How CFOs Are Steering Early-Stage Startups Toward Success

Megan - 00:00:18: Yeah, Lex, thank you very much for being my guest on today's episode of CFO Weekly.

Felix - 00:00:55: Thank you for having me, Megan.

Megan - 00:00:56: Yeah, today we're going to be talking about the role of CFOs in early stage startups and its combination with a COO ops role. I'm looking forward to learning from you and about you and your experiences. So let's get started.

Felix - 00:01:10: Right.

Megan - 00:01:11: First and as always, can you just give US a brief overview of your career and your professional journey to date?

Felix - 00:01:18: Sure. So I've started as a management consultant initially back in Argentina in a spin-off of McKinsey. I then did an MBA in Europe, in INSEAD, went to Bain & Company, LinkedIn, Pipedrive, and now I'm at Broll for the last five years. So it's a mix of consulting and tech all in all. We can talk more about that transition at some point, but it's mostly like I discovered that I wanted to be hands-on operation and not so much light design and recommendations at a high level. So I wanted to become much more hands-on. That's why I moved over to tech, starting with LinkedIn in the UK. Pipedrive in the UK, Mural remote, but now based out of the US.

Megan - 00:02:00: And your journey from management consulting to the role of CFO at Mural reflects a dynamic career trajectory. So can you share with us a pivotal moment or maybe an experience that inspired your passion for scaling tech companies and solving complex business problems?

Felix - 00:02:18: Sure. So as I was mentioning before, as a consultant, I got really loved solving problems, solving management problems that the top of the companies were struggling to solve. So that's why they were asking for help from consultants. I did this for like seven years in two different firms. But at some point, as I said, I wanted to really get hands-on and actually fix those problems in a way with my own hands. And I realized that initially my most suitable next job was in a business operations role, which is a classic path of, I think Google coined that term back in the day of like ex-consultants in a strategy team in tech companies. So that was my path. To getting more into the numbers side of the house and the strategy part of the house of companies. And then when you go younger in the stage of a company that is Neural, because LinkedIn was pretty big when I was there, already public, acquired by Microsoft. Pipedrive was a Series B company, 400 or so employees. But when I joined Neural, it was 60. So at that point in the stage of Neural, the combination of ops and finance was something I think we're going to talk about today. But that's... That made the role much more of a CFO than an ops role. But that's how I ended up in the CFO capacity.

Megan - 00:03:36: And I'm just curious, but what is it that you enjoy about the tech industry?

Felix - 00:03:41: Well, I've been always a little bit of a geeky nerd in my younger self. I was a big Apple fan. I sent faxes to Steve Jobs. He never replied back in the 90s for some reason. So I always liked technology. I'm an engineer from a degree in university. And I was always around fixing at my house. My parents always told me that I was working with old phones and old pieces of technology at my home. And I remember doing a lot of that. So I always had a passion for technology. And also that became a little bit of a passion for growth, right? Like the growth pace of technology companies is so steep that the kind of problems and the kind of dynamics you have in these companies makes it, for me, very, very attractive. You're always on your toes to try to fix whatever is more current for the problems that the company is facing. So I think it became initially as a passion for technology and ended up being a passion for growth.

Megan - 00:04:38: And in your experience, what unique challenges do CFOs face in early stage startups? And how have you addressed these challenges at Mural?

Felix - 00:04:47: Well, there's a lot, of course, that you would face in early stage. It varies in how early are we talking about, because sometimes there's not even a CFO when you go very, very early. But I would say that the challenges are always have to do with how to adapt the level of, I guess, process and structure to the level of growth that the company is deserving, right? And by that, I mean, maybe if you come from a very big company and you go to very early stage startup, you think, okay, I need an accounting team, I need a controller, I need an FP&A team. And you start to think with a big company mindset, when in reality, the company at that early stage may not need that level of structure, right? So I would say there's one challenge around knowing how... Quickly or how slowly you need to make some of these hiring decisions along the way. Sometimes you cannot afford not having a controller at a certain stage. But I guess the challenge that I'm calling out is how and when do you make these hiring decisions or these team decisions? I think that's a challenge. And it starts with the CFO, but it goes broader than that. The second is, again, it's not a new thing, but growth and profitability, right? How efficient do you want to be managing your burn, managing your growth? And striking the right balance of that, I know in the last two years or so, this became a hotter topic, but this has been always the case for CFOs of growth companies. How much do we want to invest? How much do we want to burn? Or how much are we doing in terms of runway? All of these things are top of mind for CFOs. And last but not least, that goes hand in hand with that is fundraising, right? And the ability to be solvent or be self-sufficient as quickly as possible.

