In prep for ipo….

Anytime a company is getting ready for an ipo, there is tremendous excitement. In such situations it is important to remember: the window should be right (the market and the health of financials), predictability, anchor business, and the operational readiness. But it is equally important to remember never to mislead investors. If we are aware of drivers that could lead to a shortfall of results, we need to disclose. 

Further, the plan we put forward, can have market risk, but if the market exists, should be achievable with good execution. Super important to have a viable plan. An unviable “pie in the sky” plan, if missed, is bound to attract scrutiny and spotlight. 

On taking positions with CEO…

There are going to be times when the CEO and cfo have counter views. In such situations, never take extreme positions because the other person will shut down. We, as cfos, have to provide counter points as balance, but not take extreme positions. Else we will never be able to convince the other person. 

Similarly, an acknowledgement of the other persons priorities goes a long way. Make the CEO aware, but position it as - this is exciting possibility, let’s figure what needs to be done to get us there. 

On transparency between Management, Board and Investors...

I asked Jim the question about the level of transparency he maintains with the board.  He divided his response in multiple layers.

The CFOs role with the board is to be the guy that provides transparency and tells them how the business is doing.  That's how trust is built between the the board and the CFO.  Obviously there is an art here - the CFO shouldn't submarine the CEO or rest of the leadership team - but that's where messaging comes in.

From a transparency perspective, Jim maintains two types of messaging.  One that's for the management and the board, and one that's for the investors.  The investor bit is covered in another blog post (https://akaleaderperspectives.blogspot.com/2025/05/on-earnings-calls.html).  For the management, it's complete transparency - so leaders know what they have to do and the success metrics.  For the board, the messaging is similar to the management, albeit with some variations.

The management gets the unvarnished version of numbers and narrative (eg. if new customers count is not upto expectations, it is shown as such, discussed openly and actions are derived/tracked).  The board however gets a view of the softness in new customer count, but without getting into too much detail.  This softness is shared, and it is narrated that the management is aware of it and taking necessary actions.  If need be, some more detail is provided. 

The budget discussion is also similar.  Management gets a clearer and aggressive view of the budget being planned, whereas the board gets a budget view that has some haircuts to the targets.  Read: https://akaleaderperspectives.blogspot.com/2025/03/on-numbers-for-board-investors-and.html

 

On Earnings Calls...

Earnings Calls are hard.  They are like chess - where you have to think about 3-4 moves ahead every time.  Whatever you tell investors in this call, you have to bear in mind that you will speak with them in 90 days - and they will remember what you said last time.  

Metrics - you have to disclose metrics that you are prepared to share every time.  Metrics that indicate the health of the business, yes, but also the ones that are truly strong.

Guidance - the guide you give has to be something that is achievable.  Investors are conservative type - so missing the guidance spooks them.  At the same time, you have to be cautious that you are not being so conservative that next time they will ask you to raise the guidance substantially.

Narrative - the narrative you build has to be more towards the direction you are heading in, and current results have to be presented in the context of that direction.  Anomalies are not taken nicely.

Transparency - In the narrative, you have to be careful about the level of transparency.  There are going to be times, wherein a weak quarter or a less than stellar quarter will lead investors to asking about metrics that aren't doing well.  At such time, you have to be careful and not agree or indicate concern about any such metric - else that will be all they will want to discuss.  You will have to deflect it to something else at the time.  For eg. if new customer growth is slower, you'll have to suggest that our strategy is to acquire quality new customers, or expand into our existing base.  Investors (sell side analysts) are the suspicious sort and they can blow this out of proportion.

Minimize Surprises - if you want to introduce a new concept, or are expecting a driver to impact your results in the future, it is critical to start sensitizing investors in advance.  And this "advance" sensitizing can/should happen as early as possible (maybe even 2-3 quarters ahead of time).  Because when this concept/driver does hit your results (or guidance), they are already aware of it and don't consider it to be a surprise element that they don't understand.  CFOs should take the time to explain the drivers in earnings calls, call-backs, roadshows, etc.

Preparation - above all, earnings call require incredible preparation.  About the numbers, about the narrative, and metrics that drive the business.  The CFO's command over the business and investor sentiment (to anticipate the questions that might come up) are key tools to drive the preparedness.

Ready to take input - sell side analysts generally have sophisticated models that are informed by analytics.  Finance teams typically factor in much of the analytics important to the business.  But there are going to be occasions where investors conduct deeper analytics to inform their models - analytics that your finance team isn't doing.  At such times, CFO (and finance teams) should be willing to pickup and start conducting such analytics.  By the same vein, CFO should be willing to discard metrics that aren't relevant anymore.

All in all it's an art to manage earnings calls with retail investors.   

