations. But in that article he put out or just blog, he also listed a couple of events that, not sure if you remember each of them, but in 11 Silk Road crashes, 13 Mt. Gox, 17 was the big ICO bubble, and I think we could probably cement FTX as a major crash that may drive another winter or at least some really maybe necessary introspection for maybe some of the venture dollars flowing into the projects just in terms of diligence. You could probably say that across a lot of the sectors, to be honest. But I think it's not just a result of the ecosystem but also in the financing of the ecosystem. [00:15:00] So those incentives are really important to remember because as purely sort of this libertarian sort of idealistic thing was promulgated, now all of a sudden, we've got a lot of mixed incentives going through how scaling the ecosystem's going to look. And maybe that's a natural segue into how you got interested in and how Fidelity Digital Assets started because that was back in 14, which I think was probably one of the earliest at least in kind of the institutional world. So would love to hear the history of that.[00:15:37] Brett Royer: Yeah, sure. Yeah. Fidelity's got a pretty good history here. Some of the initial blockchain research started in 2014 in our Fidelity Center for Applied Technology. And then soon after that, we launched that into a fully-fledged blockchain incubator in that group. And they were tasked with developing blockchain capabilities that Fidelity could use for future products and services. 2015, we started accepting donations in Bitcoin to our Fidelity Charitable unit. And then in 2018, Fidelity Digital Assets, which is the business that I'm a part of now, was born to offer custody and trading solutions for Bitcoin. And the thinking was really twofold at that point in time. One is we had done a lot of experimentation in some of those applied technology groups. And you can learn a ton from experimentation, but you really can accelerate your understanding of what will and will not work for customers when you are in the market trying to sell your service. Launching a business around these capabilities that we developed in-house really made sense. And then two, we believed that the institutional marketplace was really underserved by existing crypto providers at that point in time, right? Fidelity's got a really long history of providing services to institutions of all kind. We know the market well. We serve something like 4,000 institutions today through various. We understand what they demand on the traditional finance side of the house. And so, we believed we were in really good position to build a crypto platform that met the high standards of institutional rigor that those types of traditional financial services institutions would have.[00:17:26] Andrew Seski: Does Fidelity manage custody as well? I mean, I think that's probably one of the biggest issues across space still that kind of, I mean, maybe it gets talked about, maybe it doesn't. But yeah, I feel like custody solutions are one of the key aspects of being really successful as a provider in this space right now still.[00:17:44] Brett Royer: Yeah, it's a good lead-in because we really believe that everything starts with custody. So we really, we started the foundation of the entire set of capabilities that we developed in crypto, starting with ultra-high security custody. And what we utilize offline voltage storage for the cryptographic key material and then add our own sort of special Fidelity additional layers of securities and controls that you'd expect from an institution that provides custody for $10 trillion in customer assets across the enterprise. And then from there, we built some of our other capabilities, right? So started with custody, but then we said it makes a lot of sense to layer on a trading capability that settles directly to that cold storage custody solution. And so, we developed our own multivenue, smart order routing trade platform that again automatically connects and settles to that custody solution. And then, we wrapped it all up with a white-glove service model, with trading and transfers available 20/7 and service availability 24/7 to provide really that high touch that institutions expect. And then on top of that we try to seek all the assurances we can from both a regulatory standpoint and a control standpoint. So we went out and we received Limited Purpose Trust Company Charter from New York, which is really essentially the highest standard for a crypto service provider that we have in the US. [00:19:24] Andrew Seski: I can only think of one other. And if people are really conscious, they'll go back through the podcast and realize that was the only other person or only other representative of a group who can call themselves a trust company and some of these white-labeled solutions. So we'll see how savvy some of our listeners are if they can figure out that there's only, I think there may only be one other trust company, technically. But yeah, I love the fact that Fidelity's taken all of the actual steps to, I mean, that doesn't sound like there's a single beat missed from starting. [00:19:56] And I also love at some point in the conversation, we don't have to spend too long on it, but the role of trust I think is really an interesting one because I think in the institutional-grade solutions that we're talking about, no one's going to manage their own private keys. No one's going to do their cold storage. Yet it's a little bit, I don't think it detracts at all personally from the environment, but to rely on a major institution as an intermediary while discussing blockchain, smart contracts, all of this intermediating technology, it's interesting that we in this time and age are still dealing with trust issues and security issues. And a lot of it's still complex. Personally, I don't think it again detracts from the ecosystem, especially in the institutional side, to have these solutions. I actually think it's generally positive for the time being. 'Cause like you said, the early iterations of the Digital Assets arm was, we got to be able to feel it, understand it, to be able to grow it, to be able to iterate on top of it, to be able to build new products to service the environment. But kind of curious as to how you feel about all of that. And again, we probably should step back into how you got interested in the space. And you've been with the Digital Assets group for a long time now, too, right? [00:21:19] Brett Royer: Yeah, since 2019 I've been with the group. So I'll start there and then I'll go to the sort of philosophy and some of the things you talked about in terms of self-custody. Yeah. So I guess I got interested in a similar way to a lot of others. On the personal side, sort of exploration of trading and starting to mess around with some crypto assets in my personal account, I had the benefit of, at the time that I was happening to look for the next role, we had sort of just spun up this Fidelity Digital Assets unit, and I got to see Tom Jessop, who currently is the head of the unit, present out on some of the thoughts in the direction that we wanted to go with it. And at that point in time, they had a part-time CFO who was supporting the unit like as 25% of their role. The unit was only 70 people at that point in time, but it was at the point where I think there was a recognition that it was going to be an area of growth and needed the full-time attention of a full-time CFO. So things sort of lined up well in that way. I expressed interest both from a crypto standpoint as well as stepping into this role, I had to be willing to sign up for being an army of one for some period of time. And that I think that's probably familiar and true for a lot of startup CFOs. But I guess a little bit unique from the perspective of working in a really large company like Fidelity going from managing a decent size group to wanting to take on this role and needing to sign up for the idea that I was going to be an army of one for a while and that was going to be a very different sort of set of responsibilities. But in my mind why it was really attractive to me and it has played out fantastically for my career development, just staying engaged and interested in what I do every day is the breadth that you're able to get from stepping into that role is again sort of a growth business CFO within a much broader organization, right? That manifested itself in a couple of ways. I think one, probably a lot of your CFOs don't even think twice about this because it's the standard way you operate if you're a standalone business unit. [00:23:33] But coming into Fidelity, a lot of business unit finance folks don't spend a lot of time at the legal entity financial level, right? So thinking about a big corporation, you don't need to set up a new legal entity every time you set up a new product line or business unit, right? So a lot of times there's just a disaggregation of how you think about finance within your unit versus how things are done at the legal entity level. But what this role presented me an opportunity to do was to care about both because crypto's unique in its regulatory structuring, so we needed to set up a separate legal entity to be the service provider for crypto services to our institutional customers. And so, we did set up that separate legal entity and then in fact, over time, grew that into two legal entities. So we now have a legal entity in the US and we've got a UK-based legal entity that services non-US customers. And so, from a career development standpoint, right, that was important to me to be able to have that sort of full end-to-end ownership of the finance function, which included caring about audits and signing off on the financial statements, caring about balance sheet and capitalization, caring about regulatory capital and how you handle planning for what can be a pretty volatile environment in terms of customer interactions that impact your regulatory capital on a day-to-day basis.[00:24:56] So all that was really interesting and exciting to me when I looked at the opportunity. And it's played out really well. So I appreciate all the experiences that I've been able to get. And that's the risk that I was taking up front, banking on the idea that I'd get that broad exposure starting off with an army of one. Obviously, now the business has progressed. We're gonna be north of 500 people at the end of the year. So it's been a great evolution. [00:25:25] Andrew Seski: So and the idea, it's interesting, I was actually, when I was asking the question around trust, I was actually rereading a quote from Abigail Johnson talking about kind of the earlier stages of her kind of obsession with trying to figure out the full tech stack, which I thought was really, really cool. And kind of her first, one of her comments was starting with custody solutions seemed to tie antithetical to the technology, which I thought was a great comment on, I just love the approach. She basically came out to say Fidelity's had this long, privately owned success for generations due to in part contrarian thinking. And when people are running for the door, being able to have the wherewithal, the confidence, and the kind of long-term approach to nascent technologies and industries to be able to double down and really learn and feel all of that. So that's kind of where that trust question was coming from.[00:26:24] So I mean, it's nice to have somebody who's kind of leading the charge with so much thoughtful consideration in the space and where it makes sense for Fidelity to provide support versus how to push the industry forward and kind of just a nice patient approach. Especially as you said in terms of kind of the volatility of the space where all of these winters and kind of crashes are happening at so much faster of a clip. It takes a ton of patience and a ton of maturity to go through the volatility and be able to express what your priorities are maybe in a time where there's a lot of value loss at the time. So yeah, that's kind of where that was stemming from. But I do think it's super interesting that the group has continued to expand so rapidly. I think there was a comment in that article, too, that one of the first offerings was just Bitcoin and 401ks. Is that right? Does that sound? Yeah. I'm not sure how long ago that was, but I think that probably spurred a ton of interest, too.[00:27:29] Brett Royer: Yeah. Yeah, that's recent. So yeah, definitely a little bit of a response to sort of marketplace demand there. I think that the 401K unit just continued to hear a lot of interest from planned sponsors and having a product that could gain their participants' exposure to digital assets. And so, this was really in response to that and we think a relatively innovative product that gives those who are seeking a way to allocate a certain proportion of their retirement assets to digital assets. So yeah, certainly, that was a great example of a way that we think about the capabilities that are being developed within my Fidelity Digital Assets unit, potentially being used in other ways over time, right? [00:28:25] So I think from a long-term philosophy perspective, we started this unit and wanted to build the core set of capabilities. We went direct to the institutional market. But I think part of the vision always entailed the idea that over time, we expect the digital assets will begin to look and feel like any other asset class to investors. And so, we wanted to build those set of capabilities and then when the time is right and when the demand is there and when the regulatory environment is right we fully expect that we'll be able to provide digital asset services to an increasing number of customers that we touch again in the fullness of time.[00:29:08] Andrew Seski: Sweet. Well, I'd love to take a quick step back and run through a few of the questions that I really like to indulge in most of the podcast for continuity's sake. But would love to hear your perspective on just a personal definition on what you'd consider a modern CFO today. Maybe some of the characteristics that embody a modern CFO or maybe some things that modern CFOs should have on their radar that they don't today. Maybe we just start there. [00:29:39] Brett Royer: Yeah. When I think about the CFO role now, I think about the CFO role really broadening in the context of the organization, right? So I always like to aim to be viewed as a business person first who happens to know a lot about the finance of the business versus a finance person who happens to know a little bit about how the business is run. And what I mean by that is it's not okay for the modern CFO to be a passive observer to business activities and just report out on how things are going or how they went, right? The days of business leaders making decisions on gut and experience are largely gone, right? Virtually every company in the world now has a data-driven decision-making mindset. And so, the modern CFO really needs to be deeply engaged in the decision-making activities of the business, both in traditional finance terms, so P&L, NPV, IRR, return on capital, but also the nontraditional finance terms, right? They need to understand both financial and non-financial data. They need to understand how those interplay between each other and then how all of your data can be used to derive insights and make better decisions.[00:30:51] And then lastly, I guess one of the things I think a lot about is how I think the CFO role probably needs to be more willing to step outside of the traditional CFO swim lane when necessary to help the business in new and unique ways. So at my very first job out of undergrad, they taught all the incoming analysts that you are literally not allowed to say "That's not my job." Like that's a phrase you are not allowed to say. So I've carried that kind of philosophy with me throughout the rest of my career, right? And I think some of the most meaningful experiences that I've had were not handed to me in a job description or given to me by a manager. But they were formed by me raising my hand or asking a question or, in some case, just starting to do something in an area where there was a gap or an opportunity that wasn't being addressed. And I found that there are very few managers who will take issue with someone taking the initiative to just go ahead and solve a problem without asking, as long as it's not too far outside of the realm of your role. So that's another piece of the mindset that I think is important is willingness to sort of adapt and evolve around the edges some of the things that the CFO can be involved in and help the business improve upon. [00:32:06] Andrew Seski: I really appreciate that. And I typically ask people to hit that back 30-second button a few times when I hear really great advice. And I think anybody who's aspiring to the CFO role or is in their first time CFO role should really consider that advice and take it to heart. I think that was really well articulated. I appreciate that, Brett. I want to talk a little bit about 2023, the next 12 months. What's on the horizon for you and for the Digital Assets group? What's top of mind? What are you most focused on trying to build right now? [00:32:39] Brett Royer: Yeah. So certainly in general, focused on new opportunities to serve the rest of the Fidelity enterprise in terms of crypto capabilities where appropriate. From a finance team perspective, one of the things I've been spending a fair amount of time on is actually preparing for crypto tax regulations. So maybe a little bit esoteric in nature but I think this is an area where crypto is going to catch up to traditional financial services and there's obviously already been some indications of some rules to come. But this is sort of one of those areas where I talk about having the opportunity to raise your hand and take on some new responsibility sets. So as we anticipated that there was going to be some new requirements around crypto tax reporting in the not too distant future we started to work on what that would look like. And I've actually started to build out a team that's going to help us in Fidelity Digital Assets, prepare for any requirements which are going to be defined and we expect that this'll look a little bit more like a traditional set of brokerage reporting requirements, right? So I think in the future, you should expect to get something that looks like a 1099, multiple different kinds of 1099s from your crypto services provider. And that's a big initiative for the government and the IRS is I think starting to bring some of these things back under the existing frameworks and umbrellas where they make sense. And certainly the expectation is that crypto is not a tax-free realm. And so, this is just going to be one step in the direction of bringing crypto up to par with the rest of financial services. And that's an area where I think we'll spend a lot of time and focus on getting ready for that over the next 12 months.[00:34:23] Andrew Seski: Yeah. And for those listeners who don't know, the IRS received an $80 billion budget over the course of last summer. So this is not an "if" but "when." So I think Brett makes a really good point just to highlight the fact that this taxable ecosystem it's already here. So having the foresight and wherewithal to understand that the IRS is going to be pretty active in the crypto space I think is just good practice. And we've seen these iterations through the idea, and we're still going through this. I think that there's, we're going to see what happens with how securities law interacts with the crypto space. And there are some ongoing conversations with the SEC. And it's just, I think it's just part of the space and how early we, it's just good representation of how early we are still. So I think it's smart to have a good sense of the regulatory environment, but then also likely seek out counsel where appropriate to ensure that you're maintaining compliance because the worst part of some of these crashes is that they're riddled with some of the greed that we talked about earlier. And there are some consumers who aren't well protected against some close to two or considered fraud or financial crime, which really sets back the interest in the space and the participants. So wanna do the best we can to have thoughtful conversations and have thoughtful regulations around all of this. So I think that's a great initiative for the year to come. I think it'll continue to drive the space forward, so I really appreciate that. [00:35:54] I'd love to drive into one of my favorite parts of the podcast and talk about one of the things that you feel may be underestimated in the world today, and if there's anyone currently addressing that that topic or space. But love to drive into this 'cause it's always really interesting given the unique vantage points of the people we talk to on this show.[00:36:14] Brett Royer: Yeah. I'll give you a quick hit. I don't have the background to fully understand all the implications of this. But one thing that I look out at now, especially in a post-pandemic world and how globalization of the workforce and the virtual environment, it will sort of impact staffing and how we build out teams. I think about what globalization has already done for an economy like the Indian workforce, right? And you think, you look forward and you say, do you see things like that continuing to evolve and emerge? Can you imagine what that looks like for the Chinese workforce over time, right? [00:36:52] I think there's already been pockets of the ecosystem where there have been movements and certainly traditional product manufacturing and those types of roles. But even if you look at the service economy over time, right, you think about the amount of people that could be utilized and globalized in terms of the workforce for any company in the world now. One, I think it really just expands your access to talent and it can go anywhere. And then two, I think it really potentially changes the opportunity set for people in some emerging market countries, right, where normally, prior to the world sort of going in this totally virtualized environment, I think people's opportunity set for work was more limited to the localized opportunities. And I think one of the things we're going to continue to see emerge is that just that globalization of opportunity set. And I think that can have really, really massive implications for what teams look like in the future and what workforces look like in the future, right? Even thinking back to pre-pandemic, I think Fidelity has had a large set of teams in India and other parts of the world. And I think there was a little bit more of a mindset of like passing things along over time zones, right, and not having that true end-to-end connection. But now, you look at the way that teams work. And there's no concept of passing off. It's sort of a continuous like evolution and discussion of teams that work across the globe together on the same things at the same time with a connected mindset. And I think that's gonna be just a massive change that will continue to evolve over time. I see huge opportunities for certain parts of the world to start to really step in and have more of their workforce contribute to sort of that globalized service economy. [00:38:44] Andrew Seski: Yeah, absolutely. A bold case on productivity and innovation for sure. Do you see that happening at all internally with your groups or is the Digital Asset group global and partially remote? Have you had to deal with that as an army of one to 500? [00:38:59] Brett Royer: Yeah, definitely. I mean, the good news is that our unit was sort of al already global, even pre-pandemic. The nature of crypto is that the expectation was over time that we were going to get closer and closer to sort of 24/7 availability because the crypto market doesn't sleep, right? And in order to do that successfully, you need to have a geographically distributed workforce. And so, we had already made a lot of efforts to do that even pre-pandemic and. So I guess in some ways, we were somewhat uniquely prepared for this sort of scenario because if you're used to working in virtual teams anyway before you're required to, it's just sort of more of the same. It's just an extra dose of it. So yeah, I'd say we were somewhat uniquely prepared for this evolution. But I think even still, it's going to continue to evolve over time and we're going to see more and more of it, even where I think still predominantly US-based but I think you could see that change in the next 10, 15 years where teams could look a lot more like the distribution of the population of the world over time.[00:40:11] Andrew Seski: Yeah, that's great. That's a really interesting comment. I really appreciate you sharing that perspective. I was thinking, this is kind of a random thought here, but as I was preparing for our conversation today, I went through a bunch of the kind of my go-to resources for preparing for interviews and thinking about crypto and thinking about the global marketplace, and I stumbled across a really great interview with David Rubenstein and Abigail Johnson that I highly recommend people check out if they're interested in Fidelity's history in general. And it just made me think to ask in a world with so much information, and we were chatting about FTX prior and the world of Twitter being where a lot of people are getting information from, I was just kind of curious. I know Fidelity puts out really high-quality research and reports and there's a lot of marketing and media that goes into trying to educate participants. But I was kind of curious as to where you go or if you've read anything maybe even outside of financial news or crypto news. Just how you're receiving your information and if you're reading anything or listening to any podcast that listeners would value from. [00:41:19] Brett Royer: Yeah, it's funny. I don't have a whole lot to add. I use all the same sources I think that you mentioned. I think there's a lot of great resources and people who are willing to give away their opinions for free on crypto Twitter. At the same time, I like to stay away from that to stay in the echo chamber sometimes because I do think that it's always good to have perspective. And I think if you go too deep down the rabbit hole sometimes and you're really embedded in some of those echo chambers, you lose sight of what's sort of going on in the broader world around you in financial services. And so, I always try to take, I love learning new things about crypto and I love going deep and understanding things at a pretty fundamental level. But at the same time, I want to make sure that I'm balanced enough to not get too focused on crypto as the end-all be-all and always bring it back. I'm sort of pragmatic in how I think about how crypto services can be used for our customers over time. And I tend to take the approach of, I think these things are going to happen more, a little bit more gradually and we're going to find better and better use cases for customers to interact with digital assets versus the extreme perspective that crypto's going to eat the world and be the only thing that's left from a finance perspective so.[00:42:43] Andrew Seski: I think that's probably a pretty nuanced and balanced approach to learning. I think anyone who oversimplifies is sort of missing it still. It's still a pretty complicated scenario with, again, as I mentioned, a lot of kind of new and emerging incentive structures as to how products are being built.[00:43:01] So I did want to take this opportunity also to give you a chance, and it sounds like the team is probably still expanding. Would love for you to share how people can learn more about Fidelity Digital Assets or maybe even get in contact with your team to learn more, maybe check out some of the Fidelity careers and just make sure that people have an opportunity to continue to see Fidelity Digital Assets as one of the market leaders having been in the space for a good amount of time here.[00:43:30] Brett Royer: Yeah, absolutely. Our human resources and talent acquisition teams have done a terrific job. I can provide you separately with a link. But I think we now have within our sort of Fidelity jobs portal, there's the ability to click in and see the roles that are dedicated to Digital Assets within Fidelity because it's been such an area of growth for us. We really wanted to focus on reaching out to those people who are interested in it, not only from the perspective of those who are experienced or have crypto experience from prior roles but also those who are interested in learning and want to sort of come in and take the opportunity to have a place like Fidelity to take their first shot at crypto. So yeah, happy to share that. It's definitely been a huge area of focus for us in what's been a competitive talent environment. We've seen some backing off and some other firms have some challenges from the personnel perspective. But I think it's still an environment where it is a challenge and it's something that we focused a lot on to get the right talent with the right mindset to combine sort of that crypto curiosity with some of the Fidelity philosophies that we think are still really important in any of our businesses, even on the crypto side, which is customer-first mindset, customer obsession, doing things the right way.[00:44:57] Andrew Seski: Well, in my opinion, that's a very organic and really, really high value marriage of Fidelity values and a nascent emerging technology like the blockchain space. Brett, I hate the fact that we have to start wrapping up, but I wanted to say thank you so much for being on The Modern CFO today. I really hope we have the opportunity to stay in touch as your group continues to grow. And just wanted to just say thank you one more time so. [00:45:24] Brett Royer: Appreciate it, Andrew. Nice to talk to you as well. [00:45:26] Andrew Seski: Thanks

