Building a finance team from scratch


When a startup is growing rapidly, the finance team needs to keep apace. It’s usually a balancing act between hiring for today, hiring for the future, and knowing what roles to fill first – which isn’t always clear. 

Rhianna Brancato, VP of Finance at Properly, built the finance team completely from scratch just months after she started. A team of one who wore many hats, Rhianna took it upon herself to identify talent gaps, source new hires, and assess what resources were needed to scale the business. 

In this interview on the Retained Learnings podcast, she shares some advice on how to structure your team, where to find your next hire, how technology can support you, and what she would do differently if she had to do it all over again. 

Q: Tell us a bit about yourself and what led you to your role at Properly. 

A: I’ve been at Properly since April 2021, but I’ve been in accounting and finance my entire career. I worked in cannabis for a few years and had the chance to go through the IPO process, which was a lot of fun and a lot to learn. Before that, I worked at Ernst and Young where I got my CA.

I’m probably one of the few people to say that I don’t hate the audit world. I enjoyed my accounting role at the cannabis company but I was looking for something different. I wanted to get on the more practical side of things and understand how businesses really operate. I was looking for an opportunity at a smaller scale growing company – and that’s what led me to Properly. 

Q: As the first finance hire at Properly, how long did you independently manage everything and what was that experience like? 

A: I was pretty lucky. I was a team of one for about two months. When I started, we kicked off our first-ever audit, but two weeks after that, we began our Series B raise. That combined with bringing on some basic cash and payroll controls kept me very busy – I wanted to hire help right away. Although it was a short period of time working solo, it really required a lot of prioritization. When you initially join, there’s going to be tons of stuff you want to do and fix. And if you’re like most accounting people, you’re willing to work a lot of hours to get there – but there’s still going to be more than you can actually do alone. You need to make a roadmap for yourself, prioritize, and be honest with the company about what you can realistically get done and when. 

Q: You joined Properly, hired another team member, and got right into the deep end. When did you know you’d be able to hire more team members?

A: I knew I was going to hire someone before I even started. It was actually part of my business case when I interviewed with Properly – to bring on people right away. Based on what I learned about the company, I knew that they were growing really fast and that I alone wasn’t going to be enough. So I started scoping the role and may have started getting involved in interviews before my first official day in the seat. After that first person came on, I hired a lot more people in a rapid succession. Like I said, the company was growing really fast, and I realized I needed more help than I initially thought. I brought on a controller about six months after that, as well as two more people in our back office to help process deals. I had four people join within my first six months.

Q:  You mentioned you saw a need for more financial resources in the company. What in the company made you see that? Can you walk us through how you did that? What key resources were you looking for? 

A: When I was looking at the company during the interview process, I spoke to many different people there. When I spoke to a couple of the founders, they shared information about where the company was today, what they needed to get done, the legal mandatory compliance that had to happen, and what they were projecting the company to look like in the future. We discussed how fast they were growing and where they wanted to be in the next year. Based on all of that and considering what needed to be done – basic controls, getting through audits, dealing with lenders – I started scoping out how much work was involved to actually level things up and not just stick to the status quo. I wanted to make things better and raise the bar across finance and accounting and I just knew that as much as I wanted to do everything on my own, it wasn’t physically possible. From there, I began intentionally considering the type of help we would need to succeed in bringing a full finance department to the company. 

Q: What do you look for in new hires? 

A: I would say there isn’t a one-profile-fits-all when it comes to a finance team. Every time I hire, I hire for something a little bit different. Outside of finance, there’s the criteria of: What skills do they need to have? Are they quick learners or do they need a lot of training? What level of experience do they need? How senior do they need to be? What do you expect from this person? Do you expect them to be independent? Do you need to have more oversight over their role? All these factors shaped what I was looking for in people. For my first hire, I brought on someone who was more junior and didn’t have any practical industry experience. I was willing to train them and bring them up to speed. For the next one, I was looking for someone more senior. I brought on a financial controller and expected them to be independent and take work off my plate. 

There are different routes to finding the right people. Some companies will hire from the Big 4 or another accounting firm. If you’re hiring for financial reporting or accounting, you can definitely look for someone in the Big 4. They probably have all the technical skills you’re looking for but don’t have practical industry experience. You just have to be willing to train them. The other option is to hire someone with different industry experience. This can be really helpful if you’re looking for an FP&A or strategic finance role. You want someone who is a strong modeler, analytical, and has those technical skills that they may not have gotten with a traditional accounting background. Diversifying hires within the accounting team is key. 