Good companies that do a good job with earnings calls are very thoughtful of managing earnings calls.  They evaluate every earnings call in the context of previous calls, metrics shared, questions on those calls, road show questions/comments, expectations (and commentary in those reports), subsequent calls after the current call, and future drivers.

Risk appetite of a cfo…

Jim has generally been clear about being at the center of a position he has to take. Eg. If it’s a tax optimization strategy, the questions are clear:

1) are we within the bounds of tax code

2) is this something that most companies do - are there precedents

3) what’s the gain from this, a likelihood of litigation and  impact if it is litigated. 

If we are in the center (or close to), wherein the rewards are commensurate with the probability of risk materializing, and we are within the law, it’s a reasonable risk (even if litigated). The answer is not always clear, but general philosophy is to try and seek clarity. 

On numbers for the board, investors and internal…

While planning and projections are critical, what gets communicated depends on the stakeholder. 

For a board plan, you want to show numbers that are a stretch, but attainable. Numbers that show that the leadership is ambitious. Of course they need to be attainable with good execution. Not flawless execution, but really good execution. Boards don’t want to see conservative numbers at all times - else while you hit your numbers and earn their trust, they can also suspect that you are not being ambitious enough. But at the same time, boards don’t want you to miss numbers all the time. It’s a fine balance.

Investors are a different beast. They don’t like stretches. They like predictability. To investors you show a projection that you can hit. That has meaningful risk baked in. 

Internally, transparency is good. So execution leaders know what’s at stake. That they can be part of a winning team, and have good compensation effects if they execute well. And flip side, what they lose if they don’t. 

On importance of planning…

Planning is an important exercise in any company. It is important because it helps align all teams. Aligns teams to unified goals, spending envelopes, and catches disconnects before they become drivers of failure. But for that planning exercise has to be well managed. It should push sales to drive numbers that are a stretch, but reachable; and it should force product teams to deliver. A disconnected planned exercise will fail in alignment exercise and fail in getting confidence of people involved. 

On reading…

As a finance leader, you should look for breadth in your knowledge absorption. These will allow you to build high level understanding of a wide range of topics and have educated conversations with your stakeholders. Jim prefers to read articles and summaries that “net it out” for him, than reading a book where the point is made after 100 pages. A CFO should also try to spread that knowledge by forwarding key articles to relevant team members so they can also educate their work, conduct and conversations. 

Time is a scarce commodity and consuming: relevant topics, at right level of depth, and from right sources are key factors.  

Jim reads sales side analyst reports - to help understand how companies are positioning themselves, the way they manage their narrative and how investors are perceiving results. He reads insights from Korn Ferry and editorials from WSJ. Lastly, his other source of understanding is meeting professionals outside of work - bankers, attending cfo roundtables, investors. 

on introducing disruption in the team...

When you are looking to make changes in your team, you have to be mindful about how much disruption you are introducing deliberately.  Sometimes you don't have a choice - external factors introduce.  But when you do have a choice, you have to be careful about the areas getting disrupted, how much, and when.  It is also important to consider the ability of the team under the leaders.  You should also assess how your direct leaders are in collaborating with other parts of the organization.  As a CFO, it isn't just the ability of your leaders to do their functional jobs, it's also about their ability to do their organizational roles - extensions of the CFO.

on getting ready for IPO...

A lot of companies focus so much on governance and controls when they consider filing for an IPO.  But the reality is, that is one aspect of the whole proposition.  One of the trickier things is to have a rigor in the business, and the ability of FP&A to predict the business.  Whether you have the processes, the people, and the overall ability to forecast the business, tell your investors what you are going to do, and then come within an acceptable range of that forecast.  Once you have that, you also need a narrative.  A narrative that is compelling, exciting, and believable.  While private investors look for it, wall street also wants something that is more real and near term.  Something that the company can actually execute to.  It is important to have a narrative that marries possibilities with the ability of the company to execute, and then show the execution.

Once you have done this, you can think about the controls, governance, tax structures, legal compliances, etc. 

On being an 'swim lanes' type of CFO....

Someone once described Jim as a 'swim lanes' type of CFO.  That he will press functional leaders to do their jobs, but wouldn't get into their kitchens.  He will challenge, validate and verify.  But eventually, he will trust them to do their jobs.  That also allows him to remain independent and not get overly close to the business.

I asked Jim for his reaction to this characterization.  His response...

I have always been an operational CFO.  I am heavily engaged in the business and with a very balanced approach.  I try to be as rational as I can be.  And with an accountability orientation.  So in this regard, I am trying to understand what an operating leader is trying to do, kicking the tires on operational feasibility, and looking for end-to-end alignment with key stakeholders.  I am not trying to do their jobs.  

Getting investors and internal leaders to focus on the right things...