Raising capital can be a tedious process, even after investors have agreed to commit capital. This realization was the catalyst for experienced Bay Street lawyers Mat Goldstein and Rebecca Kacaba launching DealMaker—a digital transaction management platform that provides a seamless, headache-free investor experience. Since the platform’s inception in 2018, companies of all sizes have used DealMaker to launch and market their offerings to investors across the globe.In this episode of The Modern CFO, Mat talks with host Andrew Seski about the future of digital capital formation and what sets DealMaker apart from other cloud-based platforms offering capital raising solutions.‍‍Show Links Check out DealMaker Connect with Mat Goldstein on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.‍[00:00:00] Andrew Seski: Hello everyone and welcome back to The Modern CFO Podcast. As always, I'm your host, Andrew Seski. Today, we're joined by Mat Goldstein, co-founder of DealMaker. Mat, thanks so much for being here. [00:00:20] Mat Goldstein: I'm delighted to be here. Thanks, Andrew. [00:00:22] Andrew Seski: So before we kick off, let's talk about DealMaker and what it is. What does it mean to turn a simple capital raise into e-commerce?[00:00:30] Mat Goldstein: Yeah. DealMaker, first and foremost, is a technology company. Our platform is used by issuers. You know, think, when I say "issuers," think "founders." You know, companies who are raising capital, who are looking to solve an age problem of how to engage with prospective investors and turn them into a source of capital. Using our software, an entrepreneur can start an online store and run a full e-commerce campaign, identify leads, create a relationship with a community, engage with that community to turn it into a source of capital, and rely on the analytics, payment processing, and full set of functionalities you'd expect in a Shopify store. You can leverage that for a capital raise campaign. So that's what we mean by turning raising capital into e-commerce. It means using the internet as your medium of sale and using the tools of e-commerce to identify an audience, engage with it, and turn that into a source of capital. [00:01:38] Andrew Seski: So let's talk about how you identified the need for DealMaker and what actually catalyzed the entrepreneurial spirit in yourself to go start something new. You were a lawyer in your previous life. So now, are there no efficiencies when it comes to the legal frameworks of startups? Because I'm sure between all of the different types of offerings, whether you're doing Reg CF, Reg A, Reg A+, and having all of these actually change a bit probably over the last 10 to 20 years between the US and Canada, did you notice any major inefficiencies that catalyzed your, you know, desire to go try to solve some with technology?[00:02:16] Mat Goldstein: Well, Andrew, that's what we lawyers would call a leading question. You're right. So look, you know, Rebecca and I started this company back in, you know, back when we were still practicing law early kind of 2017. We did our beta in 2017. We started planning the company earlier in 2016. We were both partners at an international law firm. And in our daily practice, we dealt with technology companies and we came to understand that kind of lean startup mentality of how to solve a problem using technology by build-measure-learn. And we, you know, one day, we sat down with a whiteboard and we mapped out what the steps were in a capital markets transaction. [00:02:58] And when I say "capital markets transaction," I really just mean a company selling shares, right? And it's crazy. I mean, you have to identify, there are eligibility requirements when you're selling chairs in the exempt markets. I can get into all that. It's like, you know, you've got public companies who are listed on stock exchanges. They have a whole infrastructure to raise capital, and it's automated, and it's built on, you know, brokerage houses where you go into your Robinhood account and you press "buy" or "sell." And, you know, technology takes over. The private markets have nothing like that. Just nothing. If you and your co-founders were raising capital, which, you know, you've done so you can talk about, then you're in the exempt markets. You're not a public company. You don't have access to that infrastructure. So you need a lawyer to draft a subscription agreement. The investors have to be eligible to buy exempt market securities, which means they need to be accredited in some way or the offering needs to be qualified in a different way. They'll need to fill in the certificate, they'll need to send in the money, the money they send in has to match the order on the form. And there's a whole nine depth, you know, kabuki dance to get to a closing, which just costs everybody time, money, and headaches. [00:04:15] And so, we looked at that and said, "Well, isn't raising capital really just sales?" Right? And that's something you and I have chatted about before. Isn't it just sales? How is it different? You're identifying somebody who, you know, likes what you have. You've got an ideal profile in mind and you wanna eliminate any friction in between them liking what you have and, you know, you making the transaction. And so, there's a playbook for this. It's called the internet. And if you think back to the early days of e-commerce, you had shoe stores who would go to like Accenture and custom-build a website to sell shoes online. And along came Shopify and said, "You don't have to do that anymore. We built a platform. You can license an online store and it has everything you need to run a campaign on the internet and you have to find the buyers." That's the Shopify model. And that's our model as well. [00:05:20] And at the end of the day, there's just some stuff you can't outsource or automate. If you are a founder, it's you that people are investing in. You have to be front and center of your store. But we built a technology platform that puts the issuer front and center, puts the founder front and center, and going out to raise capital then becomes an exercise in, you know, e-commerce, right? Identifying the prospects, engaging with them in a way that, you know, speaks with them, that they connect with, using analytics to see who's likely to close, right? All of the tools of the modern kind of sales funnel management — the CRM, the prospecting, the elimination of friction in getting an order form signed, elimination of friction in taking payments online using credit card — we built all of that. [00:06:10] And over time, it became, you know, something that, I think it's true whenever you introduce innovation into a market, there's a dynamic, right? The market response, the innovation, and it unlocked people's minds. So in the very early days, right, there were, you know, people who were raising capital from friends and family and from kind of pre-IPO rounds and following the same steps that traditional capital raising would follow. But over time, as people came to really understand, you know, you mentioned Reg A and Reg CF, these are major innovations in US Securities Law that open up the ability of founders to raise capital online, and to take payment by credit card, and to market to the public at large, and to run ads on the sides of buses if they want, right, or to run, you know, ads on Google, Facebook, Instagram, right? To identify where audiences are online, it used to be you'd go and pitch in like a hotel lobby or a restaurant, right? And now, you've got the internet at your fingertips to identify your community, to build that community, and to engage with people in a way that makes it more likely for you to find them and for them to find you. And that's the story of DealMaker. [00:07:34] Andrew Seski: That's awesome. Thanks so much for sharing that. There might be some other leading questions here, but we have a really sophisticated audience of CFOs, so I kind of want to get into maybe a philosophical conversation before hitting some of the major trends of why I think it's really important to have these fundraising conversations today and in this environment. [00:07:51] One of the things that I keep a really close eye on has been the accreditation standard, here in the US anyway. And I've listened to the conversations. They're public conversations that the SEC has, and they take comments and notes from the outside. And I have to say I'm relatively unimpressed by some of the ideas, you know? It's "Go get an MBA," "Go get a JD," you know, maybe pass a test or. So I'm really curious to see what ends up happening because there's a huge push of people who are highly sophisticated who I feel should likely, you know, start to break down the barriers of accreditation. [00:08:24] But one of the critiques, and I'm sure you've heard this in earlier days of DealMaker likely, but what would you respond to, you know, in the earlier days, maybe less so now, all that was democratized was the risk of earlier stage investments as opposed to some of the higher quality opportunities, and that those who were trying to be innovative in their fundraise may have been excluded from institutional dollars. I don't think that's the case as we stand today. I think those looking for innovative raises have maybe a unique product that's more consumer-oriented. But kind of curious on your take of that critique because I think it's something in the back of some CFOs' minds and the idea if they want to open up a raise to more people, it might be more onerous to manage, you know, a messier cap table. Does technology solve for some of that? And how are you thinking about that from your vantage point maybe in the last five years?[00:09:17] Mat Goldstein: Yeah. So I think there's a lot there. I mean, look. Let's start with the traditional capital market, right? I don't think it's a secret, and I don't think I'm casting aspersions to say the traditional capital market functions very conservatively. There's quite a select group, you know, who consistently get funded by VC and institutional capital, and that group has certain attributes that don't include, you know, the public at large. Like you can read the stats yourself, but 2% of VC funding go to, you know, the nontraditional founders, the founders that don't meet, you know, traditional demographic criteria. So I don't think that's a secret. I think the way the capital markets have functioned for a long time has been very exclusive. [00:09:59] And, you know, over the last five years in particular, and if you go back to 2012, you have the JOBS Act, which was an Act of US Congress designed to say like, can we open up the capital markets to, on one side, you know, non-accredited investors who wanna participate and, on the other side, founders who are blocked from accessing capital in traditional ways? And, you know, they're gonna go out and create jobs. They're gonna go out and bring innovation into the economy. Can we not let those two sides of a marketplace find each other by removing some of the barriers? And over time, I mean, 2012 is the signing of the JOBS Act, but the, you know, the Reg CF rules and the Reg A rules, which, for people who don't know, like when we say "equity crowdfunding," we're talking about a bundle of regulations. And just without going too deep into the weeds, the bundle of regulations are designed to open up the sale of private market securities to non-accredited investors; to make a purchase and to open up the marketing of some of these securities to the public at large. In the traditional capital markets, you can't go around marketing to the public at large, and you can't go around making sale of exempt market securities to, you know, basically non-accredited investors. [00:11:25] And so, the world we've moved into is a world where US Congress has signaled, let's open things up for founders to access capital and let's open things up for, you know, ordinary people — people like me and you, you know, who have, you know, normal jobs and aren't hedge fund managers. Can they invest and make, you know, make a contribution to companies who are growing and get in on some of the real success stories? So, you know, you've seen the energy in WallStreetBets and in Reddit and, you know, GameStop was a great example. But these are signals, right, that there's an opportunity to open up this market for capital, for a public that's hungry for it and for founders who have been blocked in the traditional capital markets.[00:12:13] Andrew Seski: Alright. So you teed it up. So let's talk rise of retail. So one of my favorite quotes that one of the co-founders of Nth Round always says is that to be a successful entrepreneur who raises outside capital, you need either people who are irrationally in love with you or your product. However, in the last, I don't know, 10, 15 years, you and your products have almost avatars in, you know, the digital world, where people can feel connected to you through social media for decades, where they feel like they're a part of your journey and love your product and can engage with you and your product, your services in a really, really modern way. And that irrational love can take place in different areas. [00:12:54] So I want to talk about, you know, some of the industries where we think this is probably gonna take place and grow the fastest. And then, I think it'd be really fun to talk about essentially where the marketplace will start to develop. Will it create, you know, a piece of venture? I mean, it's really interesting to see public and private markets converge at the top end, right? You see Tiger Global coming down in free IPO venture. You see private equity coming into Series A, which is, you know, everyone is mixing and merging fundraising rounds. It'll be really interesting to see if there's a critical mass that takes place in this small, medium-sized business that has equity crowdfunding because I think a big piece of this will end up being not just the raise itself, but also liquidity at the end of these journeys. So I think to hit that piece of liquidity and real returns, you know, the secondary markets might become more robust or that trickle-down will continue into these businesses as people look to, you know, alternative capital. And I think the alternative markets are a really promising place. I think people are, they get nervous with the volatility of our geopolitical scenarios. And, you know, maybe if they all had daily price graphs, people would be nervous about the private markets too. But traditionally, I think people are looking to be more well-diversified. [00:14:12] So I know that's a lot to throw at you. But I think maybe just kicking off with, you know, the overarching trends of people being able to find and establish a relationship with you and your services online is a trend that's not going away and becoming more prevalent than ever. So I would love to kind of hear your thoughts there and talk about some of the marketplaces you think are consolidating, growing the fastest. [00:14:33] Mat Goldstein: You know, I agree with you on kind of the, some of the major considerations that you outline. Like those are major considerations on how this market is evolving. But yeah, let's start with the first part. You know, you talk about irrational love. I would bring it back to the insight we started with, which is, you know, raising capital is just sales, you know? Andrew, wouldn't you agree for any sales, any successful business development, you have to create an emotional connection? Somebody's gonna give you money. You know, there has to be a lot of respect for the ask. You are asking someone to give you money. People, you know, earn their money and you are asking for them to entrust it to you, whether you're selling them a Tesla or you're selling them shares. I think, you know, go back to Guy Kawasaki, right? Delighting the customer. How is that any different in the sale of securities? Like the sale of securities is just sales. So creating an emotional connection is the foundation of a successful sale, in my opinion, right? And that's true if you're selling a Tesla, and it's true if you are selling security. [00:15:42] So, you know, we've learned over the past 10 years, certainly in the past, you know, two and something years of the pandemic in a more accelerated way, that you can still create emotional connections without being in person. I think that's not a controversial thing to say, right? I think, you know, the internet has opened our eyes to how people can find one another online. Like you can think of so many parallels. Dating, right? So building an emotional connection using the internet, building an emotional connection using Web3, building an emotional connection using text message, right? The technology, you know, I said earlier, the technology opens up and unlocks imagination, right? That's kind of one of the main things I mean. You can use technology to create a full community, and that community can engage with each other, right? They can engage with you and your product. They can, you know. And if we, and if now we now move the analogy over to securities, you turn that community towards the source of capital and think of kind of a full cycle and maybe at the end of that active community building, that community is trading amongst itself. So we can get kind of more granular on what that looks like, but I certainly believe that raising capital follows the same principles of sales. Building an emotional connection is fundamental. [00:17:14] And, you know, there's a lot of ways to do that. You know, great content can get the conversation started. Like the first thing you need to do is get attention, you know? Send a signal that cuts through the noise. And so, your ads have to resonate, you know, your video has to resonate. You have to create a signal. You have to pierce the noise and get attention. And then once you have that, again, you have to respect your ask. You're asking people for their time. You're asking people for their attention. You have to treat that with respect, and you have to feed it. You have to engage with it. You have to give them something that creates value for them, right? You have to give them information that's valuable for them. You can't just, you know, "We're so great." Like you can, but good luck with that. When you start to treat raising capital as a form of sales and use the internet and digital technologies to really, you know, leverage what sales have, right, in drip campaigns, in content creation, in marketing materials, in video, in embedding, you know, embedding kind of native ads. Like we can deep into the weeds. But you can, you know, what you do is you send a signal and it's like waving a flag and, you know, your friends see it. The people who identify with what you have to say, they find you. And so, it's that two-way dialogue that the internet unlocks or should I just say digital technology 'cause, you know, we might talk about Web3, we might talk about mobile, but, you know, digital technology unlocks that ability to create that emotional connection. And then once you're building a community, there's a lot you can do with it. And it's, you know, mutual. [00:18:47] Andrew Seski: One of the kind of unspoken things that there's so many conversations about how Instagram and TikTok or YouTube can be really damaging. One of the things that really inspires me about this next generation of entrepreneurs is their ability to create content, to create followings, to communicate really effectively about what they're doing. And building in public, I think, establishes so much more trust. And I think that that constant flow of content kind of creates a really unique opportunity for this next generation of entrepreneurs to be really successful, you know, crowdfunders and raise capital independently of some of the major institutions.[00:19:24] So I want to talk a little bit about how DealMaker differentiates itself in terms of, well, we've talked about kind of the investor relationship with founders, but let's talk about the marketplace. And there are some marketplaces out there, some are really diverse, some have crypto offerings, some have, you know, very just narrow windows. And it's always tricky to me to come across some of these platforms that, you know, promise help with fundraising. But I want to differentiate DealMaker a little bit about automating what can't be automated. And I would love that we spent the first part of this conversation being very realistic about the relationship you have to have with investors to be successful in fundraising. So I would love to hear about how you started DealMaker and how you basically differentiated yourself knowing all of this going in. [00:20:12] Mat Goldstein: It's very simple. I mean, our core principle is self-belief. You have to believe in yourself. These are your investors, right? That's our message to the market. If you are gonna go out and raise capital, that is your brand, that is your story, that is your value prop. Those are your investors. And so, we put the founder or the issuer front and center. You can go on DealMaker.tech, you won't see anything to buy. Nobody can scroll and look for offerings. All offerings are, you know, what DealMaker's doing is it's powering the, you know, you call it a white-labelled store. It's powering the offering for the, we did the Green Bay Packers common stock offering. I don't think you and I ever talked about that, but that was —[00:20:49] Andrew Seski: No, I didn't know that. [00:20:51] Mat Goldstein: Yeah. Green Bay Packers sells shares to the publics periodically. And, you know, when they started doing it, people had to mail subscription agreements.[00:20:58] Andrew Seski: Oh my gosh, I remember that. My old firm had some of those shares in their office hanging up. [00:21:04] Mat Goldstein: Yeah, exactly. And, you know, they had to mail it in, and they had to send a check, and then they would like come back in the mail and, you know, hopefully they filled in the offering doc right, and maybe they read it, maybe they didn't. But it's a very good kind of paradigm to see how technology drives the industry forward. When November 2021, the Green Bay Packers did their common stock offering on our platform, right, you go on, you buy from your mobile phone, you're buying direct from the Green Bay Packers. It's their brand. It's their store, you know? We power the whole thing, but it isn't like that's in a marketplace where people are scrolling, looking for something to buy. It's a direct relationship between that issuer, that brand, and its community. [00:21:45] And that really kind of, you know, takes us back to how and why we started this company. We wanted to eliminate friction for, I mean, when we were lawyers, it was for our clients, right? And, you know, what are the kind of hallmarks of the Google information age? Transparency and collaboration, right? Why was the capital markets in a place where, you know, the issuer raising capital had no real visibility, right, no transparency into where people were in a funnel, where people's minds were at. Have people engaged with the content? Have they read it? Have they clicked on it? Without the internet and without digital technology, you can't get into the heads of prospects. You have to just kind of wait. Like people will send in a subscription agreement or they won't. They'll send in money or they won't. You'll never know in real time kind of where the deal is at. You might have to call your lawyer and say like, has money come in? Has it not? And so, from where we were sitting, you know, both Rebecca and I kind of took a look at this and said, "Well, what if we bring transparency and collaboration into the capital markets using technology?" And as capital markets lawyers, Rebecca and I had deep subject matter expertise. We know the rules. We know them across, you know, a number of global jurisdictions, the major centers of capital formation — the US, Canada, UK, Australia. In our practice, we always thought globally and we always thought, you know, from a scalability perspective. And so, you know, we took that subject matter expertise and we built a software based on transparency and collaboration that powers an issuer's capital raise using technology. And from there, it's become, you know, the market leader in large, global, online capital formation. We're very proud of the fact that basically all of the largest online exempt market private placements have been done powered by our technology, right? Green Bay Packers included. Green Bay Packers hasn't even been the largest. [00:23:50] So it comes back to, you know, how technology can introduce a new way of thinking and how innovation can unlock imagination. And, you know, you can use the internet to turn a community into a source of capital. And every quarter we see more and more kind of more developed brands, right, with communities who spend so much money building a community for their product. They've got newsletters. They've got Instagram. They've got ads continually going out. They can turn that community into a source of capital. And I think, you know, we're in the early, early days of kind of mainstream America just kind of waking up to that realization. You don't have to treat a capital raise and a product marketing campaign as two totally different things. You can do both at the same time.[00:24:38] Andrew Seski: That's a great point. I love that point. I normally have people, you know, hit the back 30 seconds button a few times when I really love a point, and that would be a great one to go back to. I think that's a really important concept. [00:24:51] I wanna be sort of purposely inflammatory here and talk about whether or not you think the death of Silicon Valley is kind of arriving right now. And I wanna get you to kind of, I wanna talk about like the physical location. I think founders who are nearby each other can really benefit from communities. But those communities, I mean, I look at Andreessen and I see them say, you know, "Our headquarters is wherever. We're a completely distributed team now." That's just one example. But I think about kind of the nature of venture in general. I mean, I think some people would argue, I don't know, the silicon and semiconductor industry started at TI in Texas, not in Silicon Valley anyway so it's been a marketing scheme this whole time or something kind of wild like that.[00:25:34] But I'm curious to think about, or how you think about whether or not these trends are going to basically disrupt not just the access to capital and who the key participants are, but whether or not we're headed into a purely distributed network that will kind of not rejoin each other. Do you think that this distribution of capital and participants is now just forever going to be globalized? I mean, I see that in the crypto community. That seems to be a really big kind of positive sentiment that they're pushing. But I do wonder if the need for a physical Silicon Valley or to be, you know, next to Stanford's campus, if that's gonna be as relevant in the next 10 years mostly because in the last 10 years, we've seen what VCs can do really well in scaling companies, but we haven't really participated with this technology available in really downmarkets. So we're going to see what happens when the tides kind of fall out and discuss, you know, what is the best way for different businesses to be funded, you know? There are different incentives that come with different investment types. And I think you could easily argue that there are certain companies with major venture dollars that are scaling for growth's sake as opposed to growing profitable businesses. And I think that's sort of become aspirational to a lot of young entrepreneurs. You know, if you're going to Y Combinator, if you're getting knighted by the VCs, there is some pride behind that. And I think it'd be really interesting to see what basically happens, in your opinion, on how can you create similar environments that are distributed maybe even with better terms. And just really curious to hear what you think about that.[00:27:16] Mat Goldstein: Yeah. So look. The first thing I would say is the VC and institutional capital corner of the capital markets is actually pretty small, especially for young founders. They come out of Stanford or they come out of, you know, come out of technical schools or they don't go to university or, you know. And they think, "Okay, getting funded means I have to do 'X'." And the profile of those founders and the profile of those companies end up looking a certain way, right? And it's a tiny corner of the capital markets as a whole, right? US capital formation is in the teeth, right? It's trillions of dollars of capital formation. And the 99 companies that Andreessen, you know, looks at and doesn't invest in versus the one it does, those 99 companies still go out and raise.[00:28:06] Andrew Seski: Right.[00:28:07] Mat Goldstein: Right? They may raise from their own communities. They may raise from, you know, the scratching and clawing of the founders whose hustle and determination to chase every lead, you know, eventually gets them to where they're going, where they may raise through investment banking or they may raise through, you know, programs. But I think the area of the capital markets that the VCs reside, I don't think we need to think about it like, in order to open up capital for more founders, we've gotta take some out of this space. There's huge amounts of capital formation in the US that's untapped, and I think that's the primary area of growth for, you know, founders who are being a little bit more creative about how they raise, founders who are going to build their own communities and raise that way. [00:28:52] And I think, you know, if you want to talk about some of the terms that founders are able to set when they build their own community, 99 times out of a hundred, better terms than they would get from, you know, someone heavily negotiating to take a board seat or to take liquidation differences. It's a different type of capital formation, right? It's focused on people who, you know, feel emotionally connected, who understand the story, who wanna be owners. I think Green Bay Packers is a great example. People wanna be owners, right? It's not necessarily because they have a return on capital thesis that they're pursuing. A lot of them do. I'm not talking about Green Bay. But I just mean that sentiment of, you know, I wanna be a part owner of something that I care about 'cause I have an emotional connection to it. And, you know, I'm happy to participate on terms that, you know, a whole bunch of people are participating. [00:29:48] And one of our major success stories on the platform brought in 3,000 shareholders, right? They ran a series of campaigns over 18 months, but they brought in, you know, one of them brought in 10,000 shareholders. So even though average purchase amount might be 3,000 bucks, might be 5,000 bucks, might be 1,500 bucks, it depends on the campaign and depends on what they're trying to do. But there's so much opportunity in the broader capital markets to identify people who get a story and who wanna feel emotionally connected to a company. It's, you know, is not necessarily, "Do I go VC or do I go here?" It's, you know, sometimes, it's both. Sometimes, you have venture-backed companies that are turning to the crowd because, you know, they have a growth trajectory that meets a VC thesis. And the validation of having VC backing plus the validation of having a widespread audience that wanna be owners, it works together really nicely.[00:30:44] Andrew Seski: That's a really good point, too. I think that often the way I even posited it was you've got one or the other. I think having a mix of types of investors can be really helpful along the journey of an entrepreneurial path for sure. I think actually starting with a good crowd is a ton of validation. So, I mean, and it's a loyalty metric. I think that will become more important as groups scale. You know, it's one thing to have active users, it's another if they're putting money into the firm itself. So I think it's a huge, huge, very powerful metric.[00:31:11] Mat Goldstein: That's really interesting, right? There are these kind of, you know, sacred laws that VCs follow. They look at, you know, like active user count. That wasn't an accident that you said that. That's been a sacred law for a long time. You're looking at traction by measuring something, right? Isn't another way to measure traction by, you know, kind of conversion of community into a source of capital, right? How many people believe so much in your product that they're willing to put money in, right? [00:31:39] Andrew Seski: Yeah, talk about a sticky measurement, right? Yeah, it's interesting. [00:31:42] Mat Goldstein: I think so.[00:31:43] Andrew Seski: Mat, what a cool conversation to have about what the future metrics that we're gonna look at are gonna, you know, are gonna be. Well, I'm curious what's going on when you think about investor education. I feel like the crowds have become, so we talked about this a little bit with the rise of retail, in the public markets being able to use some momentum to kind of battle with the hedge funds during the pandemic that maybe there was a lot of people inside with maybe too much free time. However, I do think the education is far more widely available than it ever has been. And I'm curious because you've had so much time working with founders from, I mean from the legal standpoint, but partially in education, I think a big piece of your role then was probably in discussing and educating on different offering types and, you know, what you were able to recommend that they do. And I'm kind of curious as the faces and knowledge has, I mean, everything has changed quite a bit, if you're seeing more sophisticated people come to your platform basically, you know, year over year as the education and information becomes more democratized, too. [00:32:47] Mat Goldstein: Yeah, absolutely. And then I think in many respects, you know, if you follow the literature on diffusion of innovation, right, and crossing the chasm, the literature shows a pretty consistent trend of, you know, innovation kind of starting in the out-there regions, the penumbra, right, and migrating into the mainstream. And it's just a question of time, and seeing success stories and, you know, word of mouth, and a mindset shift, right? When you introduce something new, it does take some time, and there's a whole art and science of change management. Education's a big piece of it. You know, we do webinars, we've got a lot of public-facing knowledge on our knowledge hub. [00:33:26] But honestly, the best, the most impactful evangelists for the space are those founders who have successfully created communities online and turned those into a source of capital. And there's a multiplier effect because, you know, if one of those issuers does bring in 3,000 or 5,000 or 10,000 shareholders, you know, that's a whole community of people who might tell their friends about this experience they had if it was a positive experience. And then, you know, you're basically building momentum one success study or one case study at a time. And what we see coming on the platform today versus, you know, the kind of business origination in the early days, totally different profile. I mean, we've got New York Stock Exchange-listed companies raising capital on the platform. That wouldn't have happened in 2012, so. [00:34:17] You gotta remember five years ago, the space was zero. Zero. Maybe six years ago. Early 2016, online capital formation rounded to zero, right? And so, you know, on our platform alone, we've done, I think it's 1.6 billion, right, which for us is a lot. But for the US capital markets, that's still physically very, very small. So we're in, you know, Rebecca likes to say we're in the second inning, to use a baseball analogy. We're in the early, early days. And, you know, education and success will fertilize the ecosystem further. And you get that snowball picking up momentum the longer it goes and the more, you know, success stories hit the market.[00:35:01] Andrew Seski: Yeah. I think the listeners should all take a moment and check out DealMaker's website just from a educational standpoint because I think that in the next, I mean, no one can predict exactly what's gonna happen, but I think markets are being shaken up quite a bit. So whether you're exploring venture debt or trying to avoid a venture down round or whatever your situation may be, I think right now is a really, really great time to double down on investor communications, to double down on, you know, innovative ways to continue to grow and to kind of showcase that you've got strength in your community. I think it's a great place to get started and a really rich resource I saw your Investor FAQ and your Issuer FAQ. I think it's a really important place to go just to educate yourself on what some people are doing to continue to grow their firms. [00:35:49] Mat, I want to talk a little bit about you for a second 'cause we have cruised through a ton of topics we could spend a few hours on. One thing I ask every podcast guest is, is there something that you feel is underestimated in the world today? And it doesn't have to be about DealMaker. It doesn't have to be about finance at all or fundraising. Just curious because of the breadth of CFOs we have on the show and their vantage points being so unique. Just something that they feel underestimated in the world typically is something we should all be thinking about but maybe don't have the specific viewpoint.[00:36:21] Mat Goldstein: I've already kind of alluded to it or I said it a little bit earlier. But for me, philosophically, the notion of self-belief is really, really important. And, you know, as a founder of this company and really, you know, my co-founder Rebecca is, I attribute enormous, I have enormous respect for how she's unlocked, you know, my own self-belief. And but, you know, there's a consistency in our philosophy around self-belief, you know, our message to the market around self-belief, you know, something we see underdeveloped in the world is self-belief. But, you know, raising capital is hard. Starting a company is hard. And the more people who believe in themselves, right, to create that emotional connection, to find a way to success, to, you know, raise their own capital, to start their own online store, we see that as having very, very positive multiplier effects on the economy, on innovation, and just on, you know, communities. Like people who are empowered to believe in themselves and who, you know, feel supported in going out to, you know, do something themselves, raise their own capital, you know, find their own investors. I'm not saying you shouldn't rely on intermediaries or, you know, look for people to help you along the way. Of course, that's part of it. But fundamentally, believing in yourself and being supported in going out to, you know, to raise capital and to start a company and to grow a company is something that we really, really would love to impart to the world as our, you know, major contribution.[00:38:01] Andrew Seski: Right. So I think one way, correct me if I'm wrong, but one way to think about fundraising is that every dollar is a vote of confidence, and that vote of confidence can continue to empower that self-belief. And DealMaker's underpinning some of that process to make that more of a reality for more people.[00:38:18] Mat Goldstein: Yeah, well put. [00:38:19] Andrew Seski: Awesome. Well, I love the fact that we got to cover so much today. I know we're already stretched for time, so I don't wanna keep you too long. But how can people learn more about DealMaker? How can they get in touch with you? And, you know, what is the best way to interact if even if just an educational standpoint as a resource?[00:38:38] Mat Goldstein: You've hit all the notes. We do our best. We do webinars. We have content available on our site DealMaker.tech. There is an intake process there, too, for people who are interested in learning more about raising capital. And we do put out consistent information about the space through our newsletter. So DealMaker.tech is the place to start. And I really appreciate the conversation. I think it was a great conversation and I'm glad to have been here. [00:39:02] Andrew Seski: Thanks, Mat. I'm excited to circle back in a number of years as this space continues to develop, and that episode's gonna be more fun as we're able to reflect back today. But thank you so much for joining The Modern CFO, and I'm looking forward to speaking again soon. [00:39:15] Mat Goldstein: Thank you. Have a great day.‍

