Joining A Startup As CFO Is A Good Path To The Top

*** Last updated 9/18/2021 ***

Every investor is looking for the “dream team” of executives to put money on. Often I find that experienced investors scan ahead to the management page of a business plan, even before they read the product description. That’s how important the people are. The Chief Financial Officer (CFO) role is usually considered second only to the CEO, because financials are critical.

In fact, about 25% of CFOs make it to the CEO position, although not necessarily in a single step, like Indra Nooyi, PepsiCo's CEO. The latest Crist Kolder report finds that the percent of female CFOs, as well as CEOs, continues to rise and is at an all-time high.

"It's not often, if ever, that we get a client saying, 'We've got to have a CEO who has been a CFO,'" says Kolder. "It's more the reality that CFOs are better prepared than ever for taking the role of CEO." Here are some key attributes of CFOs who fit the dream team definition, based on an old article by Mark Macleod from StartupCFO:

1. “It’s all in the details” - A professional accounting designation (CA, CPA) is the foundation. A few years ago it was all the rage to have MBAs in the top finance role. These days, an MBA can still be valuable, but with Sarbanes-Oxley and all the new SEC regulations, it is important to make sure the curriculum for any advanced degree program covers the accounting, process, and tax knowledge needed to steer a company’s finances.

2. “Let’s make a deal” - The dream team CFO not only runs the deal process for fundraising, but should also bring deal flow into the company. They should have a track record of originating and closing equity deals, and should have a long list of potential financing sources that are willing to take their call. Also you want someone who can stretch your funding by knowing which expenses to cut without harming your business.

3. “Time to get organized” - Your CFO should take a leading role in bringing operational excellence into your company. It means installing just the right amount of process, reporting and structure. Not so much that it slows you down, but enough so that you smoothly run and grow the engine.

4. “What happens in the company stays in the company” - Your CFO should be a trusted advisor to the CEO and other executives. Running a company can be lonely. Your CFO can be a key, objective source of advice and counsel as you make the big and the small decisions.

5. “Jack of all trades” – Able to perform other duties (e.g., human resources, technology, legal, and information technology) as needed. It will be a long time before you have in-house counsel, and you can’t afford an outside law firm for every NDA to sign. So, choose a CFO who is very comfortable with legal documents, as well as finance.

6. “Been there, done that” - Building a software company is much different than a manufacturing one, or services. The differences are just as apparent in the financials as they are in technology. You need someone who knows the ropes in your industry.

7. “I have a dream” - The startup road is guaranteed to be long and hard. Investors look for someone who loves the challenge, looks and sounds like he can weather the storm, will always see the bright side despite adversity, and never gives up.

The job of a startup CFO is very different from one at a “big” company. The latter is much more of a hands-off role focused on investor relations, deal making (financing, M & A), governance, reporting and other back office matters. In stark contrast, the startup CFO is much more hands-on and integrated into the day-to-day of the business.

As you probably noticed and Mark points out, only one of these CFO attributes actually deals with accounting. The reality is that companies are increasingly looking for leadership from their CFOs. If you are looking for funding, as well as a good career path to a CEO down the road, consider this one.

Marty Zwilling

Great Startups Are Where Soul and Technology Meet

Some entrepreneurs forget that they can’t use people the same way they use technology to build a startup. Inventors, for example, are skilled in manipulating technology, but may have little interest or experience engaging people to make an effective team. Unfortunately, startups are not one-man shows, so entrepreneurs need to study leadership as much as they study technology.

In fact, we can all benefit from focusing on the keys to people leadership from time to time. A while back I came across the new edition of “Leading Out Loud: A Guide for Engaging Others in Creating the Future,” by Terry Pearce, who has been is this space for a long time, and I felt it spoke loudly to every entrepreneur looking to improve his leadership communication.

Pearce characterizes good leadership as the place where soul and science meet. I fully espouse his explanation of how and why every entrepreneur needs to hone his skills and document his own personal leadership guide, to be comprised of the following four main parts:

1. Establishing competence and building trustworthiness. Startup leaders recognize the need for strong credentials to demonstrate competence to team members, customers, and investors. But they must also display empathy, acknowledge resistance, and share personal motivation to build trustworthiness. These are the hard parts.

2. Creating shared context. They also must share a common understanding of the past, and the urgency for creating a new, better future with the products and services on the table. Otherwise, customers and investors will see new initiatives as merely change rather than progress. On the average, change generates more fear than excitement.

3. Declaring and describing the future. Entrepreneur leaders must be able to vividly describe a new world that is compelling and exciting to others. Focusing on the technology doesn’t do it. Customers can relate to painful problems today, and can relate to solutions that will make their new world less problematic.

4. Committing to action. Personal action speaks far more loudly than any rhetoric. Startup leaders must reveal what they are willing to risk – what personal steps they will take – to enable the new reality to take shape. The team wants to see you in the pit with them. Investors want to see progress and traction. Customers want to see results.