Megan - 00:06:38: And I'm curious again, but how is it that you stay one step ahead? Like when you're hiring or implementing technology, how do you ensure that you're doing things that are a fit for the future, but not so expensive that you're burdening the company?

Felix - 00:06:55: Yeah, well, I cannot take credit for being a step ahead. Let me make that clear. It has been a journey for me as well. Like when do you bring in someone versus when to wait? It's more of an art than a science. I'm not sure I am able to call out specifically the leading indicators you can detect early on. But in the grand scheme of things, I would be always advocating for hiring quicker than what you thought you're going to hire as a CFO. Because we CFOs tend to be very conservative, very risk averse, very cautious with spend. And therefore, we're always like, well, maybe I can wait two quarters to bring in this hire or elevate my controllership organization or my team. And when in doubt, I think I've been always a little bit slower than what I would have wanted to be in this regard. I think that other functions and other insight and what I've seen here at Neural and in other places, they tend to be a little bit more proactive and planning a little bit more ahead. Like in engineering, normally, they are a little bit more, I'm talking about Neural per se, but we have been always a little bit ahead of the game here. So I would say like the hunch that the CFO normally has, and when you need these hires, I would try to move them a little bit earlier than what you think you're going to need it. That's kind of like my one piece of advice, I guess.

Megan - 00:08:17: And speaking of bringing roles on, when, in your opinion, does it become necessary for a startup to have a full-time CFO?

Felix - 00:08:27: Yeah, that's a really good question. I can't really point a specific point in time because it varies a lot by type of business you have and the dynamics of your startup. But I think the main thing that I see that CFOs can do is bring headspace to the CEO and the founder normally, right? So in a way, the main job at that early stage of a company for a CFO is to offload from the CEO's head everything that he or she doesn't want to be thinking about, right? And that could be, okay, how do we pay salaries? Or is it gasto or this other thing that we're going to use for that? Or do we need a bamboo? They are probably being caught up in a lot of operational problems or issues. That they need someone to help them with. And I think whenever the CEO or the founder is spending, I would say, a significant amount of their time into things that are operationally not very complex, or sometimes they are, but they're not adding value to the vision, to the product, to the long-term strategy of the company. I think that's a key moment to bring in someone. Now, if that's 20% of their time or 50% of their time thinking about this, I don't really... No. But if it is a significant amount of time that the CEO needs someone, hey, I actually want to offload all of this stuff to someone so that I can be more out there, I don't know, talking to customers, talking to the company about the vision or writing the strategy for the five years. That's, I think, the key moment that I would anticipate the founders need to bring someone in. Then, to add to that, sometimes there's a little bit more of a practical opportunity. In a fundraising moment, pre-series A, I would say, is normally the most common place. If it's not a CFO title, it may look or smell like a CFO, but I think that's probably a right time in general to bring someone fully dedicated to run finance in an organization.

Megan - 00:10:35: And more and more, we're seeing the roles of CFO and COO being combined. So what advice would you give to someone early in their career that wanted this kind of a path? In other words, how can someone who comes from a finance or accounting background better equip themselves to understand the operation side of a business?

Felix - 00:10:56: Yeah, good question. The good and the bad thing about operations is that it means so many different things in many different companies, right? It could mean running customer support and collections, and it could be like running sales operations, right? It's so, so broad, the actual term, that it makes it very hard to pinpoint exactly what people mean by operations. Even COOs have a wide spread of definitions. You can look at a Facebook model all the way to someone where they have the second-in-command in the COO running sales, running go-to-market, versus other companies where the COO, as I said before, could be someone just running sales operations function or business operations function. So there's a big spread out there of what operations really mean. But I guess going back to your question, Megan, that was just a caveat of what I wanted to go into is, I think understanding the driver tree on the business dynamics of your business really in and out, it's how I get a lot of insight and knowledge about the business. And that puts you in a strategic position for the company, right? That could be a COO or a CFO. But if you really know how the machine is working, right? What is coming in through the door, what is leaving the door. If you think of it in a way as a factory, like I'm bringing my engineering background here, but that's what I like about operations. It's kind of like you can dissect all the variables of a business into a big kind of driver tree, understanding all the variables in each side of the business. Once you get to understanding really deeply that, you can become much more knowledgeable about the business overall. Call it COO, call it CFO. But that's what I really like. Applying like a business or consulting mindset to how a business makes money or how grows is how I like to start in every company, right? And I remember my time at LinkedIn, like a good friend of mine there who told me, look, like the first thing I did is I put a driver tree together and he was an ex-consultant as well. And I was like, okay, I'm going to follow your advice, Stephen. I did that because that helped me in every other business I go to. It's... Mapping the company to a driver tree and knowing the variables where to put them.

