CFO THOUGHT LEADER

Doug Lindroth discusses the changing landscape of software company valuation, emphasizing the need for balanced growth, operational efficiency, free cash flow, and positive earnings to attract investors.

He shares his experiences, including the challenges faced during the dot-com crash, navigating the complexities of public accounting rules, and his transition to the role of CFO.

The discussion highlights the importance of clear role definitions, specialized finance teams, and leveraging data to drive strategic decisions within the organization.

Ana Chadwick discusses her career journey and how her network of people from her early days on forward played a crucial role in her success.

She highlights her experiences at General Electric (GE), including training programs, travels, and insights gained during her tenure there.

CFO Chadwick mentions the importance of data and transparency in finance, specifically in pricing and forecasting.

She emphasizes the significance of having sponsors who are willing to support your career advancement rather than just mentors.

Back in 2017, Donald McClure had only recently been appointed vice president of FP&A at Brinks Home Security when the company’s CFO at the time decided that it was the right time for retirement.

Unbeknownst to McClure—and perhaps even to the firm’s subsequent new CFO hire—a transformative chapter was about to get under way at the security firm that involved a massive restructuring and Chapter 11 bankruptcy.

For McClure, a 6-year Brinks veteran who had already had a hand in multiple debt refinancings, the Chapter 11 bankruptcy process proved to be yet one more experience that would advance him down the CFO path.

“We ended up negotiating a prepackaged restructuring, whereby we utilized the Chapter 11 process but at the same time sort of did all of the work in advance,” recalls McClure, who tells us that he quickly became the newly hired CFO’s “Number Two.”

Whether it was while consulting with the firm’s general counsel or with its CEO, McClure's CFO kept him ringside as they together educated others as to the ongoing process and its desired outcome.

“We were telling the story of the company in an environment where we were not just trying to refinance but also taking the constraints off to ask, 'What is the right capital structure for this business?,'" reports McClure, who notes that multiple financing partners were being engaged at once.

“At one point, we had four different types of debt and various stakeholders at the table trying to help us to figure out how we were going to structure this—it was really eye-opening in terms of understanding the importance of what we were doing and how the stakes were real," explains McClure, who adds that once the restructuring was in his rearview, he felt that it was time to move on.

Says McClure: “I knew that my work would be kind of done at this point, so I had been looking around and was able to find a company looking for a CFO.” –Jack Sweeney 

It’s a question rooted in surprise headlines that has now become one of 2023’s favorite conversation starters for finance executives inside the tech realm: “Where were you when you heard the news about Silicon Valley Bank [SVB]?”

For Tipalti CFO Sarah Spoja, the query instantly summons memories of being seated between two of Tipalti’s financing partners: JP Morgan and Hercules Capital, Inc.

Or perhaps we should say two of its "future" financing partners. Spoja, along with Tipalti’s attorneys, had gathered in a conference room with prospective partners to finalize the terms of a deal designed to secure a $150 million debt-raise for the growing business.

Looking back, Spoja tells us that the date of the gathering will forever be etched in her mind: Thursday, March 9, 2023. Within the next 24 hours, Silicon Valley Bank would be closed by the California Department of Financial Protection & Innovation, and the Federal Deposit Insurance Corporation (FDIC) would be named its “receiver.” The public would receive no advance notice of the bank's closing.

Still, the escalating challenges at SBV were no secret, and as Spoja met that Thursday in March with Tipalti’s prospective investors, SVB (which had been solvent only 24 hours earlier) would be broke within hours as depositors rushed to withdraw their funds.

Thus, the terms of Tipalti’s debt-raise were not the only business that Spoja was seeking to finalize as she took a seat at the table. Besides securing the $150 million in debt, Spoja and her treasurer were simultaneously tracking the removal of Tipalti funds from SVB in real time.

“For finance people, the thought was ‘Okay, I need to protect my company, so I need to do X, Y and Z before wire transfers are cut off,'" she recalls. "But at the same time, in the backs of our heads, we were all thinking, 'I really hope that this isn’t going where it looks like it's going.'”

Meanwhile, the terms finalized on Thursday, March 9, ultimately sealed a $150 million debt deal that would be announced by Tipalti in early that May. Why hadn't either of the prospective financing partners experienced cold feet in light of the escalating developments at SVB? Spoja tells us that “tougher diligence conversations” had already taken place to help to placate concerns about a changing economic climate. What’s more, she says, a “mutual trust” had been established that had allowed the deal to not to get stalled.   

Still, you can’t help but hear the winds that were howling outside the doors of Tipalti’s March 9 meeting.

Says Spoja: “It was a moment that a finance professional would always remember, particularly if they were in tech—because we all generally have a story.”

