The Structure of High-Growth Startups’ Finance

Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results with your host, Megan Weis, let's jump right in.

Megan - 00:00:31: Today my guest is Chithra Rajagopalan. Chithra is a finance leader with experience in high-growth SaaS companies. She formerly led accounting and finance functions for many fast-paced startups, both internally and as a consultant. She successfully led companies through fundraisers, acquisitions, international expansions, and IPO readiness. She is a strong business partner and an effective advisor to executive management teams. She's implemented and streamlined financial and operational policies and procedures. Chithra serves as a board member of a nonprofit that supports nurse retention during these challenging times and is also on the board of a nonprofit that helps underprivileged kids by breaking the caste system ceiling. Chithra, thank you very much for joining me on today's episode of CFO Weekly.

Chithra - 00:01:25: Thank you so much, Megan. I'm super happy to be here.

Megan - 00:01:28: Yeah, today we're going to be covering a few very important topics, including building and scaling finance teams and high-growth startups, forecasting efficiently for high-growth startups, and last but certainly not least, representation of women leaders and tech startups. We've got a lot to cover and I'm looking forward to learning from you. So let's get started.

Chithra - 00:01:49: Perfect.

Megan - 00:01:50: First of all, you have an MBA in marketing and finance and have vast experience of leading accounting and finance functions, both internally and as a consultant. So can you tell us more about your career path and some of the pivotal experiences that have shaped your finance expertise and thinking?

Chithra - 00:02:09: Absolutely, yeah, that's a very great question. I would have to talk a little bit about the face when I did consulting, whether it was for Big Fours or cruise consulting, and Cranston Associates, who are very well-established firms that serve startups all across the US. So the consulting gig that I did provided me with a lot of rich and diverse problems to solve, which then helped me a lot when I was leading finance teams in-house. So especially when you're dealing with multiple timelines and multiple stakeholders, understanding how to deal with different kinds of CEOs or executives, it really gave a strong foundation to my leadership skills. So the other part that I valued a lot in consulting was the different kinds of finance and accounting problems that I got to solve. It really adds to your experience pool. So one suggestion I would always have for aspiring finance leaders or professionals would be to spend some time in their career at consulting firms in some fashion or the other. It really makes your experience a bit more rich. And the other side, I would say, is that I'm super glad that I started off my career with heavy accounting and tax roles. So working in depth with gap accounting, month clause, audits, and tax compliances, were all great foundation elements later on when I shifted my focus to FB&A and strategic finance. So having that accounting background always gave me an edge when it came to financial modeling or scenario planning.

Megan - 00:03:35: And I'm just curious, you've gravitated towards startups. So what is it that you like about the startup environment?

Chithra - 00:03:41: Yeah, so startups, I think when I started at Big Four, it was always like, you're kind of like a niche, you're in a single group doing the same thing over and over again. But when I went to startup, it had a high impact. Like everything you do is very strategic. You have every single thing, every decision that you make has an immediate impact and it's very visible. So I really got addicted to the chaos and there was no turning back for me from there. And really being able to grow with the startup that you're working with, like feeling excitement to wake up every morning to be able to make that impact to the problem that they're trying to solve in the society. I think that really kept me going.

Megan - 00:04:20: And I'm curious again, how do you balance the chaos with the need for controls in a finance environment?

Chithra - 00:04:28: So I think, really understanding, I would say, like, for example, when the pandemic hit, like there was a very quick and dramatic change in how finance role was even defined. There was a need for quick decision-making and a demand for multiple permutation combinations, and scenario modeling, where all the assumptions were considered. So these were all like high-demand work that was required, even from a single junior member of the team, there was additional brain power that was required. And especially with the executive team, the way leaders were being approached, I would say finance was primarily like more of a back-in-office function, like more of an informed party when it came to decision making. But now even the small and big strategies that are being secured, like finance leaders are always on the same, which is absolutely great transformation, I would say for a finance team. But it also puts you on the spot, like now there's much more demand on how finance teams should operate. So your question would be to really have that balance between how you're handling your team, as well as like the executive team to be able to have those tools and strategies in order to make decisions on the spot, how of a good communicator you can be and how good of a storyteller you can be is going to be absolutely crucial.