Megan - 00:13:25: And many startups struggle with maintaining financial discipline while scaling rapidly. So how do you ensure that financial controls are robust enough to support growth, but still maintain agility and the ability to be adaptable change?

Felix - 00:13:42: Well, that is the million dollar question, Megan. So I don't like the word controls too much in a way, because it just makes it sound like you're going through an audit process where you have to have A, B, C, and then you're checking boxes and you go. I'm not claiming we've nailed this perfectly, but the way we like to think about this is usually around ROI, right? So if we see a particular investment opportunity in the business or a particular bet we want to make, we try and it's not always easy. And sometimes you need to make some bold assumptions, but we try to get to a place where, okay, if we're going to do this experiment or this initiative, what is the yield of this? What are we getting back? Is it, I don't know, web traffic? Is it awareness? Is it leads? Is it sales? Is it NPS in a customer? What is it? What metric can we tie to that? And again, it's not perfect, a little bit of art, a bit of science. What we try to do is like inside our FP&A function, our business partners, where they're... Cross-functional partners and try to have that conversation. Okay, this sounds like a good investment and help me understand how we can make a business impact with this. And they try to, like, again, back to this driver tree dynamic, they try to work with their cross-functional peers to get to, okay, we're going to move this variable. Okay, how much do we need to move it so that this becomes an ROI positive experiment? And that's what we try to do here.

Megan - 00:15:13: And how is it that you align financial goals with operational objectives, ensuring that financial decisions are not being made in a vacuum, but rather are deeply integrated into the company's broader strategic vision?

Felix - 00:15:29: Right. So it's all very tied together. I cannot say that there's a financial decision made in the vacuum and then the rest of the company finds out about that three months later. Our planning cycle takes a bit of time even for our early stage company, but we make it so cross-functional that it is embedded into everyone's team and work, right? And there's a value we use for leadership here at Miro. We call it from takeoff to landing, which in a way means like, if you want me to be with you in the landing, you need to be with me in the takeoff, right? There's an idiom out there. I didn't know it before, but I learned it last year. But it means like we want to bring people along the way in the journey when we make this decision. So our planning cycles, I was mentioning before, start in late October, November, our fiscal starts and ends end of January. So we have Q4, entirely dedicated to planning and it goes with the sales operations team, the FP&A team, but other teams like PMO and business operations are running this. So to make sure everyone in the company is aware of what is coming and doesn't come as a surprise later.

Megan - 00:16:39: And startups obviously face funding challenges. But as someone who's been deeply involved in fundraising efforts, what strategies have you employed to successfully secure financing rounds?

Felix - 00:16:51: Well, I guess the CFO and the CEO at the time of fundraising, they are responsible for telling the story of how the company is doing, what the company has been performing, where the growth is coming from. So they are the ambassadors of the company. I think going back to which strategies is making sure you're telling the story and showing investors or potential investors where the pockets of growth are and what are the growth opportunities you're seeing in the business. So I think when you're telling the story and it's not that, hey, we were terrible at that or we are very good at this. It's like, okay, we're seeing the pocket of growth happening in this type of customers. We also see these other opportunities in this. This type of customers or use cases or whatever that is. So the strategy, I guess, is making sure you tell the complete exhaustive story. And you're not hiding whatever is not working. It's being very, very transparent with, of course, your future partners. Because we think of this as a very strong partnership, of course. The second I would say is data is your friend, as I was talking about the driver tree before. Being very data-driven in the fundraising effort and having clear metrics. The business is... The business is using and the investors can see. I always say that what investors are going to ask you in a fundraising pitch or in a due diligence or that time of the fundraising is what you should be using as a business to run the business, right? It's not something completely different. So I always tell my peers or my team that we should have the same kind of metrics like a public company is looking at. So that whenever we want to fundraise or whenever we want to go public, we have everything already lined up. So I guess, I don't know if that's a strategy, but having your KPIs and your metrics aligned to what best-in-class type of company is looking like, I think that gives you not only the ability to tell the story in a more accurate way, but also gives the investors the confidence that you know what you're talking about. You're looking at the metrics that your market needs to look at. And that solves a lot of the back and forth and makes you go straight into the areas of growth or the areas of opportunity. So I think as a strategy, I look at a lot of B2B SaaS companies, which is our space. I look at the investor relations reports from the Zooms and Atlassian, the Dropbox, the Box of the world and look at, okay, what are Smartsheet and Asana? A lot of them are there. And I look at those and see, okay, this is how they report customer growth. This is how they report the dollar retention. This is how they report, et cetera, et cetera. And mimic that internally so that we are ready whenever we need to fundraise. We have everything lined up in the same way.