Financial management can make or break a business. Any business undertaking attempted without taking cost drivers, growth prospects, and value realization goals, among other critical factors, into account is leaving a big, wide door open to problems.Jack Boyles, Managing Director at Marcum LLP, understands this perfectly well. With his extensive experience in financial planning and modeling, valuations, and funding strategies, Jack keeps a trained eye on both the micro and macro factors that influence today’s rapidly evolving financial services sector.In this episode of The Modern CFO, Jack talks with host Andrew Seski about critical factors to consider for growing companies, how he deals with the unexpected, and the valuable lessons he learned over his 25-year-long career as founder, investor, and CFO of several companies.‍‍Show Links Check out Marcum LLP Connect with Jack Boyles on LinkedIn or via email Check out Nth Round Connect with Andrew Seski on LinkedIn ‍TranscriptPlease note that the transcript is AI-generated and may contain errors. The content in the podcast is not intended as investment advice, and is meant for informational and entertainment purposes only.‍‍[00:00:00] Andrew Seski: Hello everyone and welcome back to The Modern CFO podcast. As always, I'm your host, Andrew Seski. Today, we're joined by Jack Boyles. Jack, thank you so much for being here. [00:00:19] Jack Boyles: Thank you. I'm looking forward to our conversation. I reviewed a number of your other podcasts. They're all great and I learned something in each one.[00:00:25] Andrew Seski: So today, Jack serves as CFO at Marcum. Jack's based in Boston and has been a CFO across a number of industries and is insatiable when it comes to learning new things, trying new industries. [00:00:38] But one of the things that we've been talking about, maybe ad nauseam, but between us is the idea that maybe there is a certain time and place where CFOs can have their biggest impact at, you know, either a type of financing, an industry, and maybe CFOs shouldn't necessarily grow across all stages and all different types of industries. Maybe they should be specialized and maybe there is a time and place for that CFO who can drive the most value. [00:01:05] So this is a topic I really want to dive into and really dig our teeth into because Jack has such a unique vantage point, serving his entire career really honing in on this idea. So Jack, I got to turn it over to you to tease out some of the value and insights here on sort of that topic and whatever else we can foray into across all of the experiences you had as a CFO.[00:01:26] Jack Boyles: Thanks for the great introduction. Yeah, I'm not CFO of Marcum — number one. Marcum has a group of consulting CFOs and so I now work with roughly a half-dozen small and medium-sized companies as a fractional CFO. Prior to that, I've been CFO of a number of companies in which I was founder, investor, angel, and always had a CFO title in a wide variety of verticals — distribution and logistics, software manufacturing, IT services, natural resources. [00:01:57] And right now my portfolio includes a SaaS company — a company working on carbon credits with blockchain — and another marketplace for health services. So, you know, it's a pretty broad spectrum and I've enjoyed it because there has been a number of learning opportunities. [00:02:14] But returning to your theme, I found I'm really good at the five million to 50 million-dollar service orientation companies. And I've realized that that's where I can add the most value. I'm not somebody who can take a company public, although I've sold a number of companies to Fortune 500 companies. But it's really recognizing there are different skill sets for those by both vertical and by size of company, if you will, the capital intensity and sort of the economic structure underlying the business.[00:02:45] So I can break down those and, you know, they're all interesting problems, but it's really a different skill set for each one of them. And you need to manage differently as that, you know, financially-oriented team member. [00:02:58] Andrew Seski: In terms of where some of this interest comes from from my end is the fundraising environment over the last few years dramatically changing in the last few months. So what may have been, you know, a company doing five to 10 million then that could have been valued, and maybe in the software land, maybe even at a hundred X multiples at one point, just an absolute crazy valuation and fundraising environment to, you know, a very, very immediate, almost shift in going from, you know, pure growth orientation to conservative cost cutting, you know, headcount reduction. And I think the question there stems not only just from where the CFO can be the most valuable in their niche and their competency, but also how to weather the volatility of different market cycles. [00:03:42] And there are a lot of variables to play with here so I really like your answer that the CFO can be really valuable by identifying their impact in a niche due to all of the other market environments and volatility in the markets that could, you know, shift strategy and financial strategies that a company may pursue.[00:03:58] Jack Boyles: Well, you're shining a spotlight on, you know, certainly what is the most critical thing for growing companies, which is, do they have access to capital? And is it the right capital on the right terms and in the right timing? You know, obviously, you progress from family and friends to seed rounds, to Series A and up. [00:04:17] But it's really more important, or the starting point for that analysis is really, what's driving the need for cash? Is it building your organization? Is it financing working capital? Is it plant and equipment expansion? Is it building relationships that you need to invest in? So really understanding from a, what I would call a fairly granular level, what are the cost and capital drivers in your business and really internalizing that, that economic, that, you know, the calculus of the business, because that's gonna tell you what kind of capital you need and where to go knocking on the door. It's seldom the case that you're gonna be the first guy knocking on that door, but making sure that they understand your economic model is critical.[00:04:59] And so to narrow your field down on who you're focusing on and what you're offering and making sure, I mean, whether you look at PitchBook or anything else, it's fairly easy to qualify those people and what their investment criteria are. Most firms are very upfront about what they invest in and there's nothing wrong with reaching. But there's also economy and wisdom and finding people who've done your deal before with like competitors because they understand it. They get it. Whether you consider that investor a bank or a venture capital or a family office, find people who have done it before. They're gonna bring more knowledge to the deal — in the one they do because they are always seeking to be better. Their due diligence will be a lot more efficient and helpful to you.[00:05:43] Andrew Seski: So I want to dive into something that comes up on most podcasts. When we talk about people's route to CFO roles, there's a very traditional background of accounting courses throughout undergrad and maybe a consulting job or a Big Four role. We've had a mix between a very traditional and maybe some nontraditional of serving in the Navy. And I want to go back in time to Dartmouth undergrad and leaving school. What was your, some of those first roles? Did you have sort of a traditional background? Because I want to then kind of hit on all the successes you've had because you have a pretty incredible track record as well. [00:06:19] Jack Boyles: Not at all. I got an MBA at Dartmouth and I was something of a quant jock having a mathematics degree and liking computers, which was kind of a new thing then. And, you know, took all the accounting courses. And when I got close to what the careers looked like with the Big Eight — and there were eight at that time — versus the other things that were out there, I chose consulting. [00:06:41] I joined a firm, Temple, Barker & Sloan, in Boston, worked with them for years. And candidly, they liked me because I spoke business and I could write Fortran. Those were the qualifications. And so I ended up doing most of the financial modeling on a broad range of projects and really, you know, got to be known as something of a guru in figuring out the economics in how to simplify them to the important details. I mean, that's an important notion. [00:07:07] Getting a level of detail right is sometimes the hardest thing to do right in making a projection. Too detailed — you can't maintain it, change it, and it's not useful as a policymaking tool. Too macro — it's not informing you on what the really important relationships are between the resources and their results in a business.[00:07:28] I did that for a number of years, worked across telecommunications, oil and gas, resource recovery, some consumer products, and then got tired of working for big companies because, you know, you were kind of siloed. And so when I looked over my years in consulting, the fun companies were all small and growing. That made the choice easy. So I went off on my own and one after another, you know, lived out that dream. [00:07:53] Andrew Seski: So you've mentioned early on that you are really passionate about continuous learning. And I think you probably identified consulting as one of those ways to be very, very oriented to try to be a value adder early on in your career but also across a lot of different industries so that you can continue to learn. It's very clear that you maintain that theme by being able to have a similar job title across all of these different types of firms.[00:08:18] But how are you thinking about that in terms of some of the risk profile of — I think there are a lot of CFOs who have probably fairly, just a pretty well-defined risk adversity — but going from big consulting shop to smaller firms to deploy some of that knowledge, did that phase you at all or were you pretty comfortable in those positions? [00:08:37] Jack Boyles: My wife didn't ask a lot of questions about what I was doing. So honestly, I was blessed with somebody who was very supportive and understanding and had confidence that I could make it work, whatever I chose to do. And she's, you know, she's been half-right.[00:08:52] Andrew Seski: Well, let's start talking about some of the consistent themes across these CFO roles because you do have a lot of experience in successful exits. Like I mentioned, your track record is incredible. So I want to dive into some of the themes and valuable lessons that we can share to the network of CFOs and listeners today.[00:09:11] And maybe it starts with the kind of continuous learning aspect of always trying to drive forward continuous learning. Maybe it's the definition of what a modern CFO is across being somebody who's really proficient in understanding and measuring the value of technology versus maybe opportunity cost. So were there any things that stood out really early in your career that were cemented later across some of the more successful exits that you've had?[00:09:40] Jack Boyles: I think one of the most important things to do is not overestimate your team's understanding of what the CFO is really supposed to do. And I think it's really helpful when engaging, you know, with a new team to lay out, you know, your assessment of what the roadmap is and what the principle projects are, the priorities, timing, and resource required for them. [00:10:02] Above all, we have to be good project managers. Yes, we have to have the financial disciplines and understand how to put financial statements together and make intelligent decisions about IT, infrastructure, and risk mitigation, and so forth. But really laying out that roadmap for your team members and really saying, "These are the things I own," "These are the things I need your support with." And don't assume that they really understand what the role is and how integrating it needs to be in how the business develops. [00:10:33] You know, the CFO should really take responsibility for building the infrastructure to support the vision of the people who are creating the products and services and the technologists in this day and age that are driving it forward. But to really confirm their understanding of your role, the need for detail, the need to measure what they're doing and provide regular feedback in particular that monitors their progress against their objectives. So to me, that's a lesson I learned over and over again and every time I skip it, it's like, how did I miss that? It's just, I thought I had learned that lesson the last time. And that's critical whether it's, you know, regardless of what industry you're in. [00:11:12] You mentioned the other thing about the thing that keeps me motivated. You know, one of the things that happens at business school and when you're a math major is you acquire all these analytical techniques and tools. You know, I'm really in the business of, you know, old tools for new problems. And so when somebody talks to me about security policy — huge issue for most companies today in the security, you know, whether it's compliance with GDPR or SOX to any of those issues — you know, you don't hear anybody talking about applying Bayesian analysis to that, which is, we all know the technique, but use that framework to structure the decision, to add quantitative data and substance where you can, but also understand, you know, what you're not gonna know and is undiscoverable and be able to make decisions. [00:11:59] You know, the role of a CFO if they're effective with not only the preparation of financials but can adapt that data to the decision making that's in front of them — that's critical. That's a valuable, valuable partner in your decision-making process. Not that they don't get a vote — they do and should have a vote — but the reality is making sure we've chosen the right analytical framework and context for the problem, understand what we know, what we don't know, what's worth researching, and how much time and resources are we willing to spend to improve the decision. Critical thing. And it cuts through a lot of the maxims you hear from one CFEO or, you know, one entrepreneur or the other, speed is everything in one case, fail fast. You hear all these things, but putting it in structure and putting numbers to it really helps you apply those lessons in a very focused and constructive way.[00:12:54] Andrew Seski: I want to continue to talk about this just for a moment because we've had now the pandemic. It looks like we already have a looming recession. When we talk about constructing sort of traditional models with a little bit of leeway and communicating out, you know, exactly what the role of the CFO is, how do you create and think, or how do you personally think about how to create some sort of, you know, configurability around circumstances changing and some sort of flexibility in terms of, you know, creating the models that would be able to handle, you know, some of the maybe more unforeseen types of events that we've had in the last few years?[00:13:29] Jack Boyles: Oh. [00:13:30] Andrew Seski: It's a complex question. [00:13:32] Jack Boyles: Well, I mean, you know, there's great literature on that over the past 10 years, starting with The Black Swan and the work of The Undoing Project, which is about people, you know, two psychologists won the Nobel Prize in economy and economics for really undoing capital markets theory, is what they did, and sort of challenge some of the basics of, you know, thinking fast and thinking slow, which is Daniel Kahneman's famous book. [00:13:59] Andrew Seski: Is Undoing, is that a Michael Lewis? [00:14:01] Jack Boyles: Yes. The Undoing Project is the story of Kahneman and his partner that led to the Nobel Prize. Kahneman, you know, his partner died in this research, but Kahneman continues to write and is still very influential about thinking about how decisions are made and what we, what we just assume and make decisions on every day, which needs to be tested, which is sort of at the root of these unforeseen things that nobody saw coming. [00:14:29] I'll segue back to something I raised earlier: security issues today. You know, when you ask Amazon and you've moved all your stuff to their cloud services, you know, what are you gonna do to make sure we never fail? And they say, you're making an assumption that we're not gonna fail sometime. Assume that the network's gonna go down at some point. That's a real risk. How are you gonna handle it? We can't provide that guarantee. I think about risk in that way, which is I really do carefully consider obsolescence risk of products and services. That's particularly relevant today given the pace of technological innovation and disruption going on. [00:15:05] I think, you know, we have to think very carefully in most businesses. The current clients that I have are not really geared in doing flexible planning regarding the likely wage expectations of, you know, anybody they're hiring. You know, it's not just the commission you pay a recruiter. It's the fact that the basic wages are gonna be 10% higher. So really working through at a fairly, you know, a mid-granular level, which is wages, resources, regulation can change and fundamentally alter the nature of competition in your vertical competitors themselves as well as new products and services. And I think you just have to be structured about that and really be honest. [00:15:47] People wave a hand at it by saying we've got very strong customer relationships. Well, yeah, maybe you do. I can look back and see what the recurring revenue is per customer and I'm not sure what that tells me, you know, given the threats to their business, the threats of competitors, you know, this is a free market capital society. They're gonna earn money for their shareholders and do what they think is right for them. You really have to be very circumspect about placing too much reliance on those strong customer relationships that you've had forever and even the legal contracts underneath them. I tend to be a skeptic when it comes to that.[00:16:26] Andrew Seski: Right. Having a really, really specific understanding of stakeholders, you know, not just your stakeholders but their stakeholders and, you know, whether that's their investors, the shareholders, employee owners, you know, the things that affect their businesses and your clients' businesses as well.[00:16:40] Jack Boyles: Everybody at the table.[00:16:42] Andrew Seski: Everyone at the table.[00:16:43] Jack Boyles: Everybody at the table has alternatives and it's important to understand that you can't, you know, neglect any of them and because whether it's your circumstances or their circumstances that changes dramatically, you both have to re-examine the relationship and be prepared for it.[00:16:59] Andrew Seski: One of the things we were talking about just before we started recording were some big shifts that have taken place in terms of where financial data is stored, maybe the, like sort of the future of the CFO role. And I want to touch on some of that because I think it'll reframe some of the conversation into what we can think about in terms of strategic planning in the next three to five years or even zooming out further with more innovative technologies. You mentioned you had a blockchain company that you're working with doing carbon credit so you're hitting two major themes that, even in the news right now around climate change and government funding, some new climate initiatives.[00:17:35] So I want to zoom out a little bit and talk about some of the macro things that have happened in terms of where technology and financial services have intersected, especially in the role of the CFO. [00:17:45] Jack Boyles: My perspective is if you look back over 50 years, there have been three or four major events that wholly changed the way finance was supported within companies, starting with the creation of ADP. When Frank Wattenberg created that company back in the sixties, nobody dreamed that you'd ever have the confidence to outsource the most confidential data you had, which is the compensation of your employees. You know, 10 years later, you were considered inefficient and backwards if you weren't using an outsourcer to manage the payroll processing problem. They did it better. They did it more competently. They were well-equipped to keep pace with a compliance requirements that constantly changed. Looking back, it was like, why didn't we do that earlier? [00:18:29] A couple years later, we moved from big, secure IBM mainframes to running our financials on little local area networks everywhere that rolled up. It was a revolution from having to have a mini computer, a mainframe to process your financial data or, worse yet, do a lot of it manually. That happened, you know, overnight. We all changed again with the year 2000 worries and upgraded all of our technology. [00:18:58] The last thing that happened was the move to the cloud. In 2015, I remember talking to financial partners about, you know, was anybody else contemplating moving their accounting onto these crazy platforms, NetSuite and Intacct? Not a one. I talked to a dozen companies. Not a one. Three years later, they were behind the eight ball if they weren't in that project. And now you have to have a very stable, very small business if you haven't moved your financials to the cloud, whether it's on Oracle or SAP or Intacct or NetSuite or QuickBooks Online. [00:19:34] And I predict the next, you know, role to change is the CFO. I think that the reality is the breadth of skills that a CFO had to bring 20 years ago is irrelevant today, largely. You know, the person you want in that role has great familiarity with the vertical, has great familiarity and comfort with the size of company — how many people, what's the size of the management team. You work entirely different if you're in a C-suite of a Fortune 500 than if you're one of three people running a 50-million-dollar company and you have very intimate and intense relationships with the other members of that C-suite. [00:20:13] So I think that's going to change and you're going to find, you know, CFOs, particularly for growing companies, change more often. Somebody who's really good from startup to 10 million. Somebody else has a different skillset from 10 to a hundred million, and you need somebody else for the IPO. They're different skillsets. You know, the lower you go, the broader range of skills you have to marshal and more hats you have to wear as you go up the chain, you become more of a manager and in public relations role. [00:20:46] So within the sectors that I serve, I find that it's as important for me to be able to source critical services, whether it's in IT, professional services, legal accounting, insurance, or other specialty services, whether it's R&D tax credits, 401(k) advisory work, issues of that nature. So I'm, you know, a third sourcing agent for all the professional services, a third, you know, controller, whatever accounting hat I have to wear. And third really business planner partner to the other executives. [00:21:20] Andrew Seski: So that's really helpful in terms of contextualizing all of the dynamic requirements of the CFO today. And I think it's really helpful to look backwards before looking forward. One of the things I want to segue slightly into — maybe it's more consistent or maybe it's even changing now because of everything that is more standardized and in the cloud — but I want to talk about liquidity and exits and relationship with CEOs. [00:21:45] You've had a number of exits and I'm trying to decide if I have an opinion whether or not transactions will always be complicated. You're always gonna need to bring all of the stakeholders we've mentioned into the same room to hash through details and figure out what's best for buyers and sellers. And while there might be some standardization, there's still a ton of human-level emotion behind, you know, exits. [00:22:09] So I want to know if there's been any sort of intersection between the efficiency of due diligence and exit planning. Has technology influenced all of that or is it still highly manual? A little emotional as always in building great companies and maybe having an exit, but it'd be a fun thing to think through and talk about because it's been a hard few years. I think the number of transactions that happened in the last few years have probably been off the charts. In the early 2020, I think 2020, there was record number of IPOs, first half of the year. So just thinking through that, I would love to hear either stories or lessons learned or, you know, your perspective on whether or not you think technology's gonna impact liquidity and exits. [00:22:50] Jack Boyles: Well, I think two things. In terms of the mechanics of it, you know, the progress in deal rooms and standard terms and analytical tools to look and value companies is extraordinary today. The tools at our disposal to do financial analysis have never been better. I think the hidden value of the technology isn't just the deal room and the ability to communicate better. I think you also find that people who've done a number of transactions are starting to put more and more emphasis on what are the fundamental infrastructure systems that are in place. [00:23:25] If I'm buying a company that's using the same systems I do, hallelujah. My transaction implementation cost have been cut by two-thirds. I'm not retraining their staff. I'm not reinventing the wheel. I'm doing some data cleanup at consolidation. So if you're a small company or mid-size company with a view towards being bought or buying others, choosing an industry standard platform for your ERP is critical, you know, that's not customized. It greatly simplifies and ensures the success of a transaction because it means you spend, you know, two months integrating operations rather than a year. Time is of the essence in these transactions. [00:24:07] And I think we're gonna go into a phase, particularly with, if we are in fact in recession and are likely to see a number of quarters and the capital pools are gonna dry up or be constraints fundamental, I think you're gonna see a wave of consolidations among these companies and that's gonna be their choice, either sell their IP and their customer lists if they're just technologists or go out of business because I don't think the subsequent rounds that were readily available two years ago are gonna be coming as quick or be as favorable in terms of valuations. [00:24:40] So when you look at the, you know, how the worm's turning, I would urge mid-size companies, who are revenue, you know, have profitability, positive cash flow, to really think about who are the comparable and natural acquirers for them. Chances are those companies, if they need to exit or thinking about it, they probably know who their acquirer is. And I would in some cases that, you know, urge them to have those conversations before they engage in investment banker because we're all looking at the same two-year outlook, which is highly uncertain in terms of both economic environment, as well as the availability of capital. And I'd plan for that. [00:25:20] In most cases, you know, companies that are consolidating in some form, they already know who the players are. And they know, and they're very thoughtful and intentional about what they're gonna look like to facilitate that and remove obstacles to combinations. [00:25:35] Andrew Seski: So just thinking from an investor's standpoint and from a founder's standpoint, I think in the next three to five years, there's kind of a double-edged sword here. I think on one hand, there's some excitement around if there is a downturn and money is being spent more strategically and maybe a little less out of fear of missing out on opportunities than there is that shakeup where really there could be some market dominators, if they can survive a downturn and really capture a big part of the market share in their industries.[00:26:07] So I think that is somewhat exciting to see the shakeup. It's probably nerve-racking as well for both investors and founders in the same vein. But I was gonna ask if you were really excited about anything on that kind of time horizon. I know we just mentioned the next two years feel very uncertain. But just from all these different perspectives, I was thinking it might be unique to hear what you might be excited about in the next three to five.[00:26:30] Jack Boyles: Personally, I think, you know, the whole promise of blockchain technology, in particular smart contracts, is really going to change finance in very fundamental ways that most people don't grasp yet. When I consider simple things that we had, you know, trade finance, importing goods from another country where it used to be a long, drawn-out procedure with very strict guidelines for the documentation and a very globally revered process for clearing payments and managing the transport of goods. That's a blockchain transaction. That's a smart contract today and it's collapsing.[00:27:05] Well, you know, that's, those same technologies are gonna influence lots of things in the finance world. And so I honestly see financial organizations changing dramatically. So individually as somebody who's working with small companies as a finance guy, I find that very exciting to anticipate those changes because it'll be as important as outsourcing payroll and moving your financials to the cloud and fractionalizing your CFO. It's really gonna change the way things work. [00:27:34] And the, to me, the biggest question is, it's not "if," it's "when." Is it, it could be two years. It could be five years. It could be seven. I'm not smart enough to know what the obstacles to adoption are. Oh, maybe I do. Yeah, I'm guessing it'll be government.[00:27:48] Andrew Seski: Well, I think there are a ton of regulatory pushes being made like, as we speak, basically. But I'm glad to see that a lot of the blockchain applications that are catching some traction are around decentralized finance. It's a really hard problem to solve. But there are a lot of people trying to put certain blockchain applications out there where it's sort of a square peg in a round hole. It's a more natural fit, I think, in a lot of the legalese of smart contracts being digitized. So I'm also looking forward to that. [00:28:17] I always ask whether or not you feel something is, you know, maybe undervalued or underestimated in the world from your vantage point. I know we've touched on a lot of big themes across innovative technology, across the changing role of the CFO. But just wanted to give you the opportunity if you wanted to take the conversation in really any direction where you just feel that people may not fully appreciate something that's more clear to you given all of your industry experience. [00:28:45] Jack Boyles: This is hard for somebody who's a numbers guy to say, but the proper functioning of teams is more important than I ever wanted to admit, you know, as I chose to be a math major and then went, you know, focused on quantitative things in my consulting career. And I think COVID and virtualization of so many organizations, I think there'll be another library filled with the books consultants write in three to five years about what separates those companies that did that well and knew how to bring back and re-engage their workforce. [00:29:18] The successful company that, you know, that we write about five years from now is not the one that said, well, you know, starting 2023, you've gotta spend two days a week in the office. They're gonna be a lot more sensitive to it. They're gonna be a lot more, they'll learn a lot more from how the teams functioned during COVID and immediately thereafter and they'll figure it out. And that's gonna separate the real winners and the teams that have, you know, long-term, excess profitability, and market valuations, and all of those other good things from the rest. Because once you can do that, you're accessing a global workforce, which means you can, you know, do a much better job optimizing, you know, targeted recruiting at the best cost. You'll find centers of excellence and be able to tap into them much more rapidly than a firm that's constrained and tied into some old HR, you know, notions of how this should work. [00:30:11] So I can't predict who those companies are, but that's what I'm watching very carefully. What are the innovative companies doing when it comes to how they manage their workforce, how they reward their workforce now that we've broken the model that says you show up in the same place every day. [00:30:27] And you know, certain industries are, certain companies, those that process medical claims, for example, have led in sort of, well, we don't have to do this in New York City; we can do it in Upstate New York. Or, you know, there are lots of examples of people that have taken a function and done it well, but it tends to be a very routine function and it tends to be easily supported remotely.[00:30:50] You know, the last two years gave us an opportunity to blow everything up and try new models. As somebody who's enjoyed a business career and continues to enjoy seeing what's coming, I'm really looking forward to seeing who the winners are in that race. [00:31:04] Andrew Seski: Yeah, absolutely. I was curious if you, I know you've been somebody over the course of your career who's continuously pushing the envelope on trying to find whatever is on the horizon. I'm curious as to if there are any unique sources that you look to. I mean, I've mentioned on other podcasts, I still get a physical Wall Street Journal. I'm very careful on how I curate social media and how I get news. And it's, you can just so easily be bombarded. I'm curious as to how you curate what you receive or if there are any kind of unique ways that you go seek out information or book recommendations. [00:31:38] And I only ask because Nth Round just launched a newsfeed because we are the same way. Everyone on our team has such unique access to really different types of news and we consolidate it and try to, you know, just showcase what we're thinking about that we think is interesting. It's always kind of a really unique niche between finance, technology, regulation, but it's important to us. And it's just a really interesting mix of news. So I'm just kind of curious as to, you know, as you look to your next revolution of Web3 and blockchain and everything that's happening in the world of technology and finance and regulation, kind of how you're sifting through, you know, the huge amount of content.[00:32:16] Jack Boyles: You know, honestly, we're drinking from a fire hydrant right now.[00:32:20] Andrew Seski: Absolutely. [00:32:21] Jack Boyles: I mean, just, you know, there's so much new technology and I've never prided myself as someone who can create technology. But I've always thought I was pretty good at seeing its applications and where I could really have a role. So having said that, you know, I do scan, I love to listen to a16z podcast. They always seem to be ahead of the curve in terms of identifying a technology and sort of what the fundamental economics are that are gonna, you know, lead to mass adoption. So I find that to be a great source of ideas in thinking about what's coming next. [00:32:54] Myself, I tend to go to raw data. Who is the ex-CEO of Microsoft, not Bill Gates' successor. Who's created a, you know, an American facts database. So I'll open the phone book, essentially, of facts — the Census Bureau, the tax rolls, you know, Bureau of Labor and Statistics — and look at something that may, you know, based on the idea that there's a new technology, say, well, if this applies to plumbers, how many plumbers are there in the world? You know, where are they, what do they do? Really understanding, sort of not trying to solve a global, you know, moonshot problem, but is there a problem everybody has in their household every day that this widget, this service might address? [00:33:37] To me, I am a low-hanging fruit guy. So if there's a problem that says, you know, there was really a better mouse trap, I'd be all over it because I can estimate how many mice there are and think about the problems of addressing that problem. So that's kind of how I think about things. [00:33:54] I do have an example. I ran into a company that was doing field service in electronic repairs. I looked at it and said, well, there's 300 or 400 companies you have to maintain relationships with for warranties. And there's four to 5,000 of you guys across the nation. And there's only one national player? That doesn't seem right. There's an arbitrage. There's a roll up here. [00:34:14] So to me, that was an interesting problem. I worked on it. We merged a couple companies, interesting things. But I'll look at the existing situation in an industry. I think I'm pretty good at looking at the macro forces of how an industry works, how a business works, see where there's a real arbitrage and next opportunity to exploit, you know, not trying to reinvent the wheel, but make it work better, consolidate where possible. [00:34:40] Andrew Seski: Well, stay on after the recording. I've got a very funny story. I'll have to confirm, but I believe it's told on the podcast, it's a Steve Ballmer story about early Microsoft days. But one of our podcast guests had to report to Ballmer and got some very implicit advice in his early career about efficiency and modeling, you know, assumptions after data. So we'll talk about that as we wrap up. [00:35:03] But how would you recommend people get in touch if they'd like to talk to you about any of these concepts that we've covered today or get in touch with Marcum about maybe utilizing some of the services that you're currently serving? [00:35:16] Jack Boyles: The easiest thing. I'm on LinkedIn and very visible, Jack Boyles. There aren't that many of them. So you should be able to find me. There's also a jack.boyles@marcumllp and msn.com as well. So, happy to take all calls and look forward to chatting with anybody who found this an interesting conversation. [00:35:34] Andrew Seski: Excellent. Well, thank you so much for joining The Modern CFO podcast. And I hope to talk again soon.[00:35:38] Jack Boyles: Great. Thanks, Andrew. Take care.‍

Finance and accounting processes are vital elements of any business. In many cases, business leaders expect the finance and accounting department to run as smoothly as possible to ensure that payments are processed swiftly and reports are made on time to gather insights and inform decision-making.But what if there was a way to improve the efficiency of these vital business processes? That’s exactly what Rose Punkunus set out to do with her seed stage startup, Sudozi — a software platform designed to help finance and accounting teams automate workflows, keep track of vendors and budgets, and improve financial decisions.In this episode of The Modern CFO, Sudozi Founder, CEO, and CFO Rose Punkunus talks with host Andrew Seski about her experience starting her own firm—a software platform designed to help finance and accounting teams automate workflows, keep track of vendors and budgets, and improve financial decisions.‍Show Links Check out Sudozi Connect with Rose Punkunus on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn

There’s more to your average sports game than meets the eye. It takes a dedicated team working off the court to prepare for each game and ensure fans show up and players are paid their due.These and more are matters in which Rachel Pearcy, Senior Vice President and Chief Financial Officer of the WNBA's Dallas Wings, is an expert. Drawing from her college athletics experience and history working in the power sports industry, Rachel works tirelessly behind the scenes to ensure strategic growth for Dallas Wings season after season.In this episode of The Modern CFO, Rachel talks with host Andrew Seski about what it’s really like managing a professional sports team as well as how she keeps herself and the organization grounded in pursuit of success.Show Links Check out Dallas Wings Connect with Rachel Pearcy on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn

The challenge of a CFO’s role is more than just being the pillar of confidence and stability in any organization: their hands are on the financial tiller. They must be the cornerstone that a CEO can draw confidence. Whether navigating downturn conditions, balancing your company’s runway with its growth, or keeping your team strong despite the competitive hurdles, they must always be on deck. These and more are matters in which Lee Westerfield - Chief Financial Officer, strategic financial advisor, and Columbia alumnus - is intimately experienced. With his depth of insight and his passion for knowledge, he keeps both eyes on the ever-shifting horizon of success in today’s economy.In this episode of The Modern CFO, Lee talks with Andrew about how things never really change, and why staying committed has kept him both competitive and successful.Show Links Connect with Lee Westerfield on LinkedIn or via email Check out Nth Round Connect with Andrew Seski on LinkedIn‍

In this special episode of The Modern CFO, Andrew Seski sits down with David Magerman, renowned computer scientist, investor, and current co-founder of Differential Ventures.During the mid-90s, David was at the precipice of quantitative investing—parlaying his revolutionary research at IBM into joining mathematician Jim Simons at Renaissance Technologies.‍David’s story is fascinating. For this episode, you can watch the full conversation on Vimeo and YouTube, or listen to the audio version as usual. Enjoy!

Navigating today’s digital world is daunting, especially for businesses. There’s no shortage of tactics to leverage–emails, blogs, videos, webinars, podcasts, ads–and a seemingly endless supply of apps and platforms to execute those initiatives. So, how do you break through the noise and get your company noticed? For Cory Hogan, CRO of Lob, the key is revenue leadership. Whether you’re helping build a community for your employees or offering potential customers a personalized ad experience, your job as a leader is to meet people where they are. And taking a unique approach might just help push your brand over the top.In this episode of The Modern CFO, Cory explains how Lob is connecting the digital world with the physical one, what it takes to provide the right environment for hybrid employees, and the strategy of today’s CROs.Show Links Check out Lob Connect with P. Cory Hogan on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways7:15 – Cultivating an entrepreneurial, organizational spiritThe ambition and motivation that comes with being an entrepreneur have been a part of Cory’s DNA since childhood.“I can't take too much credit again for any of that success. Right place, right time is definitely a theme in my career. I think there's a lot of people who are both harder working and smarter than I am and have, or have not, had those types of events and exits in their own past. I am, to your point though, risk-loving. For better or for worse, I think that appetite and even that desire to go and find increasingly risky but exciting opportunities has just always driven me. Whether that was like, ‘Hey, I'm going to start this little company. I don't know the first thing about what I'm doing here, but this sounds like a really exciting opportunity.’ The ambition that comes with it; the motivation has always just been part of my DNA. I can tell you childhood stories of going around town and picking up rocks, throwing them in my wagon, and selling them door to door believing that somebody would buy them. That level of entrepreneurship and ownership and accountability that comes with the risk side has just always been part of who I am.”9:17 – Making the most of your ad spendAt Lob, the goal is to connect the digital world with the physical one through a tech-first approach to marketing.“Our mission, at the highest level, is to connect the world one mailbox at a time. The premise is in the digital world the most powerful connections can be found human to human or on the physical side, even within the mailbox. Both modern marketers and their audiences, are getting saturated with the ubiquitous, expensive digital ads that are out there. Our phones, our searches, our inboxes, they're all full of ads to which most of us are increasingly numb and oblivious in spite of some really serious and significant investments behind them. I think all of these modern marketing methods will continue to evolve, but Lob is finding surprising success as we bring in this tech-first, digital approach to the direct mail category, which is a $75 billion [industry] that is not going to go away anytime soon, in spite of what might happen in the macro-environment. Effectively, we're replacing what we call junk mail with intelligent mail. Think of highly-personalized content arriving at your home at the perfect moment. You have no choice but to actually open the mailbox, whether you want to or not, and look at all of those pieces and give them at least a couple seconds of thought, which is more than a lot of the messages that come in our inbox.”10:45 – Personalize your marketingPersonalized, timely, and physical marketing tools get your customers’ attention, and Lob’s clients have seen on average 19-times better returns than some other digital-only marketing methods.“We work with a large, leading retailer on what we would consider an ‘abandoned cart’ campaign, similar to what you might see, or not see, in your inbox–Leave an item unpurchased in your e-commerce shopping cart, then tomorrow, here's this beautiful, personalized piece [of mail] in your mailbox. ‘Hey Andrew, we see you were interested in this particular patio set yesterday. There are three others just like it.’ You scan this QR code, go hit a personalized landing page with the discount and some other options available we've curated just for you. And that level of a personalized, timely, extremely relevant message, it really gets attention. It gets results. And without technology and the Lob approach, it would have been aspirational but extremely difficult to pull off when you think about all of the content and the fulfillment that's required for that type of a use case, but it works. So customers are seeing on average 19x better returns than some of these other digital-only marketing methods. And today, Lob reaches one in two households.”13:18 – The strategy of a modern CROThe modern CRO must learn how to master both the art and the science of a revenue system in order to get the best results.“The modern CRO, to your point, is more than just a glorified VP of Sales. The modern revenue team includes all of those customer-facing motions, both sales, service, marketing–the entirety of the customer experience. That's where a lot of my background has been in that customer experience space. So, it's really about revenue leadership. That includes things like customer segmentation, the value proposition, engagement motions, channels coverage, direct versus indirect, organizational and job designs, sizing, deployment, talent and enablement, something we're talking a lot about here recently, metrics, quota, performance rewards like revenue operations, all of that. So I think today the modern CRO needs to master both the art and the science of a revenue system. Strategically and tactically, you have to develop that three-plus-year go-to-market vision and strategy. And then simultaneously jump in the trenches, send that email to close the deal this month or this quarter.”14:30 – Provide the right environmentThe remote/hybrid work model of today makes it difficult to create a cohesive workplace. Leaders must work extra hard to create a safe, creative, and productive environment.“When we talk about the cultural aspect of that, particularly the modern remote/hybrid environment or whatever this is we're all going through right now. I think one theme I'm seeing consistently is that the boundaries–really between professional and personal or work and home–have forever been softened, if not entirely eliminated, destroyed, obliterated, for better or for worse. And I think as leaders, our responsibility is obviously to provide a safe environment, but also one that is collaborative and creative, and of course one that promotes productive work. Zoom has its limits. We've all experienced that just as the office does, too. So I don't think it's one or the other, and the future might even be the metaverse, but I don't think that’s today. I think for the next few years, a lot of our success will be found around the edges, like in the hotel lobbies and the coffee shops and the basement offices, occasionally in the corporate office, sometimes on the balcony or the back deck–not to mention the co-working spaces and the conference rooms. I think it's a very shared and flexible and distributed model versus all in or all out of the office.”15:53 – Be proactive and enforce your work-life boundariesWhen you’re working from home, it’s up to you to create and enforce boundaries between work life and home life.“Individually, that puts more burden on all of us as human beings to create our own boundaries, physically, yes, but also mentally and emotionally. Without clear start and stop times or work and home spaces per se, with everything blurring together, we can work or we can play without forced interruptions and that's not always a good thing. Transitions in my life are almost non-existent. For example, I might finish a very, very intense work negotiation call or something on Zoom, hang up, and then literally be sitting at the dinner table with my family less than one minute later, no transition time whatsoever. Trying very unsuccessfully to be present for my family while that last call obviously still occupies my mind and may take me 30 minutes to wind down to be present for the next moment. I think fundamentally the workforce and the whole workplace thing has, again, modernized and accelerated in the last 24 months. I think that's incredibly positive, but it does require us as leaders and as individuals to make some adjustments. That's more than just better lighting and better backgrounds on our Zoom calls. I think we have to take control of our lives in a new and very proactive way or some of this change may actually control us.”19:24 – Protect your personal lifeYou have to be protective of your personal life, whether that’s making time with family, for exercise, or for a hobby.“I have to be very intentional and protective of my time. As much as I love working, and I truly do, I think of it as something of a hobby for better or for worse. I could work day and night and neglect some other responsibilities and duties within my own life. I have to instead be proactive and protect and block out that time, frankly, in my calendar. And whether that's like, ‘Hey, I'm actually going to have lunch today.’ I'm going to take 20 minutes and that's all it comes down to. I'm going to get away from the screen and the phone. I'm going to get some food. I'm going to sit outside for a minute, get some fresh air. Or, I'm going to make sure that this weekend, even if work trickles into the weekend, as it often does (and I don't mind), that I'm going to do at least one organized formal or informal activity with my family. That I make sure of above all else, we plan for some of that quality time together. And everybody's cadence and everybody's background is different. I did the same thing for my personal exercise and hobbies too, making sure that I actually blocked that time off. And then I attempt to treat that with the same urgency and prioritization I would give anything else in my life, professionally or personally.”24:45 – The makeup of great growth fundamentalsDon’t aspire to grow at any cost. In today’s world, you need to aim for profitable growth if you want a sustainable future.“If you think about the deal flow, where those valuations are going, Thoma Bravo is a nice example in the public sector right now, PE obviously is very active, very inquisitive in ’22. I think in March they deployed over $17 billion. They bought Anaplan, they lost SailPoint. They increased the position in UserZoom. And if you talk with Orlando Bravo, he'll tell you today's best tech companies, particularly the SaaS companies like our own, have great growth fundamentals. This recurring revenue model is going to continually command probably the best multiples over the long-term versus nearly any all industries. But the big button this year is the market has changed. He and others are looking for not just growth, but profitable growth. So those EBITDA multiples are the ones that are trending up today even when all others seem to be heading down. So at Lob thankfully we're in a very fortunate position. We've been careful, even conservative, with our cash, with our raises, with our valuations. We're not exposed like some others might be right now, so we're going to continue our forward motion, but that will include proper emphasis on profitable growth. I think the days of growth at all costs were probably a little excessive in some cases. And frankly, I welcome a more sustainable future.”32:00 – Tap humility to do whatever is necessary on your teamYou can’t always be a leader. Sometimes your best course is to just do your own job and let the leader do their job.“At the job, sometimes everybody wants to be the captain. And I appreciate the aspiration, that's great. We should aspire to whatever gets us going. But the best way to get there sometimes is to just know your job. Know your job and do it really, really well. And rather than trying to tell the captain how to navigate, share opinions and be helpful as necessary. But I think the boat actually has more success, which creates more success for us personally, as we know our jobs individually. And we do them whatever that takes. And I think I've had a good career because I've never been too good for whatever was required on the job. Call it scrappy, call it not having an ego. Certainly not perfect here, but if I needed to do a dirty job in those construction days, and that meant as the owner of this company, I'd have to go and sweep the job sites because no other contractor or team member did that. I’d go straight to the job sites, whatever it took to help us be successful. Do your job, do it well. It has worked really well for me.”

