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Mistakes founders make during fundraising (from a cfo who has done 50+ M&A and Exit deals) · The Diary of a CFO

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Welcome back to the Diary of a CFO podcast. I'm
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your host with Wassia Kamon. Each week we explore
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how top finance leaders help build high performing
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teams, partner with CEOs and boards and lead
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through growth and transformation without burning
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out in the process. Today's guest is Julianne Averill
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a healthcare AI CFO and board director with more
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than 20 years of experience. She serves on public
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and not -for -profit boards, chairs audit committees,
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and works with founders and executives on how
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to use AI thoughtfully in their businesses. So
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glad to have you on the show. Welcome, Jillian.
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I'm so glad to be here. Thank you for having
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me. Of course. Of course. I was always curious,
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you know, when I got to learn more about you,
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to understand how did you end up in the world
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of live science and biotech, especially as a
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CFO? Yeah, well that's a great question. It was
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one of those things where it was, I'd say slowly
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and then suddenly. So I started out in finance
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with an interest in numbers and then grew up,
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my parents were in the medical field. And so
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I'd always been that person who'd been exposed
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to the numbers, exposed to the health side of
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everything. And then about actually 10 years
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ago now, I had the opportunity to work for a
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healthcare information technology startup, CalIndex.
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And it was able to be, I was employee number
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13. So I was doing, it was awesome. I was doing
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everything from HR to finance to basically all
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the operations. And we scaled from this little
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tiny startup of 13 people to we became the largest
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healthcare information technology company in
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the entire US. So that was my really first biotech
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health tech company. And then kind of went from
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there and have been in life sciences ever since.
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Wow. And so at which point did you actually became
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a CFO? Cause I know now you're a fractional CFO.
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So I'm curious to hear your journey to first
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become CFO and then the one to become fractional
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CFO. Yeah, I know that's a great question. So
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how I became CFO was I started out initially
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in public accounting. So prior to the health
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IT company, I had to start in forensic accounting,
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interestingly enough. So really I was helping
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companies figure out like when things went wrong,
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why did it go wrong? And then I did the public
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accounting journey. So really helping companies
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figure out like their internal controls and all
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of that. And then went in -house. So I was at
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the health IT company. And then over time, my
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journey just took off as the companies I was
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at, we would go through mergers and growth and
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all of that. And so as I got more responsibilities,
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I moved up successfully. So I started at that
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company as a controller and moved into the VP
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finance role as I took on the finance side. And
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then eventually I moved into a biotech company
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that was actually using AI to develop drugs to
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treat depression. And then that was kind of my
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first CFO role because I was the one running
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the finance side of the house. And then from
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there, then I moved into a CFO role during COVID.
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So for a company that was developing a at -home
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infectious disease test. And then at that point,
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Since I've done so many of these companies where
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you're running the show, the company I'm at currently
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approached me and said, wow, since you've done
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all this work with companies that have done acquisitions
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have really gotten like, for example, that biotech
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company I was at, we prep for IPO. They're like,
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how about you come and be a full -time CFO for
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a bunch of fractional companies. That was five
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years ago. And I've done that ever since. Oh,
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wow. So when you went fractional, when you first
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got, you went to that fractional role, what surprised
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you the most? You know what surprised me the
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most? was two things. It's one, it was learning
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how to let go from you're basically an advisor.
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So you have that differentiation between being
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an owner, like when you're in health, you really
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want to say to the CEO, like, hey, this is what
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we need to do and then go fully execute. Whereas
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with an advisor, you are executing, but at some
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point you have to say, okay, if that... CEO wants
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to do something and it may be something that
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you disagree with, you can tell them, hey, here's
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what you should do. But if they still go do it,
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you let them go do it. And then the second thing
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I found was when I joined the current company
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I'm at, it was 2021. So we were still in the
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middle of the pandemic and we were starting to
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see a shift in life sciences. So we're starting
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to see a lot of that downturn. And what I found
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was as companies would struggle with funding,
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oftentimes you'd advise them like, Hey, if you
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don't think about these three or four things
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to fund your business, you're probably going
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to run out of cash before you get to accomplish
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what you want to do. Whether it's to bring your
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great drug to market, whether it's to achieve
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your next fundraising milestone or something
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like that. And I was amazed that oftentimes they
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wouldn't think about how they take that fuel,
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which is that cash or that funding, and be able
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to really see it through and ultimately would
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run out of cash. Wow. And so as a fractional
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CFO, you work with a lot of founders now. I'm
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curious to hear when founders come to you with
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a big vision, always have big vision, say our
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CEOs, how do you help them translate that into
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a financial plan that can actually support it?