Megan - 00:19:43: Yeah, that's great advice. But also with your background in management consulting, how do you leverage your strategic expertise to guide financial decision making at Mural?

Felix - 00:19:54: Well, I think that the kind of like tool set that the toolkit, I guess that word, the toolkit that management consulting gives you, especially when I was like a little bit more junior in my career to do a lot of this like number crunching exercises, as I was mentioned before, this one is the driver tree is one of the ones I took with me forever. I think that I get a lot of those frameworks and toolkit applied to everyday life in my job, right? Or another one, for instance, in Bain, there's a big bias for output, right? What Amazon called bias for output or Bain calls the 80-20. But I'm constantly telling my team like to focus on what matters. We have that as a value internally as an operating principle at Mural, because it's very hard to get distracted with noise and things that don't move the needle, right? So I'm always very, very 80-20 with my team. It's a small team. It's a growth company. We don't need to do everything perfectly. Sometimes you need to let some fires burn, and that's okay. But applying some logic to that prioritization effort with some of the frameworks that consulting gives you, but it's not just in consulting, but everywhere to really make those calls and say, oh, actually, I'm going to let this thing burn. I'm going to take this risk. And most of my time on this other thing over here, that is the biggest area of opportunity. So I guess to answer your question is making sure you have those discussions as a leadership team and as a finance leadership team. On where you're placing those bets, where are you actually letting those fires burn so you can really move the needle on the 20% that matters the most?

Megan - 00:21:30: And switching gears a bit, let's talk about talent and building high performance teams. So you're an advocate, an advocate for diverse and talented teams. So how do you approach building and leading multidisciplinary teams within finance and operations functions? And what role does diversity play in driving innovation and achieving organizational success?

Felix - 00:21:54: Yes, great question, Megan. And thank you for talking about something that is close to my heart. I think at this stage in 2024, nobody can ever say again that diversity doesn't help businesses operate better, right? Thankfully, it has been proven enough over time when reports and studies and HBR articles are there, everyone will tell you that diversity is good for business, right? Full stop. So I won't even spend time on that for the purposes because that's a given. And I don't think that is controversial anymore, thankfully. So when I'm thinking about my own team and my own broader team at a company level, I like to think from the skills perspective and the needs of the business. So if you're looking at a particular stage of your company, what kind of skills you need, how does that map to the skills that you have in your team? As an example, I remember when I was on LinkedIn in the UK, it was an advertising business. It was 2015 or something like that. And programmatic advertising was a thing of the time. And we didn't have enough of that skill set in my team at the time. So I said, okay, what is the best programmatic company out there? And there was Criteo, a French company. I happened to have an office in the UK. And I hired two people from there. And as a team of eight, I built that capability. I needed two programmatic experts so they can spread that knowledge into the rest of the team. And I still do that today when I look at my team in finance and operations. Where do I have gaps from a skills standpoint? Okay, I need tax expertise. Okay, we need one full-time employee dedicated to tax in the US because that's sensitive and high-risk role. So we need to make sure we have that role figured out. So I try to look at this as two variables in a way. Sometimes I do these spider charts where I can see, like the team and the skills. But I like to think of as a collective team, what skills are we missing? And where do we need to make some bets or some hires to complement the skills of the team? Does that help?