Built on the back of blockchain technology, token-based economics is creating a new kind of environment. This internet evolution–Web3–is being spearheaded by new technologies, NFTs and cryptocurrencies for example, and the people that design these new applications.Gabe Avins, Head of Finance at Alchemy, is helping to enable this shift by empowering developers to build power blockchain applications. In this episode of The Modern CFO, Gabe dives into the future of blockchain development, how startup CFOs can thrive, and how to build a winning team.Show Links Check out Alchemy Connect with Gabe Avins on LinkedIn or Twitter Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways2:56 – Determine long-term valueUnderstanding risk and reward is an intangible skill. You have to be able to make decisions based on what provides long-term value to the company.“Coming out of undergrad, Bain was a great place to develop some of the most core, underlying business frameworks and ways to think about business growth. I went from there to a private equity fund called TSG Consumer Partners, [which was a] really valuable learning experience where I think one of the skills that I picked up there was the ability to understand value. What drives value for companies, why companies are valued the way they are. That lens is how I approach many decisions on a to-the-minute and daily basis where I'm always trying to think big picture. Is what I'm doing today impactful to the business’s long-term value? And if it's not, and that’s somewhere where I find that I'm spending a lot of time working on something, it’s probably a good candidate to be on the chopping block and to spend less time there.”6:18 –The best teams are flexibleYou have to be flexible when you’re working in a small team because there are a lot of gaps. Everyone has to be willing to roll up their sleeves to get the job done.“As I was interviewing with Alchemy, it was kind of funny, reflecting on it recently that I would show up to an interview and someone would say, ‘Hey, what we really need help with is X.’ And I'd show up to the next interview and someone would say, ‘Oh, what we really need help with is Y.’ And then Z, and then A and B and C. Startup life, when you're that few people, it really requires a mindset of, ‘I'm going to roll up my sleeves and do whatever I can to help the team.’ Because teams that are that small can be fragile. If there's infighting, if not everyone's carrying their weight, that can slow the team down a lot. Two people not being on the same page, when that's almost 10 percent of the company not being on the same page, that has some real efficiency loss there.”7:07 – Learn to work collaborativelyAs a finance leader, you have to learn how to appreciate different job functions in order to help people do their jobs better.“When I was at Homebound, I spent my second year as general manager of a new line of business that we were launching. I think that mindset of building something from scratch, or at least getting something off the ground and having to work collaboratively with pretty much every other function within the company, is really instrumental. To me, seeing from the financial operator's seat how decisions and policies can be set can really enhance or take away from others’ abilities to do their job. And so I think that appreciation of what lots of different job functions look like has been really helpful to me as I've tried to help folks at Alchemy use their time best and move as fast as possible.”10:03 – Making Alchemy the best place in the world to workWhen companies have different departments, that doesn’t mean they are siloed. The strongest leaders bridge the gap and have them working in unison.“I think for a lot of companies, there are teams that are creating products to solve timely issues–that's largely going to be your engineers and your product managers. There are teams that are selling the product and educating the world on the product–sales, marketing, customer success, customer support...And then there are teams that are supporting those functions, allowing the company to maximize its potential.That's where I view my role: How do we make Alchemy the best place in the world to work overall? And, how do we set up all functions–whether you're making the product, selling the product, or supporting those who are–as successful as possible?" 11:01 – Startup CFOs wear multiple hatsIf you’re part of a growing organization, you have to don the hat of a recruiter and always look for talent you can add to your team.“With any growing organization, basically in any function, you've got to be a recruiter. You’ve got to be hiring. If you're not able to build your team, then as the company scales it's going to become unwieldy and then impossible, in many ways, to support them as effectively as possible.”11:47 – Resource allocation as a startup means constantly reprioritizing A CFO needs to be able to support different departments by helping them budget appropriately.“I think through a scaling organization, one of the most critical things for a CFO to do, besides the very basics of making sure that an operating model exists, is that the company can budget appropriately. The challenge we're having at Alchemy right now, more so than, ‘how do we rein in spending’ is ‘how do we pour gas…pour fuel on the fire?’ We have some functions who don't know exactly how much they should be spending. And when we as a finance team could give guidance that, ‘Hey, these activities are being really successful for us; really high ROI. We should be investing deeper here.’ That both gives them some positivity and inspiration to go build and also greater clarity that what they're doing is valuable and that they're really doing a good job in doing their part to help us succeed.”15:57 – Get up to speed on Web3 development vs. Web3 investmentsThe Web3 space is constantly changing. If you want to stay abreast of what’s going on, you have to be actively engaged in the Web3 community.“I get a lot of inbound from folks saying, ‘Hey, I want to move into the Web3 space. How do I do that?’ One thing that we look for often is we really like people who are deep in the Web3 space, who know the recent developments that have happened, and know who the major players are. Anyone can get deep in the Web3 space pretty quickly because of how fast it changes. If you took a month-long nap and woke up, you'd be surprised by what the Web3 space looks like when you wake up. And so for those who are interested in making a move into this space, get on crypto Twitter, listen to the podcasts, the YouTube tutorials, etc.--you can get up to speed pretty quickly.”17:05 – The future of Web3 developmentFueled by the increase in the number of developers moving to Web3, the future of the Web3 environment looks promising.“One of our North Star metrics here is the number of developers that are developing on Alchemy's platform. Regardless of if token prices are up or down, if general investment interest in crypto companies is up or down, what we're seeing is a massive secular trend towards uber-talented developers who are smarter saying, ‘Yep, I love this technology. I'm fascinated by the possibilities of it. I'm going to start developing, maybe just on the side to start or start making the full-time leap into the Web3 space.’ And that's what gives myself, and I think a lot of us at Alchemy, great comfort that this is here to stay. This much brainpower matched with this innovative technology is likely to produce some really cool things, certainly in the next three to five years. I think that pace of innovation here, given how much will exist in public forums, should exceed that of Web2. Given that it'll be easier for people to build on top of one another’s inventions.”21:34 – Prioritize humility in hiringSuccessful organizations hire low ego, intelligent, collaborative workers “Most people that I've had the pleasure to work with have been humble, low ego, collaborative individuals; which I feel very fortunate about. It's at another level of Alchemy that folks here are really willing to do whatever they can in order to, number one, help the Web3 community in whatever way they can, and number two, help the company achieve its goals. It's unique and inspiring and awesome to see this group of immensely talented people–super smart, driven, passionate folks who truly have the spirit of, ‘We're all in this together!’”

Many early-stage companies leverage equity when fundraising after considering certain risk profiles and limited liability to the founders. Though, in unique and more regularly-occurring situations, there are other options to consider. If you’re looking for capital but don’t want to raise equity, James Turner of 5th Line Capital recommends looking to venture debt instead. Venture debt is a type of debt financing for venture-backed companies that helps them fund their businesses without diluting capital through an equity raise. While some venture debt has a higher interest rate than a bank like SVB, it likely won't be as expensive as the equity. In this episode of The Modern CFO, James explains the mechanics of venture debt, when to use it, and how to be more strategic overall with your capital.Show Links Check out 5th Line Capital Connect with James Turner on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways5:54 – The best time to raise venture debtKnowing when to raise venture debt can be a challenge. The best opportunity for companies is when they’re in between major equity events.“If you're a CFO and you're not one hundred percent well versed in a venture debt market, or this isn't something that you've done very recently, that can mean 30-40 names you have to shoot a ton of emails to. You have to disclose all your documentation, [and] make a bunch of phone calls to handle preliminary diligence processes. A good chance for them all to come back and say, “No.” So, I'd say the opportunity that we've identified as a result is that we know who fits where. It used to be, if you were a SaaS company, and you raised money from a big name VC or any VC really, you knew who your options were. But that was the only time you could really go raise venture debt. So where we actually see the greatest opportunity in the clients we work with is they’re most of the time in between major equity events.”9:40 – When to use venture debtAs your company grows, venture debt will be more available. Once you hit the $2 million ARR threshold, more venture debt opportunities open up.“If you're a traditional business-to-business SaaS company–you've hit all the metrics, and have a decent retention margin. You can still be cash burning, but annual contracts, things like that, the bread and butter stats–At the earliest stages, at maybe $500,000 a year or so, if you don't have a robust capital need, there are early-stage SaaS financing options that have popped up. A lot of them are platform-based like a Pipe or Capchase. (consider linking) But once you hit around the $2 million ARR mark, that's when true venture debt options start opening up to you. You can look at taking on maybe a million-dollar term loan or a lot of credit at that point, and that can continue scaling with you as you grow.”10:24 – How 5th Line Advises Clients on Venture Debt Options Companies don’t always need all of their capital upfront. Your venture debt can scale with you as you grow.“Most of the time, what we're doing on educating our clients is they'll tell us, ‘Hey, we're doing $10 million a year. We need $12 million or this won't be a fit.’ Okay, do you need $12 million now? Or do you need $12 million over the next two years? Because that's how they've always thought about equity. They're like, ‘Oh, well we actually need $12 million over the next two to two and a half years.’ We run through their plan with them, say, ‘Okay, let's model this out. Well, let's start with five to seven now. And that scales with you over time.’ And we've had a lot of clients come around to the idea as a result. A lot of entrepreneurs, especially, hear the word debt and they’re like, ‘No, we're not sure. How do we repay it? We're burning cash.’ Venture debt providers look at companies in a very similar way that the equity investors do in my personal experience, with the caveat that obviously as we don't need a 10x return on this, and we also need to be paid every month on our capital, but they are banking on the ability for the entrepreneur to grow. They are banking that there is validity in what they're offering and scalability and that eventually down the road, someone will come along and buy the company or provide another equity investment.”12:58 – Know where your money is goingYou shouldn’t take on capital equity or debt unless you know exactly where it’s going to go. Figure out a product roadmap before you borrow.“I think one of the common misconceptions is that a lender's going to be meaner to you than an equity investor. At the end of the day, everyone's writing a check to you, and everyone's looking for a return. So, my theory personally, and this is my personal opinion, is you should never take on any capital equity or debt unless you know where it's going. Obviously, you want to have room for a rainy day or an off-plan scenario, but if you're raising, whether it's $5 million in equity or debt, you should have a good idea, in my opinion, on where at least $3 million of that is going. You should have a product roadmap, a hiring plan for sales, marketing–whatever it may be. What I've seen that works the most for companies is just that.”13:37 – Be strategic with your capitalDon’t raise capital if you don’t need to. Venture debt can increase your cash flow without forcing you to sell a percentage of your business.“We're actually working with a few companies now where they're profitable, or at least break even, which is rare in the growth stage market. They have a pretty extensive product development roadmap and they're trying to drive towards an acquisition in a couple of years. They may tell us, ‘Well, we can raise another venture round, but we're cash flow break even. We don't want to raise another venture round and sell off 10% of the company to get the same amount of capital.’ So we're in the process of securing them a loan that's going to allow them to go into a cash burn mode, but it's very strategic. They have a direct correlation, a proven strategy that scales their top line. When someone's buying a company, that's obviously what they look at: what is the top line? I think the best successes come from when you know you're going to spend the money, and you know how it's going to go out the door, and making sure that it's not just capital they're going to have sit on their balance sheet for no reason.”16:08 – Repaying a loan may be a better route than justifying a valuation down the roadIf you take on more equity than you need, chances are you’re going to underperform. You need to ground your ideas in reality.“The vast majority of companies who raised a Series B end up drastically underperforming, because they have to tell their VCs, whether it's current or prospective, certain targets to justify these massive valuations. And they're just not grounded in reality. They're not something that’s anything more than numbers on a spreadsheet that they build out. So they ended up laying off sales teams, missing quotas, and then they have flat or down rounds, whether they're inside or on a new round down the road. I always tell people I think it's a great opportunity for the debt markets. Like that CEO I told you about; I talked to right before Christmas, $12 million for his company is nothing. It's a very good deal for his side of the company, and that's all he needs. He's not going to have to justify a massive exit down the road, based on that $12 million raise. He just needs to be able to repay that loan over the next 12 to 24 months until he sells the company. That's really where I think companies see the most value.”22:11 – Understand your optionsThere are times when your best option is to go to a bank or raise venture capital, while other times venture debt is your best bet. Weigh your needs carefully so you know which to choose.“What I always tell people is that if someone just wrote you a $25 million check, do not come to us. Go talk to a Silicon Valley bank. They'll give you what you want at 3%. You can't beat it. So I'd say for the clients that come to us and they're the best fit for us, it's, ‘I'm looking for $5 million. This is where I'm at. This is what I got most of the time. These are some issues I've had over the past couple of years and going forward, what are my options?’ And then we'll tell them, just to your point, these are your options. This is what it’s going to look like. We always outline upfront before we engage with them. These are the risks and the hurdles that you'll see, and that we should be prepared to review during diligence, whether it's retention, liquidity, flat revenue, or things like that. And then what terms and structure will look like. Sometimes they say yes, sometimes they say no–but if they say yes, then really where we plug in is, ‘Okay, here's what you're going to need to get everything wrapped up.’”25:45 – Venture debt is cheaper than raising equityWhile venture debt has a higher interest rate than a Silicon Valley bank, it’s still cheaper than raising a round of equity.“What we try to educate the market on is, one, it is an option either sooner than you think, or in different scenarios than you think. You don't need a big equity round. You don't need to be generating $10 million a year. As far as beyond that, sometimes it's on the other side. Yes, it's an option, but it's not Silicon Valley Bank rates. It's not 3%. It's not your SBA loans, whatever an SBA deal charges nowadays, but the rates are 8% to 12% on the rate. Compared to your car loan or an SBA loan, yeah, that's pretty high. But if you compare it to an equity raise, it's a lot cheaper. So there are two sides to education. One is on if it's an option, and let them know that it is in that case, but also letting them know you may not have all of the options that you've thought. This is where you fit in the market. And we do that education for clients upfront to let them know what their options will be if we go forward with the process.”28:44 – Agile CEOs can navigate changeDuring the pandemic, many companies were forced to evolve or fail. The most agile CEOs were the ones that helped their companies shift to a new business model.“We've talked to some CEOs whose business model did a complete 180. They are in a completely different market offering something completely different, and they did it during the pandemic. They saw an opportunity and quickly capitalized on it. They had to go outside their comfort zone. They had to make investors comfortable. They had to work with their team on completely changing their business model or their customer base. And they've done super well. A lot of people underestimate founders. Granted, some get overestimated in that an idea can sometimes lead to a billion-dollar valuation sooner than it should, but at the same time companies had a very hard time over the past few years. And if you're a good founder and especially if you're the founder and CEO, you've figured out how to navigate that. You’ve figured out how to work with limited or minimal resources. You’ve figured out how to capitalize on an opportunity that probably didn't even exist six months earlier, but you've been able to save your company as a result.”30:22 –  Use equity sparinglyVenture debt can be good for both investors and CEOs and CFOs, as long as they know how to use it properly.“If you're an investor in a company and you're not looking to write the check that your portfolio company needs, venture debt could be an option better than you think. You may not get the markup or the write-up as far as valuation in your book just yet, but you may get a better return on your overall investment two years later when they go to exit and you aren't diluted by another equity investor coming in. If you are a founder, CEO, CFO, whatever may be in a company that's looking for capital, it might be available sooner than you think. It might be a better alternative than you think. Equity is obviously the go-to fundraising process for companies because they do see all the flashy headlines about it. But it may be an opportunity sooner than you think to be able to get some capital on the balance sheet and you may not get the valuation right up just yet, but two years later, you may be able to exit and own an extra 5% to 10% of the company as a result.”

The route to transitioning from “Big 4” accounting to early startups is not always a natural transition, but for that exact reason–and more–Melinda Smith is one of the most unique CFOs we’ve had on the podcast. She demonstrates how to best leverage practical, financial, and technical skills into emerging firms like she has done in the past at now-massive companies like Venmo. On this episode of The Modern CFO, Melinda shares her insights on driving culture, building a strong finance team, and what it means to be a custodian while raising venture dollars.Show Links Check out ChaosSearch Connect with Melinda Smith on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways5:21 – Your team is your foundationWhile most CFOs are thought of as the public face of the finance team, they are also an extension of the firm's culture and mission. At startups, CFOs tackle some of the most important functions in the company, including hiring.“I think, from a leadership perspective, building the team is one of the most critical things in an early-stage business. It's also true of a finance team inside of an early-stage business. Rapidly realizing that the experience matters of people you bring onto your team, the training matters for building and growing your team. It's the energy as a leader that you put behind building the business–building something, partnering with the team, and providing those operational insights and the custodian of where that investment is going–that really helps motivate and drive and, ultimately, retain a great finance team.”6:18 – Drive the culture of your startupAs CFO, you are a key driver of the company’s culture, especially in the early days. Make sure you are in alignment with what the founders and CEO want that culture to be.“In my experience, I've found that the CFO at an early-stage company has a lot of responsibility for some of the more traditional human resources functions. I have been in a role where I have some HR support, but I am also driving a lot around the culture. I think it's really important to be true to the founders and the CEO to some respect–maybe the founder/CEO and how they want to drive the culture of the business–but ultimately in a startup, you just have naturally that energy of a team and the passion of a founder that you can get behind.”12:42 – Timing is importantIn a young organization, timing is everything. Each business has a different trajectory, so you can’t rush the growth process.“The experience that I have gives me a good perspective on where we can be looking to partner with certain organizations–to really build that value towards an exit, or just generally thinking about each business uniquely. I think each business has a different trajectory and there's honestly a little bit of luck and timing that goes into when a founder's coming to market. There are businesses that can be incredibly efficient with their funding. They are right on the timing to build that value and they perhaps grow very quickly, but I think in the normal and more usual case it is more of that longer timeframe to incremental progress, building value over time, taking 10 customers that you have when you first start, figuring out how to build that into a hundred customers, figuring out what that timeline is really going to look like uniquely to your business for the sales cycle and all the other metrics that go into determining how fast your company is ultimately going to grow and achieve that exit.”16:16 – Becoming a custodian of your funding Your role as CFO is to be a custodian over the company’s funding. You need to determine how much to bring in, and what to do with the funding once you’ve secured it.“One of the interesting things I see in the environment we're in today is companies that are raising these gigantic rounds of funding. I do think that there is a role of a CFO to help the team determine how much is the right funding to bring on and balancing that with the dilution that you're taking on in the business. And how confident you are in what you see as the data points towards your growth rate, that supports that valuation at the end of the day. I think there's a propensity, potentially, to take this big amount of money and then have trouble being responsible, I guess, about where to invest that money. That ties back to my view of this custodian of the funding and how do you invest every dollar to drive at least a dollar of value, so that effectively you're turning that dilution that you took from selling equity in your business down to zero.”18:53 – Women in technologyThe best way for a woman in technology to succeed is with the right support resources. As society shifts to a less traditional work culture, that support is easier to come by.“I think that some of the quality of women in the workplace is fundamentally dependent on this concept of having the right resources to support them in that journey. Whether it means flexibility for a two-job family to split up everything that needs to be done in a day; whether it means splitting up childcare drop-offs in the morning or in the evening, or heading to the soccer field for a four o'clock varsity soccer game, then getting back to finishing up your email when you get home after dinner; spending time together as a family; cooking on Sunday afternoons so that you have food to reheat during the week for dinner. I think employers fundamentally need to realize that those old days of a single breadwinner dedicating nine to five in-person in an office are long gone. I think the interesting part about today's world is that COVID has accelerated this flexibility for families and for that two-career household where it’s a lot easier now when you're working from home, at least for people who have the opportunity to work from home, to really split up that flexibility. And I'm hopeful that that's going to drive more opportunity for women and that support structure that they need to accelerate their careers.”20:47 – Scaling for both company and investor value As you lead up to a new round of fundraising, it’s important to build up as much value into the business as you can.“In the next 12 months, we are working towards our next fundraising, so it's all about building as much value in the business this year as we can leading up to that fundraising round. We're really laser-focused on identifying that repeatable business model where our ideal customer profile is focused and how we can also look towards building the right team, spending a lot of time on the hiring process, and this environment right now, especially for hiring engineers, I know lots of your listeners out there probably have the same challenges we have.”21:44 – Building a diverse team in 2022The best and most effective teams are the ones that have a commitment to diversity, so be intentional about building a diverse team.“I'm a big believer in building a diverse team. The best teams and the most effective teams come from a commitment to diversity, which is also increasingly hard in this COVID environment to find workers who are now demanding that they can live in dispersed locations with flexible working schedules. So really focused on building the team. And then ultimately it's building the top line. A lot of what I spend time doing these days internally is being that data-driven advocate for where those proof points are working in terms of marketing campaigns that are driving the best qualified opportunities, moving those down the funnel into sales accepted opportunities. And then ultimately, what is the velocity that I can forecast for how the growth of the business is going to support our next fundraising?”23:55 – Keep your culture consistentWith a dispersed workforce, it can be difficult to maintain a sense of unity and culture. Work to keep your culture consistent, whether that means regular Zoom meetings or other check-ins.“We also do have a fairly dispersed workforce. We have some folks in the UK, and we also have a bunch of locations now in the U.S., and so to your point, Andrew, it's really difficult to keep that culture moving. Some of the things that we're doing–we have town hall meetings over Zoom every other week. That's been a big part of building the culture of the business given the realities that we live in today with everybody on Zoom. We hold these town hall meetings, and Thomas Hazel, who's our CTO, is also quite the character and he likes to open up our town hall meetings with some kind of fun activity. We then spend a lot of time making sure that we're connecting our business wins in those meetings so that the entire employee base can understand how the business is progressing, and really building that excitement coming from that passion that our founder has in the business.”28:28 – Put in the workAt the end of the day, CFOs need to put in the work to partner with the other leaders and learn as much as they can about the operational aspects of the business.“I think a lot of what I've learned has been rolling up your sleeves and putting forth a partnership with all of the other leaders, trying to learn as much as you can about operational aspects of the business, and being a driver of that data analysis internally. Not only does the CFO have to worry about more of the mundane accounting, traditional flows of quote to cash, procure to pay, and things like that, but the value of that first CFO role is learning as much as you can about the operational aspects of the business and how you can drive whatever data elements you can out of early learnings, especially in that early stage mode. Learning from every data point you can is really going to help you become a better custodian of where to invest and help those leaders direct that funding.”

Culture is the core of every company, but keeping it consistent isn’t always easy, especially in an increasingly remote-first world. On this episode of The Modern CFO, Tim Brown shares how Dakota prioritizes culture-building and why CFOs should think about the more permanent changes brought on by the pandemic.Show Links Check out Dakota Connect with Tim Brown on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways5:54 – The pandemic caused a shift in business practices for sales professionalsTravel and in-person meetings halted during the pandemic, which meant investment sales professionals had to find other means to connect quickly.“When the pandemic hit, all that changed. Travel was essentially halted for quite a period of time. People were not taking in-person meetings. The vast majority of people were not working in offices, and it just required a very quick, fundamental shift in terms of how you could continue to be effective in that role. I think our team adapted really well, the industry adapted really well–as did a lot of industries. You can't meet live, you meet over Zoom, you meet over some of these other means where you cannot be in the same location, but still have effective discussions. Certainly, it's an adjustment. If you've spent your entire career on the road, and then all of a sudden you're not able to do that, that’s a pretty significant adjustment. I think the software side of our business actually gave us a little bit of a tailwind. Dakota Marketplace was a means that could help bridge that gap between what investment sales professionals were used to, to what the current situation was.”8:07 – Lead with culture during the hiring processIt can be challenging to maintain a consistent culture, especially through periods of growth. Transparency into the important parts of your company culture during the hiring process helps build a strong, well-aligned team.“Culture has always been very important at Dakota. When I joined about four years ago, there were roughly 10 people, many of whom had been at the firm for quite some time. It was very evident from day one what that culture was. As our business has started to grow, we doubled the size of the team in the last 18-24 months. So, coinciding with the pandemic, it's been very important for us to not only formalize or write down, for lack of a better term, what those cultural components are (as opposed to just people understanding what they are), but to lead with [the cultural components] during the hiring process. I think each firm will have a slightly different culture. For the most part, no culture is better than another. I think it's knowing yourself as a human being. It's knowing who you are, knowing who you are as a company, knowing what attributes are important to everyone at that company, and that really helps you identify people who fit well and have similar outlooks of the world, and are likely to be great teammates.”9:48 – Emphasize what’s important to your companyRecognize which components of your culture are most important to the company. That way, potential hires know what to expect from your business.“I do a lot of the initial interviews of candidates that we're meeting with. Inevitably, culture is one of the first things that’s brought up. It's one of the things that we like to emphasize. ‘These are the things that are important to us.’ It's just really recognizing what are those components of your culture that are important that you want people to come in and sort of add to and build on. Like I said, for us, it's really led to a greater degree of success in bringing on new teammates. One of the challenges a lot of companies are facing is retaining talent, and it's really helped us retain employees as well. Because we're doing a better job, upfront, of laying out what's important to us and our culture, people are self-selecting into that.”11:05 – Be a true business partner to your team and CEOCFOs are no longer just experts in finance. Today, the modern CFO is the strategic confidant to their CEOs and a driver of sustained culture to the rest of their teams.“For most companies, gone are the days where the CFO is just the expert in the finance organization. I think those are table stakes for any CFO. I think that a modern CFO is really that true business partner of the CEO and the management team in helping to lead a lot of different components of the organization, not necessarily just the finance component. Certainly, culture is a key component of it. A lot of larger organizations will have separate HR departments, but at smaller organizations like Dakota, that CFO will wear multiple hats and the HR recruiting aspect is a big part of that.”14:33 – Pinpoint where your investors’ incentives and your company’s culture intersect“A family office of a very wealthy family that may have made money under a certain industry, et cetera, may have a very different perspective in terms of what's important to them than a foundation that's geared towards a specific purpose and is utilizing their investment portfolio to help drive income or other value creation that they can then flow through the foundation towards their purpose. So, each one is going to certainly have different things, but I think there's a component of that, of macro long-term trends, ESG being one of them. Then any given day, week, month, year, there's going to be more components that are pressing for that time. Not that those other things aren't pressing, but what I mean by that is in an environment where we sit today, where everyone's looking to the Fed to raise interest rates, and how people look at their portfolios or what the mix of those portfolios are is ever-changing.”16:10 – By investment sales professionals. for investment sales professionalsIf you want to add value for potential customers, find the tools that will help them be more successful.“Our target customer for all of the products and services we create is an investment salesperson–A person who wakes up every day to raise money for the investment strategies that they represent. Dakota has a number of people at the firm, including our founder, who have been in that industry their entire lives. I think we have a very good perspective as to what types of tools and services can help that person be more successful in their job. One of the things that's exciting to me about Dakota is that we're never short of ideas of other things that we could do, or other ways that we could help our customers grow their careers. So what's exciting to me one year, three years, five years out is just looking at our product pipeline, seeing what's coming, and knowing that there's a bounty of ideas that will come after those that will continue to help us continue to add value and drive value for our customers.”17:39 – Give your ideas a shotEven if you don’t have all the details of your idea worked out, give it a shot. Failing fast is better than not trying at all.“Not everything has to be a fully-baked idea before you're going to try it. If you have an idea and you have the basics down, give it a shot! What's the worst thing that happens? It doesn't work. You kind of have that ‘fail fast’ methodology. If it doesn't work, move on and try the next idea that's on the list. I think it's one of the things we've done while here. We've done some things that haven't been successful, and then we've done some things that have been wildly successful, and we double down on those and continue to do more and continue to develop more. One of the things, having spent a fair amount of time with venture capitalists in Silicon Valley in my prior life, is this methodology of ‘fail fast.’ I think that's one of the things at Dakota that we live by. Give it a shot. The worst thing that happens–It doesn't work. Limit your losses, move on, and try something else.”19:31 – Shift your perspective on in-office workMany businesses are pushing people to get back into the office, but not everyone wants to go back to five days a week in-house.“One of the things that I think is underestimated in certain circles is the fundamental change of how people view work and view spending time in an office. That’s occurred over the last couple of years with the pandemic, but you see these changes in history, where different viewpoints are fundamentally changed, and then don't go back to where they were before. I do think that the way people view work and the way people view working in an office is one of those things that's changed over the last two years. Now, a lot of times deadlines have gotten pushed back just due to variants and waves, if you will, but there are still firms talking about bringing back their employees to the office and having them there five days a week. It shall be seen what happens, but I do think there's going to be some challenges with doing so.”21:32 – Changing times call for updated policiesPotential employees are now looking for a more flexible working environment. Make sure your business can keep up with the changing times.“We've done a lot of hiring over the last 18-24 months, and inevitably one of the first questions we always get in the interview process is what is our policy there? Two years ago, a lot of those questions were born out of people not being comfortable being around groups of people, given what was going on. I think of late, increasingly, it's more people that are, quite honestly, looking [for that], because they see their company at least outwardly saying that at some point in the near future, they're going to expect everyone to come back to the office every day. That's just not something they're interested in. So, I do think it will be, as hopefully this pandemic starts winding down and things return closer to normal, one of those things that’s never going to return to where we were two years ago. Many entities will end up with this flexible philosophy where some days are in the office, some days you're at home. As long as you're effective, it works.”23:59 – Write down your valuesIf you’re struggling to define your culture, write down the values that are most important to the company. That will help you define what your culture is both for yourself and for potential hires.“Culture is one of those things that people know and understand. For us, one of the turning points in terms of adding to the team is when we formally wrote it down. It sounds like the simplest thing, but getting the right people together, formally writing it down, and getting everyone behind it...Then we began to lead with that in our interview process. But again, it's not that different cultures are better than others. It's more so just being clear about what's important to you and what you want to be important for the people that join your firm. I think it has really helped us add some great teammates who buy into that culture and have helped us grow and expand it.”

Jared Shaw didn’t take the traditional path to the financial world. When his classmates were starting prestigious internships, he joined the military and gained valuable leadership skills. Today, Jared is focused on solving problems: specifically, solving the distribution problem in the world of cryptocurrency.As the Head Of Finance at Gemini, Jared is deeply embedded in the frontier of crypto and digital assets. Gemini’s goal is simple yet ambitious: create a platform so secure and accessible that everyone will feel comfortable adopting it, no matter their age or background.On this episode of The Modern CFO, Jared explains how he fell down the crypto rabbit hole, what’s so different about Gemini’s approach, and why every company needs a digital asset strategy.Show Links Check out Gemini Connect with Jared Shaw on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways2:57 - Jared’s path to cryptoWhen Jared joined Ernst and Young’s San Francisco Bay Area consulting division, he began to encounter startups who were disrupting the traditional financial services industry.“I was helping financial services firms stay out of trouble. Banks, broker-dealers, insurance asset managers were all coming out of the financial crisis. Everyone was dealing with regulatory pressure, and so there was a lot of work helping them stay out of trouble. I started doing that in the San Francisco Bay Area, and shortly thereafter in the 2014-2015 timeframe FinTech really started to emerge. And being in the Bay Area, I was geographically fortunate to be able to focus on that sector and help EY build out its FinTech practice and approach. That was tremendous. Being able to just run around Silicon Valley and meet with all these great emerging startups that were really trying to disrupt the traditional financial services industry. And that's what got me first thinking about how can I work in a financial career, but maybe a little bit differently than the traditional path? And then that largely turned into cryptocurrency emerging in 2017. And in 2018, I did a large consulting engagement for a couple of crypto firms. And then, as everyone who gets involved in crypto, I fell down the rabbit hole and knew this is what I wanted to do with my career.”8:00 - Learn to navigate ups and downsWhether you work in a new environment like the crypto space, a startup, or a large company, you need to be prepared to ride the wave of disruptive technology.“We've grown 2x in our headcount over the last year. And with that, we're still all wearing many hats. And so the day-to-day is just all over the place. What I think that means is an ability to be able to handle a volatile changing environment. Certainly working in cryptocurrency, all of the things happening in digital assets somewhat dulls one’s senses to massive amounts of change, or things being really great one quarter and not so good the next quarter. I think an ability to be able to navigate through those ups and downs is something that we learned really, really well at Gemini and in the crypto industry more broadly. And so having that mindset of focusing on being consistent, of looking towards the future in a measured way. Being able to stomach the ups and downs in the short term is something that's critical for anyone within a startup environment. And probably I would suspect important for someone who is the CFO of a large company or operating a large company, because innovative, disruptive technologies are only going to impact those industries more and more.”10:10 - Taming the wild west of cryptoGemini’s founders, the Winklevoss twins, are focused on a path that will make crypto accessible to and trusted by a mass audience.“The genesis of the company was very focused on Cameron and Tyler Winklevoss, our co-founders’, early experience investing in Bitcoin. Which was as they would put it the wild west, very uncertain, unsecure. Large hacks like Mt. Gox historically made the experience really difficult for the average person. Their vision was trying to make this experience much more approachable for the average consumer. That first started out with the institutions, obviously building weapons-grade security and safety of an environment for buying, selling, storing cryptocurrency. That is the core. And Cameron and Tyler had the vision that ultimately there needs to be regulation, there needs to be rules around this. Because that will bring broader mass adoption. It really focuses on security and trust, and that's something that Gemini has built its brand around, and we will continue to build a brand around.”13:10 - Solving crypto’s distribution problemThe next frontier of crypto is taking it beyond the hands of users who are digitally native and placing it in the hands of older generations.“I think cryptocurrency has a distribution problem. It is very accessible to individuals who are digital natives, who understand having value stored on the internet and who have grown up that way. But there is a vast amount of individuals and wealth out there that are not digital native, and individuals who hear about cryptocurrency but have never had the desire or trust that a digital native person has. So perfect example, you mentioned Andrew before we started that your dad was an RIA wealth manager. I'm sure your dad has a number of customers that ask him all the time ‘What about Bitcoin? What about Ether? Or my child tells me I should buy some Dogecoin.’ Your dad's customers are going to do whatever he tells them. They're not going to go outside for a Gemini account or some other platform and get involved in cryptocurrency. And so that distribution of being able to get folks like your dad’s customers into cryptocurrency is what we think is really the next frontier.”14:37 - The genius of a crypto credit cardGemini’s newest project is a credit card with crypto rewards, where users can instantly select tokens to collect.“Everyone swipes a credit card. And if we can attach the experience of cryptocurrency to something that you do every day, that is a fascinating new entry point for individuals. Even if someone did sign up for a Gemini account, they still didn't have to think about, okay, which token do I want to buy? And now do I buy it today or do I buy it tomorrow? There's a lot of nervousness around that. But if you're just collecting or being awarded cryptocurrency every time you swipe a credit card, that's fantastic. The great thing about the card is it's instant. So you earn up to 3% on purchases. You can pick any of the tokens we offer on our platform. And once you swipe, the next minute that crypto hits your account and it's available for you. You don't have to wait for the end of the month for your statement period, or whatever. It's yours. So you really get a chance to interact with it right away, which is we think is a really compelling offer.”20:50 - Don’t chase shiny objectsGemini’s staying power comes from the fact that they are laser-focused on their vision of secure, accessible cryptocurrency.“Gemini is very fortunate in the sense that we have founders who have a very long-term vision, and have invested in this sector not only personally, but also within Gemini. They've backed the company, and Gemini is very closely held from that standpoint. That long-term view is really important to us. And I think it's something that's not shared consistently among other private companies who might be looking for a quick transaction, or might be looking to release a quick product or service that gets them acquired. And I think our founders are perfectly happy keeping this company private as long as possible. We might not do that, but I think that long-term view serves us, because we're not chasing the next greatest shiny object. There's certainly many, many different things we can go after in the cryptocurrency sector, but an ability to be thoughtful and patient and go after the areas that we think are most long-term impactful is really important.”24:09 - Create a digital asset strategyIf you don’t ride the wave of crypto and digital assets now, you could find your company left far behind. Jared recommends tapping your internal employees for inspiration.“Should companies have a cryptocurrency or digital asset strategy? 100%. It kind of makes me think about companies maybe in the early nineties, as there was this little thing called the world wide web developing, and a lot of companies thinking maybe it wasn't that important. But there were probably some very smart junior people within the company who were saying, hey, bang the table. This thing is going to be huge. We need to get involved with this new emerging technology called the internet. And so there are probably a lot of people at companies today in a similar boat who have mid-level or low-level roles that are super passionate about digital assets that are banging the table. If you're a company and you have those people, listen to them. Hear them out and understand where they're coming from in regards to this technology. Because you need to hear them now. If you don't act quickly on that, the technology will move so quickly and move away from you. And so I would say mine your internal employees for what they're passionate about on this frontier, and make sure you take advantage of that.”27:08 - The difference between a manager and a leaderHoning leadership skills takes a lifetime. There are no quick courses that will grant you leadership powers.“A manager is someone in my view that oversees things and processes. Leaders are people that influence others to do really hard things, or motivate people to accomplish really outsize objectives. And managing and leading are two very different things. And like I said, there are a zillion books about how to lead. But if you're not practicing it and looking at it every day, it's really hard to keep up. As you grow and evolve, or as your leadership style or your influences grow and evolve. I think it's important to continue to focus on that. So whether it's taking a course or reading a book, that's one thing. But more likely, it's thinking about how you handle different situations, and looking around you, looking at how others handle various situations and applying that to your own leadership style. So it's a never-ending process. It's something that can continuously be focused on. And I wish more companies focused on that ongoing learning.”29:02 - Leave your ego at the doorIf you want to work at a startup, you need to roll up your sleeves and do whatever work needs to be done, without resenting the tasks.“Working in a very fast-paced startup requires that individuals be able to do a lot of different things. And so not being shy about rolling your sleeves up and doing something that's maybe slightly below your role or responsibility is needed on a daily basis. And two, having a low ego. So this is in line with rolling up your sleeves. If you have a low ego, you're willing to do what it takes to get the job done and not rest on a title, or a laurel, or some other thing that you might think is owed to you. If you can roll up your sleeves and have a low ego, I guarantee you you’ll be successful in whatever job you’re working on.”