Megan - 00:05:48: And you have the best experience of building finance teams in high-growth startups. So can you talk to us about how you've successfully been able to do this?

Chithra - 00:05:56: I would say, really boils down to having that. Strategic thinking around what the business needs. And one of the things that I've noticed is that when you actually kind of like peel the onions here it really boils down to having that proper data hygiene. I would say that if finance teams are really successful, then there's enough data to work with. I'm just picking on one single aspect here. Yes, I will talk a little bit about the team structure later on, but let me start with like the main problem just like having that data. Are you partnering enough with the data science team to ensure you have the right data to build the models and forecast scenarios? So it's basically remembering the phrase garbage in garbage out. So the other question you might want to ask yourself is like, where's the source of truth? Like where are the final numbers coming from? Whether it's your ARR, your unit economics, or other Nordstrad metrics, who owns that? And how collaborative are you today with the rev ops team or the data science team to make sure all the numbers are verified and vouched by finance teams that are being before it's being reported? And if you look at the team side, I've seen the shift happen very dramatically, exactly what I was talking about earlier. Like before, I wouldn't mind hiring FB&A analysts in my team, who would just be back in crunching numbers. But now when I think about it, especially now that we're working with leaner teams, I want to hire people, especially on the FB&A side, who can be good communicators and it comes with that soft skill of storytelling capabilities. Can this person be that strategic partner in the future? Like does this person have the curiosity to learn more, and understand the ins and outs of the business when it comes to like interacting with stakeholders cross-functionally? So I think that shift also has happened quite a bit even your junior team member is expected to have that soft skill element.

Megan - 00:07:59: And how do you compete against larger tech companies when it comes to attracting the best talent?

Chithra - 00:08:07: Yeah, that's a very good question. I think I've always struck this balance. When people apply for startups, I think it is going to be a task that they take on. Not everybody can get in a merge with that kind of chaotic environment. So it really takes somebody who really wants to be part of it. So I kind of like try and definitely vouch that during my interview process, like, what are you trying to get out of this? Like, can you keep up with that base? Is that value that you're looking for really aligned with what the company is capable of providing to you? Otherwise, you're just going to have like an unhappy employee at the end of the day. And also like, do you have that personal space right now to be able to take on a high impact, high growth, high demanding job, like a startup? So it comes with that attitude, I would say. And that's like half the job, like people who have that attitude and have that craving to be part of startups, it's going to be a much better fit. So I would say like competition, this is something you have to sign up for, like being in a startup and yes, it comes with like higher pay or like maybe there's more equity, there's more fruitful outcomes that come out of it, but still it is going to be a commitment that you have to take on.

Megan - 00:09:24: Maybe you just touched on it a bit, but can you talk to us a little bit about the greatest challenges that you faced while building out finance teams and how you overcame them?