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Cause like you said, you can have a big plan,
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but be short on their balance sheet, especially
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when it comes to cash. So how do you walk them
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through that journey? It's a great question.
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So how I walk them through that journey and it
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can be oftentimes they're coming to us and myself
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and maybe a team, it's really understanding where
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they want to end up. So they may give me a call
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and they may say they want to go IPO tomorrow,
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which is like, okay, well that may or may not
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happen, but we can try. Or they may be ultimately
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looking to be. acquired and be part of a larger
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pharma someday. But it's really working with
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that partner or CEO founder to understand what
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their ultimate vision is. So where do they want
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their company to go? And how do they want their
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technology or their therapeutic to live on? So
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are they taking it all the way like with us in
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development, we have different phases. So we
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have like that ideation phase, we have that development
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phase, like does it go through clinical trials
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oftentimes? And then we have that commercial
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And so I partner with them to see, okay, how
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far do they want to take this business? And then
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we kind of work backwards from there to develop
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that basically that long -term strategy and those
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financial models that can support them through
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that fundraising process. Okay. And so when you
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come in and you, like you said, I think in life
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sciences, the life cycle is quite long, right?
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Cause I used to work for a pharma company as
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well. Um, so how are you able to say to these
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businesses that have this kind of long life cycle,
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how do you keep cashing? your bank account? How
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do you get funded? Yeah, so it's interesting
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because oftentimes these companies may have no
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revenue or maybe early stage revenue. So a lot
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of it is founded almost on it's really understanding
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that valuation and that potential. And so what
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we're thinking through in terms of funding rounds
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is it depends on where they are in that development
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cycle. And so, for example, if they're very early
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stage, so they're really at that, okay, we're
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thinking about this idea where we have the science,
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but we don't have, okay, it hasn't gone through
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clinical development. We may not have gone through
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human proof of concept data. It's really showing
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the investors what they have available. So at
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that point it's the people, it's the early stage
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potential from any scientific studies they have,
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but it's really that long -term potential to
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see could this eventually become a drug that
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could help people. Then if they're later stage,
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and like let's say they're looking to go to the
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public markets, it's have they taken... whatever
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they developed and significantly do you risk
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it. Plus they've also have a built out the business
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to really be a standalone public company that
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can basically turn out different milestones quarterly,
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annually, and have a team that can really partner
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externally and build out that public company
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infrastructure. Okay. So now let's bring it back
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to just any company trying to go from where they
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are now. So that IDH and process all the way
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to IPO. Can you walk us through how that's. out
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of funding works from series A, B, all the way,
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all the way. I'd love to be a private company
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at Z. That'd be amazing. So really when you think
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about it, it's, and cause I know that the A,
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B, C and all that kind of starts to get muddy
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nowadays. A is really idea. So it's your, you're
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betting on the founder. You're betting on the
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founder and can they execute? So what do they
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have? Do they have a great product? Do they have
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a great team? Towards B, you're thinking about
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proof of concept. So have they started to build
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out the team? Have they started to get traction?
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So like if they have a product or service, do
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they have a minimum viable product or do they
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have early sales if they're a revenue generating
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company? By the time you get towards C, and this
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is kind of where it gets muddled because you
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could be B1, B2, C2, blah, blah, blah. But that
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is really about have you started to D. risk your
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asset, build out your team, and also have you
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start to build out the business to take you to
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that next stage. And the next stage can be again,
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the E to Fs or even the public market. So really
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are you able to scale and have consistent robust
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milestones or maybe you have more assets, more
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service lines, more segments and things like
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that. So it's kind of the way to think about
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it, basically that growth trajectory. And oftentimes
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investors are really looking for that billion
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dollar company. So what is it that's unique about
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the team, about the founder that's really going
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to take you from point A all the way up to that
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trajectory and that scale. And so as the companies
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are moving through these rounds, how do you help
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founders figure out whether debt or equity is
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a better choice? That is a great question on
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that perspective because it's really all about
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how do you found that company and how do you
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add that fuel to really get your company through
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to realize your vision? And so it's pulling those
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levers to say what is it that can extend your
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runway? And then also how do you think through
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what makes sense for the company long term? So
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when we think about debt, debt is always a good
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lever when a company company has additional capital.
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So like if it has equity with debt, then that
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means what debt can do is it can really enhance
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the company. Or oftentimes a lot of the companies
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I partner with, if they're very capital intensive,
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debt may be a good lever. So for example, equipment
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loans to really help find a way to leverage and
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extend the runway because you take out an equipment
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loan and then you can really think through, okay,
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I can use like my equity funding to then extend
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my runway and focus on the development side,
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whereas the debt is focused on the equipment.