In 2012, Woodie Neiss was a CFO and entrepreneur who was seeking to change the rules of the investment game. When President Obama signed his crowdfunding bill later that year, it opened a whole new world for individuals to participate in the private capital markets. Today, the crowdfunding industry has surpassed $1 billion in funding and takes place almost entirely online.Woodie continues to empower entrepreneurs through his latest venture, GUARDD, where he automates the process of ensuring audited financials with the goal of creating a more liquid environment for private company founders and shareholders. He is a vanguard of empowering founders throughout the lifecycle of their businesses from fundraising to exit.On this episode of The Modern CFO, Woodie shares how he architected the roadmap of Regulation Crowdfunding (Reg CF), what is so powerful about crowdfunding, and why one-size regulation does not fit all.Show Links Check out GUARDD Connect with Sherwood (Woodie) Neiss on LinkedIn or Twitter Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways2:30 - Tackle outdated investing lawsIn his early days as an entrepreneur, Woodie was frustrated by the inability to tap into individuals as investors, like his large customer base.“I had started a company with my brother-in-law called Flavor RX. We flavored medicine for children so they’re more compliant. The coolest thing about our company was a mother got her kid to take her medicine by going into the pharmacy and asking pharmacists to flavor it. The kid took the medicine and she's like, ‘Oh my God, you just saved me countless hours of struggling.’ I would get a phone call the next day: ‘How do I invest in your business?’ I thought, well, you can't because we can only raise money from accredited investors. When my lawyers told me this, I knew this was a complete missed opportunity. I have hundreds of mothers calling me saying, ‘How can I become an investor in your business?’ They can be a marketing agent for my company. Why can't I take money from them? These laws were written 80 years ago to protect retail investors, and you have to live by them. I thought was stupid.”3:53 - How the crowdfunding bill was signedWoodie and two friends from business school ultimately drafted a new framework for Reg CF. President Obama signed it into the Jumpstart Our Business Startups (JOBS) Act in 2012.“We wrote this eight bullet-point framework for investment crowdfunding. We went to the SEC, they said it was cute. Then they said, You should head over to that building with the white dome on it.’ I kid you not. Naively enough, we just walked over there, because we had a few days in Washington. We started knocking on the doors of both Republicans and Democrats. People were shocked that entrepreneurs were there, so they listened.”6:04 - Connecting retail investors to the private capital marketsToday, crowdfunding doesn’t just live on websites—it’s been used on social media as well. Woodie never anticipated the breadth and reach of his bill, which he sees as bringing positive transparency to the investment space.“The industry launched in May 2016. Just this past month it surpassed $1 billion in funding. When we put this together, I was thinking, ‘Wouldn't it be great to use a website to be able to allow people that have a customer list, or their own friends and family, to invest in their business the same way that a campaign on Kickstarter or Indiegogo can?’ To see people using Twitter, Instagram, YouTube Live as the outreach, the public solicitation, I think is awesome. It really connects the people to the entrepreneur in a way that a website just doesn't do by itself. I think the advances in technology are really benefiting the industry because it ties you closer to the people that are raising capital. I think that's all good, too, because I think it brings this level of transparency that you otherwise don't have in the private capital markets.”8:43 - Deciding which constraints would minimize retail investor riskOne major fear was that crowdfunding would end up like gambling, leading some investors to lose everything. That’s why Woodie and his team wrote in limits based on annual income.“Any accredited investor can risk everything that they have in one company. Do they? No. They're smart enough to diversify their assets. Now, when we built this framework we were concerned that people might be risking more than they can afford to lose. This is the only segment in the private capital markets where investors are capped on how much exposure they can have. We built into the framework, based on net income, or annual salary I should say, as an individual investor, how much you make or how much you have saved thresholds as to how much you can invest. That doesn't exist anywhere else. People will tell us that’s pedantic, but quite frankly that was an investor protection mechanism we put in there. So, the investors that are saying, ‘I think it's too risky for certain investors to put in there,’ my response to that is well, there are caps and limits on how much people can risk.”11:11 - Tap into the power of the crowdSome assumed crowdfunding would operate only within the San Francisco and New York venture communities. That hasn’t been the case.“The deals are the same deals that are being seen in the Bay Area and New York City, with the same investors. What we've seen is the evolution of this industry, where instead of those people saying, ‘You know what? You shouldn't go to crowdfunding.’ They're saying, ‘Well, we should use crowdfunding and we should syndicate our deals to the crowd because the crowd brings something that we don't bring.’ We can bring deep pockets, but they can bring marketing power because they've got a vested interest in the outcome of the business. They can bring connections. They can bring their own brainpower to how we can help scale this business. VCs are great for that Rolodex of people that they might be able to connect you to, but the reality is you can get so much more out of a crowd.”12:44 - Make transformative moves at the right timeWoodie credits the success of the crowdfunding initiative to timing. His team pitched the idea to Capitol Hill on the back of the recession when political leaders were hungry for job creation.“We were in the right place at the right time. In 2008, we had a recession. Washington was looking for solutions. We went and showed up in 2010 with this [pitch]. People were looking for an answer to the question, ‘How do we create jobs in local communities?’ The whole point of investment-based crowdfunding is you are, essentially, helping people that have great ideas all over the country create businesses that hire people. The government can't do that on a macro level and so they need to look at innovative solutions like this that can actually solve what they need to solve at the most basic zip code level. That's what we delivered to them. That's why we were able to build support for this.”16:34 - One size regulation does not fit allRaising capital in public markets requires intense structure, while in private markets it takes place behind closed doors. Woodie knew that crowdfunding deserved structure, but scaled down.“In the public markets, we have a structure under which you raise capital, and you have to do filings with the SEC. They have to be reviewed and approved, and then your offering can go public. But you also [need to] use a broker-dealer. There's a tremendous amount of time, effort, and money that goes into these IPOs that take place. In the private capital markets, that structure doesn't exist because when your company goes out and raises money, they do it behind closed doors. What we tried to do was create a structure and a framework. I believe we did that. With the private capital markets they say, ‘If you want to raise money from retail investors, you actually have to provide them a certain level of disclosure that they're typically used to in a public setting. But let's scope it down.’ And I think that's one of the big things that I, as an entrepreneur, and my experience over time, has taught me--that one size regulation doesn't fit all.”20:59 - The importance of a holding period for investor protectionTo weed out fraud and get-rich-quick scams, Woodie is a fan of a required holding period. This was another element built into the crowdfunding bill.“People take advantage of people where there's efficiency in the market. The fact that you don't have a holding period on something means that someone can come in there, buy a bunch of it, and then push hype out there, and then push up the price of it. They sell. And then everyone's left holding these points that are worthless. I think if you had the holding period attached to it, it would keep the people out that are like, ‘Well, I have to wait until I can make my money off of this.’ They're looking for quick get-rich schemes. A holding period on anything pushes the frauds away. Not that it doesn't happen. There will be fraud, and there is fraud everywhere. I'm just saying that when you can put triggers like that in there that keep people out of the marketplace, I don't think it's such a bad thing. So we put that in there for regulation crowdfunding.”26:00 - Value your company based on supply and demandAlternative trading systems help provide proof of a company’s worth. Woodie thinks there is no better way to accurately value a company.“The other thing I tell these issuers is, if you have a desire to raise a future round, if you have a desire to go public, there is no better way to value your company than a supply and demand decision. To let the market decide what an investor is willing to pay for that security. Because then you don't have an argument. VCs will sit behind a closed door. Investment banks will sit behind a closed door and price your IPO based on what they think the market will pay for it. But what these alternative trading systems provide now is an actual proof point that says: these are what our shares traded for in the past. I think that's a baseline for where we are. I think we can go up from there, because we've accomplished X, Y, and Z.”28:49 - The future of secondary marketsWoodie sees a bright future for secondary markets, where VCs will be able to get real ROI to reinvest by selling part of their cap table.“This is where this market's going to go, mark my words. VCs make money in private equity by returning money to their investors. There's no money in without money out. That's our mantra. The way in which we have these alternative trading systems, these secondary markets now have evolved to the point where VCs can say, you know what, let's take 10% of this hot company that's doing really well. We'll still have the 90% of it on our cap table. But we'll get rid of 10% that people pay for that. We'll get the money for that. We'll return that to our investors. Let's go out for our next fund. They're going to be thrilled at how we're doing because they can see actual—it's not unrealized ROI at that point. There's a way in which they can say, this is what we got for this. So we know it's proof of what it's valued at. And it allows them to actually raise more money. So they're going to be using these secondary markets to liquidate some of their investments so that they can get more investments down the road.”

With an abundance of capital chasing a limited number of opportunities, one unique entry point for investors is in secondary direct investments. Secondary opportunities consist of buying shares in private, pre-IPO companies directly from employees and investors versus the traditional route of participating in the next round of fundraising.Andrea Walne is at the center of this world at Manhattan Venture Partners (MVP), where 80% of their investments are in late-stage companies by buying secondary investments. Andrea and her team are focused on tapping into the value that already exists. Formerly a founder of Forge Global, Andrea has worked with over 100 late-stage private companies and has facilitated over $10 billion worth of transactions. On this episode of The Modern CFO, Andrea shares insights on this growing market segment in VC, its evolving landscape, and the opportunity for liquidity it presents.Show Links Check out Manhattan Venture Partners Connect with Andrea Walne on LinkedIn or Twitter Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways3:20 - Build a secondary positionInstead of fighting to issue a term sheet and compete with late-stage investors, MVP uses its network of relationships to enter a business at the ground level.“We're on our fourth fund right now. With our strategy, it allows us, strategically, to pinpoint how we want to enter a business that we're interested in. When I say enter a business, we're not fighting to issue a term sheet and compete against other late-stage investors to lead a round of funding. What we are doing is generally considered “friendly” to many of our counterparts in the late-stage venture community, because we are figuring out a price point and identifying, by way of our network, (who all knows the partners of our firm really well by way of our experience); We find our way in with a certain price point and we're able to dollar cost average and choose that building of a position by way of the secondary. So, it's pretty awesome. It allows us to choose what valuations make the most sense for us.”6:33 - The changing environment of common stockCommon stock used to be considered a risky business. Today, it’s easier to assess if a company—and therefore its common stock—is valuable early on.“I've never seen a world where a company can raise a round of funding and be a mid-stage or late-stage company. I do say mid-stage, because I think it's important. A company will raise a round. It's typically oversubscribed—most companies are raising oversubscribed rounds. There's a ton of capital flowing in and immediately after the round is raised, we're working with issuers and their shareholders who believe that their stock is immediately worth a premium to that round, immediately after the round is closed. Precedent will tell you that, historically, you could see that common stock, which is issued to the employees of a private company, versus the preferred stock, which is issued to the investors when they invest, the common stock is usually priced at a discount, because there's inherent risk associated with common stock. God forbid there's ever a bankruptcy in a private company, the common stock gets paid back last after all the preferred stock and any debt. So, there's inherent risk associated with common stock. If you go back three to five years, 20-25% discounts for common stock were normal relative to the latest round of preferred financing. For the environment to change so rapidly is absolutely fascinating for us.”10:03 - The danger of taxing unrealized gainsCongress has floated different options for taxing wealthy figures, like Jeff Bezos. The problem is the potential for harmful trickle-down effects that could negatively impact budding entrepreneurs and their early employees.“Something that seems like it comes up in Congress quite often is just taxing unrealized gains. That alone is constantly brought up and constantly talked about at both the gains-perspective and then deeper on a carried-interest perspective, which is obviously gains earned by way of the profits to venture capitalists and those that are investment managers. Overall, what I will tell you is that the resounding theme across all of these proposed changes and contemplations is that clearly Congress is looking at the folks like Jeff Bezos, Elon Musk, Mark Zuckerberg, and the upper echelon of the tech community as being the only population that really matters. The more that Congress can better target them and tax them for their wealth, which was in my mind earned wealth, quite well-earned wealth, is something that I feel is so shocking, because I don't think Congress realizes how that permeates down to those who are really the rank and file working at tech companies. Employees these days are given stock options at private companies. That doesn't mean that they own the shares outright. A stock option simply means they have the right to exercise, AKA pay a cost, to then own common stock shares in a private company. For there to be a concept of taxing unrealized gains when there hasn't been any form of a sale, where there's any gain to be had or money in the bank, it's just constantly shocking to me that that's even a consideration. It's something I worry about..”15:44 - Successful startups are impossible to ignoreMany startups today are coming out of the gate with incredible growth and high value.“As much as we all love working with institutional folks, school endowments, pension funds, fund of funds and the like, there's a bit more of a disconnect when you're working with an institution that has a bit more of a regimented strategy as it relates to their venture asset allocation. The passion comes from the family offices and so, when we speak to our LPs, we see that they're all seeing startups more and more and more in the news. What I think has really shifted in the last five or six years has been that you're now seeing startups with bigger market caps than any company listed on the Nasdaq or New York Stock Exchange. So, it's impossible to ignore these startups, because they're bigger by way of market cap and size and growth than most listed businesses. That shift means that startups are in the news every single day. There's a new $10 billion minted company every single day, which is shocking to hear. It used to be that seeing a billion-dollar valuation four years ago was fascinating.”21:41 - The impact of media exposureWith large private companies doing so well, they also get a huge amount of media coverage. That means that determining facts about their financial profile is easier than ever.“The biggest private companies these days are actually getting more exposure in the media than most public companies are, which is really fascinating. It's because they're just so big, they're so innovative, they're breaking rules, and they're making change. With all of that, they are getting more media exposure. With media exposure comes people who are covering them and digging into the company's analytics, digging into the company's financing history, revenues, and growth. There's a lot more of a spotlight on that and late-stage private companies these days than there ever was. Coupled with the concept of vast transparency, companies aren't as hidden as they were five years ago as it relates to their growth. It's also very competitive out there, right? Companies are all competing for talent. They need to be able to go out publicly and say: ‘we're the best in our space.’ They're doing this because it's a signal to potential recruits to say: 'look at how big we are relative to our competition.' So along those lines, it doesn't take much these days to actually find sources that distill down a company's financial profile.”25:09 - Private startups benefit from closed doorsPrivate companies looking to issue stock have an advantage of insularity and control. For investors, that means it’s important that the cap table is properly managed for accuracy.“On the platforms, just to kind of go back to that concept, we're talking about Carta, Forage, Nasdaq, there's a bunch of them, Zanbato.. At the end of the day all of them are trying to effectively reflect, and trade, and transact in an asset that has a lot of governance control by the issuer itself, and is not controlled by way of a transfer agent, market maker, or exchange. With that, the companies, the issuers themselves, these private startups are really benefiting from having kind of closed-door access to their equity and their ownership. Because you know what, they have the right to do that. They have the right to be very insular in terms of how they manage their investor base. Knowing that, the struggle that I think every company that is building software in the private market, kind of trading or cap tables or investment management space is kind of looking through is, well what is the source kind of information for all of this equity or the legal documents that govern the ownership of an asset? A piece of a unit. And when you're talking about a private company's cap table—and a cap table is a ledger that reflects ownership of investors and shareholders and otherwise—if that ledger isn't managed properly and kept updated, you really can't do much with that information.”29:56 - The catalyst for secondary investmentsWhen Andrea’s friend Sohail Prasad found himself stuck at a company with “golden handcuffs” thanks to equity benefits, he and Andrea started brainstorming ways to cash out the value of his stock prior to IPO. The result was Forge Global.“He, kind of secretly, was begging he would get the layoff package, so that he could go build a new startup. And that never happened. He never ended up getting terminated as part of the layoffs. So with all that, Sohail and I brainstormed and said, 'Well, what if we could just sell your Zynga stock before they go public in some way shape or form, and get your cash and then we can go build something cool?' We really dug into it to find out just how difficult that idea really was, selling your private company startup stock before a traditional IPO. So we started really thinking about what it would take, and overall we said, we're going to have to come up with an instrument to trade or transact in these private securities, because it's so difficult to trade the underlying stock itself, that underlying startup employee stock.”33:56 - The overabundance of capital in the private marketsSecondary investing is becoming more common because funding rounds are oversubscribed. It’s a strategy that makes sense for many founders, whose energy and finances are often stretched thin.“Over 50% of Series B rounds now include a secondary component and it's not necessarily limited to the founders. It expands to some of the early employees, or maybe even Angel or seed investors who had just had stuck with the business and needed a little bit of cash because they were the founder’s mom or dad, or something similar. I do absolutely see the trickle-down, but I would say it's really predicated on the fact that in today's world, Series A and B rounds are getting oversubscribed. So, the activity that's happening in 90% of instances (and this is all based on the data I had been reviewing) is that it's really the secondaries that are happening. Because the rounds are oversubscribed, the company doesn't want to take on any further dilution. So, the founders look in their pockets and say, 'What else can we offer to the investors we do want to bring on as partners?' And they ended up offering a portion of their own stock. I don't blame them because these founders usually take huge pay cuts to build their startup for the first few years.”35:14 - Liquidity is no longer a necessary sweetenerFounders offering stock to investors used it as a carrot dangled in front of them to get them to invest. Today, it’s more about getting an infusion of non-dilutive capital.“You go back three years, and if I saw liquidity in a Series A or B, a lot of it was more of a sweetener than anything else. And when I say that, it's that a company was raising money. They wanted to bring in some really strategic investors and as a way to get better terms for those investors, they would offer their own kind of founder stock or employee stock at a discount to the Series A or B or C as, like I said, a sweetener. Now, that has really shifted to not being a necessity in the best companies. Instead, it's a volume point that's brought up later, as a way to get more capital in that is non-dilutive in its function.”37:52 - A new world means new investment strategiesToday, Andrea is captivated by the changing ways that families are investing. Buying a piece of real estate is no longer the silver bullet it once was.“I am fascinated by the changing dynamic of family lifestyles, and how people want to be in multiple places at the same time, and quite frankly, how in today's market, owning real estate really isn't any more of the best investment strategy as part of a family's overall gross income and value. It really isn't. We're at the a ‘top of the market’ kind of focus here. People are exploring other avenues for investing strategies because, as we are talking about, tying into today's theme, the democratization of investing is happening rapidly around us. People don't need to buy a house to say that that's going to be their highest grossing asset over time. So, what I get fascinated about in today's world are companies like Pacaso, which is a startup, and Feather Homes, which is a startup, that you get to rent furniture by the month that gets delivered to your nomadic lifestyle. Pacaso was started by the guys who were in the real estate firms at Redfin who said, 'Let's do fractional ownership of mega homes.' Why dump all of your net value into one home? Instead, let’s pool it together, and you can own an eighth of an amazing luxury home, and then you could sell that eighth.”

Jeremy Baksht has a rich history in finance, from banking at J.P. Morgan to several entrepreneurial ventures. His specialty is data and FinTech, and his newest company is DataFrame Ventures. Over the years, Jeremy has learned that he has a good eye for investing and generating LP interest in his niche. In this episode, he talks about the importance of generating interest, curating a funnel, and deciding what type of CFO you want to be in today's ever-changing environment.Show Links Check out DataFrame Ventures Connect with Jeremy Baksht on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways2:53 - Invest in high-margin, repeatable businessesEarly in his career at J.P. Morgan, Jeremy saw companies getting out of investments in businesses with poor margins.“You typically want to be in that high-margin, repeatable business and get out of the clunkier businesses. So every time I talked to these businesses, they all wanted to know, what do you see in IoT? What do you see in sensors? What are you seeing in clean-tech? And even though I hadn't been an investor personally at any stage in this formation, I kept coming back to tech and data, SaaS. These are all changing the world, they are the highest multiple companies. Whether they're B2B or B2C, you have to get into these businesses. Coming up with ideas is hard, but seeing what was happening in capital markets in the early 2010s, some colleagues and I from Citi joined up with one of their former colleagues and we created a private markets exchange.”6:15 - The value of automationWhen Jeremy set out as an entrepreneur, the best advice he received from CEO Peter Williams was to look for ways to streamline clunky processes.“The first step was automating a process. When you see a process that has very repeatable patterns yet involves a ton of people, it doesn't often make sense to have all those people involved. Whether you're a real estate broker or private placements broker, you're just thinking about if you could map all the funnels of the 20 things you need to know, maybe some offering documents, and put all the investors or interested parties in one place, and then, hopefully, they can transact in a more automated way. So, I think step one was recognizing there was no leap of faith there. You have all these people and an expensive, clunky process. Can you automate that? That really spoke to me.”8:40 - Get people to show upWhen you deal in marketplaces, you need to generate interest and demand. That’s what led Jeremy to focus on access to Series A and B companies early on.“All marketplaces are massively 'chicken and egg,' and you need to time very carefully which curated product do you have. How do you stoke the initial deals? Whether your eBay finding a beanie baby or Craigslist with San Francisco apartments, you have to have some reason for people to show up. So for us, at first we started to do LPs assets in hedge funds. We realized that was a fun market, but one that wasn't that liquid. People aren't necessarily looking for those unless there's a big secondary discount. What we did try to do was more company stuff, where people are excited about a Series A or a Series B, and they can't get access. This was really early. I know it's very common now, but that was our thesis 8-9 years ago.”11:57 - Create a curated funnelWhen he founded DataFrame Ventures, growing trust with LPs quickly led to more time sources deals and less time needed to promote them.“Two partners and I stood up DataFrame Ventures at the end of last year. We've done 17 deals, a few million in capital deployed. It was almost by happy accident. We would find something we found interesting in a data-oriented company. We'd put it up to our LP group. The first few deals took a lot of stoking the well, and calling people, and actually acting as agents in a way like, ‘Hey, we put this deal up. Are you excited about it?’ But by the fourth or fifth deal, we kept finding as you layer on LPs, they understand your thesis. As you build up trust, deals are moving faster and faster and faster. We spend almost all of our time finding interesting deals and zero time promoting them. Because they don't really require a promotion if you have a really curated funnel.”12:55 - Being a unicorn is overratedJeremy recognizes that some people will achieve unicorn exits, and some won’t. But there’s nothing wrong with a successful multi-million dollar exit, either.“Starting a fund is no different than starting a company. It's a little less focused on some crazy unique idea. It's more putting your ideas onto paper and actually framing those and wrangling LPs and getting people excited about you. So I think the rest of my life, I will probably mostly be an investor. I find that to be really fun. And then look, between us, I've started or been a part of some really interesting companies. I don't know that I'm a next-level founder. You try it a few times, and if you don't have a unicorn exit, you know, society tells you you haven't succeeded. I see a lot of my friends and more people in the industry accepting a 50 to multiple hundred million-dollar exit. As long as you're really helping and influencing people or building a unique product or something interesting and remunerating your LPs, you've done really well. As we've talked about, 95%, or whatever the number is, of companies in the seed stage don't get to the Series A stage. You don't always get to win. So having an exit 10-million plus, as long as you didn't raise 10 million, is probably a good thing for everybody involved.”18:58 - You need trust, a platform, and distributionWhen working on Qineqt, Jeremy started a conversation with Bloomberg to see if they would be interested in a partnership. He ended up starting a job with Bloomberg and working in the pioneer days of their enterprise data portal.“I kept coming around to, 'Wow, there are lots of different data sources. Nobody knows how to find them. There are very few people that can pay for and use them. How do you wrap all this into a bow and package it?' I thought it was using the data structures and being more technical. But what I realized was after a year of trying to make that business go, it was you need trust and you need a big platform and you need distribution. I was talking to Bloomberg and a few others about acquiring the company or somehow working with us. I ended up being lucky enough to join Bloomberg, and spend about three years there with the enterprise data access portal and putting a lot of unique data sets in there. It was the beginnings of what is now a pretty large all-data practice, but it was early for Bloomberg. One of the industry telltale signs is if you're putting a unique product into one place and thousands of people can access, is it really unique anymore? And I think the answer really is, I guess not. In a way, we call it all external data, not alternative data now because you're putting unique things in one place and maybe some of the alpha bleeds out on a one-to-one basis. But at the end of the day, everybody's got the ingredients and they cook together.”23:32 - There are many types of CFOsFrom big companies to small companies, process-focused to funding-focused, the type of CFO you become is up to you. Jeremy has also seen CFOs transition to the CEO role.“Are you really good at process, and having a very big group of people reporting to you? Are you very good at being strategic and getting through tough and confusing transactions? Those are some of the bigger company CFO attributes, certainly on the private equity side or others where you're in a changing industry or the dynamics are moving against you. Do you need to be a very tactical, money-saving CFO? That’s another one of the elements. And then, of course, there's the young company CFO that almost acts like a COO or CEO, and has to be very tactical from a different perspective. So when I look at the modern CFO, it's almost, what do you want to be when you grow up?”27:27 - Find your hedgeThe world of capital today is converging and changing. The important thing is to find your hedge, whether that’s crypto or something else.“Hedge funds are getting into venture capital, venture capital is getting into private equity, private equity is getting into public markets. Everybody's converging. So, being crisp on finding new assets and frankly, hedging yourself against inflation or where it's at. You know, Mike Alfred's a friend of mine and I heard him on a podcast yesterday, look, anybody that doesn't understand crypto, I just tell them it's an MMT hedge. It's basically an MMT hedge. And if you don't get that, fine. You don't have to like crypto specifically but find your hedge. And a lot of people are finding it in crypto, including some of the smartest people in the world that have gone on record saying that.”31:11 - Focus on fundingIf people aren’t investing in you, you won’t succeed. That’s why it’s important to differentiate and generate interest.“Whether it's a company or a fund, it's always finding the funding. You've got to find people to believe in you. Lots of people will tell you that your baby’s pretty, and then walk away and not really invest in the baby. And it's very easy for VCs, family offices, institutional LPs, to say this is interesting, but not right now. Come back to me in six months. It's very easy for them to give you optionality. It's very hard for you to convince them that there's urgency and you need to wire now. I think that's the hardest part—creating a product, creating the product marketing, imputing that vision into who you want to follow you and invest in you, and then providing the FOMO. You know, 'Hey, this is going away in 60 days. We're fully subscribed.' That kind of marketing conversation is really challenging. And maybe for me, I'm not sure that my product is the most differentiated in the world. I believe it is. I'm an entrepreneur, so I have to believe in that and I think I do generally. But getting other people to resonate with that, I think is the toughest.”32:21 - Learn where to double-downAs an investor, Jeremy has hones his instincts for deciding who and what to invest in. Often it comes down to your gut and your belief in specific founders.“I play in the angel and seed space right now, and you really believe in people. And I've seen rounds now, multiple millions going into pre-product companies. And you're only relying on your gut, the knowledge you have of that person, and their ability to execute. And that's a really hard bet. Anything you can do to parse through the signal as fast as possible and product-market fit. That's really what I look for. It's like trying to find a company where you can get a few access to a few of their early customers, and really get a sense for is this something that you would double down on. And do you think a hundred people in your industry need it? That's where I spend most of my time. But spinning it backward, I would say creating a product, creating a vision, getting a website thrown up, convincing two or three or four people to join you, those things were all hard. But actually taking that and getting an LP to wire you money, that's always the hardest.”