Q: How do you train someone without industry experience? What are the challenges someone might encounter?

A: I’ll tell you what was done for me. It may not be a one-size-fits-all approach but I swear by this. When I left the Big 4, I was a second-year manager, so in my mind I was fairly senior. I got hired by a VP of Finance who said “guess what, you’re doing all of the bookkeeping, replacing our external bookkeepers, and taking it all on yourself.” In my mind, I was already at manager level, so I wondered why I had to do this. But at the same time, he was really smart for throwing me into it. I learned a lot about the company and how accounting systems work in the industry. I was able to see how the company functions, how the payroll runs, and how the manual journal entries are posted. I didn’t do it for very long – it was a couple of months before I hired someone onto my team to do it for me. But I think that experience got me up to speed with the practical day-to-day functions of an accounting department. When I brought on my first hire at Properly, I made them do the same thing. I got them right into the books and connected to our external bookkeepers. He learned very quickly and gained a lot of practical, hands-on experience.

Q: Other than hiring new staff, how else can you scale your team’s impact and effectiveness in a startup like Properly?

A: I never want my team to operate in a silo. Being an effective finance department means that you’re serving as a partner to the rest of the company. To me, scaling fast and being impactful to the business requires us to be curious about what’s going on in other departments. I have that expectation for my team. They have that curiosity and genuinely want to understand the business. They want to help other teams make their lives simpler. My team reads every monthly and quarterly report, they are integrated in many different Slack channels, and they just have a pulse on the business. When we’re closing the books, doing variance analysis, and board reporting, we actually understand what happened because we’re so integrated with what’s going on. It’s also important for my team to be able to identify where other teams are struggling and where they might need more support in their analysis – we can bring a different perspective.

Q: Did you make any key technology decisions that helped scale your team? For example, an ERP. 

A: We’re not on an ERP. That in and of itself is a ton of work and we just didn’t have the manpower to get there. Instead, I focused on finding a software that was easy to integrate, could be added to the existing backbone of our accounting system, and just made everyone’s life easier. Everything we have is automated. We brought on Float – shameless plug there – but it was absolutely great. We’re able to automate a bunch of our cash controls and get rid of the need to collect receipts and invoices from employees. There was no more manual work for us to do. 

It’s important to know that with smaller systems like Xero or QuickBooks, there’s a lot of add-ons that can provide greater value – without the need to fully rip out your system and bring on an ERP, which takes a lot of time and money to do. 

Q: As a high-growth startup that’s constantly thinking about scaling, how far in the future are you living from a resourcing perspective? 

A: I think the right way to do it is to be thinking six months ahead. Startups and scale ups grow fast. A year in the startup world is probably five years in any other business. If you’re hiring for what you need today, you’re already behind. It takes three or more months to actually bring in a good person who knows what they’re doing so if you’re not thinking six months down the road, you’re not going to have the person when you actually need them. When I first joined Properly, I didn’t necessarily think six months ahead. I was thinking about today and by the time I got my controller in the seat, I wished I had them a lot sooner. But I learned from that and now we’re constantly thinking about where the business is going and looking at what team members we’ll need to support at the next size and scale. I have a mentality that finance should never block anything the company is doing because we can’t move fast enough. I don’t ever want to be a blocker, so I need to get ahead of the changes that are coming. 

Q: Are there any lessons or guidance you would provide to people that are coming into similar roles at a startup? 

A: Hire fast and don’t be scared to bring on a more senior person. My initial instinct when I joined Properly was to hire an analyst-level position first, and in reality, I probably should have brought on the controller first. This is more so because I would have been able to leverage the controller to help me in the hiring process and they could have built out their own team for themselves. If you’re in a fast-growing company and you can see the volume of work that’s coming in, bringing on someone more senior might be more expensive but if it’s going to provide more value to the team and the company, it’s a worthwhile conversation to have. 

Q: What does the finance team at Properly look like today? 

A: I have the finance team divided into three different sub-teams, and we operate together as one unit but with three different focus areas. On the FP&A and strategic finance side, I have two people. On the financial accounting and reporting side, I have another two people. We’ve replaced our external bookkeepers and brought everything in-house a couple of months ago. And then on our back office brokerage side, which are the people responsible for processing real estate transactions, we have another two people. So it’s myself plus a team of six. 

Q: Is there a rough number of people you’d expect to have easy rubric in a startup? 