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And so at which point would you say, especially
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for the founders that come to you when they're
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like, okay, I'm just calling you, I'm stressed
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out. What would you say are the biggest mistakes
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you see founders make during these fundraising
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rounds? Yeah. So it's when they call us and they're
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stressed out, it's, it's when they start to think
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too narrow and then they start to say, okay,
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I don't need X, Y, and Z. And by, I mean, X,
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Y, and Z. I mean, like, for example, if we're
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at mid stage, they forgo building the operation.
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and they focus exclusively on building just their
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science or their asset or their technology. Because
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the thing they always want to keep in mind is
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if they want to be a standalone company, how
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do you de -risk the full picture for investors?
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But also more importantly, where do they want
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to be as a company overall for themselves? And
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also talking to those investors that make sense
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to partner with them as well. because sometimes
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I see a mistake is they'll go for example a biotech
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may be talking to a tech investor that may not
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be fully aligned with their mission and vision.
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And then if they get funding from that tech investor,
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that may not work or vice versa, you know? So
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it's always making sure that you have the right
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funding from somebody who really aligns with
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your vision and vice versa. Okay. I'm always
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curious to hear, especially when it comes to
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cash management and building a sustainable business.
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Most founders don't have a background in finance.
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So what has been some advice or go -to moves
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you've done? to bring them along with you all
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the way. Because like you said, they may choose
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to say, I don't want XYZ, but you as a finance
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person, you know that XYZ is needed, whether
12:06
it's for your investor relationship or just having
12:08
enough runway to make it till the end. So what
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have been your go -to moves? Yeah. So my go -to
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moves are really to bring them along in the process.
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It's meaning that founder where they're at and
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then helping educate them in a way that makes
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sense for that person and that person's personality.
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And what I mean by that is sometimes if you have
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a founder that's early stage at a seed stage,
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they may not necessarily need a high power CFO.
12:32
They may want a controller or head of finance
12:35
who can be that day -to -day partner and can
12:37
really get the tactical work done and really
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partner with them from that perspective. But
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then my role as a fractional CFO is to really
12:45
be that strategic thought partner to them to
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check in with them periodically and see, okay,
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are you thinking about your next milestone or
12:52
your next development process? And then really
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be there to answer any questions. It can be anything
12:57
as simple as, okay, what should your monthly
12:59
burn be for a company at this stage? So it's
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really being there to be their sounding board
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about these questions that will come up that
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they may be getting from investors on the finance
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side and help them think through those strategic
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items. Okay. I would like to pause a little bit
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here on the ideal finance structure as a company
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scales, right? We thinking, like you said, you
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start up maybe need a bookkeeper or controller,
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but you probably see also new fractional CFOs.
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So can you walk us a bit through how do funders
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can realize or other finance people realize when
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to grow the finance and accounting function and
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how, like which roles do you bring in at which
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point? That's a fantastic question because one
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of the things you want to do is you never want
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to, and this is for any role, is scale too early.
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And so the way to think about it, and this is
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probably due reason we have such a growth in
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fractional roles or even the reason my now exist
13:53
is bring on the expertise when you need it and
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leverage consultants i .e. the fractional roles
14:00
until you get to that point of okay you're using
14:03
somebody 40 hours or more per week and specifically
14:06
to your question about what do the teams look
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like at each stage it can be slightly different
14:10
depending on the company so if you have a small
14:13
company where they just have us operations and
14:16
they're very simple maybe they're pre -revenue
14:19
and their burn is a million dollars a month They
14:22
may not need a very large team at the beginning,
14:24
but then when they go public, they may need to
14:26
supplement with additional technical resources,
14:29
bring on the CFO, all of that, versus a early
14:33
stage company that's technically a Series A,
14:35
but has raised $300 million and plans to go IPO
14:38
a year from now. That may need a bigger team.
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So the way to think about it is in terms of scale
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and in terms of complexity from the business
14:47
operations too. Okay. When you think about the
14:50
actual talent, so we agree on you need a controller.
14:55
Um, but then who else do you need? Because at
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some point we have to think about internal controls.
15:00
And once you go public, you want to build that
15:02
structure before you go public. But unfortunately,
15:05
a lot of people see accounting as a cost. Finance
15:08
as you guys are too expensive. What are you doing?