Invest in people. Easy, right? While more money than ever is being deployed around the world into new ventures, Oslene Carrington is leveraging her own entrepreneurial experience to ensure entrepreneurs in Guyana and the Caribbean have access to financing as well. Oslene is not one to wait around for change to occur. She decided she would create her own community of angel investors. By expertly explaining the risks of financing innovation abroad, especially at the angel stage, some of that risk is mitigated by tapping an angel network with first-hand experience within these unique cultures and landscapes. With the Caribbean Diaspora Angel Investor Network Trust and !nnovate Guyana, Oslene is accelerating the trends of access and democratization of private markets with a veteran approach. Show Links Check out !nnovate Guyana Check out The Caribbean Diaspora Angel Investor Network Follow !nnovate Guyana on LinkedIn or Twitter Connect with Oslene Carrington on LinkedIn Check out Nth Round Connect with Andrew Seski on LinkedIn Key Takeaways3:45 - Fostering and funding great ideas from homeOslene traveled home to Guyana and witnessed some innovative business presentations. When she realized those great ideas would need greater support to develop, she started a program to award capital to the most viable ones.“I happened to be at home in Guyana at one point visiting five years ago and was at the university there where I have friends and saw some really amazing things happening in terms of innovation. Like a lot of universities, they have these annual presentations of student research conferences...I had experienced doing startup programs and finding funding for them, and commercial relationships with the private sector and with the academic environment and so on and so forth. And so it just clicked for me very easily to create something. And so what was born from that is something called the Guyana Innovation Prize, which is like an MIT prize or any of these other university-based prizes where I go find money. I find capital. Either initially as donations, we started out and in many ways still are a philanthropic endeavor, and find capital and match those up with great ideas. And so annually, we have a competition and the funding is awarded to the best commercializable ideas.”5:53 - The angel of the CaribbeanOslene’s second major venture was founding the Caribbean Diaspora Angel Investor Network (CDAIN), an angel investor network that takes the concept of funding great ideas in the Caribbean further, this time backed by corporate sponsors and government grants.“That brought me to my second business idea, which is the Caribbean Diaspora Angel Investor Network, or CDAIN. Because, you know, again, we would find the funding. We have corporate sponsors now, you know a USA government grant. But [the] point is, now we're able to take these ideas and go to the next stage. So you can sort of say that the initial support is pre-seed. And that what we then do is, you know, you can sort of categorize pre-seed and stages. Maybe there's a pre-seed A, and a pre-seed B round, or whatever you want to call it. I mean, we can pretty much make up anything we want in this space, because it is still pretty much angel. And so now through the network, we're able to bring those products along further and get them ready for [an investment], or actually get them invested.”9:55 - Invest in solutions aimed at solving big problemsIn Oslene’s eyes, community members are best positioned to know exactly what they need. Investing in ideas that meet fundamental needs feels much less risky than other investing endeavors.“The idea of a community coming together to find opportunities that we're all familiar with, or that we can connect to in some way, because it's either from places that we know, or it's addressing problems that we know happens, quote-unquote, back home, that's kind of how it all came together. To your question about risk, I mean, we don't see these things as risky. Because we know what the challenges are. We know what the needs are...It's amazing what people consider risky. Like I would never put my money, for example, in penny stocks. I would never put my money in yet another IoT solution when most people in America and in the world are not living in quote-unquote smart homes. Like I would never do that. And I'm not saying that stuff isn’t smart, I'm not saying that it's bad investing to do that. I'm just saying there are so many other problems in the world that are fundamental. And there are a lot of smart people in other places that have solutions for these problems. And if the capital met up with that, there'd be a lot of very, very wealthy people. And it's the basis of that, that I said, well, why not us? Why couldn't it be us? Who we're not only pooling our money to solve the problems, but potentially experiencing a wealth boom.”12:23 - Solving for the southern hemisphereSeven billion people live in the southern hemisphere, where primary concerns revolve around agriculture more than tech. Problem-solving in one agricultural area, for example, has immediate potential to expand to other, similar areas.“I know about my particular area of the world and the sector, which happens to be ag-tech, agro-processing, and ag science. Right. Because the part of the world we're talking about is heavily agricultural. But so are a lot of other places in the world. And so we feel like we're not just solving for a country or a few countries in this region. We're talking about any place in the world that's heavily agricultural and tropical. Well, guess what? That's the vast majority of the world, right? Southeast Asia, Southern Africa, the Caribbean. The Southern half of the world is as populated as the Northern part of the world, and the Southern part of the world is tropical. So we're talking about half of the 7 billion people in the world and solving for them. So this isn't risky. We're not talking about is somebody going to buy this IoT solution versus this other one, is somebody gonna buy this electric car versus the other one? That is real risk. Solving for problems that affect billions of people is not risk.”14:33 - Establishing trust outweighs the dataWhen a community already knows what needs to be done, they don’t immediately worry about what the data says. Building trust and the narrative becomes the focal point.“The risk aversion is a different kind. It has to do with trust. And it's not about data. So, you know, how do you bring data to the picture to establish a level of trust? So the fact is, if I say to you, Andrew, I've got this great offering, this great opportunity. Probably because you don't know the region or the area, you're probably going to look at all the numbers. Probably try to do some additional research outside of what I share with you to see whether what I say is in fact the truth, or if I've missed anything, or if there's more, assuming you're interested. When we're talking to people who already know what the problems are, now it's well, I want to be sure that I'm not going to lose my money because you're talking about people that I don't know. So it becomes much more of about ‘who are you?’ versus ‘what is this opportunity?’ And so we are using technology to sort of strip away this whole, ‘who are you?’”16:01 - Non-accredited investors are underservedOslene’s target investors have a deep understanding of international affairs. They are intelligent and interested in an equally sophisticated investing experience.“If you're an accredited investor and you're doing private investing, you're not writing a check to somebody. For the most part, you're entering into a data room. You're looking at stuff, you're interacting on a professional level. And so we wanted to bring that same experience. Why should we pull punches, or have people have a ‘less than’ experience, just because we're targeting a different part of the world or a different group of people? Who by the way, are not accredited. They’re sophisticated. And so another point is that some of the technology that's out there is not an option for us. Because we don't want to do crowdfunding for a whole host of reasons, not the least of which is a crazy cap table. You know, we wanted to get to people who were not gambling for a smart enough, sophisticated. And then when I say smart, I don't mean intelligence-wise. I mean, able to look at documents that would go with an offering and discern what's there, and talk to their attorneys and do their own research and so forth. So we wanted that person. We just wanted to remove the barrier that says, you know, you have to have, I think it's about a million dollars in net worth, and take that off the table, but still give you the same quality experience using technology.”19:47 - Removing barriers to entry There are clear requirements to become an accredited investor. The problem is that the majority of the population falls just below that threshold. Oslene hopes to give them an investing opportunity beyond crowdfunding.“If you are ready to invest, say you have $25,000. Say you have $50,000 that you want to put into two or three or one particularly strong investment. But you can't check the box that you're an accredited investor because you make $180,000 and not $200,000. Or when you put in your mortgage and your car, you're at $600,000 in net assets or net worth versus one million. So what, you don't get to invest? The best thing that we have to offer you as an investment community is crowdfunding? What is that? Come on! There's stuff in the middle. And I don't think that many people are interested in it. Because like I said, the folks who were raising want to do it quickly and with a small cap. That's not my aim. My aim is to do it reasonably quickly, but it's also to offer people like me the opportunity to have wealth without having to jump through, you know, ten hoops, which are unnecessary by the way.”30:09 - Creating a communityThere is a vast number of Caribbean Americans in the U.S. Oslene’s next goal is to bring more people into the network she’s established to create an even stronger community of investors.“Top of mind for me is bringing more people into the network. So we're all women, by the way. I didn't mention that [earlier], but we're all just an amazing group of women. Some of whom I knew before I started this. Others, not even a little bit, didn't know them from a can of paint! And we want to get more folks involved. We want to make sure we do that in a way that nobody gets upset, like the authorities. We're not selling anything. We are just trying to create a community. So the next 12 months for me, I think, is about getting more people to hear this story. Because I don't know if you know this, but I believe according to the most recent data I looked at, there are 14 million people in the U.S. who are immigrants from the Caribbean. That doesn't include first and second generation who very much would culturally associate with the Caribbean. And so we want to get those folks engaged. That's a lot of people, that's a lot of purchasing power.”31:14 - Blockbusters or bustOslene’s 3-5 year goal is to see some of the ideas in which they invest become blockbuster successes, bringing wealth to the CDAIN community.“Without question is bringing resources, and I don't just mean money. I mean intellect, experience, everything else to bring the products that are part of the companies that we have in the fold to really have them build some blockbusters. They're already building blockbuster products, but to really create wealth. To have them get acquired or, you know, gangbusters in sales, and just stay private, whatever. We're not really looking at IPOs and things like that, although certainly that could happen. But the vast majority of companies that have exits are acquired. And so that's what we want to do. We want to have a couple of, more than a couple, but a few exits in the next five years that really create wealth for the community of investors that make up CDAIN.”

Realized returns on investments for venture capital funds used to happen within three to seven years. Now, the biggest companies are extending funds to 15+ years—and investors are getting impatient. This could dampen venture capital as an asset class, but not if Aman Verjee can help it. On this episode of The Modern CFO, Aman discusses how Practical Venture Capital is creating a secondary market from VC funds, how faster liquidity will keep VC relevant, and how his experiences at PayPal, eBay, and 500 Startups resonate with modern CFOs.Show Links Check out Practical Venture Capital Follow Practical Venture Capital on LinkedIn or Twitter Connect with Aman Verjee on LinkedIn or Twitter Connect with Andrew Seski on LinkedIn Key Takeaways02:59 - A new application to a new asset classPractical Venture Capital (PVC) focuses on venture capital secondary, buying LP and GP interests in early-stage venture funds, and direct secondary in breakout portfolio companies.“It's not a new idea, but it's a new application to a new asset class. I think in venture, there wasn't a need for secondary markets, even up to 2005, 2008, 2010. I was at PayPal early. I joined in 2001. That company went public in four years, from founding all the way to the IPO. Yahoo, Amazon, and eBay were all four- to five-year exits. So, there was not a terribly long time to get your money back. The biggest IPOs, now, in the venture community are: Airbnb, which took 15 years and counting to get their liquidity. Palantir was 17 years and counting. All the biggest companies now are taking much, much longer to get their money back. So, there's much more demand on the investor side for that kind of liquidity, around year 8, year 10, year 12, and year 15. That's a fairly new phenomenon, taking place over the last 10 years. That's what we’re capitalizing on.”20:49 - Three functions of the modern CFOAccording to Aman, the modern CFO has an accounting function, a treasury function, and a data analytics function.“There's the traditional [function], or the accounting function, which is really about understanding and applying accounting principles, backward-looking, making sure stuff gets done, operational, and that communications infrastructure is running well. That is one job. And it's a big one. That's the digital controller function. And that's always been part and parcel with the finance function and will never go away. There's increasingly another aspect around treasury and managing cash and making sure, especially in global businesses, that all the functions are adequately capitalized, and you've got the right liquid resources where you need them. That's a big problem in venture and venture-backed companies. They never have enough liquid cash. There's a lot of paper valuations. There's a lot of investors locked up for 5, 10, 15 years, so that's a big challenge. Then, I think the third part is just the business facing [functions]. How do you help a team make good decisions, and how do you use data and use analytics in order to inform those decisions?”24:19 - Communicate data across the organizationMost departments deal with data, but CFOs have to be able to communicate it to every department clearly and accurately.“You have to be able to communicate to all those [department] heads and the entire team about what matters. To be able to store data and make it a single source of truth. That's often a problem in big companies. Like it or not, finance is always going to be seen as an objective repository of the information that then gets to make it into boards. That's how you pay bonuses. If your data is wrong, that's a terrible consequence for the whole organization. If the head of marketing is using imperfect data or some of the analytics isn't perfect, even if it's off by 1%, they'll make mistakes, but it's probably not the end of the world. It doesn't endanger the business in most cases. Product engineers take shortcuts and make quick data-driven assumptions. Finance has got to be right. You have to be able to double click and understand some of the flaws and how data is being kept, how it's been used. You have to be facile with statistics and be able to communicate all these concepts across different teams. That's really the challenge of the CFO job.”29:43 - The need for a secondary marketAs COO of @500 Startups, Aman had a unique vantage point to observe the shifts taking place in the venture community, as well as the developing needs of LPs. “What we recognized a few years ago was that as these funds are getting longer and longer with no liquidity back to LPs, there’s this pent up demand from sellers who've been in a great fund for 8 years, 10 years, 12 years, but haven't gotten their money back. The fund is maybe up 6x, 7x, 9x on paper, but family offices may want to rebalance their portfolio. They have cash flow needs, they have liquidity problems and so they want to be able to sell. No one's doing it in that market right now. There's no market for venture secondary right now. We are literally buying great portfolios at a 30% discount to fair value and there's no bidder. We are the only bidder who says I'll take that portfolio of nine great companies and a lot of other companies you may have never heard of but we like, and I'll pay you 30% less than the fair value. The challenge in this space is they're all private companies, so you don't have a lot of information about the companies, but that's where Dave and I excel. We've been investing in private companies and figuring out how to diligence and source intel about them for years now.”33:53 - Venture capital as an asset class won’t reach its full potential without meeting investor needs.Private companies are extending their funds to longer and longer timeframes, but LPs want their money sooner. If this keeps happening, VC may stop being an in-demand asset class.“I'm just going to extend the fund. We're now in year 17. Please read the fine print in your LP agreement. I can extend the fund as long as I want to and, when I have money, I’ll give it to you. Those early LPs are looking for liquidity and may want to take some money off the table for good reasons. That just doesn't happen in VC today. If that continues, VC as an asset class will just be an afterthought. It won’t ever be as big as private equity, or as big as it should be because it's not solving the key problems. So, I'm hoping that PVC can help solve the problem and really help the whole asset class, too.”35:39 - Modern CFOs serve as the custodian of their CEOs long-term vision.The CEO-CFO relationship is most productive when both address their strengths and weaknesses in sharing the vision of the company and grounding that vision with current financials.   “You have to take your cues off your CEO, because it is a team sport. In many of my cases, I've had CEOs who were very strong in product and marketing. They would kind of amp stuff up. They would tell a story where there's always a happy ending and there's a hero in the story - it's just Marketing 101. The CFO has got to be the counterpoint to that. You have to be prepared, for sure. You have to be able to tell a story with financials and data to ground people, investors, in reality. That way, I think they feel like there's an inspirational CEO, but also someone who is on the team who's very complimentary, and who can keep the company from running out of cash. If things don't work according to plan, there's a backup plan, and this person's got it. Some CEOs are very, very buttoned up and maybe not as charismatic and maybe more introverted. Their role tends to be more focused on what they're good at, but leave a lot of the effort to the CFO.”37:07 - Make honesty your policyA thoughtful, measured approach when responding to investor questions is best when the answer isn’t quite at your fingertips. Honest and transparent communication builds trust and helps foster a long-term relationship.“For a CFO, especially in a fundraising context, you are going to be with this investor for a long time. It's okay to say, ‘I don't know or I’m not sure. Let me come back to you with a thoughtful, prepared answer. Here's what I think, but here are the caveats, assumptions, and what I have to research.’ Don't leave yourself exposed by putting yourself out and answering a question and not having it backed up. Investors will always figure that out in diligence. God forbid they don't, but they invest. Then, they’re on your board or you're working with them every day. If something comes out later, that's the worst thing.”39:30 - Untapped human potential outside Silicon ValleyAman sees rapid changes occurring for both entrepreneurs and investors, especially in terms of diversity.   “The number of entrepreneurs who are outside of the valley, outside of the U.S., from different and diverse backgrounds and geographies, as well as their ability to iterate, build businesses, access capital.. is so great; Relative to even 10 years ago, or certainly 20 years ago, that it's quite astonishing. I think we'll be stunned in the next 10-15 years by the types of companies that get started outside of the valley, all over the world. The types of entrepreneurs who start them who don't meet our expectations or our thoughts on what entrepreneurs should look like, or their backgrounds and where they went to school, what their particular situations were. I think there's a large untapped human potential that is just now unlocking and it's happening because investors are globalizing. They're more willing to take those risks than they used to be.”41:05 - The next iteration of venture capitalAman has proven this concept and strengthened his investment thesis alongside the expertise of the PVC team. Launching PVC’s first fund will modernize the VC ecosystem with more sophisticated and transparent valuation models, which will result in a more liquid marketplace for locked-up investors.   “It's been great working on these deals to prove out the concept and work out some of the kinks. Actually having a fund where we can then diversify and go across 10-20 different portfolios and do this in a more systematic way is a game-changer for us and for the industry. I said before, I don't think venture will be around if they can't promise realized returns to investors in 3, 5, 7 years. 10 to 17 years is just too long for realized returns, and that's not a timeframe that most investors can stomach. Creating a way to value these assets in a fair, transparent way, create some liquidity for investors, be able to have a little bit of a marketplace, and maybe take a company like this, scale it, and take it public... That’s not going to happen in 12 months. Maybe, that's the 5-10 year timeframe, but it is the longer-term goal.”

The heyday of Main Street is over. The spotlight now shines on Digital Street. Curt Sigfstead has been long drawn to the power of entrepreneurs and the opportunity they present to transform the world. After leading the prominent West Coast technology investing division at JP Morgan, Curt joined Clearco. Clearco is at the forefront of digital growth, where they are busy building out the capital infrastructure for the internet in the realm of embedded finance. Working with digital founders, software platforms, and financial institutions, Clearco is helping to revolutionize how founders raise capital.Show Links Follow Clearco on LinkedIn or Twitter Connect with Curt Sigfstead on LinkedIn or Twitter Connect with Andrew Seski on LinkedIn Key Takeaways1:44 - Providing capital based on dataDigitally-founded businesses often don’t have the traditional assets required to raise capital. By providing capital based on more diverse factors, Clearco is serving a new, data-driven market.“It means that we can, in a very innovative way, provide capital, provide advice, provide benchmarking, provide a means by which entrepreneurs can improve their business with capital by using data. That's an important core of our business; our ability to leverage third-party data sources to create a modern finance platform that can serve these digital founders. As you were getting to Andrew, [Clearco is] serving what is a global transition from Main Street to Digital Street. And as more and more businesses are founded, at least initially, online--as businesses become less and less geographically constrained--they don't have the aspects that typical financing institutions like banks or credit unions are looking for. They don't have collateral. They don't have inventory. They don't have the assets. But they do have a lot of data. And their data is very revealing with respect to how the business is performing, what the opportunity is for that business. So, what we found is this vast, global underserved market.”3:32 - Helping entrepreneurs retain ownershipAs a rule of thumb, entrepreneurs don’t want to give up equity. Clearco gets that, helping businesses get off the ground by focusing on repeatable processes.“So we're part of a spectrum. We're not in the business of competing with venture capital or with seed investors or with friends and family. We're in the business of being a complementary pool of capital for entrepreneurs to leverage as they grow their businesses. And in any business, there are aspects that are repeatable. So, you have an understanding of how the business is actually going to perform based on data, historical data, and how you might project that--like your return on ad spend, or how much inventory you need relative to your sales growth. There are other aspects of your business that are not repeatable. It's innovation that you may have underway. It's actually kicking off a very early-stage business."4:19 - Creating repeatable actions to grow your businessClearco understands what entrepreneurs need--helping them control their destiny through repeatable aspects of the business.“Where Clearco comes in is in those aspects of the business that are repeatable. Our perspective--and what we found product market fit with--is the fact that entrepreneurs don't want to give up equity in their company, and therefore ownership, for aspects of their business that are effectively repeatable. It's, ‘okay, I know if I put a dollar here, I will get $3 in revenue. Why should I give up equity for that?’...As businesses grow, ownership is important for entrepreneurs. It's part of the economic puzzle. And so if we can help them control their destiny, if we can help them access lower-cost capital effectively, and maintain ownership, then we think we’re doing our job.”7:06 - The three benchmarks of successCurt says that success comes down to three things: a bulletproof process, strong performance, and a solid market backdrop.“For me, there are really three aspects to a successful process and this is obviously something I learned over many years helping companies to access the market. Which is: 1) you have to have a bulletproof process. You've got to start with a large funnel. You've got to work that funnel and you're eventually going to have a number of investors who come out the bottom of who are committed to funding the company at terms that are acceptable to the board and to the founders of the company. 2) You've got to have performance. Investors really want to understand, at least at the Series C level, how $1 of investment turns into $5-10 of return. It has to be a very repeatable process, i.e., in the Series C you're not introducing new operational risks, you're introducing scaling risk. There's product market fit. Your business works. It's got a huge TAM and really, it's about scaling the company...3) You've got to have a solid market backdrop. None of this happens in isolation. Investors are influenced every day by what happens in the capital markets and what's going on with their investments, as well as how other businesses in their portfolios are growing.”9:39 - A conservative-aggressive approachIt might sound like an oxymoron, but Curt says that the best forecast is optimistic while also building out realistic benchmarks based on market share.“My job was to ensure that our forecast was bulletproof. It was highly conservative, yet aggressive. What do I mean by that? Our job is to express the business in the most optimistic way that we can as a company. That's why we're here. We've got a big opportunity, but at the same time, building in aspects to the forecast that are not leaps of faith. I.e., for us, the size of our marketplace: If there are 10 to 12 trillion of GMV globally, which is cited in a bunch of market forecasts, then trillions of dollars, tens of trillions of dollars - us saying that we can get to 20, 40 billion, 100 billion of GMV, well, that's pretty conservative. We don't have to get a lot of market share. Those are the types of aspects to set the context of your forecast conservatively relative to a lot of external metrics. I think these are important aspects to getting investors to buy into your forecast. [The second factor] is based on your existing business, and so we were very, very focused on that. [The third factor is] you want to make sure that as you go through the funding process, you're meeting and beating your numbers.”11:41 - How to analyze and present dataUse the data you have to prepare. Then, keep investors in an honest feedback loop where you consistently provide contextual updates.“If you fail to prepare, you're preparing to fail. It's kind of like that old adage. We spent a lot of time on that. Then, the second piece of it is obviously thinking about the second and third-order diligence that's going to support that. For us, it’s beating up the metrics. It's analyzing the data. It's focusing on, ‘okay, so what are the cohorts doing? How do we present that data in a way that reflects our business?’ Not all of it is obviously the best news. You have to be prepared to present the business in a way that is consistent, and it gives investors real insight into how you operate the business. But, you have to do a lot of thinking about how best to present that data because investors don't have any context when they come in. Your job as a modern CFO and as a modern finance team is a much bigger understanding of strategy, so you set the context by which the numbers are being presented because out of context, I think they can be misinterpreted.”16:18 - The magnetic power of foundersCurt was lucky to oversee countless IPOs while at JP Morgan. His favorite part? Working with the founders themselves.“Through my career at JP Morgan, what really got me excited, and I realized this in my last couple of years, was working with founders. In particular, working with CEO/founders who had built their businesses from the ground up, had made the transitions through the various levels of financing and growth. We got to work with them going public and I was fortunate to work with Jeff Lawson at Twilio, and the team with Eric Yuan at Zoom. Obviously relevant names, and a full host of other names, which brings me to Andrew and Michelle [co-founders of Clearco]. As I reflect on it, I had done 100 IPOs and 250 billion of tech M&A and I was looking for that, ‘okay, if I really want to narrow it down, what I really want to do?’ I want to work with founders in incredibly constructive ways because I have a very strong personal belief that entrepreneurs and founders are the people changing this world for the better.”23:22 - Building CFO/CEO trustAs a strategic partner, modern CFOs must lead company alignment. Having a united front is critical to success, but it doesn’t happen without asking the hard questions.“The most important piece you have to figure out is trust. It sounds a bit cliche, but you've got to find the opportunity over those conversations - and we did - to ask each other hard questions about how...I asked, ‘well how are you guys doing?’ or, ‘why didn't you do it this way or do that way?’ You're getting a sense of how you're going to operate because if you're coming on as a strategic partner effectively, which I do think is really the role of the modern CFO, you're going to have to have a common operating system effectively because you're going to have to answer questions where all three of you are not in the room, but they're going to have to be based on a consistent framework. You're going to have to defend your decision-making post decision with your partners, just in the way you would if it was a law firm or financial firm. You better have a framework by which everyone can understand how you got there.”24:40 - The best investments often appear a little crazyIt’s hard to break with tradition. That’s why so many people in the finance world told Clearco founders Andrew and Michelle they were downright crazy, but Curt learned that thinking differently can have its advantages.“When Andrew and Michelle were forming the company, they probably had 100+ meetings with various finance individuals who said they were, ‘absolutely crazy’ or, ‘this will never work.’ or, ‘how in the world could you do this? This is the way it's been done for a hundred years.’ Of course, there are aspects of that I had, as sort of bias or sort of frameworks that I had growing up working at JP Morgan. I've had to learn to just understand it, let it play out, add constructive aspects to it and then just course-correct where we can, let things ride out because there could be something really interesting around the corner on some of those decisions we make that, you know, wouldn't be obvious in the same frameworks that some of the more traditional financing companies work in.”25:40 - Put away your egoThe successful modern CFO is ego-free. The key is embracing a service mindset where the company wins and your wins are the same.“You have to put the ego in the bottom drawer. You're an at-service leader. So, you're here to help people win. You're not here to push your career in a certain direction, or to look good because it doesn't fit with the mission of - and I would say this is probably for any modern CFO is - you're serving the board, you're serving the audit committee, you're serving the founders, you're serving all the employees, you're serving investors. You've got to be in that mindset so that when you get criticism, you get feedback, or otherwise, you have to just take it in. It's all for the better of the company. Push forward.”29:44 - The untapped global potentialCurt says that with the right resources and support, there are hundreds of underrepresented individuals in the world who have the power to change it for the better.“One thing that is underestimated globally is the power of the committed entrepreneur. The power of someone, an individual who is committed to change, who is committed to development, who's committed to their idea and what they're able to accomplish if they have the right resources to do that. I think that is underestimated globally. We have billions of people on this planet who in some way don't have the resources available that other billions do. We're not tapping into the greatest resource we have in this world, which is our human colleagues and capital, and other inhabitants on the planet. I think that is something that we often underestimate. It all seems very normal when we look back, but when you look back over history, it's really people who make a difference. Our responsibility, if we want the best out of this world and the best out of, from business to science to education, we need to empower these people and give them the resources.”‍

Looking for a long-term view of what it means to be a good CFO? Brian Hughes is a retired partner of KPMG and an experienced advisor to public VC- and PE-backed portfolio companies.His perspective spans an entire career of public and private market transactions, overseeing multiple market cycles--like the dot-com bubble and the 2008 recession--and becoming acquainted with the needs of companies through different life cycles. He is uniquely positioned to deliver a holistic picture of our current environment and provide advice to financial leaders.On this episode of The Modern CFO, Brian advises CFOs to plan ahead--not just for internal organization, but for future macroeconomic shifts. As he sees it, a modern CFO needs to ensure the financial plumbing of an organization is not just working, but safeguarded for what lies ahead.Show Links Connect with Brian Hughes on LinkedIn or Twitter Connect with Andrew Seski on LinkedIn Key Takeaways5:09 - Understand the CFO roleIn Brian’s view, the most important job of the CFO is being a great partner to the CEO. The second job is to be strategic, collaborative, and adaptable.“Number one, you know, I think if you're a CFO in a company you've got to understand what your role is. And there's a lot of different things, but I think being the CEO's trusted business partner is probably by far one of the most important things that you can do as a CFO. And you need to really establish that on day one because that's the individual that's helping set strategy and direction. At the same time, I think you also, as an individual, you need to be aware of sort of what your strengths and your weaknesses are, which will dictate the type of CFO you're going to be...I also think that today's CFO needs to be more strategic in their thinking. It used to be that you were the numbers guy and you put together the financial statements. Now it's really how do you make the numbers come alive and really tell the story of the company in terms of their operations, the metrics and the KPIs. And also, it used to be you thought about the CFO just within the financial function. I think it's also extremely important now for the CFO to really get outside of their swim lane and really become more cross-functionally across the organization, supporting all the different functions that help a company operate.”7:28 - Gain the trust of investors and stakeholdersA good CFO isn’t just savvy internally. They have the confidence and ability to communicate with external partners, such as investors and board members.“The other part of a CFO is again it's multi-faceted. And you obviously need to not only have the trust and insight of the people in the company, but also the key investors and stakeholders outside the company. Because the CFO and the CEO tend to be the folks that are interfacing the most with investors and board members. And therefore that requires a unique set of skills as well in terms of understanding sort of what their needs and wants are, and presenting that in a way in which they can understand it. And then, of course, I think you need to also be somebody who can fix things that get broken quickly, right? That happens in organizations, whether it be through acquisitions or divestitures. But you need to make sure that you're able to act quickly to address issues that need attention on a real-time basis.”10:57 - The “going public” craze: then and nowBrian contrasted today’s SPAC boom with the bubble of the dot-com era. In the early 2000s, many unprepared companies went public. Today, companies are generally well-established.“I think there was the euphoria, if you will, around the dot-com boom that created a unique opportunity for companies to go public, but unfortunately they shouldn't have been public. And then I'll compare and contrast that today, where I think we'll talk more about this later, but the SPAC boom is very different than sort of the dot-com boom, in that the companies that are even going public through SPACs today are fairly mature, well-established, later stage either venture-backed or private equity companies that have a business model, have a management team, typically are generating revenues...Some may not be generating profits, but it's a very different feel and type of company going public today than it was back in 2000.”12:31 - The two worlds of the pandemicThe pandemic starkly impacted some industries and helped others. Going forward, Brian believes those temporary inequalities will begin to normalize on both sides.“Today feels very, very different in that even though we've had the pandemic, it's really been certain industries impacted. You know, travel, leisure, hospitality, restaurants. And if you look at the other industries, they have really benefited greatly by the pandemic and people being at home. So it's a story of two worlds. And now that we're coming out of the pandemic and people are now able to go back to stores and restaurants without masks, I think that, again, those industries will come back, obviously laggers we've seen them now perform pretty well in the markets. And so I think we're on a trajectory of all the industries returning to normal. And some correcting, rightfully so, because they benefited abnormally just from the pandemic...The key is that on either side, you, as a CFO, were reacting one way or another, and you were called into action very quickly.”16:51 - The rise of the IPO marketAvailable capital is fueling growth opportunities for both public and private companies. Brian believes that the SPAC model will only increase in popularity.“We've also seen the IPO markets open up rather dramatically last year into this year, and all through three different ways, direct listings, a regular IPO, or a SPAC transaction. And so, in SPACs, just recently, there's been a lot of them that have occurred in the last year; recently have slowed down because of a matter that the SEC raised about certain accounting for warrants that had issued in connection with these initial IPOs, that of course caused some people to slow down and they've had to refile their 10Ks. So although it's slowed down temporarily, I think it is probably here to stay. And in fact, we're also seeing overseas the European community now begin to adopt the SPAC as a bible for a way in which to go public in the European Union. So long story short, whether it be public or private, there's a real significant availability of capital that's driving either 1) helping companies that are earlier stage grow while they're private or 2) help those later stage private companies come public.”23:28 - Be prepared for the unexpectedWhen you have talented teams and proven processes in place, you are better equipped to handle any curveballs that are sent your way.“The CFO needs to be prepared always for the unexpected, right, as I like to call it. And what that means is you better make sure your house is in order if you're going to have something unexpected occur. And so that's why, initially when I talked about some of the things I did at the beginning around, you know, being the trusted partner, being strategic, having elite teams, having the right processes, people and systems in place. If you don't have all those things operating effectively, it doesn't allow you to prepare for what I would call the unexpected. So I think for CFOs out there, you never know when you're going to be called in to raise new capital. You never know when you're going to be called in to potentially think about doing a public offering. You never know when you're going to be called in to do a major acquisition. But each one of those three...has different complexities that your organization may or may not have been prepared for previously.”24:46 - Preparing for acquisitionsIs an acquisition in your future? You should start preparing now. It’s not just a financial process, it’s a deeply operational undertaking.“John Chambers was a master from Cisco. And any time he did an acquisition, he integrated all of the operations of that acquired company - almost all - on day one. I'm not suggesting that's the right model for every company, but I think people and companies need to think about what's their model for integration because you have to get done with the financial valuation and the structuring. You need to operate that company in a way that adds value to the existing shareholders. And obviously, it takes care of whatever capital you're raised to do the acquisition. So I would say on the acquisition side for the CFOs out there is if you're anticipating an acquisition, anticipate, what is the integration plan? It's not just financial, it's operational.”25:48 - Preparing for IPOsPreparation is also key for going public. Whether that’s through a SPAC or traditional listing, you need to have your financial ducks in order well before you seal the deal.“You've got to be prepared to be a public company before either 1) do your SPAC transaction or 2) do your direct listing or do your traditional IPO. Because you've got different financial reporting requirements around quarterly and annually. You've got different governance requirements around board composition and audit committee meetings. You've got, depending upon the size of your company, internal controls, Sarbanes-Oxley testing that needs to be done at a minimum by management but also potentially by your auditor, at some point in the future. And then you've got to close your books really on a timely basis each quarter and each year end. And you have to have the ability to forecast so that you don't miss your guidance that you've given, or you weren't able to update your guide just to the extent you do it quarterly or annually.”32:12 - The limitations of a hybrid work modelFive-day workweeks in the office may be a thing of the past, but Brian believes that areas that relied on face-to-face interactions in the past will continue to do so as part of a competitive strategy.“I don't think my expectation is that we will not go back to five days for most people, five days in the office as being the norm. And it will be a hybrid model of work at home and then work in the office. What will change I think is that for those folks that need to have what I’d call client-facing responsibilities. They will get back on buses, trains, and planes because the last thing you're going to want to find is that your competition has gone out and had those face-to-face meetings. And you were complacent at home, still tied to the Zoom. So I think for certain functions within the company, you're going to see more of a return to normal, as opposed to others which are going to become the hybrid model. But, you know, one thing I think the pandemic proved to all of us is that you don't know what you don't know, but that we are all resilient.”23:08 - Look for the smoke signalsThe Fed may not be worried about inflation - but should you be? Brian says it’s important to read subtle signs and plan to act in advance.“One thing I think people are taking for granted is inflation, or the lack of inflation. And it's only when it happens that it becomes unexpected. I think people probably should be thinking more about looking inward at their own business, and they're probably seeing things like supply chain disruptions. They're probably seeing labor disruptions. They're probably saying, you know, commodity price increases, so typically, where there's smoke, there's fire. I'm not arguing that they're not aware of it, but I think we become complacent when we hear folks like the Fed speak to policy is driving and keeping interest rates low, as opposed to what's really happening out there...If there's going to be an increase in inflation and interest rates, be prepared to start thinking about what you're going to do now, so that when it does happen, you're prepared to act. And if it doesn't, then you take advantage of the market cycle.”