Merely understanding what matters will not assure that you can communicate to inspire. Effective leaders have to be courageous enough to communicate authentically from the basis of their real values, whether they are pitching to investors, closing a customer sale, or conversing informally with the team. Their passion, commitment, and self-knowledge have to come through.

In the business and financial world, the choice and use of evidence in communication is also critical. Passion, excitement, and emotion are usually not enough to get investors and customers lined up. Evidence like the following leads to understanding and receptivity:

• Data specifics encourage engagement. People equate specificity with certainty, so facts are far more powerful than generalities. Specifics allow comparison and judgment, engaging others in a mental process rather than treating them as passive receptors.

• Make data relevant and meaningful. Use examples to make it possible for each constituent to directly and personally experience the relevance of the data you present. Put global data in a local context to make it familiar. This establishes a much closer connection.

• Highlight quotes and support from others. Quoting an expert or customer who agrees with your idea generally adds weight to your evidence. For even more power, use personal relationships, audience members, or people who have actually impacted your own life.

Technology may be the key to building a great product, but people are the key to building a great business. Effective communication and leadership are a tremendous advantage in both cases. A great entrepreneur creates the future by declaring it and describing it in such a compelling way that people go there without fearing the change. Start today.

Marty Zwilling

Dread Startup Problems Or Learn To Enjoy Challenges

If you can’t solve problems and enjoy it, you won’t make it as an entrepreneur. By definition, an entrepreneur is the first to undertake a given business, and firsts never happen without problems and people frustrations. The toughest problems are people problems, like personnel issues, but there are tough operational problems as well, such as vendor delays and quality surprises.

The real entrepreneurs I know are good at overcoming both people problems and business obstacles, and get satisfaction from the challenge. Some people think this is a talent that you must be born with, but experts disagree. You can definitely train yourself to be a problem solver, if you haven’t already. It’s a key skill for success in every business role, from accountant to customer support. Here are some basics rules:

1. Practice active listening. Whether it’s a frustrated employee, or a dissatisfied customer, what you first hear is usually someone yelling with emotion or talking so fast that you don’t know what they are talking about. The first thing to do is resist the urge to vocally jump into the fray, and listen attentively without interruption. Often the person will solve their own problem as they are unloading.

2. Promise action but manage expectations. Calmly commit to resolve the problem, but don’t immediately promise any given solution. Let the person know that the situation is not simple, and you need some time to investigate the circumstances and alternatives. Then give an expected time frame for an answer, and move to the next stage.

3. Investigate thoroughly. There are at least two sides to every problem. Don’t assume anything, and gather facts from all relevant parties. If it’s a judgment or fair treatment question, practice your active listening with each party. If a problem requires special expertise, like a tax question, do your homework or call an expert.

4. Provide regular progress updates to all. Status communication is critical, if the resolution time is going to be longer than one day, even if you have given an expected time from longer than one day. This is probably the most important step and probably the most neglected. If they hear nothing, unhappy people get progressively harder to satisfy.

5. Make a timely decision. Meet your committed time frame for a resolution. Schedule enough face-to-face time (not email or text message) to lay out your understanding of the problem, facts you have assembled, options that you considered, and your decision reached, with reasoning behind it. If possible, let the person with the problem chose from alternatives, so you get more “buy-in.” Put the decision in writing to prevent ambiguity.

6. Follow-up. No matter how smooth the resolution, you need to re-confirm the decision with affected parties within hours or days. This reaffirms your commitment to the process, their satisfaction, and avoids any secondary problems. If the problem was a business process, get the process update documented and communicated to all.

It’s critical to train everyone in your team on these principles, if you want an effective business. Your goal in all of this is to be a role model and get respect for you own position, as well as to empower team members to effectively solve problems for you and for your customers directly.

Problems happen, that’s part of life and people usually understand that. Problems are an everyday part of every business and personal environment. In fact, every business is about solutions to customer problems – no problems, no business.

Entrepreneurs who are great problem solvers within the business are the best prepared to solve their customers’ needs effectively as well. But in both cases, forcing a smile is not an alternative to the techniques described above. Your team and your customers will see right through it.

Marty Zwilling

Every Entrepreneur Needs Help In Getting Things Done

The universal challenge of every startup founder is to get everything done that needs to get done, and still have a life. Even outside of business, everyone wants to accomplish more, while working less. I’ve been a student of these techniques for some time, but some time ago I saw a great summary that seems to pull all the key principles together.

Stever Robbins, known on the Internet as the Get-It-Done Guy, outlines his strategies in his classic book “9 Steps to Work Less and Do More.” These steps are not aimed specifically at entrepreneurs, but I see how they can be applied there as follows:

1. Do what you know and enjoy. Figure out what’s really important to you as an entrepreneur. For most, it’s following a passion to show customers your better solution. Live your lifestyle, do what you love, and identify your top priorities. Then you will get things done, and it won’t even seem like work.

2. Stop procrastinating. Procrastination is a killer when it comes to being effective. One of the best ways to stop procrastinating is to break things down into small chunks, using tiny steps to move forward. Break time into pieces. When there’s an end in sight, it’s a lot easier to get down to business.