In startups, it's common for founders and leaders to pitch a promise of a bright future to investors.  They get aggressive in projections, growth strategies and investment options.  And often, they start believing in their own spiel - they start smoking their own vapor.  As the CFO, you need to steer people to see past the sizzle, get to the steak.  It is critical to keep people focused on the right metrics and allocating on real basis (not allocations only to attain an investor promise).  This is the sure way of building the business for long term.

Similar to business leaders, it is important for the CFO to get the investors to focus on the real growth story.  Sometimes companies are saddled with businesses that create a drag to the overall growth.  This could be a set of customers, products, or markets.  But investors often focus too much on the drag - since that presents risk.  It is important for the CFO to carve a story that drives focus to the growth pieces.  eg. in akamai, when the Giants (Apple, Facebook, etc) went DIY, Jim had to carve the story saying "internet platform companies are not on Akamai anymore as they build their own capabilities, but the core business continues to show momentum and growth" 

On determining whether the team really needs resources...

It is generally hard to determine when the team needs more people.  But the decision making can be eased with two step evaluation:

1) what do you want to get done and do you have the right capabilities in the team to get that done.  If not - or if the team is being built from scratch, decision is easier.

2) the team has the capabilities, but bandwidth is short.  In this case, it is best to implement performance metrics and then assess whether bandwidth is really short.  And even in this, it is important to pressure test and check for automation options before throwing people.  Startups usually suffer with the mentality of throwing people at the problem.

For eg. in an invoice processing team, if they were processing 100 invoices earlier, and now they are processing 300 - great, its indicative of bandwidth shortage.  but the question should be, can we get some system to do the processing, rather than throw people at the problem.

Art of being a leader, friends with peers, and also be respected...

This is more of an art than science. Either you have it or you don’t. But broadly... it is a combination of following factors: 

1) whether the other leaders are doing the right thing for the business. If they are, then your life becomes easier. But you need to assess if they are. And that’s hard. 

2) quick wins. Are you doing simple things that can help them in their jobs. These could be something in your sleeve - not too painful for you, but makes them feel good. 

3) genuine interest: you have to show that you are genuinely interested in their pain.  And not just pain with finance, but pain in doing their jobs. And you can’t fake it. You have to listen, you have to ask questions. 

4) business acumen and operational understanding: you have to bring to the table business acumen to show that you get it. That you know business in general, and that company’s business specifically. 

5) push them: you have to demand/push them in the right direction. That shows that you are not a puppy dog ready to help them. That you are going to be equal. 

Eg. When Bob Hughes needed some marketing $$, I found him some. It wasn’t hard, but the next time I had some contentious topic, he was more willing to work with me. 

Key is to ask and understand general pain, not just with finance. Show interest.  And figure the easy stuff to solve. Your challenge, Nitin, is not to go too far with the business leaders. How do you build and keep that objectivity. At the end, THAT will get you the respect. The overly native is the friendship. Striking that balance is the hard stuff - but that's what gets you the respect.

Working as a controller...

This is good experience to have. You get to learn the complexity of a business and the trade offs.  But as a controller you need to realize that accounting is what it is.  You can’t and shouldn’t mess with it. In other words, contract languages drive accounting treatments.  Unless contracts change, accounting should happen the way it should.  Dont try to bend rules.   

But the key to remember is - how do you work with auditors and how do you make them your partners. How do you take complex agreements and ensure treatment will be conducive for the business. And here it doesn’t mean going as a puppy dog to the auditors, asking them for opinion and following it.  It means you read the contract, take your interpretation, form an opinion and ask them for theirs.  If they don’t partner, you escalate, and if that doesn’t work you need to float a replacement option. But remember, you need to get out of the role quick coz that’s not why they hired you. And if you stay there long, you risk getting boxed. 

On evaluating job opportunities and interviewing...

It is possible that we find an opportunity appealing - it is a great fit from the outside, we like the people, and we feel we can add tremendous value quickly.  However, it is important to listen to the interviewers as they outline their expectations of the person once they get the role.  While some stretch is reasonable (and somewhat good to have), if an area unknown to us is meant to be the focus of the candidate, then the role may not be right for us.  This emphasis can be understood while speaking with the interviewers about their expectations, and getting a 360 view of the role.  

The other thing to consider is the alignment between management and board/investors.  For a CFO, while it is great to hear diverse perspectives of diverse investors, broadly the expectations of the management and CEO should be aligned.  If the CEO and investors have differing expectations from the CFO, that is a red flag to be evaluated with caution.