Chithra - 00:09:34: Yeah. So talking about challenges, let me talk a little bit about the go-to-market side and maybe, maybe we can touch a little bit about how I've seen the forecasting side of things if that is where you were heading. Sure. So one of the challenges that I've seen, especially in the scaling process, or when you're talking about a high growth business, one thing I've always seen, which has been a challenge from a forecast perspective, is like the dog track, having the dog track in line between sales, marketing teams, and then being able to tie that in with what the product has on their roadmap. Are the promises sales teams making to customers in line with how marketing is positioning the product and does that tie to what product is able to deliver at a reasonable timeline? If this is not recognized early on, it easily becomes like a blame game. Sales teams could always say that you know, we're not able to generate pipeline because the market is not feeding them leads. Product can always say that, you know, sales and CX promise customers about all these amazing things, but they're not able to deliver. So there's this mismatch when the product roadmap is unable to keep up with those promises and messages on the go-to-market side. Now, is this ever going to be a perfect match? I don't think so. Like there's always going to be friction, but I feel like finance leaders should be stepping up more into that role where you can unblock those frictions. So this could mean different things based on what the business dynamics could be. It could be stand-up tablet reporting notion reporting or a mix of everything. Either way, I think finance leaders have that superpower, which is something I love about finance teams, like any strategy that you have has a quantifiable positioning and there's nothing that you can escape from your finance leader. So you can actually be that liaison between R&D and go-to-market teams to be able to facilitate that conversation and make sure everybody's moving towards that common goal for the company. This becomes very critical in having meaningful forecast numbers. The other area where I've seen a lot of challenges is information flow between sales, like CX teams to R and D on the product feedback, especially when we are dealing with a high-growth tech startup situation, for example. So are we really paying attention to the adoption and usability and feedback from customers or even potential customers? Like how much information are we relaying back to the R and D teams? There's so much power on that information and really gives leaders a chance to regroup their thoughts on products, features, roadmap. Now, the tricky part is that you really should not go down the path of being too much of a nonstop, custom product builder for some of your customers. That becomes really tricky because then you lose the long-term vision of what you want to achieve as a company. But there's always this fine balance you need to hit. This is another area where finance leaders can be a huge strategic partner for your R&D leaders and have a say in the product roadmap offering early on. They come in early on and have those opinions and provide some feedback. This data has so much impact on pricing strategy, like why would a customer want to buy more or stay on as a user? Right. And on the flip side, like there's also this other section, which is like post-sales, like there's so much emphasis on like, let's bring new customers, let's bring new ARR, but what about post-sales? There's so much to do once the customer comes into the door and starts using the product, which is why the role of customer success and post sales, in my opinion, would be this other important area that I feel like finance leaders should really step in, like what is the customer buy behavior, especially now it has changed so much, like how do we ensure that customer will renew with us at the end of the contract? Like why would they want to upsell with us? So there's so much customer success work that can be very crucial in even protecting your net retention rates. How stickable is the product? And finance leaders have a huge impact here too, like becoming their trusted partner to deep dive into that data, product usage, adoptability metrics, customer journey mapping, and even like white space analysis, and active user tracking. So just to name a few, but this is going to be a huge factor in expansion strategy and forecast that I would say, like, these are probably some of those tricky elements that sometimes like we get so focused on the numbers, like we forget some of the underlying assumptions. So that would be one area that I've seen should be very critical aspects when it comes to considering for forecast.

Megan - 00:14:23: Are there any tools you're currently using that you really like for the purpose of storytelling or analyzing data?

Chithra - 00:14:32: Yeah, I am a huge believer in keeping things super simple, especially when you're trying to make a lot of decision-making and you're going 1,000 miles per hour. It's so important that you don't overwhelm yourself with multiple tools. My favorites have always been your standard Salesforce reporting, but also having that single source of Tableau dashboards and reporting. Recently, I've been falling in love with my Notion pages where you can have very simple reports, straightforward, having a one-page run, what the executive team should know on a weekly basis a monthly basis, or a quarterly basis. Just having that finance leader outlook on, these are my red flags, these are the assumptions, this is what's going on, here's the deal. So I always believe in the simplicity of things.

Megan - 00:15:24: And as you're growing, how do you ensure that your processes are efficient? How do you not just like bolting on stuff to an existing process, but you have like a high-level view of the process and ensure it's efficient?

Chithra - 00:15:40: That's a very great question because I feel like there's definitely automation and tech stack. I do believe a lot of technology and automation can bring a lot of leverage and make teams efficient. At the same time, there's so much,so many products that are popping up every day, digital products in this space. So really need to know what works best for your business. One thing that I've always done is consult with other finance leaders in the same space and we kind of share notes on what has worked for you. How have you thought about decision-making, especially finance tools can be like extremely expensive and time-consuming? So that's probably one of the things. And then it comes to like one question I always ask myself, like is this process scalable? Like am I building towards scalability? Like what I'm investing right now? Like can I still use it? Like is it going to grow with the company, especially when you think about startups, the business is going to look very different every quarter or every six months because you're growing so fast. So I think having that vision on the finance team is going to be also very, very critical. I think a combination of those is probably going to be very important. At the same time, like ruthlessly prioritizing, there are always a million things you can do to make things better, but like what's going to add immediate value and how can you make sure that it's going to be like making your lives better? Also, your teammates are not burned out. I think those are some of the decision-making that you'll have to do, which is going to be very customized to your business.

