How CFOs Play a Key Role in Supporting Business Growth Through Fundraising

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: Today, my guest is Jeremy Foster. Jeremy is the chief financial officer at Talroo. He has more than 15 years of experience as a senior executive, primarily in the technology and banking arenas. He's been CFO or COO for three Inc. 5000 companies, two of which have made the Inc. 500, and all three have been recognized by the Austin Business Journal, as among Austin's best places to work.

At Kasasa, he guided the strategy for a $25 billion bank product portfolio, managed an analytics team responsible for product performance and financial reporting for 800 banks and credit unions, and led the development of an enterprise-grade business intelligence platform. Hello, Jeremy, and thank you so much for joining me on today's episode.

Jeremy: You bet. Thanks for making time to visit.

Megan: Yes. Today, we're going to be discussing your journey as a CFO, the role of a CFO at fast-growing companies, and how to support that growth through fundraising. I'm looking forward to learning from you today. Let's go ahead and get started.

Jeremy: Sounds good.

Megan: Let's start with you. If you could just tell us a little bit about your career journey and how it is you got to where you are today, that would be great.

Jeremy: Yes. My career journey's probably a little unorthodox. I actually started in marketing. I started as marketing director of a community bank in New Mexico and West Texas. Ended up getting promoted to lead operations, retail, and marketing for them. It was a great experience. We grew that to 600 million in assets and then really enjoyed the team that I worked with, but had an entrepreneurial itch. I gave a pretty extended notice period. Then when I finally left the bank in the space of about a week, quit my job, got married, moved to Austin, and started a new company, and so moved out there.

Megan: Exciting times.

Jeremy: Yes. Six days of that week was the honeymoon. It was a busy time. That startup was a standardized test prep company intended to help provide cost-effective SAT and ACT preparation for disadvantaged kids. We were profitable pretty early on, but not making enough to really support my wife and me both. I went back to work for a company called Accenture when we decided to have kids and ended up--

Megan: Small company?

Jeremy: Yes. Ended up starting as a banking subject matter expert for a very large nationwide bank engagement and then ended up leading curriculum management. They created a full-time role called curriculum lead and I helped manage the frontline training curriculum. This was in the middle of the banking crisis, so it was a fun time to be involved in that. I had a great opportunity to go work for a startup here in Austin called BancVue.

Started as what they called an executive consultant, which was really a mix of consulting and account management. Ended up leading our analytics team then took over a portion of our finance team, went back, had the opportunity to get my MBA, so got my MBA and then came back to the company full-time as CFO. Was CFO there for about five and a half years, helped scale the company, and helped sell the company to private equity?

Then went to another smaller company here in Austin and spun out a startup called Homeward. That's done well and then had a great opportunity to come back to Talroo, come back up to a bigger company with Talroo, and have been there for about three years and just really been enjoying it.

Megan: Yes. What an accomplished background you have and like I was mentioning before we started this conversation you're the second CFO I've spoken to in the last four weeks. That's come from a marketing background.

Jeremy: Which is really unusual, but I think it's a really terrific fit given the importance that the consumer plays and the increasing importance that understanding consumer unit economics really plays for the CFO. I think if you have a good grasp on how to acquire customers, you're going to do a better job helping to grow an organization.

Megan: Yes. That's a great point. As you look back throughout your career, are there any stories that stand out in your mind as moments that turned your career from one direction to another? Obviously, making the jump from marketing to accounting and finance was probably one of them.

Jeremy: Yes, absolutely. At the bank, I think the first real opportunity I had to branch out into operations came when, as marketing director, I started picking up special projects effectively for our CEO. One of those we had a situation where our ATMs were constantly down, and it was impacting consumers. I was raising it as an issue, and our CEO said, "Well, then it sounds like we need to fix it. Let me know what you need to do to go fix the problem for us." He really gave me the support that I needed to go out and effectively find sources and renegotiate a better contract with a different vendor. We ended up with better service delivery at a lower cost.