What do Microsoft and a dental care marketplace have in common? Plenty, if you look at it from the inside-out. Dave Monahan, CEO of Kleer, got his entrepreneurial training at Microsoft, where he learned how to focus on solutions, build transparency, and innovate faster. Today, Dave is building a pandemic-proof culture at Kleer, a dental care marketplace aiming to replace inefficient insurance plans. In this episode of The Modern CFO podcast, Dave and host Andrew Seski talk about the benefits of transparency, where to look for product data, and how Kleer survived COVID-19.Show Links Check out Kleer Follow Kleer on LinkedIn or Twitter Connect with Dave Monahan on LinkedIn Connect with Andrew Seski on LinkedIn Key Takeaways4:22 - Microsoft-made entrepreneurIn his first year at Microsoft, Dave learned from CEO Steve Ballmer how to stay solution-focused.“The person running that area asked me to present the first 10 minutes of the presentation... when I was done, [Steve’s] first words to me were, ‘I hated that presentation.’ I’m in front of Steve and his leadership team and all the leaders of the group I just joined. And so he goes, ‘let me tell you why.’ And he said, ‘you presented a number of problems. You did not give me any solutions.’ I think I was 29 or so at this point. And then that one for me was, all right. I will never ever do that again. If I'm going to go into a presentation anytime and anywhere, and I am ever going to present any kind of issue or problem, I will not only have the solution, but I'll have the data to back it up.”6:44 - A model of transparencyMicrosoft’s open-access information model encouraged responsibility and encouraged healthy risk-taking.“Transparency was critical to Microsoft's success. They shared everything. It was the first time I'd been in an organization where you could get information about anything within the company. It was very open. Like these presentations we would do - there was, I can't remember the exact number, maybe 30 or 40 subsidiaries in Microsoft - at the time I could go get ahold of all their presentations and look at all their data and the company would post results on a weekly basis. And you can dig in and take a look at it in as much detail as you wanted. With that transparency though, they're their team's responsibility. So they assumed, ‘okay, if you have all that information, I'm mobilizing you to do things and take risks.’”7:35 - If you gotta fail, do it with dataMicrosoft’s corporate culture encouraged rapid experimentation backed by smart data to keep innovation moving.“The second culture piece that came from Microsoft for me, that I instill in every company I'm at is to try things, you know, always try moving forward. It's okay to fail. I know this is sort of a common term now, but back then it was sort of new for me: good news travels fast, bad news travels faster. Something doesn't work, try things, experiment, it doesn't work, kill it fast. It’s really important to try, but also kill when needed. And so that was our thing - just bringing that sort of culture of experimentation to the company that I'm with. And then the other piece of both of those items needs support from a data infrastructure standpoint. You don't want paralysis by analysis, but you want data and information to support where you're going and the decisions you're making.”9:25 - The Kleer revolutionDave’s company, Kleer, is a dental practice marketplace connecting patients, dentists, and affordable care.“So it's a bit of a parlor game, dental insurance, and it ends up costing the dental practice a lot of money, and patients and employers a lot of money...we decided the dental space needed was an open marketplace where dentists and patients can connect directly without a middleman in the way. We created a platform that enables dental practices to design care plans for the patients. And these care plans can be different because one practice might be tailored towards older patients, but others would be tailored towards younger patients. And then the patients pay a subscription to dental practice. A simple subscription could be twenty-five dollars a month, $30 a month, and they get pretty much everything that's in insurance. You get your exams, your cleanings, your x-rays, and then you get discounts off of other treatments. But it costs about 30 or 40%, less than dental insurance. And it also has like, no, there's only no tax. There's no deductibles, there's no waiting periods, all that stuff's going away because we've gotten rid of that middleman. There's no reason for that middleman to be in the way. And once you get rid of that middleman, get rid of all the wasted inefficiency.”17:37- Here’s to the milestonesAs the company grows, the Kleer team builds camaraderie and motivation with a culture of celebration.“A big part of how we run Kleer - or any company I'm in - is it's not me making all the decisions. It's me asking others to sort of step in and take responsibility for certain things. And so one person on my team is in charge of making sure we are celebrating and taking a break,  making sure everybody is having fun and enjoying themselves. So what he's put in place is once a quarter, we actually go off-site. Now, obviously, the pandemic has caused an issue with this, but prior to the pandemic - and we're going to start it up again as soon as everything's back to normal - is once a quarter, we go out and do something and it can be all kinds of different things from bowling to ax throwing to make sure that's part of our culture is that we're willing to relax and enjoy each other and see each other on a personal side. We find the milestones in the company that really matter, and we celebrate those.”21:20 - How transparency beat COVID-19How do you save a start-up in a pandemic? Reinforce your transparent culture to rally your team - and extend the courtesy to customers, too.“So we reflected on that when COVID hit and decided this was a chance to actually rally the company. And to position that as a major challenge, where everybody's going to learn through the challenge, but we're going to have to sacrifice to get through it. So we basically rallied the team around, ‘Hey guys, we're going to get through this, it's going to be some pain along the way, but we're going to come out relatively stronger than any of our competition. So on the other side of this thing, we'll be in a better position than we were prior to it.’ We just basically got feedback from everybody in the company and we had open sessions and everybody was willing to sacrifice. We ended up cutting salaries drastically. We ended up negotiating ahead, my COO went out and negotiated with our vendors to get lots of concessions from a cost standpoint…we actually implemented a thing for our dental practices where they could suspend their subscription. So if a patient was paying a subscription, we enabled dental practices to suspend the subscription until the pandemic passes.  Then they can come back into the office. The net was the goodwill we created.”27:09 - DIY transparency cultureWant an open culture? Stop worrying and allow access to key info - your employees and growth will benefit from it.“Probably the first thing that comes to my mind is letting go. A lot of people just hold on to information or insight. And what I think is they are either afraid it’s going to get into somebody’s hands and competitor's hands, or they're afraid that people are going to react when they see negative news negatively. And I can see the exact opposite -is that people will protect information. And let's say some leaks, that information is not going to cause damage to you as much as the positive you create by giving it to your company. People, one, when they have data can act smarter and execute better. And then the other is you'll be really surprised at the level of engagement you get from people and the buy-in you'll get once they have information in their hands and their ability to tolerate bad information goes way up.”30:48 - No skeletons in the officeDave keeps the info door open to investors to build trust, gain support, and benefit from outsider feedback.“There's not a business in the world that doesn't have a problem or multiple problems. And I'm not a miracle worker. I'm not going to tell them that they'll never see an issue from me and I'll never have a problem with my business. But I do tell them is I will share my issues with you, but I will also have my plan I'll have my plan for fixing it, but I'd welcome your feedback on those, but all data is exposed...It allows me to one, be free and do what I need to do to run the business, but also sometimes - not all the time - but sometimes they’ll have an insight how to help me.  I've had plenty of mentors, CFOs, podcasts try to shake their heads on this one. I had multiple investors come to me with ideas that were horrible. And I'll share information with them. They'll come back, interpret it wrong, come back and say, ‘Hey, here's what you should do’. And I think thank you very much for your feedback, not gonna do it but thank you for your feedback.”38:14 - Connecting the data dotsDave prioritizes collecting and understanding data from multiple sources, such as customer feedback.“The way I look at problems is probably what my core strength is. I think of myself as somebody who can connect a lot of dots, and those dots are all over the place. So some dots are we go and talk to our customers and ask, what do you like about us? What don't you like about it? How can we do that better? Right. They're going to give you a list of things from their perspective. The other thing you got to understand from their perspective, it's really critical,  when you're considering different data sources. So great. I understand that some people think, well, that's enough information. Let's go now. It's not actually. Customers don't know what they don't know, and that's one set of data as customers.”39:56 - Keeping a global viewAlong with market and customer analysis, Dave looks to the outside world to get a sense of what’s to come.“So market research or whatever, market analysis, you've got customer analysis. And then the other thing I try to do is look at the world outside of our market. So I do a lot of reading. And a trickier one is where is the world headed? And sort of where or how can we sort of map to those macro trends? And which ones make sense to us or are relevant to us, and which ones aren’t.”

As a serial entrepreneur, Matt Wensing is no stranger to managing the day-to-day operations and growing pains of new businesses. However, he was surprised that his dependency on the same, stale spreadsheets hadn’t waned by his third venture.In 2019, Matt launched Summit to accelerate financial intelligence by replacing idiosyncratic, disparate spreadsheets with a collaborative modeling platform. His goal is simple: to create a forecasting platform that anyone, from CFOs to start-up founders, can leverage successfully. On this episode of The Modern CFO, Matt and guest host Stuart Balcombe discuss where Excel falls short and how Summit’s plug-and-play features are a leap forward in building companies within our globally connected world.Show Links Check out Summit Follow Summit on LinkedIn or Twitter Connect with Matt Wensing on Twitter Connect with Stuart Balcombe on Twitter Key Takeaways1:12 - The question that started SummittMatt was confident in his financial know-how, until he was hit with a question Excel couldn’t easily answer.“The simple question was: if your sales cycles extend from what they are today, which is approximately 30-60 days lets say to 90-120 days, what's that going to do to your business? What's that gonna do to your capital needs, to your hiring plan, etc? And I remember thinking, that's really smart. He's seeing a trend, which sales cycles are extending, and he's buying into it, which is what I want them to do as a founder. But he's then saying, ‘If that’s true, then what?’ I remember going back to my Excel-based model and realizing that in order to answer that question accurately, it wasn't going to be simple. I couldn't just delay receivables. I couldn't just change the pipeline. So many things about the business needed to change to capture that distended sales cycle. It occurred to me as I was going through that wow, this is an extremely painful, but extremely smart question. And it's kind of crazy that in order to answer this, I'm going to have to spend hours and hours back in Excel."6:33 -  Messaging that hits homeSummit’s mantra is: speak quietly and carry a big message that pushes your users right where it (currently) hurts.“You are in a relationship with a tool that both simultaneously delights you and simultaneously frustrates and disappoints you. And in some cases betrays you when you want it to support you and have your back. There's this love-hate dynamic. And because of that, the H1 there says, ‘Tell your forecasting spreadsheet you're never getting back together.’  It's really directly appealing to the fact that it's not all love all the time. And you had your moments, maybe not today, but in the recent past, where you've thought about burning it down and starting again.”11:35 - Summit’s customer-led approachTo compete with Excel’s customizable model, Summit had to become a language - not a product.“I ended up realizing spreadsheets are a programming environment, not a database. And I think that the approach that you choose to take, when you're attempting to replace a spreadsheet, has to take a position on that. Am I going to replace this programming environment -  this language, if you will -  with a SaaS tool, which is effectively a product?  And I am the only one who can improve that product, my team improves that product and launches features? Or am I going to take a platform language approach and say, ‘I'm actually going to build a better programming environment that enables you to do everything that you can do today, but better?’...For Summit, I've chosen an approach of building a better language, a better programming environment for financial modeling, as opposed to just a product. Because I don't think you can build you can't beat a language with a product. You can only be the better language.”14:38 - The global market vs. ExcelEveryone’s got their own dialect of Excel - and that’s killing collaboration in a global workforce.“The more valuable a spreadsheet is to an individual, the less valuable it is to the group. So much individualism, idiosyncratic statements, dialects, ways of doing things, structures that are unique to my mental models, all get infused into the sheet. And that puts the ‘anything-goes’ approach to development at odds with the internet itself, in terms of collaboration and protocols that inter-operate with one another. You've literally created a lot of impedance around this very valuable asset. And it's this cruel irony that the more I invest into it, the worse it gets for you. That is fundamentally at odds with a world where you and I have an easier time than ever working together, even though we're separated by thousands of miles, the fact that this paradigm is not supportive of that or conducive to that.”16:07 - The challenge of new economic activityAs businesses rely more on subscription-based services, Excel spreadsheets don’t provide an easy way to model this new economic activity.“The other thing is the subscription economy, which I believe has put a lot of pressure on a need for standardization of certain representations within financial models. So cohorts, retention, subscriptions, plans, tiers and pricing and all of these - so much economic activity now is centered around subscription revenue. You can create subscription revenue in Excel, but the fact is that it's so hard to properly model cohort-based retention and retention analysis in a spreadsheet. Call it a difficulty level of 50 - and there's pressure for it to become a 5, because there's a thousand times more subscription revenue activity going on in the world than there was 30 years ago.”18:12 - VC’s growing interest in financial healthToday, presenting a financially sound business is more critical than unicorn growth when it comes to landing VC investments.“There's a long list now of funds and firms that are actually looking for a financially sound investment. They're not just looking for unicorns. Of course, they want unicorns.That's great. But they're actually very happy with what they call the long SaaS ramp of growth. And they're looking for this at very early stages, to make loans, to make investments with maybe even revenue based returns. So the IRR is great, but they need to look at your business at a much earlier stage than ever before. And they’ll make a decision not just based on the founders and the hotness of the markets or the market potential, but they want to make a decision based on the things we just talked about, which is how sound and strong your business is financially. And that means that founders and early-stage operators are being asked to produce models that are much more rigorous much earlier in their life cycle than they did 10, 20 years ago to get that $300,000 loan for a business doing $300,000 a year in revenue.”24: 21 - When growth hits the wallCompanies may get away with poor financial practices for a while - but most will reach a growth plateau. This reality demands re-evaluating the antiquated tools we rely upon.“Everybody hits this asymptote at some point in their growth. That asymptote is a painful relative to the e number of ideas that the founder has left in terms of how to break through. So if they hit that asymptote, the founder goes, ‘Oh yeah, but we haven't launched X yet.’ Well, they go launch X and maybe it works, maybe it doesn't. But when they get to the point where they're at an asymptote and the founder is no longer confident that if they turn this dial, they're going to get more growth. Then you really find this point of, ‘I need to understand the levers in my business.’”25:26 - Financial models that talk backWhen companies hit a plateau, founders realize that their financial models aren’t giving them new data or insights - and start looking for a change.“Growth and founders and startups are all very intertwined. And so the stage at which they switch varies, but a lot of it has to do with acknowledgment that I no longer understand my business sufficiently well. Therefore I need a model that is in many ways smarter than me, that I can ask questions and it tells me things that I didn't know before. As opposed to that early stage of ‘I'll tell this spreadsheet what growth I'm going to get’ which is literally the opposite mindset of a mature approach.”33:12 - Speaking the founder’s languageMatt designed Summit’s UX to fit the skillset and tech needs of all founders, not just those with investment banking backgrounds.“The blankness of it and the existing structure of the P&L view of it forces founders - it sort of sets them up for failure in terms of describing their business. Because not only are they going to just not finding a way to describe it in the natural sense, they also know that as soon as they start describing it, somebody is going to come along one day and slap their wrist for doing it wrong. It's extremely antagonistic. But then I get in Summit and I say okay, tell me, how do you acquire customers? Oh, we have organic leads about how many per month done. And I just begin to build the model component by components. They just are in their happy place suddenly. Then, when you say that if we capture all of your activities, if we capture all of your pricing plans and your subscriptions and your acquisition funnels, we can hit a button and a computer can generate the P&L view. We just need the activities from you. It's this moment of joy, where they go, wait a minute. I can just come back into this one thing and change this number. And then I can hit rebuild. And the spreadsheet builds itself in a way that means I'm not going to embarrass myself when I show it to those people.”36:52 - Climbing towards a collaborative futureSummit trusts current users to direct the growth of features and possibilities.“It's a freemium approach. So we actually have many hundreds of companies and users who are just using the free version of the products. There's really no risk. I should also say that where we are today as a product and as a business is really a - think of it as a bucket of Legos that we're handing you and saying, here's a bucket of Legos. You can probably build your house out of these, but if you can't, let us know. Where I want to go over the next 12 months is actually allowing our own users to design their own Lego pieces. And therefore there's really no end, whatever they can imagine they can do. And that's fully possible within Summit.”

Public practice accountant Martin Chee knows: no one likes wasting time on tedious data entry of the same numbers over and over again. That’s the gap he uncovered in the financial accounting industry — and the gap that his company Amaka fills seamlessly. Their accounting integrations software lets businesses capture their financial data and use it across all their systems, so there’s no double work. Martin talks with Andrew Seski of the Modern CFO podcast about the importance of data accessibility today and the evolution of Amaka, especially during an unprecedented pandemic, plus how parenting is good prep for running a business.‍Show Links Check out Amaka Follow Amaka on LinkedIn or Twitter Follow Martin Chee on LinkedIn or Twitter Connect with Andrew Seski on LinkedIn or Twitter Key Takeaways5:04 — A really, really clunky processA great idea — like Amaka — always starts with a problem, in this case the overly manual, time-consuming, and error-prone process for exchanging financial information.“This process around organizing finance was really, really clunky and antiquated and just deeply inefficient, and effectively what it was, was the exchange of financial information. So, you want to borrow money for the business. You need to provide the business’s financials and a whole host of other documents and information...What a lot of banks were doing is, they'd consume that information in a really manual way. Like you would email them a PDF or worse still, you'd hand deliver documents to them and then they'd give it to someone else. And they'd be like keying in the numbers into this piece of software, which would then spit out a result. And it was just a really, really long, time-consuming process. And it was really error prone as well.”‍‍‍10:42 — Same information, different systemsAmaka was carefully developed to capture the myriad data points from a single transaction (date, time, price, cashier, etc.) so they can be used across all systems.“We definitely put a lot of work into architecting something that made it really easy to understand the same information, but in different systems. Take a sale, as an example, can you just talk about generic attributes of a transaction? You might have the date of the transaction occurred, the time when it occurred, the day that it occurred, the employee that was responsible for it, the value of the items, the discounts that were applied on it — you can quickly see how much data is there just in a, in a simple transaction like that.”‍13:36 — Data liberationMartin and the Amaka team call what they do “data liberation” — they free data so it’s no longer tied to just one system.‍“One of the phrases that we kind of throw around at the office is data liberation. Like we liberate your data from whatever system you might have. Because as a business owner, you have this information there, but it's just not always easily accessible. We're really trying to solve that problem, so you can leverage the information that you have in a really, really easy way.”‍18:35 — Stay positive and knuckle downA strong team and honest, hard work is what kept Amaka going during the pandemic, says Martin.“We really just had to stay positive and knuckle down...We're developing new products and we're enhancing things and it's like, whatever was happening in the broader economy, in the broader market, macrowise — well, if you didn't have a positive outlook and you didn't think that this was going to be something that eventually was going to go away, then I don't know what the alternative really looks like. And no one was going to stick their head in the sand and just, like, ignore it. But at the same time, we had a full schedule of work to get through. And we just kind of knuckled down and focused on that. Rather than, you know, looking at the things that were happening, which were outside of our control anyway. And we knew other businesses largely anyway were having that experience. So it just didn't pay to do anything else, except that.”‍20:19 — Plan accordinglyAndrew shares a comment from a different interviewee that struck him; it removed all emotion from the equation and focused on just getting the job done.“One of the more insightful comments I've heard that just took me aback, as somebody who hasn't been through at least one pandemic through their lifetime, was that if the world is only going to end, plan accordingly. If you're confident that this is the time, that the world ends, then plan accordingly. If you don't believe so, plan accordingly. It was such a detachment from the emotion that was running through.”‍24:32 — An annoying distractionFundraising rounds, while essential, can be a distraction from the important work of growing and directing a business“There's a lot of components to the business as well, particularly when you're gearing up for a fundraising round — that is a really big, annoying distraction for the business, particularly from the leadership perspective. When you get dragged out to do pitches or prepare materials, answer questions — that is a really time-consuming process that takes a lot of the focus away from the important things that are adding value to the business (other than giving it capital, which is also incredibly important obviously). That’s always a challenging thing to be contending with, at the same time that you're trying to help your business grow and direct it accordingly and really make sure that you're gearing it up for success.”‍28:26 — So much changeEverything changes so rapidly in the startup world, says Martin. Sometimes even what you did last week is already obsolete.“The reporting side of things is always like a challenge anyway. At the best of times, with a startup — it's changing and pivoting. If I put together a business model, like two years ago, the one that we have now is like poles apart. Aside from just underlying assumptions changing, products have changed out, pricing has changed, revenue models have changed. So there's just so much change that's constant. Where, you know, you're always trying to spin things out that are relevant, and then, you know, a week later they could be totally irrelevant. And you really need that speed to be able to access that information. That's incredibly challenging.”‍30:52 — Going through startup lifeThe ebb and flow of living through a pandemic, Andrew observes, is a lot like running a start-up; priorities must be constantly reassessed and reset as conditions and variables shift at an exhausting pace.“In the startup world, which we are both endeavoring to navigate, it's almost as if there's a constant reprioritization process that occurs, and that it can ebb and flow with great ideas, great new clients, international clients, and just a number of variables. And I think that is almost a great analogy for the year that we've been through. It's almost as if the world was going through startup life and all of a sudden we're all trying to navigate a tumultuous time and figuring out where we can ebb and flow appropriately.”‍32:03 — Don’t indulge the emotionsMartin shares a life lesson he gleaned from a cricket player with incredible focus.“The interviewer at the end of the match asked, ‘Why don't you celebrate when you score 100?’ And he just said, ‘If I celebrate the highs and indulge in the lows, I feel like that affects the focus that I have on the pitch.’ And that's something that, it's kind of like a philosophy, I guess, that I have, also a general approach to life. It requires a lot of energy to really live on those highs. And also, perhaps like indulge in the lows, and in indulging in emotions, just generally in — in business and particularly in startups — is such a roller coaster...At the end of the day, a lot of these things you just gotta get on with the job and get on with things. Sometimes it's just a matter of you genuinely don't have time to get caught up in that emotion.”‍36:24 — A double-edged swordWill sharing sensitive company information with employees motivate them or topple their focus? Figuring out what to share and when is a tough call, says Martin.“As founders and leaders within the business, we’ve been quite transparent with the whole team and that's a bit of a double-edged sword in a lot of ways. How much information you're exposing to people is such a delicate balancing act where, you know, people are performing a really specific role and a specific function within the business. Not that you necessarily want to limit the exposure to information generally, but you have to really understand the impact that can have on people — whether it's potentially damaging to their focus. Maybe it introduces a degree of uncertainty, which wasn't there before.”‍47:45 — A hell of a lot of patienceMartin draws a parallel between the composure and patience required from a new parent to that required from a leader of a new startup.“Trying to try to keep a level head and not get too emotional with kids — you gotta be that way anyway. That is a really great skill to possess and to carry across in the startup world. Cause it is incredibly challenging and every day is different and you know, you're definitely the recipient of pressure from a lot of different angles, whether it's investors or business partners, employees, potential customers, existing customers — there's always some fire that you've got to sort of deal with from time to time. It requires developing a hell of a lot of patience. I just think that is so relatable — the early stages of parenthood to an early-stage startup. There are so many parallels to the challenges that you face.”‍

Cameron Hyzer is the CFO of ZoomInfo, a B2B database seeking to revolutionize the sales & marketing process. With over 2 decades of experience, Cameron is expanding the role (and importance) of CFOs in growing companies. Cameron joined me to talk about the evolution of today’s CFO, the best mentalities for success, and how ZoomInfo is changing go-to-market motions for good….even during a global pandemic.Show Links Check out ZoomInfo Follow ZoomInfo on LinkedIn or Twitter Connect with Cameron on LinkedIn Connect with Andrew on LinkedIn Key Takeaways1:24 - The many roles of a CFONumbers are just the start. CFOs are a critical link between growing companies and their investors.‍“I think the CFO's role is really being the steward of the company's both business model and capital, as well as the bridge between the management team and shareholders. As the CFO role has evolved over time, there is a lot that gets bundled into that. Everything from the ability to report and understand drivers of the business, to helping the management team itself improve and grow. As well as really working with the capital markets and various different transactions, whether that's acquisitions or sales or fundraising. And finally, making sure that investors understand where we're going and are excited about that.”‍‍‍2:57 - Profits first‍Cameron cautions against losing sight of the basics, like profitability and shareholder returns.“I do think that the transactional orientation of a CFO is really important: knowing what happens in an acquisition, whether you're acquiring or being acquired, understanding how to fundraise, and make sure that your capital structure is as efficient as possible…You don't want to be entirely focused on just capital structure and transactions, but that is ultimately what drives returns for shareholders. So having that point of view is important along with the ability to help the company grow and mature, making sure that you're making the right investments within the company to power growth or profitability over time.”‍‍‍4:50 - Driving sales with better data‍Cameron’s company, ZoomInfo, provides in-depth data to give sales teams critical insights into potential leads.‍“ZoomInfo helps sales and marketing teams, and recently we've rolled out products to help recruiters as well, understand the world around them and their prospects and customers. We do this by gathering data from literally millions of different sources, normalizing, and bringing the quality up of that data so that customers can identify their next best customers…We provide information about companies, everything from how many employees that are what's the revenue within that company to org charts within that companies and what technologies they use and what they’re planning to buy over the next 1, 3, 6, 12 months. With that information, a salesperson can identify who to talk to and figure out when, how to prioritize the different prospects that they have.”‍‍8:27- Pioneering the data trend‍Businesses have started recognizing that traditional sales & marketing need a modern overhaul, 14 years after ZoomInfo’s vision began.‍“Before the pandemic people were looking for better ways to engage with their customers... making their sales and marketing teams more effective and more efficient. And the natural way in our minds to do that is to use data to make better decisions. High-quality data drives better outcomes. And that's been our mantra for the last 14 years. So as companies got more acclimated to the environment, they started to determine that maybe they shouldn't be worried about conserving cash at all costs and actually looking to grow the business.”‍‍‍9:11- The ups and downs of 2020‍After the stalled markets of early 2020, ZoomInfo saw a surge in sales as traditional sales tactics disappeared.‍“That secular trend that we'd seen of people trying to improve their go to market motions became a much starker relief when you can't go to a conference and collect business cards anymore to figure out who to talk to when you can't take people out to golf outings or baseball games in order to get the inside scoop from the company when you can't shmooze people at dinners to meet other people in the company. Our platform allows people to do all of those things from their desk or home or whatever else. So we're really excited about that acceleration that we've seen of that trend in the second half [of 2020].”‍‍‍11:21 - Cameron’s key to navigating crisis‍Cooler heads prevail, as does a long-term focus that can see past today’s hurdle.‍“I think that the most important thing is that you need to be long-term focused. You can't be focused on what's necessarily happening right now and panic about whatever. You need to look past what the current hurdle is and understand what you are going to do to overcome that hurdle that isn't just a quick fix, but it's going to actually drive value for the company in the long term. Being calm in the face of pressure and being able to have that long-term view, no matter what's going on is the most important aspect."‍‍‍13:14 - Lessons from the pre-internet bubble‍Cameron’s early years in the workforce showed him that profit beats popularity.‍“I've had the luxury of seeing a lot of different things over time. Among the probably most formative things, I graduated from college in the late nineties and went into the workforce and worked for an investment bank that focused on technology companies in 1998, which was like the huge rise of pre-internet bubble, fast growth, multiple software companies changing the world. And I think that living through that era where everything was changing, everything was fast, everything was super valuable. And then going through the collapse of the internet bubble and always having a view that valuation isn't about how many eyeballs you make, but ultimately about how much money you can make in the long-term.”‍‍‍16:03- Two success mentalities‍The best CFOs are always learning new approaches and willing to get hands-on to solve problems.‍“I think that the most important thing that I see of CFOs that I really admire or are high quality is that they're always looking to learn something new. They're not just focused on ‘this is what I learned and how I approach it.’...Putting yourself in that situation where you're not just relying on someone else to solve it for you, but actually solving that problem. I think that that makes for people that are able to weather a bunch of different situations and able to drive value through the unknown. There's always going to be twists and turns in the road and you want to make sure you get to the right place at the end of the day.”‍‍‍18:35 - Growing with a high-growth company‍From early-stage startup to public company, the CFO needs to continually develop new skills to keep up with changing business needs.‍“If you think about an earlier stage company, that's building the company and is probably more likely to be venture-backed, it’s going to require someone who's a little bit more internally focused. A builder of processes and a builder of teams...as you grow, you end up driving more complexity, whether that's complexity in the business, whether it's complexity around capital structure, whether it's complexity around potential acquisitions and growth through various different factors. That complexity starts to mean that you do need to round out more of that curiosity aspect of things. That you're able to articulate that curiosity and manage it in a way where everyone feels comfortable with the risks that come along.”‍‍‍21:26 - Building a winning team‍Hire for personality as well as expertise to build teams that excel.‍“I often look for team members that complement me and complement each other. Obviously, you're always going to want to find people that have a specific skill set that meets the needs.But I think from a personality perspective and from a background perspective, finding people that aren't just like you is what ultimately makes for a better team. One of my prior controllers was a very outgoing, very team-building type person. That was actually a great complement for me because I tend to be a lot more analytical and thinking about how to move pieces on the chessboard as opposed to trying to get the team as excited as possible. I think finding those personalities that can complement the team overall is part of the most important thing about building a team and making it as successful as possible.”‍‍‍23:24 - ZoomInfo’s next steps‍Over the next 3-5 years, ZoomInfo has big plans to expand its service and client base.“We rebuilt a whole new platform that took our service from being something that was more of a lookup tool to find information about companies or individuals and change that to a real engine to drive your go-to-market motion, to take signals from the world outside, whether that's intent or people changing jobs or getting funding or being acquired. All of those signals are important things for a sales or marketing person…If you sell security software, as an example, if a company has hired a new VP of security, that's a really good signal that you should go and talk to them.”