Megan - 00:17:23: And is there any other advice that you'd offer CFOs who are currently building their finance functions in tech or other startups?

Chithra - 00:17:33: I would say the finance team has to be that sounding board, you know, like a reality check for the company. At the same time, understand that decision-making is quick, especially for a high company. Like I said, there are always going to be amazing ideas and things that department heads think they can do, but does it all tie back to like overall company strategy? Is it a fiscally viable plan at the end of the day? And this cross-functional clarity only happens with a strong finance team. I really believe in complete transparency with the executive team on what the finance team knows, what we don't know, and what are our assumptions here. One of the strengths that is needed in a finance leader is to be able to have those sorts of conversations and be able to give a complete outlook on strategy in order to have and make an informed decision. However, as a strategic thinking partner, you don't want to be that negative person, who's always saying no. So along with your tough conversations, you also want to bring to the table options one, two, and three that could work as a solution to the problem. And also have a backing on why it would work. And this only comes with having that open conversation, even within the finance team, when it comes to forecasting. So being able to train your team to be able to make red flags early on becomes very important. So the other point would be being in to pay for the numbers. I always say to my team, that we are the guardians of the metrics. So once you have the quarterly or goals or annual goals set, you have to kind of take that apart and see, what are the smaller metrics? Like what are some functional metrics, and operational metrics that we should be watching? And then being able to continuously work with the leaders to monitor that and also understand the progress towards those granular KPIs that are relevant to that department. This really ensures progress and makes sure that the company is moving in the direction which is towards the overall goals. The other element everyone has to keep in mind, I would say is that all of this is only possible with good data I cannot stress that enough, like the finance team has so much power to strategically impact every single decision. And it only comes with healthy data integrity. Like without good data, the finance team just cannot, like there are so many limitations. There'll be so much human power, energy, and time spent and they're not just cleaned up every day. So after a certain stage, it'll be very hard to go back and clean historical data too, like given the size and scope of what you're dealing with. So the sooner that you can fix any data issue, I would say you're like really giving so much leverage and you're doing yourself a favor. And I've been collaborating with so many CFOs and other leaders at forums. Like even two weeks back, we had a conference, the F Suite CFO round table, where we discussed the exact same thing, like the power of defining sources of truth and data, which really shows that this can be an ongoing issue, if not dealt properly, the foundation is always going to be shaking. So I always have to mention the data issue when I talk about scalability and foundation and building teams.

Megan - 00:20:58: That's really great advice and you've touched on it a bit throughout our conversation, but can you tell us about the strategies you've employed to ensure efficient forecasting, specifically at high-growth startups?

Chithra - 00:21:11: Yeah. So I would say really understanding that rattle between the exec team like one thing I really like to do is just have those conversations pretty early on because we need to know like at what pace they're also working. So I like to have more conversations around like what are some of the granular problems they're trying to solve and then like trying to tie that back to like company goals and how we're going to set that. So that whole process where we go through that annual planning cycle is going to be very, very important. It also goes back to some of those areas that I touched on earlier. On having that early conversation about in-depth functioning on the golden market side, on the R&D side, like how are you going to tie those communications together? So really mapping that out early on in the year is going to have like a very good foundation set for annual planning and putting in the budgets and everything. And really just charting out the project road map of how you're going to establish some of these guardrails and also what are some of those check-in points where you're going to have conversations with department leaders and the execs is also going to be extremely important. And making sure the execs understand having that finance on the table to be able to make some of these decisions is going to be extremely important. So I would say that is probably like part one. And then the tools that you use, are just Google Sheets? Is there a different kind of tech stack that you introduce early on in the process? One thing you don't want to be stuck doing is, having a leaner team and then trying to implement something new and at the same time, you have this annual planning process going on where things just need to be done pretty quickly. So really understand how you want to map that out and really have that milestone set for yourself. I think those probably would be the foundational elements I would say in setting up for success.