The combination of those two things, I think really caught the CEO's attention. That opened up a lot of opportunities for me in operations, which led to more opportunities leading all of our retail banking group. I think that was a real key opportunity. Another one was at BancVue, which became Kasasa. As I moved into our analytics division, we identified some challenges and opportunities in our pricing and our invoicing.

As we built out the function that we needed to effectively begin recontracting clients, we were able to effectively turn an invoicing and collections activity into a client renewal and revenue center. I think that that also created a pretty meaningful opportunity for me as I moved into finance. Both of those really came because someone, in the first case, the CEO, and in the second case, our controller, looked at the value that I was providing and said, "Hey, I think there's an opportunity for you to create more value in this space."

I think a big part of my career has just been looking for the problems that are most painful and most need to be solved. Finding the right support to go solve them, and then doing a good job with that. If you do that, then that opens up opportunities wherever there's room for growth in the organization.

Megan: Yes, absolutely. Making an impact really is what it comes down to.

Jeremy: That's right.

Megan: Let's talk about your current organization, Talroo, and what it is that they do.

Jeremy: Yes, Talroo provides quality candidates primarily in the essential worker space to medium-sized and enterprise businesses. We do it really with what we call the Talroo Ad Platform, TAP for short. That includes three primary product stacks. We have Talroo Pro, which is a mix of programmatic advertising and search capabilities in the HCM, the Human Capital Markets, and HR space.

One of the buzzwords is programmatic, which basically means allocating your ad spend to channels that are going to drive the candidates that you want. That's really about half of the solution. The other half is making sure that you have the search and match technology capabilities to identify good candidates and help place them. With Talroo, what that really translates to is the technology that would allow us to have a client set, for example, a target cost per applicant. We go out and we drive the traffic and we look at the conversion rates to make sure that the candidates that are going to become qualified applicants for that employer are effectively hitting and meeting that target.

If you're a CFO looking to staff somebody, you've got budgets that are set, and then your recruiters are going out and they're trying to fulfill the organization's needs within those budgets. Talroo really has the technology to allow us to help make that possible. We have the product of an event that essentially schedules and then manages attendance to try to help drive candidates to hire events.

We have an insights product that won 2019's HR Executive magazine's Product of the Year award, and it allows you to plan your recruitment strategy with actionable data by being able to look at places like in a specific market, how many job seekers are there looking for this specific type of job. If you wanted to plan out a warehouse, you could, for example, use that data to think about which city you might want to build that warehouse in.

Megan: Wow. I imagine you've seen demand explode in the last 12 months or so.

Jeremy: Yes, so I think the overall industry, the best estimates we've seen overall in the industry are that the total addressable market, the total amount of spend in the recruitment marketing space is going to go up by about 25%, 30%. We've had significantly greater growth than that over the last year. A lot of that is because the quality investment that we have made in our product has allowed us to do a better job driving high-quality candidates and so we see significant increases in spending from clients as we deliver for them.

Megan: Yes, I haven't spoken to one CFO who hasn't mentioned staffing as their number one pain point.

Jeremy: Yes, it is incredibly important, it's always important, for most organizations. In most organizations today, the most important resource that you have is people. When there's a shortage of talented people, that really shifts things a lot and so a big part of what we've seen with the great resignation that we've seen over the last couple of years is that the tight labor market has really forced companies to rethink talent acquisition and to put a priority on it the same way that they've always placed on customer acquisition and both of those are really marketing functions.

If you don't have that capability or even if you do and you just need an additional source then we've really seen significant additional focus and investment from companies to meet that gap and meet that need.

Megan: You've been with that company now for three years. What have been your proudest achievements?

Jeremy: I think I would say a couple of the key achievements for us have been, one is really building out a direct sales team that can deploy our products and sell our products directly to customers. Our CEO has known from the beginning that there's going to be a tremendous opportunity in retail. That's really been the driving vision for the company for quite a while. We've had terrific products and terrific software for a long time but we really needed to invest in and build out the capabilities to reach the market and so we brought on a really talented sales leader.