There's little doubt, though, that Spoja’s story is better than most. –Jack Sweeney

The corporate headquarters of Bend All Automotive may have been a mere 30-minute drive from KPMG’s offices in Waterloo, Ontario—but Melissa Howatson had to put in a 6-year career investment at the accounting house before she came to realize that it was time to go the distance.

Not unlike those of many of her peers, Howatson’s years in public accounting were laden with mentorship generously supplied by a partner (and a number of senior managers). KPMG was an enviable launchpad populated by many professionals who remain in Howatson’s life today, as she explains when we make inquiries to better understand the motivations and choices made by this future CFO. 

When Howatson arrived inside Bend All’s corporate offices in late 1999, she used the preferred door-of-entry for accountants far and wide: controllership. She would have a lengthy tenure there (10 years), which leads us to prod her in hope of better exposing what she perceives to be the return on this career-years investment.

In the early 2000s, it seems, auto parts manufacturer Bend All may well have had traditional expectations for whoever filled the role of controller that didn’t necessarily include undertaking menu of strategic finance initiatives. 

Looking back, Howatson tells us that she now wishes that she perhaps had been “more deliberate” when it came to acquiring financial planning and analysis experience during the early years of her career. Still, she lets us know that she satisfied her growing appetite for financial insight by tapping finance expertise that resided with professionals outside Bend All’s existing accounting and finance functions.

“We had a very strong engineering leader who was very financially astute, so I would really lean in to try to understand how his part of the business worked,” recalls Howatson, who notes that she eventually sought to build her own “tight” network of professionals across the company.

“I had to build my own network in order understand how the key inputs could help me to build a financial plan, but this was something that I really had to learn on my own as I went along,” she continues.  

Fast-forward a few years, as Howatson finds herself in a conference room seated alongside Bend All management and a number of bankers. The topic for discussion is the potential sale of the company, and Howatson is expected to participate in a management presentation.

“This was when I realized that I needed to practice those skill sets,” explains Howatson, who reports that although she had never really feared presenting to groups before, the possibility that she’d be presenting to the future owner of the business presented circumstances altogether different.

She adds: “While our CEO and president covered a lot of  the material, I appreciated the chance to present. I was a little nervous, but it did help that I had the confidence of the CEO behind me.” –Jack Sweeney 

For those executives residing inside the private equity and investment banking realm that aspire to someday occupy the CFO office, it’s not uncommon to seek out an “operator’s role” – one that allows recruiters “to check the box” and confidently present a leadership candidate (operations credentials intact) to a company’s management team or board members.

“Inspect your chute carefully and jump smart,” might be the abbreviated advice for those looking to land inside an operations role.  Once inside, the goal is to canvas the corridors and collaborate with the company functional areas and managers the banking world seldom sees.  Sometimes such operations stints are little more than a year long, while others last several years and incorporate roles at multiple companies.  

For Michael Linford, whose chute opened wide, the operations tour of duty was at Hewlett-Packard, and the multiyear stint would arguably afford him more operational insights than any aspiring CFO could hope to glean.

“When I joined the decision to separate HP’s consumer business and the enterprise business had been made,” explains Linford recalling his 2015 arrival within the firm’s M&A integration team.   The historic split up of Hewlett-Packard company was structured so that the former company would change its name to HP Inc., spin off Hewlett Packard Enterprise as a newly created company and sell off its enterprise services business.

“As the slpit off was happening we knew we had to continue to grow the company. …There was a duality to it.  If you want to achieve change, you must continue to buy and sell companies at the same time,” comments Linford, who tells us he quickly became involved with helping integrate a recently acquired networking firm that had stumbled since being acquired.

“The networking business had been growing quickly, but as it came into the HP mothership it had just stalled, so we spent a lot of time getting that business back on track – and this was as the larger separation was underway – so we were tasked with building a real business and at the same time shed these other businesses,” explains Linford, who tell us the role taught him to be mindful of distractions.  

“If you didn’t focus on getting the value from the acquisitions that were being made – what is left wouldn’t have any value,” comments Linford, who tell us the networking business would ultimately become a “material part” of the business.  

Roughly two years into his M&A stint, Linford joins HP’s software business where he would serve as finance leader for the newly formed HP Enterprise.  

“That was where I encountered one of the hardest problems I’ve ever had to solve in my career,” comments Linford, who tells us the succession of business separations within HP led to a talent shortage as employees found themselves attached to one or another entity.   

“By the time we got to the software business separation, there was nothing left in the cupboard. And so, we had to stand up a whole new technology stack to operate the business. And we had to hire a whole new team to support the business,” remarks Linford, who once more emphasizes the stiff price for indulging distractions.  