Megan - 00:23:11: Yeah, maybe this will be a duplicate question, but can you talk to us a little bit about the key challenges you faced when forecasting?

Chithra - 00:23:21: Yeah, key challenges. That's always going to be a challenge, I feel. It's very interesting how things have been very different in every company that you go to. Yes, there are problems that are different, but everything underlying really comes back to data, like, I really have to talk about that again. But one thing I've noticed, which I would say was the most challenging, was when I had to clean up data for a much larger company, where they were north of 70 million in revenue. And we had to go back and clean two, three years of data. That was honestly very, very challenging. I remember like so much time being spent on just cleanup because we were not able to do anything else, it was just so limiting because we couldn't do any trend analysis or we couldn't understand what is, where's the source of truth. So there were a lot of different software or tools that they were using to track data, but then there was no single source of truth. So every company that I've worked with, I've always taken over that role of like kind of holding onto that source of truth. Some companies I know like it's probably the engineering team or maybe like the rem-ops team, but I always try and kind of like consolidate that at the finance level because it's going to be extremely important when you kind of scale, when you one point you stop being a startup and you kind of like become that grown-up company, at that point, it's going to be very critical. So I feel like challenge-wise that has always been the challenge and it kind of like really depletes the power you have when it comes to forecasting or making informed decisions or even simple strategic decision-making that you need to do with the executive team.

Megan - 00:25:11: And I'm just curious, but when you talk about a single source of truth, does that always equate to like an ERP implementation? If a company doesn't have a single source of truth, is it because they're using too many ERPs or what's the problem usually?

Chithra - 00:25:29: Yeah, that's a very great question, and the answer there is no, just because having an ERP system, might not directly equate, but it could solve a majority of the problem. So one thing I remember that I've done at a different company was to have that ERP system, but also do a Tableau dashboard. So in that case, everybody can collaborate and see that the Tableau dashboard could be like a reporting platform where everything is going to lay out. So it really depends on how you want to store the data plus do the reporting it could be different things. But when it comes to consolidating data, even if you have an ERP system, maybe your CRM is up to date, is the information going somewhere else, like Snowflake, or do you have HubSpot and Salesforce for some reason? There are so many multiple elements here. And then understanding, is it all coming to the ERP property and is it all syncing properly into the system? Or is it going to be like two different systems that you need to use? I feel like it is still a customized answer depending on what the business is. But at the end of the day, does finance have all the audit trails to be able to answer any questions about any numbers that you're reporting at the end of the day, whether it's for external reporting, whether it's internal reporting, whether it's for board meetings, whatever that is, do you have the proper audit trails? But your question, the majority of the problem, yes, you can resolve it by having a proper ERP system implemented but at the same time, it really boils down to whether can finance team hold that answer to every number that is being reported. And can we track it back to why certain numbers have changed or who's going to take that ownership?

Megan - 00:27:23: And let's switch gears now and talk about the representation of women leaders in the tech industry. Historically, that hasn't been very prevalent, but how have you seen it change over the years, if at all?

Chithra - 00:27:37: So I would say like being a woman and person of color myself, there have been instances where I had to challenge my thinking to break some barriers, which may not have prominently existed otherwise. I remember that there was a study done by Zippia in 2023, which showed that women make like 44% of the entire US employed adults, but they only hold fewer than like 20% of the leadership positions in the tech industry. Out of that, only 19% are senior vice presidents or 15% are probably CEOs in tech are women. So I feel like there is still progress, you kind of see things shifting. But it's pretty slow from my perspective, it's still not like catching on to the pace that I personally would have loved to see. And my perspective here is that like, it's always coming from like that Silicon Valley tech space, which can be pretty brutal, like it is a stressful market. And even in current times, it's been very challenging. It would be hard for a woman leader to kind of be in that controlled environment, maintain a full-time job with the family, and also like squeezing some time for their self-care, it's not an easy task. So naturally, like if it's a family of two, mothers tend to take the role of caregivers or stay-at-home moms, which could be why you naturally see fewer women moving into those leadership roles, which makes it harder for recruiters because the talent pool they're working with also becomes pretty less. I've seen women leaders who've thrived in spite of the situation, but I'm a hundred percent sure that they would have had to make a fair share of trade-offs in their lives. I think it's a bit too toxic to put that kind of pressure on yourselves, to be like perfect at everything, I think it's healthier to accept that it's all about choices and trade-offs. So I feel like women are really coming out of their shells and like really going and reaching out for higher leadership roles. But I feel like it comes with a lot more support that's required for them and really boosting their confidence. And it's slowly getting there, but I feel like the pace is still pretty minimal.