We built out a lot of the operational processes, have invested considerably in tools and in our sales force, and we've really seen a tremendous amount of growth as a result of that. I would say that's been a real key for us as a team. I'd say another one that was important was really that we began making that transition right before COVID hit, then Q2 and Q3 of 2020 were difficult for a lot of companies, and we were no exception, and so really figuring out how we were going to manage to continue moving forward with those investments in a time when the natural impulse is to retrench. The natural impulse is to pull back.

I think the organizational courage to continue to move forward and make investments in growth when there are signs that you are having to be responsive to and you are having to plan for poor case scenarios but really putting in place plans that say, "Okay, if things don't go well, this is what this looks like and if things do go well, this is what this looks like." Then really deciding to move forward, as I said as an organization with a spirit of optimism and intentionality when things look bleak, I think that's a moment of pride for the whole company, I think.

Megan: Yes, absolutely. The world pretty much shut down for at least a few months in 2020. For you guys to keep moving forward says a lot.

Jeremy: Yes.

Megan: Okay. Talroo has been named as a top place to work within Austin for five consecutive years, which is really saying a lot. As a CFO, how do you help prioritize and support the investments that are necessary to reinforce this type of success when it comes to Talroo's work culture?

Jeremy: Culture really, does start at the top and our CEO has always been very focused on our work culture and one of the key ways that we do that is with Talroo experiences. If you think about what people remember and what people think about, certainly people care about compensation and people care about having a great break room but people also care a lot about experiences and sometimes experiences are a lot less expensive to arrange than buying a new building.

Looking at where we can make the biggest difference and the biggest impact from a cultural perspective bang for the buck I think is a key function of the CFO. I'd also say that one of the most important parts of culture is making sure that you're bringing in the right people, and then making sure that you have a high level of transparency within the organization. I would argue that for any company, transparency is, if not the most important function of a CFO, certainly one of the most important functions of a CFO. I'd say that's really key for keeping a company a great place to work.

Megan: Yes, I think transparency is probably even more important these days with most of the workforce in many cases-

Jeremy: Remote.

Megan: -still being remote.

Jeremy: Absolutely.

Megan: Yes. That's awesome. I'm sure that helps you guys retain employees in a time when employee retention is not easy.

Jeremy: It does.

Megan: Just curious, what kind of experiences?

Jeremy: We do everything ranging from large group experiences. One of my favorites was actually one that was during my first year as CFO, we had a big Casino night poker party. We also have an RV that we will allow employees to check out and take with them for the weekend when they've made some meaningful contribution. We're a sponsor of Austin FC which is the soccer team here in Austin, and we have tickets that we share with employees so it's really about what we do, then we do more regular touchpoints, so to your point about remote workforce, we have always had this fantastic break room and lunches used to be a big thing.

Well, as we began to move remote, fell off and so part of what we did is we formed partnerships with some of the food delivery services and just started setting aside essentially budget for what we call management mingles, where every executive in the company, basically every month this meeting with a team of seven or eight folks and we're all having lunch and everybody can order their lunch in. It's making sure that we have opportunities for people to connect with each other and for people to also do things that they're going to remember.

Megan: Yes, and that goes so far as making work a fun experience for people. I love that you guys have an RV and that lets people take it for the weekend. Okay, so you've been a CFO or COO for several fast-growing companies now, and as someone with experience working in this environment, what have you found that growth companies want from their CFO?

Jeremy: I think it varies a lot based on the company. When I look at the three companies I've been at that have hit the Inc. 5000, every single one of them, my core CFO duties of let's make sure that we're putting resources where resources need to go, that's always key. All of them are always trying to figure out where we need to put resources and so a key part of that is Goldratt's classic Theory of Constraints. You look at whatever it is that's limiting the organization from growing.

It might be that you don't have a good sales team to reach out to and reach customers directly. It might be that you don't have the deadlines that are necessary to fully make the investments that you might need to make in the product. You might have a product that's panning out and you've already got a model that's working and you just need to gather the funding to pour fuel on a fire. It might be that you don't have a fundable model. You have a great sales team, but you don't actually have the key product. There's not any demand there.