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So what are your thoughts on that? My thoughts
15:13
on that are it's either you pay now or you pay
15:15
later. So the way to think about it is it's like
15:17
deferred maintenance. on your car. So it's you
15:19
can do your oil changes or you can wait till
15:22
the catalytic converter blows up and then go
15:25
fix it all at once. And so this is where the
15:27
leverage of like a fractional model becomes really
15:30
important is if you bring on strategic resources
15:33
early, so like a strategic CFO, even strategic
15:36
legal or ops, those are good resources to supplement
15:39
even at a few hours a month because they can
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help you think through, okay, what are those
15:44
roadblocks that you may be missing? And so that's
15:48
the thing to think about is that I know I see
15:50
a lot of founders sometimes forget is they'll
15:52
say, okay, I want a controller now and I'll keep
15:54
me running for a few years. And then they may
15:56
find out the hard way that, okay, I should have
15:58
been back to the debtor equity question. Maybe
16:00
I could have been thinking about bringing on
16:02
debt when I'm closing my round. And that's what
16:04
a strategic CFO can really help them with because
16:06
they tend to have the connections to the different
16:08
lenders and think about the different sources
16:10
of capital. Now I like how you keep saying strategic
16:13
CFO. So I'm curious to hear what's your definition
16:16
of strategic CFO. And as you think about the
16:20
life cycle of a company, the maturity stages
16:23
of the company, what kind of CFO do companies
16:27
need at each stage? Yeah. So my definition of
16:30
a strategic CFO is a CFO who understands the
16:33
business and is really a partner to the CEO,
16:38
the executive team, and the board. And that's
16:41
regardless of industry. So it's somebody who
16:43
really understands how the business runs. So
16:47
what are the key drivers of revenue? If the company
16:50
has revenue or the product development. So like
16:53
in biotech, oftentimes we're pre -revenue. So
16:56
you really need to understand that at the CFO
16:58
level. And then even down into the lower levels
17:01
too, for finance. So every single team member
17:04
of finance and operations should really be those
17:07
partners to the rest of the business. how that's
17:10
how we end up transitioning from what we're reviewed
17:12
as a cost center to more of a partner. for the
17:15
rest of the business value driver. Okay. And
17:17
then as the company mature, so part of the startup
17:20
stage, what are the kind of skills that founders
17:23
or CFO may want to bring in? Because how you
17:26
run a business when it's just scaling or pre
17:29
-revenue is definitely different than when you
17:31
are or you pass the startup stage. Now you have,
17:35
let's say quality compliance to be done and all
17:37
that other good stuff. Yeah. So the, the skillsets
17:40
to bring in beyond that stage. So really the
17:42
growth stage in the public stage are in. who
17:44
are very familiar with internal controls and
17:47
then additionally Individuals who are familiar
17:50
with leveraging technology to build segregation
17:53
of duties and compliance. So really to make it
17:56
easy for the business to get greater insights
17:59
faster. And what I mean by that is like, for
18:02
example, we're starting to see a lot of growth
18:04
with artificial intelligence being able to give
18:07
us financial data sooner, but really you need
18:10
individuals who can understand how to weigh the
18:12
pros and cons of what type of technology to implement.
18:16
So that way you can give your business partners,
18:18
so like your manufacturing team or your commercial
18:21
team data that they can use to make decisions.
18:24
And that's really important. And then of course,
18:26
when you go public, you really need to make sure
18:27
you have your technical team either outsourced
18:30
or in -house so that way you can deal with your
18:32
SEC compliance requirements as well. Oh, let's
18:35
talk about that part because you do that a lot.
18:40
What are some of the things you will say you
18:42
wish people knew about going public? Because
18:45
when we hear a company going public, everybody's
18:48
thinking mula money coming in. But what are the
18:51
realities of transitioning from the startup stage
18:55
to becoming a public company? The biggest reality
18:58
is it's not the end state. It's the start of
19:01
a new wave. And so that's the piece that I think
19:04
is always an evolution for a lot of individuals
19:07
to understand. And that is a big transition for
19:10
a lot of companies, especially when it happens
19:12
very fast, because all of a sudden finance goes
19:14
from more of an internal function to the, it
19:18
becomes a very external facing organization,
19:21
where you're partnering even more so with your
19:25
CEO, with your teams and even, I mean, the CFO
19:28
is directly talking oftentimes to analysts, to
19:30
bankers and everything to say, okay, here's what's
19:32
going on with the company. And then more importantly,
19:34
everyone in the company starts to learn whatever
19:36
you say out there can actually impact, you have
19:39
a stock price and that can impact things. And
19:42
a lot of individuals who have been in just the
19:44
private company world may not understand that.