He explains “Staying focused on the job at hand while all this change is happening around you is a tremendous leadership challenge, and its alongside the technical, operational and finance challenges that were all very real for us.” – Jack Sweeney

CFOTL: Tell us about Affirm .. what does this firm do and what are its offerings today?

Linford: So Affirm’s mission is to build honest financial product that improve lives. We’re a payment network that helps consumers purchase the things they want and need. And we help merchants grow their businesses. Many people, especially millennial and Gen Z consumers, are not happy with the choices they have for their existing credit products. They do not want to be revolving on credit cards. They do not want the ball and chain that comes with compounding debt.

And with Affirm, they don’t have to. We have never charged late fees. We don’t compound interest on interest. We give consumers immutable certainty of the cost of financing when they check out. We can bring 0% as well as interest bearing products to help merchants offer a differentiated set of financing offers to their consumers. And in all of this is with an eye towards attacking what we think is a lot of areas of potential future benefit for consumers and harm that happens today where consumers do fall into a lot of traps.

I have nine siblings. I grew up as one of 10 people. And I like to tell folks that I don’t care how wealthy you are, financially caring for 10 human beings is something that will put an incredible amount of stress on your financial life. And so for me growing up, there was always a constraint on even access to credit. And my parents were certainly not immune from those who fall into the spiral of never ending credit card debt.

And I saw what Max was building and I said, this is going to be something that has the opportunity to change the world. And that was my criteria. To answer your question, I did not want to work. If I was going to get out of bed and I was going to stop my four times a week running routine and going to the gym, I was going to do all that. I wanted it to be on something that I thought had a good chance of changing the world.

And with that audacious statement, which truly, it’s a lot of audacity to say you want to get out of bed and change the world. I wanted to do it somewhere that I thought was going to do it responsibly. And the combination of financial services, technology, solving a real problem for consumers, to never charge late fees, and then to position yourselves with real principles, we like to say that we will never profit off of a consumer’s misfortune or mistake.

When Ralph Leung relocated to Hong Kong from Morgan Stanley’s New York offices, he was a newlywed eager to energize the financial world as one of the bank’s senior deal makers for the Asia Pacific region.

Four years later, when he accepted a call from a U. S. recruiter, he had been credited with having helped led numerous transactions (mostly IPOs) from the region, including Alibaba Group’s historic $25 billion IPO. What’s more, Leung had become the father of two.

“It was time to go back home,” recalls Leung, who would relocate to San Francisco’s Bay Area after accepting a finance leadership role for an online video and entertainment company. 

Looking back on his Hong Kong years, Leung tells us that the experience was a departure from his previous Morgan experience because it involved advising more early-stage founders and entrepreneurs.   

“I learned what Series A, Series B, and Series C meant and how to grow a business from different capital perspectives,” continues Leung, who credits the experience with having helped to open the door to CFO roles within early-stage companies.

Still, Leung tells us that some of the best learning experiences from his banking years came from transactions that never occurred, including one IPO that after 2 years of persistent effort failed to capture the necessary investor attention.   

“It was taking a lot of time to educate investors, and while we thought that we could get over the hump by using industry research and really demonstrating how the company could be a profitable business, we underappreciated the difficulty of advancing the narrative,” explains Leung, who tells us that the IPO was “shut down” when the company opted instead to reposition itself according to investor feedback and give itself an operations boost to make it more attractive to investors.

“So, the business responded and made some changes, rather than just trying to have us sell through certain obstacles,” reports Leung, who adds that ultimately the business went public a year or so later.  

He concludes: “Some obstacles just have to be respected and resolved.” –Jack Sweeney

Of the different acquisitions with which Jason Leet became involved at ExactTarget of Indianapolis, Indiana, there’s little question that the seventh was the most impactful on his finance career.

As it turned out, this would also be his last acquisition—or perhaps we should say his last ExactTarget acquisition, given that this time it was ExactTarget itself that was being acquired.

In 2013, ExactTarget became not only the largest company that tech wunderkind Salesforce had ever acquired but also the first publicly traded one.

Over the next 9 years, Leet would work on more than 40 acquisitions for Salesforce, including an additional four publicly traded firms. What’s more, over this period he would lead the finance team that took charge of what he calls Salesforce’s “best-in-class M&A machine.”

However, turn back the clock to his ExactTarget days, and it’s easy to see that for a number of months, Salesforce did indeed flip Leet’s world upside down. 

“I was involved in some of the diligence, so I was aware of what was going down several months in advance,” explains Leet, who had joined ExactTarget in 2006, as he vividly recalls for us the company’s impressive climb upward—along with its disappointing 2007 decision to pull its IPO due to Wall Street’s economic collapse.