In that case, you have to think that's probably the biggest of those challenges. You have to think about how I go back and work with the team to help us identify what types of products are going to have opportunities in the market space. It really depends on, I think the organization, and how you supplement that CFO role. I would say that it always starts from the perspective of what's limiting the organization's objectives. With high-growth organizations that's typically what's limiting growth.

Megan: Yes, that's great advice. Switching gears just a bit, from Talroo to one of your previous employers, Kasasa, you guided strategy for a $25 billion bank product while you were at Kasasa. Talk to us about what that process was like.

Jeremy: Yes. Kasasa was really a distributed branded suite of checking and savings account products. Probably the best way to think about it is, you might be able to buy Rolex at the local jeweler, and Kasasa was effectively providing the Rolex checking account solutions. When you're dealing with something like bank products that have deposits attached to them, a key piece of that is understanding your clients' asset and liability management profile. A lot of its understanding is the underlying, consumer economics that goes into making those products good for a customer.

In the case of Kasasa, Kasasa would power, for example, you might be able in the current market to pick up 3% interest on your checking account, but you need to swipe your debit card 10 times and you need to take any statement. Well, 3% is a great rate on a checking account. That's fantastic for a consumer. The client, the bank, or the credit union earns money every time you swipe your debit card. If you can align the interest of the consumer with the interest of the organization, the organization can pay a premium interest rate for it.

Then it really becomes about making sure that you're working through getting that product designed right and putting in place strategies that help your products stack work with all of their other products. Obviously, in a rate environment that has some intersections with finance. With my background in banking and my background in finance, that was a very logical touchpoint for helping to provide some of those strategies.

Megan: You also have significant experience in multiple equity rounds. What, in your point of view, is the role of the CFO when preparing for fundraising other than to pull together obviously the financial statements?

Jeremy: Yes. I think the CFO should be instrumental, I shouldn't say should be. I think for me, a lot of my capabilities are around financial architecture and design. Part of what that brings with it is the ability to go back and really look at the underlying business model. Within that, I think you really have three key building blocks that any investor, at least any modern investor is really typically going to look at. They're going to want to know what's the lifetime value of a customer. How much total revenue and gross profit are you going to generate from each customer?

Then they're going to want to know how much is it going to cost you to acquire that customer. You've got your customer acquisition costs and a lot of times in the finance space, we talk about that as LTV/CAC. Different investors might have a 3:1 ratio, some might have a 5:1 ratio. The real question is what are you looking for to make that an investable model? If those two things are right, then you know that you have a profitable way, you know that you can acquire customers profitably, you can put money in, you can get customers, and you can make money from those customers.

Then the next question is, how many of those customers are out there? What's the total addressable market? If the total addressable market is big enough, then you know that you can make enough money off of enough customers to cover whatever your investment is. Oversimplifying a business model a bit, if you can start with those three building blocks, then a lot of times from there, you're able to put together a ground-up build on a growth model that is a highly investible growth model. That's really what investors are looking at.

They're looking at it and they're saying, "Okay, if I pour money in--" Venture capital and private equity, there's a bit of art to it at times, but it can also be pretty formulaic. The key formula is if I pour money into the top, do I get more money out of the bottom? That's the question. With a high degree of confidence and a good level of support and data put together and support a model that can drive that result, then you're going to be able to get investment. Then they'll also want to check the box on the management team, they'll want to make sure that all the metrics that you're providing, check out with environmental trends.

If those numbers are right, the rest, I don't want to say it all takes care of itself, but it all certainly is a lot easier to manage if those numbers check out.

Megan: Yes. Your point just reminds me of a conversation I had a while ago with the CFO and the topic for that podcast was storytelling and the importance of being a good storyteller as a CFO. I'm sure when it comes to private equity being able to tell the organization's story and convince them is what it all comes down to.

Jeremy: Yes. It is. I definitely think that being able to tell the story is important and it's easier to tell a good story if that story is true. Sometimes you walk in and that's exactly what's been missing. You walk in and the business has a great product and they already have good acquisition, they just haven't thought about how to tell that story. Sometimes you walk in one piece that is missing, you have good lifetime value from your customers, but you don't have an effective sales delivery channel to go out and acquire those customers.