19:47
So it's a, it's a mind. And it's a good fun mind
19:50
shift, but it's also just, okay, you go IPO and
19:53
you're not done. It's your starting and it literally
19:55
starts from day one and you hit the ground running.
19:58
And basically depending on when you go IPO, it
20:00
can be three months after that your queues out
20:02
or it can be who knows two weeks after that.
20:05
So it just depends on what day you pick to go
20:06
public. Okay. And what would you say is the right
20:09
thing to do when a company should stay private
20:12
versus going through a public. offering. It really
20:15
depends on what the objectives are of the company
20:18
long term. We are starting to see a lot of this
20:21
trend come back, which was around actually when
20:23
I was at my company, the AI neuro company, which
20:26
is they're thinking through doing the dual track
20:28
of IPO and M &A. Number one is, is the company
20:31
ready for the rigor of being a public organization?
20:34
So do they have the operational infrastructure
20:37
to turn out public company financials and public
20:40
company reporting every quarter? But more importantly
20:42
too, on the business side, Do they have those
20:45
upcoming milestones? So where are they at? Are
20:47
they like, if it's revenue generating, what does
20:50
their product line look like? Are they going
20:51
to have a good cadence of product initiatives?
20:55
Are they going to have different milestones where
20:56
they can really say, okay, every single quarter,
20:58
we're going to have something come out because
21:00
they really are. It's almost like you now have
21:02
a flashlight shown on the company that wasn't
21:05
there when you're private. And so it's really
21:06
understanding is the organization ready for that?
21:09
And is the executive team ready for that as well
21:11
as the board? Okay. that's what the IPO what
21:14
about the M &A route? Yeah so the M &A route
21:16
makes more sense in a couple situations. One
21:20
is if there is a synergistic M &A where it's
21:24
like you meet you may have a partner like a merger
21:27
of equals situation where you may have somebody
21:29
who's a complementary product or a product that
21:32
could align really well where you can fit in
21:34
nicely with that organization. So that's a good
21:36
opportunity. Or if you're looking to go public
21:39
but then as you're looking to go public a larger
21:42
organization may say, okay, you actually make
21:45
sense to be in our complimentary portfolio. Then
21:47
that may make sense for you to say, okay, this
21:49
is a better path for us long -term versus being
21:52
standalone. Because if we think about what is
21:54
the end state of our business and our product,
21:56
let's go that route. Okay. M &A is another term,
22:00
just like IPO, we hear mula when we hear, like,
22:03
we're getting bigger. And then finance and accounting
22:05
is like, oh, we scared. Go ahead. Oh, you can
22:13
feel it. No, exactly. Well, it's funny because
22:15
I've been through, I think, on both sides, the
22:18
buy side and sell side. I think I've been through
22:20
over 50 in my career. And I think the thing is
22:24
the transition with the people, the finance and
22:26
the operation. So there's like. three different
22:29
sides to M &A that people just don't even realize.
22:32
Yeah. So curious to hear your stories, especially
22:34
around the buy side versus the sell side. Like
22:37
what are the things you probably learned the
22:39
hard way and now recommend people do? What are
22:41
they on each side? Yeah. I think, um, on the
22:45
thing I recommend people don't do is don't ignore
22:48
the people on the transactions, especially when
22:50
you're thinking about these ones, like the mergers
22:53
of equals concept, where when you're combining
22:55
companies, because there's value between the
22:57
combined organizations. Because where I've seen
23:00
that go awry is if, for example, you don't think
23:03
about, okay, lockup agreements for the individuals,
23:06
so you don't think about the compensation arrangements
23:08
beforehand, you may lose key individuals from
23:11
both teams. Or the other piece too is if you're
23:14
scaling an organization and you combine the two
23:18
organizations, now all of a sudden you have double
23:19
of everything potentially. So you may have two
23:22
IT organizations, your finance teams, you may
23:25
have one organization that's more robust or oftentimes
23:29
the transactions I've been through, especially
23:31
on the buy side, we had a very robust finance
23:34
team and then we acquired a company that. didn't
23:37
and we hadn't, and sometimes we hadn't thought
23:39
through, okay, what does that look like? So it
23:41
would oftentimes take a lot of cleanup of that
23:44
organization post transaction. And there wasn't
23:46
consideration around how long that cleanup truly
23:48
takes. So it was things like that to think about
23:51
upfront. And then on the sales side, like you
23:54
just said, you, you acquire a company, you have
23:56
to do more cleanup. What would you say and how
23:58
should finance be involved when they're in the
24:00
sales side process or the buy side process? Because
24:04
I feel like we often not included. conversation
24:07
and then it's like why don't you guys have your
24:09
stuff together by now we should be involved as
24:14
early as as possible because of the lens we have
24:16
in finance we tend to see businesses at that
24:19
like 10 000 foot level so we can identify early
24:23
on in the diligence process if there's gap in
24:26
the organization so like you can look at a finance
24:28
um like you look at the balance sheet oftentimes
24:31
and see, okay, are they missing key obligations?