CFO Mandeep Basra joined RentMoola right as COVID-19 was declared a worldwide pandemic. Little did he know that the company would be quickly pivoting to help landlords and tenants by offering remote payment options and micro-lending assistance. This digital innovation is just what Mandeep thinks the world needs in order to serve sophisticated digital customers as well as support under-banked populations around the world.Show Links Check out RentMoola Follow RentMoola on LinkedIn Connect with Mandeep Basra on LinkedIn Connect with Andrew on LinkedIn ‍Key Takeaways‍3:30 - Keeping tenants safeDuring the pandemic, RentMoola worked with property managers to keep tenants safe by offering fully digital rent paying solutions.“It was interesting to see our customers thinking about their employees and wanting to keep them safe. A lot of our property managers who have tenants that were paying by cash or check, they wanted to stop that because they didn't know how the virus was going to spread with paper and whatnot. So what we saw was an increase with our property managers and our marketing team, working together to market our solution to their tenants. And saying how to keep us safe, keep yourself safe. What we're going to do is we're not going to accept any checks anymore for the time being, we're not gonna accept cash payments. What we're going to do is we're going to utilize this tool that we have in place with RentMoola and make sure that you're able to pay your rent without the risk of getting sick.”‍7:29 - Micro-financing for rentersNo one should have to decide between paying rent or feeding their family. RentMoola solved this with a system of micro-financing.“There's right now, I believe there is 70 some-odd billion dollars in backrent that is outstanding right now for tenants, for apartment buildings and whatnot, condos. And what we've done, we've partnered with a few companies out there and we're offering kind of like a rent now and pay later solution. Where it's kind of like micro lending, micro financing, you can call it at 0% interest. So the tenants don't have to face any financial hardship in these times. And the property manager still gets paid. And there's no additional interest right now. It's a decision that people have to make. Do I feed my family? Or do I pay my rent is basically the state of the economy right now. So we're finding those kind of solutions to help our user base.”‍9:15 - FinTech at the forefrontMandeep thinks that FinTech will explode over the next year, as legacy banks struggle to meet growing user needs.“I think 2021, you know, for the next couple of years, FinTech is going to be the forefront in business. There's a lot of solutions out there. You know, obviously RentMoola is one of them and the banks, they have legacy systems. They can't support the current user base right now...my gut feel is within the next 12 to 18 months, these banks with their legacy system, they can't really develop and move forward. So there's, there's going to be a lot of synergies between the legacy banking systems and solutions like ours, where the banks will need to, or will be forced to work with companies like companies like ours.”‍17:25 - Data is your crystal ballWhile no one can predict the future, looking carefully at data can help uncover important trends.“I think probably from my side, the data is key. Is analyzing data. You know, so we can always see, like you said, if we had a crystal ball, a magic wand, we can predict it. You know, we can see what's going on a month from now and we can be ready for it. But we can prepare ourselves the best we can with the data that we have. So, you know, in the data right now, I'm not speaking about balance sheets and income statements and cash flow statements. It's actually you know, the trends that we see in our payment processing. And you know, we do dig down deeper. What do we see a certain customer of ours, what their tenants are doing and how that changes over time? Is it just a cycle? Is it just going month over month? Or is it, you know, seasonal? And that's the stuff that we need to get a handle on. And so we can kind of predict a future. For example, if we see in the summertime, you know, short-term rentals is very high typically. And then all of a sudden, we see a decrease. We need to figure out why that decrease is happening.”‍21:12 - Big bank partnershipsSoon, big banks will begin partnering with small FinTech companies to bring sophisticated offerings to their existing customers.“Like I mentioned earlier, I think there's gonna be a frenzy of M&A activity with banks, partnerships with big banks. I think it's going to be key there, and there's a lot of companies out there that are doing great things, obviously RentMoola included, that banks can benefit from, as well as platforms like ours. So, and I'm just using examples, like building the deck as an example, partnering with a bank, we can offer bill payment, utility payments, bill payments, to our user base. Cell phone bills or whatever other kinds of bills. On the flip side, their banks can offer rental payments. Which they cannot do right now, because basically they're not an aggregator. They'll do one payment here and there for people, but using platforms like ours, partnering with platforms like ours, it's kind of like a win-win situation. They already have the user base and they're just offering, whether it's a white label or a referral, partnership, with RentMoola.”‍23:34 - The RentMoola advantageTo explain the benefits of RentMoola, Mandeep described how you can spend weeks pursuing financing through a bank, versus 90 seconds on an app.“Let's go with micro-financing as an example. Right now you have to go into a bank, you have to make an appointment, that appointment can take days. And then you have to provide them with all your, your IRS tax returns, your W2's and whatnot. And we're looking at a week to two week process for a thousand dollars, $2,000 a loan to get you through to next pay period or whatever. But with technology like ours, it's all done through the app. You can apply for your micro-financing and you get a response back within 90 seconds. You have the funds deposited in your account within a couple of minutes, and it's at 0% financing. Whereas in the banks, they'll charge you 5-8% for that. Or on the flip side, if you're not going to go to the bank, you're going to a payday lender. And for those who don't know how challenging it is to be in a situation where a payday lender is your option, I can vouch that RentMoola’s no interest payment structure is a far more wise route.”‍25:37 - Profiting from processingIf RentMoola is helping people out and charging 0% interest in these challenging times, how do they make money? The answer is the elegant solution of payment processing fees.“So the way, high level, without getting in details and stuff, the way RentMoola makes money. And you know, this is all available online. So it's nothing that is secret here, is basically interchange fees, processing fees is where we make a bulk of our money. So as an example, you go to a gas station, you know, Esso or Chevron. You pay at the pump, you pay $100 for gas. You receive a hundred dollars in gas, but what the merchant only gets is about $97 or $96 because Visa, MasterCard, Amex are keeping $4 for themselves. And then we get a portion of that.”‍27:00 - The underbanked are underestimatedOne thing that Mandeep sees as requiring more attention is the underbanked population, who may not have convenient access to the services they want and need.“I think what the world is underestimating is the underbanked population. And that's what a lot of these FinTech companies are out there doing is serving the underbanked or unbanked. I believe it's somewhere around the 40% range or 30-40% range where residents of the US are underbanked. There's a large number in Europe that are underbanked, Australia, the same thing. You know, obviously we have the third world countries that don't have bank accounts, and this is where solutions like ours and FinTech, and obviously partnering with banks or even neobanks that are very, very popular these days are the solutions.”‍29:24 - 100% digitalIn the modern age, you can complete almost all financial transactions without ever opening your physical wallet.“For example, I'll use myself as an example. I don't even remember the last time I went to a bank. I had, majority of my stuff is done online. You know you, and I'm like, like you said, I'm from Canada. And we don't use checks that much, but when I do receive a check it's, I open up my app and take a picture and deposit the check. Everything, majority of the time, everything is digital. Now you have wallets - you just have to tap your phone and you can pay for whatever you need. Cash is just, it's in the bank and you use it to pay your Visa bills or your MasterCard or Amex bills.”‍32:40 - Embracing innovationIn the past, technology was a scary unknown for many people. Today, people trust that innovation will help them, versus hurt them.“I don't think there will ever be an end to innovation, right? Like we mentioned, we have neobanks all of a sudden, branchless banks. We have bitcoin. Like it's, you know, it's just crazy. The electric cars, self-driving cars. So it changed. Back when I started my career a long time ago, I'm not going to age myself here, but you know, we were implementing a new software on the accounting and HR side. And there was a lot of fear, because back then change was perceived as negative. We're getting new systems, we're getting automating, we're automating things and I'm going to lose my job were the discussions in the workplace before. Now, innovation, it's seen as something positive. Change is good. We're actually getting tools, we’re automating things to move the business forward, to help our employees be more efficient and more effective.”

In 2013 Luc Jodet first heard of Bitcoin, and dismissed it as uninteresting. Fast forward to 2018 and Luc found himself co-founding Arianee, a company that is quickly becoming one of the most successful businesses in the blockchain world. Today, Arianee helps provide luxury brands with non-fungible tokens, or digital passports certifying the authenticity and ownership of high-value, one-of-a-kind products. We chatted about Luc’s journey to the blockchain world, how the technology works, and the type of projects Arianee hopes to spearhead in the future. Show Links Check out Arianee Follow Arianee on LinkedIn Follow Luc Jodet on LinkedIn or Twitter Connect with Andrew on LinkedIn  Key Takeaways 2:34  - Creating digital identities There are three main reasons to create digital identities for physical products.“The idea is to create a digital identity for physical products. And we started with products of high value, in particular in the luxury industry. And there's really three reasons you're creating those digital identities. The first one is really it's a proof of authenticity, meaning it's a way to figure out that your product is actually real because it was created by, the passport was generated by the brand. The second one is a proof of property, it's a proof of ownership that is. Because it's really transferrable from one owner to the other. And the third one is really the history of the product. Because every time something happens to your product you can record, you can notarize a new event in the NFT or in the passport of the product. So it's really like a digital passport for your product.” 4:07 - A decentralized CFOFor Luc, the role of CFO is expanded from the classic definition into one that encompasses the realm of decentralized finance. “Classically the work of the CFO is to manage. Then I'll do the bookkeeping and manage the books, measure treasury, have financing manage some of the, especially in the early startup managed a lot of the regulatory risks and in general deal with the corporate structure and how to manage this...Now we have an additional layer. Because of our blockchain and crypto infrastructure our architecture is that we have to deal with those crypto incentives and the life of a token. So the entire protocol is actually completely decentralized.”6:41- Educating the world’s brands  Several years ago, much of Arianee’s work was focused on crypto education. Today, executives are actively reaching out.“It's really like a financial innovation, the entire blockchain and crypto sphere. So a lot of our work is educating the different brands that we work with. And over the last, I mean the first two and a half years we were educating. But there was no craze, or no actual really strong interest...10 days ago when Elon Musk and Tesla announced that he had purchased $1.5 billion worth of Bitcoin, all of a sudden I have a lot of corporate executives and directors who I speak with who actually now are actively asking me.”11:52 - Embracing Ethereum Bitcoin didn’t interest Luc, but Ethereum got his attention. Why? Because it added the element of a decentralized computer.“The real thing that got me to change my mind was when Ethereum was introduced in 2015. Because the theme was really the idea of creating more than just a ‘digital gold’ kind of like a store of value. It was actually building a decentralized computer. The idea being that I could actually write some code, push it on Ethereum and it would exist as long as Ethereum keeps on running. And there was no way to censor it. That was to me, fascinating.” 14:53 - The definition of a non-fungible token When you trade one-dollar bill or even one Bitcoin with a friend, the exchange is equal. But an NFT represents a physical product that’s one-of-a-kind.“When I take one Bitcoin and another Bitcoin, they're interchangeable. It's the same thing. Or if I take one Ether and another Ether, it doesn't matter if I have this Ether or this Ether. It's always going to be the same. I don't have any preference. It's the same thing as a dollar bill in a way. If you gave me this dollar bill and another dollar bill, it doesn't make a difference. It still has the same utilities, same value. A non-fungible token is the idea that actually one of those tokens is not exchangeable, is not the same as another token. So technically for us, for instance we work with Breitling and create a passport for every one of their watches. Every one of their watches has a serial number. So every one of their digital passports is unique, because it has a different serial number linked to the non-fungible token.”16:42 - The practical advantages of NFTsHaving a digital passport for your item isn’t just cool. It also allows you to insure or resell your item with ease.“We really see in the longer-term vision is the idea that a digital identity for every product actually enables an ecosystem of services. So what do I mean by this is the fact that you can prove that you own a real product, so you can prove that you own a Breitling watch for instance, you can then imagine having access to a lot of different services such as one-click insurance. Today, if you need to get insurance on a watch, you actually need to provide two or three documents…It's all paper-based. What we're doing is actually replacing it by a digital identity, a digital record.” 19:05 - Luxury resale is booming Arianee has been particularly successful because of the rapidly growing luxury resale market.“The resell market, secondhand market for luxury products is worth about $21 billion per year. And it's booming. It's growing really rapidly. But actually three quarters of it is linked to the watch industry. So reselling your watch is something that is, or your luxury watch, is something that's extremely developed. It's actually the product that in the luxury industry is the most resold. And what we're building here is really something that helps or fortifies that market.” 21:31 - Why blockchain won’t rule the world Some people say blockchain is the future of everything - but Luc disagrees.“You hear it sometimes, like ‘everything will be on a blockchain one day.’ I don't think so. And the reason why is because actually blockchains are slower than regular classical databases. And even though it's going to, scalability and all improvements are going to make it a little bit less clunky compared to what they are today, they will always be slower than a regular database...So regular databases will always be necessary.”23:19 - True proof of ownership A digital passport is the same as having a physical certificate of authenticity. Although it’s digital, no one but you has the power to delete or remove it.“When you're on a centralized database, you don't really own the data that you own...There's always an admin that can delete it. When you're on a blockchain, you actually are the owner of the record. The owner of the non-fungible token of our passport is the true owner. Meaning there's no admins that can come in and delete it or change information. So what it brings is really that same level of ownership for a digital record that you have when you have a physical paper-based record.”29:02 - The future of decentralized finance Exciting innovations on the horizon will apply blockchain technology to the finance market.“One of the fastest moving developments in our sector being developed on Ethereum, but also on some other blockchains is what's called decentralized finance, or defi as they like to call it. And and here it's really the idea of recreating a lot of the tools that the regular, or the let's say the old school financial or centralized financial sector actually created...we're starting to experiment with the idea of using our digital passport, as in the product and the underlying product, as a collateral to get a loan.”

John Collins is the CFO at LivePerson and the very definition of a modern CFO in every way. His career journey spans a job at the New York stock exchange, grad school at MIT, inventing a fully automated trading platform that he wrote from scratch, managing the portfolio for a 10 billion AUM fund, co-founding his own company, and joining LivePerson. As CFO at LivePerson, John is passionate about the role of data in the CFO world, the possibilities of “conversational commerce,” and the vision of combining algorithms and social justice. Show Links Check out LivePerson  Follow LivePerson on LinkedIn  Connect with John on LinkedIn  Connect with Andrew on LinkedIn ‍Key TakeawaysJohn’s journey to LivePersonAfter getting introduced to LivePerson’s CEO Rob by chance, the compelling encounter led John to join the LivePerson team. “After I met Rob, he gave me his vision for LivePerson and how the company’s innovations are changing the way that we communicate and do business. And the value proposition really resonated with me on a deep personal and professional level. I mean, who hasn't experienced frustration waiting on hold or dialing 1-800 numbers to get some intent, some need resolved with the brand? So being able to send a message and then go about your day and feel confident that your need would be taken care of without putting you on the brand or the agent’s schedule is super compelling. And then leveling that up into what we call conversational AI and specifically conversational commerce was a really compelling vision that I was pretty sold on from the beginning.”Navigating data constraints John describes how the data that most companies collect is inherently messy. “I distinguish data from information. Data needs to be transformed in some way. It needs to be normalized. It needs to be cleaned in order to produce some kind of useful information for decision-making purposes. Many companies have a lot of data, but they have trouble accessing it. They have trouble reconciling. It's not clean, it's not reliable. I call these data constraints. And so there are many constraints you need to overcome in order to leverage data effectively.”Conversational commerceThe future of commerce is conversational: two-way engagement that takes place on the customer’s terms. “LivePerson is really a cloud-based platform that the largest brands in the world use to converse with their customers through messaging...You can, let's say, change your flight, order a burrito, arrange contactless, commerce services, like curbside pickup, all from the convenience of iMessage or WhatsApp or Facebook or any other channel that we prefer to use today. And messaging-based transactions like these I think represent a modern engagement model for brands and consumers that we call conversational commerce. The company has really evolved from synchronous web chat for customer care applications to asynchronous communications for a wide range of use cases, including two-way proactive notifications. So, no longer do you get this email that says “do not reply.” The LivePerson ethos and the essence of conversational commerce is that it's always two-way.”LivePerson’s vision The ability to converse with a brand in real-time will be a game changer, supplanting historical physical sales interactions. “The vision of the company is that conversational commerce will really supplant the types of commerce that we've seen: historically brick-and-mortar, sort of physical retail sales, e-commerce where you're pointing and clicking on a website. The ability to converse with a brand to get questions answered increases confidence, increases the satisfaction of the experience. And ultimately, as the results show, it drives more sales for it for brands.”CFO as a data scientist John sees data transformation as the primary goal of the modern CFO - a departure from previous perceptions of the CFO as purely a financial professional. “The CFO operates at the intersection of all the company's data flows, whether it's sales, product usage, finance. That's a vast sea of data. And fundamentally the role is to transform that data into useful information, right? As we mentioned for strategic decision making purposes, spreadsheets and traditional financial analysts are simply not capable of effectively utilizing the volume of data that's available in our increasingly quantified world. And from this perspective, the CFO sounds, I think, more like a job for a data scientist than a classically-trained finance professional.”Navigating information silosWhen information systems are fragmented, the entire company suffers. Creating efficient workflows is what allows companies to truly succeed. “Most large companies’ internal operations run on a fragmented network of siloed spreadsheets and enterprise software where humans actually perform the equivalent of ETL jobs - that is, they manually extract data from one system. They transform it in a spreadsheet combining with other data or whatever the case may be. Then they load it into another system. And that creates the link, the connection between systems to make, you know, to make workflows happen; to complete processes is incredibly inefficient...the result of all this is severely constrained flow of reliable data that renders even the simplest automations very hard to deploy. So in order to move faster, in order to be smarter and take on the kinds of challenges and opportunities that were presented to us by the pandemic, you have to solve these data constraints.”Statistically Sound DecisionsAs humans and companies, we are predisposed to do things the way they’ve always been done. Analyzing data can help reveal whether or not those patterns are valuable. “When you can bring to bear hard evidence that is statistically sound, it can change the way that we might be predisposed to think about a problem or an opportunity. You know, as humans, we have many innate biases, some of the most profound being availability bias. You know, what have we seen most recently that works? Well, let me just apply that same tool to this problem, which may not be the appropriate way or the optimal way to solve the problem. And so I think being more quote-unquote “data-driven” has allowed us to make more objective, higher quality, in other words more predictive decisions that ultimately lead to higher ROI.”The importance of empathy2020 was a year of stress. John says that recognizing that stress and supporting team members on an emotional level is a necessary task. “Empathy is a clear trait that is needed in times of great uncertainty and in times of emotional stress. And certainly many people in the world were experiencing uncertainty and emotional stress. And so I think that putting yourself in the shoes of your employees and empathizing with them in a genuine way to find solutions to their problems, not just the company's problems, is essential for any leader to come through a unique challenge like the one we experienced in 2020.”Giving employees ownershipAs a CFO, it can be easy to dictate from the top down. But John believes that motivated employees are the best employees. “I've always been a strong proponent of ownership. And I don't mean that in the way of, “just delegate everything.” I mean, people should feel excited about what they do. And in most cases you're excited about your work if you have a lot of control and you can kind of steer the ship to an extent, and take pride in what ultimately results from your decision-making. And if you're just having people execute on decisions that have already been made, I think that's a work mode that can be useful in some contexts, but from a leadership position I think it's a little bit suboptimal. And you know, you end up with people who are just working 9-5, right. They're just collecting a paycheck. Whereas if they're bought in, if they're a part of devising the solution and they're steering the ship, then I think they wake up in the morning thinking about that problem.”Combating machine-learning biasBy pioneering programs like Equal AI, LivePerson hopes to ensure that algorithms are free of harmful bias. “LivePerson has helped to found an organization called Equal AI whose sole mission is to eliminate bias in algorithms. And the classic scenario here is where let's say biased, legacy practices have collected data...There's just a broader need to question the way that we're building and training these algorithms, especially considering the extent to which they permeate our everyday lives and the extent to which virtually all digital brands today are leveraging some form of machine learning to bring value to the consumer.”Banking loveNeed proof that LivePerson wants the world to be a better place? Look no further than Bella, the new banking concept that combines cash with karma. “We've launched a new brand. We call it Bella. You may have seen some of the buzz on social media. It's a bit of a test and learn scenario right now for LivePerson, but it's essentially a bank that literally loves its customers. Bella offers its members a beautiful, conversational experience that covers all of your traditional banking needs, but there's a lot more to it. For example, customers are randomly rewarded with up to 200% cash back just for using their Bella cards. And random acts of kindness are also a staple of the experience. For example, if you buy a coffee or your lunch, Bella may pick up the tab for you.”The digital transformationThe world was already going digital before the pandemic. Now, there’s no going back. “There was obviously kind of a forcing function for this digital transformation. And I think that has a lot of implications for our future strategy...once you have built a machine, right, just to solve a problem, you'll never put that problem back in the hands of less efficient, more expensive human labor. And so all of this in my mind comes together in a way that spells out an investment strategy and a product development roadmap and a go-to-market strategy that's very cohesive and aligned. And so that's how we're currently thinking about making decisions this year.”Leveraging data advantagesThe bottom line is that leveraging data is a full time job. To that end, John has hired a dedicated team to analyze data and put it to work within the company flywheel. “There's a need to leverage more data to stay competitive, to lean in on what I call data advantages, which are distinct from leading with engineering or leading with business relationships. Data advantages I think are some of the most powerful forces you can bring to bear to solve business problems and unlock new opportunities...I've created a team that I call DMD: Data Models & Decisions, where I've hired a large team of scientists and engineers instead of the typical financial analysts and business analysts that are often found in the back office. And the central idea behind DMD is that, like my example with Alibaba, leveraging data appropriately, can create flywheel effects.”

Kevin Appleby helps run GrowCFO, a community and development resource for finance professionals. A PwC alum-turned instructor, Kevin realized that what CFOs really needed was a support system. He joined me on The Modern CFO podcast to talk about the challenges facing CFOs today, the importance of seeking out mentors, and how to embrace imposter syndrome by conducting thoughtful self-assessment.  Check out GrowCFO Follow GrowCFO on LinkedIn  Connect with Kevin on LinkedIn  Connect with Andrew on LinkedIn  ‍Key TakeawaysKevin’s journey: from CPA to the classroomKevin’s experience runs the gamut from CPA work to the chemical industry to working as a consultant for PwC. Ultimately he ended up in the classroom. When COVID hit, GrowCFO was the perfect segue. “I became a management consultant and ended up working for PwC, mainly doing finance transformation projects, my client would typically be the finance director, the VP finance, or the CFO and often working with his team trying to find information for the project. And I found over time there are lots of stuff that I knew the answer to, but the client's own finance team didn't. I ended up spending time in the classroom teaching a lot of that stuff.” ‍Creating a dedicated CFO networkAlmost every industry has numerous networking and educational resources. Kevin saw that the CFO world was an exception. “There's nothing really out there for CFOs, senior finance people to communicate with each other and to help each other solve problems. There's plenty of space here to go to the big advisory firms, but nothing really here to allow CFOs to cooperate with each other and share learning.” ‍Helping CFOs break through the glass ceilingA major challenge young CFOs face is breaking into the C-suite. GrowCFO helps prepare aspiring CFOs to succeed in the application process and beyond. “What we found was there's a big glass ceiling. It's very difficult to break through into the C-suite...95% of the roles out there are looking for experienced CFOs, right? How do you ever get through that? So we put together the Future CFO program. We've got it accredited for 40 hours of CPD, continuing professional development, and it takes you on a nine module or a nine-step journey between being a very good, very accomplished head finance professional through to landing your first CFO job, how to move into that job. And it finishes with creating the plan for your first hundred days in your new CFO role.”‍CFOs are asked to do it allNew CFOs are often in for a rude shock. The breadth and amount of work expected can be staggering. “Why does GrowCFO exist? One of the things that we're very definitely seeing Andrew is that the kind of breadth of skills that a CFO needs to have these days is huge. And there's no way that any one person can be expected to be rounded at absolutely everything. I think communication is one of those interesting ones that you've got a guy who's used to being in the back office, used to be behind his favorite Excel spreadsheet, he's used to running the finance team, become CFO. Suddenly, he's going to talk to customers, to suppliers, to investors, to shareholders, countless other stakeholders. He's gotta be the right hand man to the CEO. Now suddenly he's got a whole new world to play in.” Promoting inclusion and diversityStrong CFOs are often tactful and inclusive. Today, that means doing a quick check of your assumptions before communicating. “The equity house looks for people like themselves. You as the CFO you're constantly thinking of communicating to yourself...one of my regular weekly tasks in GrowCFO is to write the weekly newsletter. Normally I write it. So the last few weeks I've written on a Sunday evening with a schedule set to go at about eight 30, Monday morning. And I do find myself looking back on this and suddenly realizing, Oh, Kevin, you've written this for another male CFO. Go back, take out all the references to he or him or whatever, and realize that probably 40-45% of the people that are reading this newsletter are female.”Learn to specialize & delegateSince you can’t possibly do it all, what’s the answer? Kevin says the solution is to learn when to dig in - and when to pull back. “You can be weak in something. And part of it is recognizing you're weak and maybe getting somebody else to help you rather than learn the skills yourself...The CFO cannot be good at everything. But if you've got a few strengths, then strength is the sort of thing you can take the mastery. So why not put your personal development into stuff that you are good at, and become better at it? And that becomes your kind of specialism. I think that's a far more sensible way of approaching things. Especially since things that you're strong in, things you good in, tend to be the things that you enjoy doing as well.” ‍Dealing with imposter syndromeThe only way to deal with imposter syndrome is to face it. Kevin explained that admitting how you’re feeling is the first step to banishing it. “Nearly everybody that gets promoted to the top of your game, top of their game, whether it's to the C-suite, whether it's to partner level in one of the big four accounting firms, they get to a point that they're going to think, what am I doing here? I haven't got all the skills and the talents that are needed for this role. I'm going to get found out at some point.”“That's perfectly normal. And the first thing you're going to do with imposter syndrome is actually admit that you've got it. And that's a very hard thing to do, but once you've made that admission, then you can start to do something about it...The CFO suddenly has to be the man who understands business strategy, has got to be the man that understands the finance numbers. That's probably easy because he's done that all his time, but he's got to be able to communicate. You've got to know about investor relationships. I think in the CFO role the potential to have imposter syndrome is probably doubled over any other role in the C-suite.” ‍Finding a mentorOnce you’ve realized that you have questions to ask, a good mentor can help you think through the answers. “One of the things in GrowCFO that we passionately believe in is the role of a mentor. I think CFOs as well feel as though they should know it all and probably think, Oh, if I have a mentor, it's a sign of weakness. But actually again it's recognizing that you can't possibly know and know everything...One thing I loved about consulting was that we always had a consulting team of fellow, reasonably senior people. [If] we had a problem around a project - yeah, let's go have a beer and work out what we're going to do about this. I don't see the CFO having the same kind of peer group. So why not have a mentor?” ‍Embracing technologyNew CFOs have a unique opportunity to understand and embrace new technology in the finance space. The pandemic exposed the shortcomings of legacy systems and the lack of tech knowledge among leadership. “People were suddenly learning how to work remotely. that gave some people a shock, because they realize that and how the old, really old-fashioned systems that they thought were still gonna work for them just didn't work remotely.”“It's not unusual for a brand new company to start off and they just keep the accounts on an Excel spreadsheet. The number of companies that we found out that kept going that way and never quite flipped over to buying themselves some proper accounting software, that surprised us. It was more than we imagined.”

Rob Masson is the CFO at Hypertherm, a 50-year-old company that is a leader in industrial cutting systems. He’s also a former Naval aviator who learned critical leadership skills firsthand. Rob joined us on the Modern CFO Podcast to share his unique perspective on management and the ways in which empowered, confident employees helped Hypertherm weather the COVID-19 crisis.  Visit Hypertherm Connect with Rob on LinkedIn  Key TakeawaysWeathering COVID-19The pandemic took an early toll on Hypertherm, but the company stayed true to its employee-centric values. “We suffered, you know, over a 30% loss in sales almost overnight in April, and that caused a whole chain of events...We're an employee-owned company. We all share in the success of the company. And so we're all committed to each other. We have a no-layoff philosophy. So a lot of the normal things you do in public company settings and others, we don't do. And we have a very strong passion for that. So we will cut costs. We're very aggressive with that. But in terms of commitment to people, we don't do that. We come together as a team and solve the problem.” Overcoming obstacles as a team Teamwork enabled Hypertherm to bounce back from COVID-19 amid global challenges.“It was quite a dramatic response from us internally to reset for the new norm. And then there were a lot of things on the capital structure side that we thought about with the treasury group and working with our banks, just to make sure we were secure from a cash flow and keeping that going...we serve some essential end markets. So we worked very diligently to keep our supply chain open, to make sure we had raw materials, stock, etc., since we source from all over the world. So it was really a team effort.” Crisis builds new muscles Once you go through a crisis situation, you are better equipped to face the future. “This year, actually, we really surprised the organization because our business came back quite strong and we really stepped forward and shared a lot of that profit back with our associates...When you go through crisis, you live through it, you gain new muscles. So I feel very confident. Hopefully we never have to face it again as a company, but we're now prepared more than we were prior. And I think we'd do even better the next time, just because of the response and teamwork of the company.”Navel experience in action Rob’s Naval background played a critical role in his ability to keep cool under pressure. “There's just a different experience you get as a Naval aviator than you get in other walks of life, and that's trained into you to compartmentalize and solve the problem. ‘There's no end until it's over’ kind of thing. And excellence is that way too. You demand a lot of yourself. And anytime I flew, we briefed as a team. We flew in the mission then we came back and we assessed what we did and how we could get better the next time...so it was a very critical look and that was all part of teamwork as well. And then the last thing is tenacity, which is what I started with. When you're in a crisis situation, you're not done until you've tried everything. And you don't let yourself think of anything but solving the problem and keeping with it. And I think that's the type of unique training I had as a Naval aviator that helps me in all sorts of situations.”The value of parallel expertise While traditional jobs require a one-track mindset, the Navy instilled in Rob the ability to adapt to new situations. “The Navy does that to you. They put you in and just when you're comfortable and you succeeded somewhere, they throw you in a totally different leadership situation and you learn to lead in situations where you're not the expert. Some cases you're the expert, some cases you're not the expert...I think that gives me a little bit different perspective. The normal business career is get out of college, get started as an individual contributor, prove yourself through your technical skill, and then start getting advanced into leadership situations. And I think with the Navy, it's a professional training organization and it's much more about parallel technical expertise.” Structural versus Operational CFOsRob sees himself as a leader first, and an operating CFO second.“I was an economics major in college. So the art and the science of economics always appealed to me. And I think it's more of that side of operational finance, and what does finance tell you about the operations of the business. So I'm much more of an operating CFO if you will. And those are really, if you look at CFOs, you either have a structural technical side or you have the operating side. And I definitely fall into the operating mode with my military experience...I think of myself as a leader first, it's my first passion. And I really enjoy the art and science of finance. So I choose to apply my leadership skills through the function of finance in that lens. But I always do come at things first with the grounding of leadership.”Commitment to the “triple bottom line” At Hypertherm, the company’s unwavering focus is on customers, associates, and the community. “We're really on the next S curve of growth at Hypertherm. And that's what's really exciting. We really see the opportunities in our end markets to add value with the types of investments we're making...We have a motto here. A part of our strategy of shaping possibility for our customers, our associates, and our community. And that's what we call the ‘triple bottom line.’ But what that really entails for me inside my function is okay, Hypertherm has been incredibly successful to where we are here. And all businesses go through transformations to get to the next level. We have to continue to evolve and advance. And so I'm focusing my team on re-looking at what we've done and where we've come from so that we can leverage the future.”Flipping the triangle Rob’s goal is for 80% of company time to be spend on insight & action, and 20% on transactional duties. “In most organizations, people spend their time on the transactional side of things on that lower end of the triangle. And that takes up the 80/20 rule applies here. That basically takes up 80% of people's time. And the insight and action, where they're really making meaty decisions and driving the value of the company, is sort of at the point at the top. The 20% or less of their time. And so the transformation we're going through is I call it flipping the triangle. We want to flip that ratio on its head...I want 80% of the time spent on insight and action. How do we drive the business forward? How do we meet our customers? How do we benefit our associates? And how do we hit the community with positive impact?”Breaking down barriers Rob believes that by empowering individual employees, the entire company benefits. “My job as CFO now is to make sure I'm getting input from everybody at the right time, at the right spot to empower them to make the decisions. The people in the right position to make the decision with the right information. I want to make sure they're able to do that. And that's really what that story's about. One it's about communication. Make sure that everyone is feeling included. It's a leader's responsibility to break down any barriers and make sure they're getting the best out of the people...if I can just get the best out of each individual person, we're going to be much better off as an additive thing than if I get the one superstar.”

Hello and welcome to the Modern CFO podcast.  I'm your host Andrew Seski. Join me as I go behind the scenes with top CFO's to share the stories of how this pivotal role is changing in today's business climate. The full show notes and every new episode can be found at nthround.com/podcast.