A: I do. I’ve heard this from a few different finance leaders, and so far it’s made sense as we grow. So I’m going to stick to it. Somewhere around 5% of headcount should be your finance team. It’s not that it must be 5% on the dot but I’d say if you’re dipping below that, you’re probably understaffed. I’d say 5% to 6% is likely where you want to be. If you know your company is growing quickly, think about what you need to bring on to keep that ratio as the company grows further.  

Q: Where does FinOps fall for you at Properly?

A: We don’t actually have a true FinOps team at Properly right now. I think the responsibility of a FinOps or financial operations sits between our operations and accounting teams – we both do different pieces of that. I think as we grow, it’s something we’re looking at and considering where it belongs. I think a lot of people define FinOps in different ways too. When I think of it, I think more of the customer-facing side of finance. So operationally you’re dealing with customers, whether they’re potential or paying. Operationalizing finance is how I think about it. As we grow, it’s something we need to pay more attention to and we’re actively thinking about where to go from here. 

The importance of aligning FinOps and RevOps

Throughout Canada, finance leaders and executives are preparing for economic uncertainty. The good news is that Bank of Canada Senior Deputy Governor Carolyn Wilkins expects Canadians to be in a strong position to weather the economic storm.

Keeping this context in mind, one of the smartest moves that Canadian finance leaders can make is to strengthen the alignment between RevOps and FinOps. With this perspective, businesses can operate with a higher degree of focus and resilience.

Where FinOps is about the orchestration of accounting systems, enterprise resource planning solutions, procurement, and other relevant processes, RevOps introduces a more holistic approach to measuring a business’s health — connecting sales, marketing, and customer success into an integrated picture that breaks down silos.

To understand how these pieces fit together, we’ve interviewed three people who have experience aligning FinOps and RevOps at their companies. Here are their perspectives for how to build the right system.

The experts we interviewed

Leo Leung is COO at CrowdRiff, which is a visual content marketing platform for travel and hospitality brands. He joined the company as Director of Customer Success in 2016 and over the past 6 years has been building up a cross-functional RevOps function that improves communication throughout the company. He is skilled in systems-building, with the finance function reporting into him at CrowdRiff.

Alan Gryn is Director of Finance at MiQ, which is a media technology company that specializes in connected marketing solutions for advertisers. Before joining MiQ in 2019, Alan worked in finance departments for industries ranging from healthcare to retail. At MiQ, one of his goals is to increase transparency between leadership teams and employees.

Claire Jones is Senior Vice President of Operations at MiQ where she has spent the last 3 years helping to ensure that business goals and people goals are working together rather than at odds. She is a speaker on the topic of mental wellness at work.

The discussion that unfolded

Editor’s note: Each person was interviewed individually; we have grouped their responses together.

In your opinion, what are the core goals at the intersection of FinOps and RevOps at your company? 

Gryn: At MiQ, we think of RevOps as a people-driven function. Specifically, for our client-facing teams who are leading key relationships. To its core, the advertising industry is partnership-driven, so RevOps depends on how well we work with our existing and prospective customers. This is done by meeting our customers’ campaign needs externally, and internally by delivering great value in a sustainable way for our employees.

As a finance leader, my role is to support strategic initiatives that people like Claire on our leadership team have prioritized by ensuring the right information, plans and resourcing are in place to achieve them sustainably. That means looking beyond metrics in the short term, to determine what will establish future success.

Jones: People are at the forefront of a lot of what we do at MiQ. Media is a fast-paced growth industry. As we build towards the future, our executive team’s core goal is to ensure that we never lose sight of the people-side of our operations. That means over-delivering when it comes to issues like burnout and mental health. We think of RevOps as a pathway for building out our business strategy in a way where the needs of our people internally and our clients externally are synced. For us, you can’t have one without the other because there’s going to be strain somewhere.

Leung: From my perspective, it’s about the movement of information — not too much and not too little…just enough to reach the right person at the right frequency. It’s also about making sure that each person at the company has the intelligence they need to do their jobs well. As one example, we provide a monthly written report that communicates details including sales, renewals, and other information that leaders within our company need to make situational decisions.

The biggest need, at the intersection of RevOps and FinOps, is to make tradeoffs in building high-integrity processes for capturing data. The information that finance needs, for instance, is different from what a sales or customer success rep would want to see. One of my focus areas has been creating these tailored experiences for working with data.

With people being the connective tissue between RevOps and FinOps, how do you build processes that best support the organization on a human level? 

Leung: For me, it’s a lot like writing code. I implement a lot of design thinking protocols when developing data models to meet specific decision-making scenarios. Every situation is a little bit different, with trade offs constantly taking place.  