24:35
Or is there something that we see post -close
24:38
where if we look at the employee agreements,
24:40
is there some employee that may or may not have
24:43
a compensation agreement that should have? Or
24:46
does somebody have some interesting compensation
24:48
agreement that may become an issue afterwards?
24:51
And so if we get involved in the diligence process,
24:53
we can usually see pretty quickly some of the
24:56
potential things to look out for during a transaction.
24:59
I'm curious to hear any war story or horror story,
25:03
I should say, during the M &A deal. Like you
25:05
were like, ooh, we're not doing this again. The
25:10
one was, there was one I was dealing with where,
25:13
so I was on the side where we all agreed that
25:15
we were going to keep it as confidential as possible
25:17
because we all knew the transaction was going
25:19
to happen about six months beforehand. On the
25:21
other side, and this was from most of the employees,
25:24
so there's only a handful of individuals who
25:26
knew, the senior executives and that was it.
25:28
The other side, because it was we were combining
25:30
the companies, the other side did not opt to
25:33
do that. So they told the entire organization
25:36
of 40 people that they were going to get acquired.
25:39
So because of that, they started changing things
25:42
in advance of the pending acquisition. And so
25:45
they would do things like they raise people's
25:47
salaries, gave them promotions. And then they
25:50
also decided part of the combination was we were
25:53
planning to combine a new tech platform. So they
25:56
also decided to go change the tech platform.
25:57
And so we now had a situation where we had to
25:59
deal with not just combination of two tech platforms,
26:03
we had a third one. So is a lesson learned? I
26:07
would make sure that everyone agrees up front
26:10
who's involved in the diligence process, what
26:13
we're going to be communicating beforehand, during,
26:15
and after. Because those decisions made by the
26:19
team on the other side led to some interesting
26:21
dynamics post -close. Wow. Yeah, that sounds
26:24
like the worst. Yeah. It created some fun integration
26:29
concerns. Oh, wow. Thanks for sharing. Now, looking
26:33
ahead, I know there's a lot about technology
26:37
changing fundraising, uh, whether it's MNA going
26:41
IPO. Do you think AI is changing the way investors
26:45
discover or evaluate companies? Like how does
26:47
it affect that CEO CFO relationship? Yeah. So
26:52
I do think AI is changing it in a good way. And
26:55
what I mean by that is AI is allowing number
26:58
one for the potential discovery of organizations
27:02
that may or may not have been targets beforehand,
27:05
because you can do a lot more diligence quicker.
27:08
with AI. Anyone at this point can build a simple
27:11
agent within their LLM of choice that says, okay,
27:14
I want to discover X, Y, and Z and target these
27:17
industries. So you have that all the way to you
27:19
have fully robust built out diligence agents
27:22
that can really help you figure out these processes.
27:24
So that is speeding up the M &A process as well
27:27
as the IPO process. And then what that means
27:30
for CFOs and CEOs is you can also expect deeper
27:33
questions during the M &A and IPO process. And
27:37
then as well as you may get a random outreach
27:39
or inbound from investors that you may not have
27:42
even thought of before. But on the flip side,
27:44
CFOs and CEOs can use AI to think about, okay,
27:48
if you want to ultimately go through a transaction
27:51
or IPO process, who are those targets you want
27:53
to reach out to? So who are those investors or
27:55
who are those strategic partners that you may
27:58
not have originally thought? thought of that
27:59
could be tangential to your typical targets.
28:02
Nice. Nice. I'm always looking for stories, right?
28:08
Is there any set out story from your time as
28:10
a CFO that really taught you something you want?
28:14
CEOs, founders, or finance leaders to here. Because
28:18
like you said, AI is changing how we do M &A,
28:21
IPO, how we do finance, how we do work overall.