Megan - 00:24:04: Yeah, that's helpful. Thank you. And at Mural, you recently completed first acquisition with Luma Institute. So can you discuss the financial considerations and the strategic rationale behind this acquisition and how it aligns with Mural's long-term growth objectives?

Felix - 00:24:24: Yeah, thank you. Recently, maybe it was two years ago. How much recently applies to these days, but it was, yes, two years ago in March of 2022, we closed this transaction with Luma Institute, which has been a partner to us since, I don't know, 2013 or 2014. We have been very, very closely talking to Chris and the rest of his co-founders. Because when you think about the solution we provide to our customers, what we want to be selling and what we're doing our jobs right is helping them with their transformation efforts, right? Imagine large organizations with teams around the world trying to work better as a company, and they need help, and they need assistance, and they need methodologies or ways to fix teamwork. We believe that teamwork is broken. And Mural provided the platform for that to be a solution to it. That problem. And Luma was more often than not a key enabler of that with the how, right? You can put it in simple terms. Mural was a little bit of the where, right? It was the whiteboard, the solution to where you were doing your work. And Luma was more of the how, the methodologies, the templates, the frameworks that you would be applying to your specific company to try to fix teamwork. We were already working very closely with Luma in many big accounts, where we were fixing teamwork and having great results together as partners. And we decided to take it a step further and integrate fully. And we made this acquisition two years ago, because we believe that in the future with, or not in the future right now, but with the amount of different solutions or basic whiteboards you could find out there, the key strategic rationale for this acquisition was that we became way more differentiated than other plays in the space. Because we offered the full comprehensive solution of not just a pure whiteboard, that is a white canvas where you can do whatever you want, but hand in hand with a methodology playbook that can help you fix teamwork at your company. And that was a key rationale for the acquisition. We did that two years ago. And it has been still like the case where we are now helping the largest companies in the world fix teamwork with Mural and with all the Luma research that we have from this human centered design organization.

Megan - 00:26:54: And last question, and speaking about the future, but what do you envision the future role of CFOs and early stage startups being, particularly in terms of leveraging technology, which is quickly changing, data analytics, and innovation to drive financial performance?

Felix - 00:27:14: Yeah. I don't know who said this recently, but I read it and I found it funny that you cannot spell finance without AI. So I saw it somewhere. I can't keep credit because I don't remember who that was. But honestly, what we're doing right now is we're thinking of all the AI use cases we can think of as a team to help the team elevate what they do in their day-to-day. And this could be anything from we're using AI today to help internal employees, like our own employees, with their questions about their payroll or with their questions about compliance and security when they're selling to customers or with their questions about commissions in their paychecks. We have a small team here, but imagine if you go to marketing that has quarter ends and they want to know what their commission is going to be. We have a tool for that, but then they may have questions. And normally what ends up happening, they go, to Slack or they go to email or Jira's or whatever. And there's a big burden in internal teams in serving other internal teams, right? It's not minor. And normally, more often than not, most of their answers are in a wiki, in a confluence or in an FAQ somewhere. So it's very annoying to be like a robot in a way answering to your colleagues, well, actually, your commission is not going to be paid this much. As we said last time, we sent you this email. So... You need to repeat a lot of this information and a lot of the things that were communicated before. So with AI, we partner very closely with LegalOS, whose AI tool we like a lot. And it's called LegalOS, but in reality, their use cases are way more than just for legal teams. We use it internally to help all our employees get answers, reading straight from Confluence or Slack or Docs. So to answer your question, we're leveraging AI in initial phases. We started this last year, but we see a lot of potential on the FP&A side with scenario modelings, on the accounts payable side to find efficiencies, on the NetSuite and reconciliations of large transaction details where AI can help us a lot. So I guess to answer your question, it's AI, AI, AI, and try to learn as much as we can from a very growing and interesting space right now.

Megan - 00:29:40: Felix, thank you so much for being my guest today.

Felix - 00:29:42: Thank you so much for having me, Megan. I've been following your pod and I was delighted when I got the invitation to be a speaker here. So thank you so much for having me today.

Megan - 00:29:52: Well, thank you. Yeah, I really enjoyed speaking with you. And thanks for finding the time to be here with us today to share all of your knowledge. And I wish you and Mural all the best.

Felix - 00:30:01: Thank you. I hope it was useful. I'm looking forward to not listening in the near future.

Megan - 00:30:07: And to all of our listeners, please tune in next week. And until then, take care.