Megan - 00:29:53: And what do you think companies can do to help change the challenges that women face or help accommodate women leaders as they progress up the ladder?

Chithra - 00:30:06: Yeah, I think women leaders, like even women in general, I feel like we need more allies, and mentors within or outside work. So my suggestion to all women out there who want that leadership position is to, would be to like find those mentors proactively through networking or like really reach out through their sources rather than waiting for companies to conduct a mentorship program or something. But we also need women-centric leadership programs that companies provide so that there's a resource immediately available for women who want to climb up that ladder. Because women naturally tend not to speak highly about their achievements and we are notoriously known for that and we don't know how to toot our own horns. So there should be programs out there to help them build their personal brand and self-confidence, so it'd be a huge rally ride. When it comes to what companies and businesses can do, it really comes down to taking that proactive step towards making that change in executive team structure or board structure, it has to be a conscious decision. There was even a Forbes article that I read somewhere, that shows that first time in 68 years of existence of the Fortune 500 list, more than 10% of Fortune 500 companies are being led by Vivint now. So it's definitely shaping up, it is slow, but it's moving in the right direction, which means we are capable of bringing that change about. And there were even many studies that showed that men are more likely to opt for internal leadership advancement than women. Such impacts can already happen if a company consciously takes that proactive step through leadership programs diversity programs or mentorship programs. So I don't know if there's a perfect answer to the issue here, but with consistent efforts, I think the change will happen sooner. In addition to what we talked about earlier, companies should really focus on or like invest in flexibility for women and working mothers and their companies. This would naturally kind of create a very well-balanced, less stressful environment for everyone. So I feel like compassion goes a really long way in creating loyal and happy employees.

Megan - 00:32:29: And last question, but what is it that's keeping you up at night right now?

Chithra - 00:32:34: Wonderful question. I don't know where to start.

Megan - 00:32:38: There's lots to worry about these days.

Chithra - 00:32:39: I know, there's a lot. So I would say the predictability of the market, has been very choppy. Going from a pandemic to a period of high valuation on equity rounds to slowing ourselves into a recession, on top of that, episodes like bank crashes. There's literally never been a dull moment for finance teams right now in the last few years. But one area that I really get into conversation with other industry leaders around me is change in customer behavior, like how product market fit needs to be redefined, and how go-to-market thinking has to change. What is the formula right now that we can apply, which will make an impact on how we make sales for our product? So even if we look at the traditional marketing approach, it probably would have worked without questions asked, but now it doesn't have the same impact, which will have a diverse effect on your gap ratio. So really understanding how to address that pain point of a target ICP is very crucial. There's a lot of trial and error that probably will need to happen based on what's your product you're trying to sell but this is an area that I see a lot of time being spent now, like understanding how the go-to-market strategy needs to evolve. So there has been this massive shift also from obsession over high top-line growth to now it's all about cash, runway preservation, and like making sure we are equipped to kind of like have that slow ride. So that mindset shift is also something finance leaders are navigating through every day now and kind of like going through that trial and error phase.

Megan - 00:34:19: Chithra, thank you so much for being my guest today.

Chithra - 00:34:21: Of course. Thank you so much for having me. Really enjoyed the conversation.

Megan - 00:34:25: Me too. I've enjoyed speaking with you and thank you for finding the time to be here with us today to share all of your experience and knowledge. It's really been great.

Chithra - 00:34:35: Thank you so much.

Megan - 00:34:37: And to all of our listeners, please tune in next week. And until then, take care.

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