28:25
But one thing I'm sure is there are certain things
28:27
that will not necessarily change. Like you said,
28:29
for example, there is an M &A. Let's agree on
28:31
what we say, what we don't say. What is probably
28:34
a story that helped you kind of develop your
28:38
to do and to don't list? Yeah, one was interesting
28:42
to me and it was actually about five or six years
28:44
ago. So it was one of the first venture funds
28:48
I've come across that was actually using AI in
28:50
its process was I did diligence. I was sitting
28:55
CFO in -house and we were doing a series B fundraise
28:59
and a venture fund approach us and their entire
29:01
process was done by AI. So they actually let
29:04
the algorithm determine whether to invest in
29:06
us or not. And the way it worked was it was a
29:08
two -part process. They met with us. So it was
29:11
the analyst and then the algorithm recorded our
29:14
pitch and then they went through our data room
29:16
and that's it. And then they give you a score
29:18
and then they say yes or no. Wow. That was the
29:21
most interesting thing to me but what I took
29:23
away from it was they did give us compliments
29:25
on our data room, ultimately decided not to invest
29:28
because of the stage of the product. What I took
29:30
away from it was make sure our pitch is on point
29:32
and then also always make sure your data room
29:35
is clean and truly tells your story of the company
29:39
because you never know, okay, when somebody is
29:41
going to choose to say we're going to rely on
29:44
this technology that we've built that has our
29:47
internal knowledge and go with it. Wow. See,
29:50
this kind of thing makes me both excited and
29:53
scared at the same time, right? I'm excited because
29:55
it means that I can check myself, right? If I
29:59
have that algorithm, I can double check to see
30:02
where are the gaps in my data room, for example,
30:04
the gaps in my pitch. So it allows me to be ready,
30:08
but then... can be scary if you have been in
30:11
this process for a while and now AI comes and
30:13
you're like, oops, where do I start? Exactly.
30:16
Yeah. And so that's always the hard part is like,
30:18
you have to think about, okay, how do I prepare?
30:20
But then the AI can also conversely, it's like,
30:23
okay, that AI was judging us, but then now we
30:26
have access to AI that can help us prep. and
30:29
think through what we're missing. So that's always
30:31
a good, that's a positive of it versus, okay,
30:34
the AI is telling you yes or no, it's going to
30:37
invest. Okay. And in your experience with fundraising
30:40
and M &A IPO, we can see how the CFO role is
30:44
becoming more and more involved and be that second
30:49
person in charge next to the CEO. What are some
30:52
things you will say should be included? Like
30:54
people should make sure they include in their
30:57
fundraising pitch. Yeah, so in their fundraising
30:59
pitch, I'd always include who the team is. And
31:03
importantly, what one of the things in the pitch
31:07
that typically happens is they put logos of everybody.
31:10
I would go a step deeper and say, here's who
31:13
everyone. like where they came from and why they
31:16
are the perfect people for this team. So really
31:19
having that piece of it and then the other piece
31:22
is of course what you plan to do with the funds.
31:25
So sometimes that gets left off and then one
31:28
item that I've also seen because you really only
31:30
want five slides like usually in a teaser slide
31:32
then of course you have the detailed conversations
31:34
everything but really the why you should invest
31:37
and then why you shouldn't invest. So like here's
31:40
your overview slide so somebody can see really
31:42
quickly What is it that makes you special? But
31:45
then conversely, the ones that do really well
31:47
are the ones that have said, here's why you shouldn't.
31:49
And here's the things that why, like why we think
31:52
you might not be the right person for us. And
31:54
we've thought through those. Nice. Nice. Yeah.
31:58
Definitely wanted a simple deck for the audience
32:01
when you get it. Yeah. Exactly. Cause the deck
32:04
really leads to a conversation. Yes. And I like
32:07
that you keep it at five slides and not like
32:09
a... Exactly. Everybody is busy and they want
32:15
to see, okay, yes, I want a conversation or no,
32:18
this is not right for us. And if it's not right
32:19
for you, what'll happen is oftentimes investors
32:21
will say, I may not be right for you, but I may
32:24
know this person who is. And how, what are some
32:27
of the things that helped you become a better
32:30
picture if I can say a better fundraiser as a
32:33
financial person because you're studying in forensic
32:36
accounting, which means you were part of the
32:37
people who said something is wrong, which is
32:40
quite different from giving me money. Exactly.
32:43
Well, it was interesting because back then you
32:45
had to say what was wrong, but you also had to
32:47
go on the stand. and explain in basically, well,
32:51
one of my partners I worked with used to say,
32:53
we have to explain this in terms that a 10 year
32:55
old can understand. So like, for example, dividends,
32:57
that's always fun trying to explain to someone
33:00
or at the time the mortgage industry was collapsing.
33:04
So credit default swaps, trying to explain that
33:06
very simply was challenging. So what makes you
33:09
a better pitcher is understanding communication.
