In the last 12-18 months many of the tech industry’s most innovative and successful private companies …the real disrupters …have hired a new CFO as they consider and prepare for an IPO.This list includes Daversa Partners clients like Gilt Groupe, Twitter, Groupon, Yelp, Hubspot, Palo Alto Networks, Shoedazzle, Recyclebank, and Trulia.
Dropbox and Workday have yet to announce new CFOs and many other industry leaders are also in the midst of hunting for new CFOs.
A leading venture capitalist in our network recently conducted an informal poll amongst top-search firms and figured there to be 35+ concurrent CFO searches going on in the valley for private company CFOs.
Daversa Partners served as the lead “headhunters” in the pursuit for the companies listed above. In each situation this hire was considered the most strategic hire our clients would make prior to entering the public markets. Everyone of these companies has visionary entrepreneurs in leadership roles, high profile venture partners as lead board members with high bar expectations and new business models threatening conventional thinking.
Finding the “rock star” CFO for these breakaway companies that are reinventing business models required a relentless focus on a very narrow set of people. I can assure you that, often, it was shifting gears and pivoting to new targets to get it right. The common misconception is that its easy to get guys for those companies…who wouldn’t want to go to Twitter, Groupon, Gilt ect. It seems obvious now that they are high single or double digit billions in value. But it was far from obvious when the candidates were leaving their $1M jobs. The reality is they worked for pretty darn good CEO’s who recruit, counter offer and retain talent…they run well regarded companies like Amazon, Apple, Disney and eBay!
Most important, are the patterns that emerged across all of these companies as they hunted for material impact CFOs. Though the entrepreneurs and investors were very different in each case, they instinctively focused on four pivotal themes that landed them what we believe are game changing CFO’s. These themes tend to prevail in most of the CFO projects we engage in.
This was and continues to be the driving force behind every “go” or “no go” decision. I have seen boards and investors rank this lower trading off for the big name or the killer IPO experience. I watched one founder white board the criteria agreed upon by the Board and the force ranked order…he then put a big “X” through it, rewrote it and said, “this is the order we are hiring in! Culture #1”.
Jeremy Lewis, CEO of Bigfishgames in Seattle a company readying for an IPO, commented, “I care about patterns of success and judgment…but in the end the cultural fit is so critical that everything else is secondary. I would rather acquire extraordinary talent with a good value fit and high trust, than the get caught up in the seduction of the impressive resume but runs the risk of destroying a great culture”.
Don’t waiver on this. The CFO needs to be a slam-dunk cultural fit. One you trust and know your leadership team will gravitate towards. Culture is defined differently in every company. Nobody ever asks me to find them a “really good guy” they all ask me to find them a “star” …define early what that means in your company. Get clear on where those skills are developed.
The great CFO’s I’ve worked with are also great people, they don’t carry their egos on their sleeves, have a great set of values and none were really looking. When I interviewed them, they tended to askonly two questions usually in order…”tell me about the founders and the culture they have built” and “tell me about the complexity of the business and the problem they are solving”. Its a two way street. This is your number one criteria.
Operational Finance Experience
Disruptive ideas create a new set of challenges. Social Commerce, O2O (offline to online) and mobile are changing business models. Almost every CFO we have placed this past couple of years has a variation of experiences. A stint in iBanking or operational consulting, a move to a large company where they were dropped into a strategic finance role, a smattering of international, and business operations experience where they were making decisions that were NON CFO related decisions but rather how to affect the bottom line of the business.
The premium on this skill is second only to the cultural fit. The conditioning around making tough business decisions has been swallowed up by start-ups. Hubspot in Boston recently hired JD Sherman, Akamai’s CFO to become President and COO, Ali Rowghani CFO at Twitter was hired from Pixar to help think through and shape Twitter’s minimization model; Andy Page, Gilt’s CFO, was recently named President of Stores drawing on deep operational chops from Stubhub where he helped to reinvent a fragmented and disparate space.
Jason Child, CFO of Groupon, and David Stephenson, CFO of Bigfishgames, were young, long-term veterans at Amazon clocking in nine plus years respectively at the one of the worlds most transformative business. Both were deep in the weeds in operations.
Hubspot CEO Brian Halligan says, “I really wanted an operator, someone who could think strategically about scaling the business and less about the nuts and bolts. It was like a lightning strike when I thought of it in terms of the companies I admired the most and the business creativity it fostered. Once I zeroed in on that competency…. it was really just convincing the guy to join us”.
The IPO Experience
Totally overrated! Don’t confuse respected street credibility with the analysts and the mechanics of the filing. Confident boards will tell you they could not care less. Go get an “athlete” who is long on IQ and EQ and has tremendous long term potential. You want the candidate that has lots of headroom. I am not underestimating the importance of the experience of filing an S1 in this economic climate, coupled with the increased scrutiny by the SEC.
However, taking the company public and managing the street as the CFO are two very different experiences. A great CFO will have developed relationships with the coverage analysts and be respected on the road show…so we’re back to the actual authoring and mechanics of the S1. None of the above mentioned CFO’s have taken a company through an IPO yet all have been pursued by public companies to become their CFO’s.
Becoming more and more critical. The business model of “capture the U.S. market and so goes the rest of the world” is being turned upside down. Now the grab for international market share, as in the cases of Groupon and Airbnb, creates a level of complexity rarely seen for such early stage ventures. I believe we will see an increased premium and focus on this experience being shouldered by the CFO.
Brian Robins, most recently exited as the CFO of Verisign to focus on his search for a private tech company where he could create value and put to use his global experience. Tech company
Announce Media met Robins during their CFO search and subsequently hired him as COO and CFO. Robins stated, “I wanted to find a company that recognised my deep business experience and help them scale in a way that I know would set them up for success…I’ve considered myself an operational finance executive who understands what financial patterns are evolving and partners with the CEO in executing the strategy.”
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