Interviewing is another skill/art to sharpen.  It is hard for any one leader to have deep understanding and experience in all areas of finance.  Butofcourse, familiarity with all of them is required.  After that, the CFO should hire people who are experts.  During interviews, it becomes important to land this point.  It is **important to understand what the company is looking for, and then connect those requirements to your experience**.  For eg. you haven't been a public company CFO.  But taking the company public doesn't bother me as much as getting a company ready for public listing.  There is a lot of help available in the market today to take a company public - bankers, consultants, talent.  The difficulty is navigating the internal environment to get ready.  Besides, making a pitch and delivering it something I have done during my fundraising.  And taking a company public is, in a way, raising capital from the public.  

Sidebar:  you might not be great at selling yourself.  That's ok.  Eventually you also have to be yourself.

On age to become CFO, importance of luck, and progression in a career...

During a conversation with Jim, I was complaining that I have time till 45-46 to become CFO.  After which, my window of opportunity will close.  He smiled and said, "you sound like Chris Andersen.  His magical number was 50".  Then he commented - there is no real number to become CFO.  People can become CFOs at 50 or 52.  What's important is that there is natural progression in everything that a person does over his/her career.  If there is a sense of plateauing - the person does similar things across multiple roles - then it indicates limited upside.

Sure, you would find several folks who are CFOs at an earlier age.  This isn't surprising, even if it is somewhat disappointing.  Careers are a combination of experiences, decisions and luck.  Ofcourse, you have to be good at what you do, but luck is important.  While assessing our failures and others succcesses, we often attribute more weight to skills/abilities and less weight to luck.  Folks attaining higher levels at earlier stages of their career could've joined a company at an early stage (and grown with the company), they could've known someone there, they could've networked their way in - there can be a multitude of reasons.

On leadership (CFO) recruiting...

Once Jim and I were speaking about my interviews, and how I had recently received a rejection from Amagi - a company I really wanted to work with, and could make a difference in.  After hearing me out, Jim commented that usually a company, when it starts looking for leaders, has a laundry list of criteria.  It is worse than typical recruiting - because they know leadership hiring is critical.  This laundry list of criteria, when looked together, seems to indicate that they are looking for a unicorn.  As the company goes through candidates, it realizes that this unicorn doesn't exist.  That's when they are forced to make choices on which criteria are most important to them.  This process of searching for a unicorn, interviewing, realization that unicorns don't exist, prioritizing/making tradeoffs of requirements, and then re-interviewing - takes time.  One would expect leadership recruiting firms such as Spencer Stuart or Korn Ferry to help shape such requirements.  But often it doesn't happen.

This makes it important to have the right timing of entering the process.  Enter too early, and you are likely to get rejected because you aren't the unicorn everyone wants - management team, board, investors, team members, etc.  Enter too late, and you are one of the many they have already seen.  

Unfortunately, one cannot time the entry into a process, but that's where networking and referral can help. As the company goes through it's interviewing motions, staying in touch with the founders/CEO, can some time result in the company coming back and reconsidering you.        

On models of Growth companies v Value companies...

Companies sometimes try to be what they are not. 

At the risk of being binary, either you are a growth company, or a value company.  A growth company is growing revenue, adding new logos, etc.  Value companies, on the other hand, are generally more sticky with customers, but struggle to grow.  There is nothing wrong in either state - a growth company and a value company could both provide sufficient value to investors.  But managements need to realize and accept what they are, and operate that way.  Value companies have to be more efficient with their capital.  They need to be profitable and yield cash.  If they don’t, then it’s hard to get investors to stick.  It's possible for value companies can become growth companies via inorganic opportunities and M&A.  But that's true only if they acquire something that gives them access to a material TAM.  They grow in an adjacency to leverage existing competencies, and have new conversations with customers.  If, on the contrary, value companies do m&a in their core business and are merely sustaining that business, then it’s yet a value company.  Sell side investors see through this and value such a company accordingly. 

On valuation of private companies...

Valuation generally tends to be a complicated topic.  Often wall street analysts use their own models, comparables, and multiples to assess value of companies and shares.  But in case of private companies, valuation involves a lot of judgement/subjectivity.  Often value of private company shares is determined based on: 1) the last fund raise, or 2) independent valuers (that provide a 409A valuation report), or 3) (worst) a judgement call by the founders.  None of these are overly reliable.  Last fund raise value could be inflated depending on the excitement of the investor, or the true value of the business could, in reality, be lowered by other structural nuances.  The investor could've asked for anti-dilution clauses (to cap their downside risk - indicating that the value at which they've invested is inflated), or could've received warrants (which, when liquidated, lowers the per share value).  The independent valuers report is usually skewed by level of optimism shown by the management's projections, and the founder call is the least reliable.  

Of these, 409A report should be considered more reliable of the three (especially when the last fund raise happened a while back).  This report, even though based on management's projections, is subject to statutory audits and auditors will question material under achievement to the projections in 409A.  It's because of this very reason, 409A valuations are determined using conservative projections - projections that are closest to expected reality.