33:12
So I found some of the biggest skills that have
33:16
helped me in my career are actually non -finance
33:19
skills. So for example, I took a negotiation
33:22
class in college that has been a great class
33:27
for me because it tells me how to learn how to
33:29
listen more than I speak. And even today, I really
33:34
enjoy listening to individuals. So I listen to
33:36
a great podcast, Diary of a CEO. I love hearing
33:41
those individuals talk about communication. Because
33:44
that's really what a pitch is, is it's how do
33:46
you talk to somebody and deciding on both sides
33:49
of the table. Does this make sense for a long
33:51
-term, basically partnership? Nice. Nice. Yeah.
33:54
I also realized that in my career, at some point
33:57
you're, you cap out of your technical skills,
34:00
taking you somewhere. It's like everything is
34:02
more on the human side slash softer side of skills.
34:06
Now. I have two more questions for you before
34:08
I leave. First, you are a board member. You've
34:12
been advising boards. And I feel like, especially
34:18
in the CFO community, C -suite community, I've
34:20
noticed that being on the board feels like the
34:22
next natural step, right? Helping with governance
34:25
and things like that. What would you say people
34:28
should also be mindful of getting on the board?
34:31
Exactly. It's a great question. So the other
34:33
thing to be mindful of is a board tends to be
34:36
a longer term journey and relationship than your
34:40
CFO journey. Because when you're committing to
34:42
a board, you're committing for whether things
34:45
go right. or things go wrong because what happens
34:49
is you're, you're there, but you're not in the
34:52
day to day. So the phrase is always often knows
34:55
in fingers out, which means like, okay, our tendency
34:58
as CFOs is really again to the details, but the
35:01
board level, we really need to. to help with
35:03
governance. So making sure we ask the right questions.
35:06
And so when you're thinking about whether the
35:08
board journey is right for you, it's really asking,
35:10
and this was part of my journey is, okay, do
35:13
I align with the mission of the company? And
35:15
is it a place where I can truly make a difference?
35:18
And so can I really say, okay, what value can
35:20
I add to that particular company? And is it a
35:23
company where I really want to help them grow?
35:26
And what can I bring to the table? So like we
35:28
were talking about the M &A and IPO experience,
35:31
the company, the board's I've chosen to join
35:33
tend to have that need. And they also have that
35:37
healthcare alignment because that tends to be
35:38
where my passion is. Oh, nice. Nice. Any, any
35:42
scary story you want to share about being on
35:44
the board or dealing with the board? Of course,
35:50
all poor conversations are confidential also.
35:53
Um, I'd say one. Yeah, one of the more interesting
35:57
conversations I've had at the board table is
36:00
often when you're dealing with board conversations,
36:06
I've gone in calls out of the blue where someone
36:10
has done something that they probably shouldn't
36:12
have, and then we've had to deal with the consequences.
36:16
And so that's always the challenge is where we've
36:19
had a management team member do something and
36:23
we've had to figure out how to do that and also
36:26
how to have that conversation with them about
36:28
number one, why did they do what they did? And
36:31
then number two, how do we address it? So that's
36:33
always the part. It's like, how do you, because
36:36
when you're at the board, everyone on your board
36:38
is a peer and then your management team is also
36:41
there to, you're there to help guide them. So
36:44
that's the conversations that we tend to have.
36:47
Oh, good. Sounds good. Then last thing, last
36:50
thing I promise. What's your favorite thing to
36:53
do outside of work? My favorite thing. Oh, outside
36:56
of work, it's fun doing a lot of different things.
36:59
But right now my favorite thing is I spend a
37:02
lot of time on my Peloton app and that means
37:05
I'm running. Yes, I'm running with my dog. So
37:08
we've been doing a lot of training for races.
37:10
And I recently just did the half marathon, um,
37:14
down in surf city. So Huntington beach by the
37:16
beach. So it was awesome. Oh, so you race with
37:20
your dog. I do. Well, she doesn't go to the races
37:22
because if we did, so she's a Siberian Husky.
37:24
She would totally just want to meet everybody.
37:30
But she's my training partner. So every morning
37:33
she makes sure that we get out the door because
37:36
if we don't. Huskies love to talk. She talks
37:39
to me and tells me that I'm procrastinating.
37:41
So she's the best personal trainer ever. Oh,
37:44
wow. That is so cute. Oh, thank you so much for
37:48
sharing. This was such a great conversation.
37:51
I hope we get to see a little sample of your
37:53
PJs because I always get questions from the audience
37:56
about practical ways that they can apply some
37:59
of the things that our guests are sharing. So
38:01
thank you. Thank you. Thank you so much. Yeah.
38:03
Thank you. This has been awesome.