“Never waste a good crisis: Having that IPO door slammed became a pivotal moment in our future success,” comments Leet, who tells us that ExactTarget then turned to private investors for funding, which allowed the company to generously invest in the business at a time when many firms were curtailing their spending.   

After consecutive years of impressive revenue growth, ExactTarget went public in 2012, after which Salesforce came knocking on the door with a $2.5 billion deal in 2013.   

“Since this was Salesforce’s first acquisition of a publicly traded company, there was a sense of being in it together with the Salesforce folks with regard to how this whole thing was going to work,” remarks Leet, who tells us that when word of the deal first surfaced, he fed his enthusiasm for the career chapter that lay ahead by buying a copy of Salesforce CEO Marc Benioff’s book Behind the Cloud.

”To me,” he continues, “the acquisition was an opportunity, first, to support the business—but as you go through an integration, it’s also a chance to follow different lanes of experience, with an eye toward growing with your different teams.”

For Leet, this growth would remain inside the realm of M&A, where his 9 years at Salesforce would be what he describes as always being “fresh,” as he became engaged with the different management teams of the companies that Salesforce acquired and sought out knowledge to help in determining how best to invest in the acquired firm to maximize post-acquisition top-line growth.

From the ExactTarget acquisition on forward, Leet tells us, M&A has consistently broadened his view of the role that finance plays in business and exposed to him how often the “people part” is the most time-consuming yet most vital aspect of the success of an acquisition.

Leet concludes: “My team and I had this sense of ownership, in that we took personally the success or failure of the acquired companies—and because of this, we were able to step up and play a broader leadership role.” –Jack Sweeney

Brett and Jack draw parallels between the challenges faced by our three featured Planning Aces as they seek to optimize the talent resources and processes in their different organizations.

The pressure to align strategy and execution is increasing, and all three CFOs share their responses to these external pressures. Brett also touches on the adoption of AI in finance. With AI, the depth of analysis and speed of feedback are significantly enhanced, leading to faster decision-making and more innovative ideas as revealed by CFO Steven Cirulis of Potbelly

The episode features planning insights and commentary from Tony Boor, CFO of Blackbaud, Michelle, Hook, CFO, Portillo’s and Steven Cirulis, CFO Potbelly.

OUR COHO

Roughly 20 years ago, Neha Krishnamohan arrived as a college freshman on Duke University’s Durham, N.C., campus, intent on pursuing a career that would someday grant her the agency to develop a product or therapy capable of solving a healthcare problem.

Having grown up among family members with different careers in the medical field, Krishnamohan had inherited a deep interest in medicine—although she felt that her tendency to want to be more “hands-on” might make engineering a more suitable field of study.

“As far as I was concerned, I was going to go to work for a Medtronic or a Pfizer, where I would come up with a great new product,” reports Krishnamohan, who after enrolling in Duke’s Pratt School of Engineering chose biomedical engineering as her major.

As Krishnamohan was ratcheting up her engineering studies, one of her professors made a lasting impression on her by enlivening their discussions with tales of past experiences as a Wall Street banker.

“The idea that the financial merits of a company really inform its decision-making and that you as a finance person are at the center of critical decisions that need to be made was intriguing, to say the least,” recalls Krishnamohan, who along the way began thinking of investment banking as perhaps an alternative path along which to achieve her goal of developing a medical product.   

As her college years progressed and Krishnamohan applied to a number of investment bank internship programs, eventually she nabbed a spot at Goldman Sachs, which subsequently offered her a full-time position upon her graduation in 2008.  

“This was a tumultuous time to be starting a career in investment banking, but I think that it helped to lay a foundation for me with regard to the importance of being prepared for the worst,” explains Krishnamohan, who would remain at Goldman Sachs for a period 13 years, 11 of which were spent inside the firm’s healthcare investment banking group. Krishnamohan ended up being named a Goldman vice president in 2015, about midway into her lengthy tenure with the firm.

In this same year, while Krishnamohan was tasked with helping a Boston-based client to prepare for an IPO, a snowstorm prevented her manager and Goldman colleagues from attending the company’s “drafting sessions,” wherein the firm’s management and lawyers would toil for many hours over a period of days to create its IPO documents.

As Krishnamohan remembers, “I knew that the room was going to be looking to me for the right guidance, so I embraced this and found myself having a point of view, asking questions, guiding them through the story—and I saw that people were listening. It was a remarkable 3 days.”

“Leadership doesn’t have to have all the answers,” she adds. “You have to listen and drive toward decisions that have conviction.” –Jack Sweeney