3. Conquer the technology you need. Cellphones, laptops, and other electronic devices are supposed to give users additional freedom, but far too often, they create time traps. Separate yourself from technology on a regular schedule to not allow a machine’s interruptions to set your day’s agenda.

4. Maintain your focus. You need to set boundaries and say “no”; to stop multitasking; and to find ways to group similar tasks or similar contents. Don’t forget to delegate to other team members, and don’t be tempted by the current “crisis” to postpone the important tasks of strategy decisions and monitoring the progress of the business.

5. Stay organized. Many people confuse ‘organized’ with ‘neat.’ In fact, organized means a place for everything and everything in its place. When you stumble over something that doesn’t have a place, either throw it away or make a place for it. If you don’t have any more room, throw something away – don’t rent a storage unit.

6. Stop wasting time. Work is whatever you need to do that most matches your business goals as they are today. Use the 80/20 Rule to pick and then complete those taks. Stop trying to do things perfectly. “Good enough” is the antidote to perfectionism. Make faster decisions by limiting the options you consider.

7. Optimize your efforts on every task. Stop doing what isn’t working so you’ll have the time to optimize the rest of what you do. Some of the best ways to optimize include using team feedback to identify blind spots that could be limiting effectiveness; recognizing when it’s time to call in an expert to get the job done; and listening to your own advice.

8. Build stronger relationships. Build a network of contacts to allow you to harness the power of others’ strengths. Superficial relationships don’t help. Giving is the best and quickest way to strengthen a relationship. Conflict takes energy to sustain, so work to prevent conflicts from arising, and work to end conflicts quickly that do arise.

9. Leverage technology. Use technology thoughtfully to automate things that take a lot of time, thus gaining leverage. Reuse things rather than re-inventing them. The most valuable computer function in business is “cut and paste.” These days, on the Internet you can find samples of every document and contract you will ever need, so use them.

With each of these steps, you will reclaim more control of your business and your life. You will find yourself honing in on the things that actually move the startup forward and make you happy, and learning the skills you need to resist the rest. You too can be a get-it-done guy.

Marty Zwilling

6 Principles For Building A Winning Business Culture

Sponsored by VISA Business

I’m seeing a renewed appreciation of culture and values in business these days. Maybe it’s just another example of nature abhorring a vacuum, but I prefer to think it’s a natural evolution of the pervasive social networking communities where people relate to, and expect to interact with businesses and products they like. They drive the market, rather than the other way around.

“Your values as you create a startup are the key to creating an enviable culture that attracts more customers,” says Ann Rhoades in her book Built on Values. She would assert, and I agree, that you need to get it right the first time because first impressions are critical, and changing your values and culture in the eyes of customers and employees is extremely difficult.

I believe in a startup culture that strongly transmits the values of integrity, customer focus, and results. Ann outlines six fundamental principles that are key to building this culture, or changing an existing culture to improve financial return, customer satisfaction, and employee performance:

1. You can’t force culture, you can only create environment. Every culture is the culmination of the leadership, values, language, people processes, rules, and other conditions, good or bad, present within the organization. No leader can “create culture,” just the environment where the desired culture can emerge and flourish.

2. You are on the outside what you are on the inside. The service you provide for your customers will never be greater than the service you provide to your employees. You can’t force people to treat customers well if they feel ill-used themselves. Hire a diverse set of people who fit your desired culture, and treat them the same way.

3. Success is doing the right things the right way. By defining your values and behavior by the right actions, you simplify and enable everyone to make the right decisions on the front line. Empowering and educating everyone to make the right decisions at every opportunity leads to happy customers and business success.

4. People do exactly what they are incented to do. Your expressed values will be perceived as hollow and meaningless unless you base compensation and rewards on the behaviors that go along with the values. It takes diligence and courage to hire only people with these values, and fire ones who have lost them.

5. Input = output. Your organization will get out of values only what they are willing to put into them. Communicate your values often, and use values-based performance metrics to gauge your results, measure the level of implementation, leadership development, and succession planning.

6. The environment you want can be built on diversity, strategic values and financial responsibility. Conscious actions, beginning with determining a set of shared values and fostering diversity, can set up the necessary conditions for encouraging a culture that will make a startup into a leader. Values are most critical when making tough decisions, but that is also when they come in handy to illuminate the way forward.

Startups are the only businesses able to set their culture and values from a clean slate. Values start and emanate from you, the founding entrepreneur. Your values are not what you proclaim on your mission statement (if you have one). They set the culture by what you live by and project on the front line in day-to-day actions.

Strategy matters, but without a winning culture and the right values to drive it forward, your strategy will take you nowhere. Good leaders matter, but you need a culture with positive values in order to attract the best leaders and compete effectively.

Leaders drive value, values drive behavior, behavior drives culture, and culture drives performance. High performance makes new leaders. This is the self-reinforcing circle of excellence every startup needs to succeed. You can’t afford to wait on any of these, so get your culture right sooner rather than later.

Marty Zwilling

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