Then you got to figure out how you're going to build it. You have to figure out how to make those numbers work. Sometimes, as I said, the harder part is if you walk into a situation where you don't have that lifetime value and the customers that you have today aren't driving that value, then you really have to go through a full rethink but if you--

Megan: Having the irrelevant product, I'm sure is probably the worst possible thing to have.

Jeremy: By far. Everything else ends up feeling pretty mechanical. If you walk into a situation where you've got a great product and you've got customers that like it, from there everything starts to feel pretty easy.

Megan: What advice do you have for CFOs who are looking to drive strategic value within their organizations to grow revenue and margin?

Jeremy: Yes. The first key I think is looking at what the organization does well and doesn't do well. Typical SWOT analysis. That'll give you an idea of what the organization's capabilities are and then really look for opportunities to drive extra value inside or outside the organization. Then it's really about figuring out how you get the resources necessary to take advantage of those opportunities.

At one of the places I worked at the time I took over as CFO, the model wasn't really fundable. We didn't really have a great opportunity to go out and raise additional money at that point in time. We were spending a lot of money on legal expenses. That was really routine legal. It wasn't like we had big lawsuits during issues like that. It was just a lot of legal expenses that had all been outsourced to manage contracts. We built out a contract management function. We saved $500,000 in legal expenses annually.

We took a small portion of that and began to build out an FPA team. Then the rest of it really went over to product to help us build out the new products that we needed to get in front of the clients. Thinking about where you can find the money and a lot of times, the CFOs may think that it's more about moving money from one bucket to another. Sometimes executives in any space in the organization are focused on growing their division. Everybody tends to come at it from a perspective of, I can manage the money better than anybody else can.

Really the better question is, where does the money need to be spent for the company, and who's in the best role to do that? In some instances, as I said in the example I just gave a legal report. I made my organization more efficient, then we took money away from my organization, and I gave that somewhere else. We reallocated that to a team that needed it because that was where the opportunity for the business was. I think one of the keys if you want to be a strategic CFO, the key is to stop thinking about how do I make finance bigger, or how do I make finance more powerful.

It's more about, how I make the organization more successful and where is the best place to find those resources and reallocate those resources so that the company can grow. If you do that, then one, you've inherently become more strategic, but you're thinking about the company instead of about your team. You start to get invited into strategic conversations across the organization in a more meaningful way because people know that you're not there to build your empire, you're there to make the company more successful and hopefully make each department more successful in that process.

Megan: That's very good advice. I'm sure success for any organization is a team effort and not just a bunch of sole contributors trying to get to the top.

Jeremy: Right.

Megan: Lastly, as a CFO, what is currently keeping you up at night?

Jeremy: Well, I think looking at the overall domestic and global environment.

Megan: It's a crazy world.

Jeremy: There are macro forces at work that in some places have been pretty predictable and in some ways, have not been predictable. Certainly, almost none of us can realistically predict the outcome of being on the potential verge of World War III of having incredibly high inflation rates of all of a federal reserve that might implement economic policies that restrict growth to try to deal with that inflation. All of these are factors and forces that we have to be aware of. I think most of us, myself included, are kept up at night by things that are outside of our control. Right now in the environment, there's a lot of that.

Megan: Definitely tumultuous times. To our point earlier, you can't just sit still and freeze and not move forward.

Jeremy: That's right. You just keep making the best moves that you can and the environment that you're in, and then the environment that you think you're most likely to be in and you have contingency plans.

Megan: Jeremy, thank you very much for taking the time to speak with me today.

Jeremy: It was great to visit with you. Thank you for making time and inviting me on.

Megan: I've enjoyed our conversation and all the insights that you've provided. I want to wish you and Talroo all the best. It sounds like the two of you are both doing amazing things. To all of my listeners, thank you for tuning in. Until next week, take care.

Jeremy: Thanks, Megan. Have a great day.

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