As an operations leader with CFO duties, I’m always thinking about the frontline user experience in connection with the needs of finance. Where finance teams tend to need more controls with their data, people in RevOps functions tend to prefer more freedom. It’s a balancing act in creating the best of both worlds with finance having the structure they need while the data collection process being as easy as possible for frontline teams. That means asking the right questions.

Do I really need 36 inputs to make a business decision? No, I probably only need 12. So I think about the bare minimum number of data points needed at this part of the business process. With this approach, we are also able to find opportunities for automation.

Gryn: At times there are different goals front-and center for finance and client facing teams, but good communication and processes that share the right information and balance priorities help us stay aligned. This alignment goes all the way up to shared understanding of our company objectives, and how they ladder across department goals. In this respect Finance plays a role to ensure clarity, and a focus on key results in our BI processes to tee-up the best outputs from our RevOps teams.

Jones: Something that we’re looking at more closely as an organization is the overall employee experience. We started deepening our efforts in this area in 2022. We’ve been taking a systems thinking approach to being very intentional about each individual experience at the company. Tactically, that means gathering feedback, listening to peoples’ suggestions for solutions, and hosting workshops. 

Next year, employee feedback will be something we incorporate more closely into our RevOps strategy. On-the-ground perspectives ultimately shape the narratives that our finance team is tracking.

How are you thinking about agility in FinOps and RevOps heading into 2023?

Gryn: In my past experiences, agility is not something typically associated with finance teams. But, in my opinion, it’s one of the most important goals to strive for in a fast moving space. We work in a dynamic industry and finance must also adapt to support the needs of the business.

Organizing the right data to build plans, and evaluating different scenarios and levers of opportunities and risks can arm the RevOps teams through uncertainty expected in 2023.

We’re examining everything at face value right now. There are no crystal balls. Some people suspect that the United States, for instance, is already in a recession. So we’re thinking about the relationships and partnerships that we have today against the greater context of our industry growing through 2023. For sure, we are thinking about the potential headwinds, but with an approach of how the challenges could shape our industry, and ultimately we think companies like ours are positioned well to come out stronger.

Jones: Business intelligence is key here. We’re thinking a lot about the flow of information throughout the organization, to ensure informed decision-making. Our senior leadership is very involved in the day-to-day. In addition to agility being one of our company values, so is unity. Everyone has a seat at the table regarding RevOps decision-making because ultimately, everyone at the company is impacted by the judgment calls being made. 

Gyn: Collaboration is a key priority for us, in addition to tightening down information. There’s a lot of trial and error that comes with developing reporting for different audiences — a c-level executive vs. an account manager, for instance. What it comes down to is that the finance team at MiQ really cares about the well-being of everyone at the company. Our goal is to help everyone at the company win.

Leung: Responsiveness of data is crucial. At CrowdRiff, as we head into 2023, we’re particularly focused on the speed at which data can get in and get back out. Moving at increasing speeds, the data also needs to be trustworthy. With this perspective, we can have conversations at all levels of the organization — including with our board — at a higher level of accuracy, at real-time precision.

In 2023, I’m also looking to meet with more finance and revenue operations leaders who are tackling similar challenges. I don’t think there is a systems thinking community out there. It would be great to find more people to jam on this stuff.

8 ways finance professionals can rise above the stress of the job

The average finance professional’s relationship with workplace stress is one of cruel irony. 

Despite the sometimes-extreme demands of the job they are often most valued for their ability to stay calm under pressure. That means in high-pressure situations, finance professionals are under extra pressure to demonstrate that the pressure isn’t getting to them. 

Most jobs are at least a little stressful, but finance professionals often carry a little extra weight on their shoulders, especially during the busier times of year. Not only are they responsible for ensuring the financial wellbeing of their employer or client, but they are also responsible for untangling the web of (hopefully innocent) mistakes that inevitably land on their desk, and often on a tight deadline. 

“The numbers on the financial report do lie in that sense, because they can be prepared based on incorrect bookkeeping,” said Nilay Savla, a Senior Accounting Solutions Lead for Level Software Inc. “That makes it very stressful.” 

So how do you keep your cool in the most high-pressure situations? We asked a few industry veterans for their best advice.  

1. Jam it out 

Savla says early in his career he discovered one useful tactic that never fails to lower the temperature in times of stress. “When I find myself in stressful situations I play some music, even while I’m at work,” he said. “I find a lot of peace when I listen to songs; they help keep my mind calm.” 

Music can be an effective way to soothe the savage beast that lives within us all, and keep it from emerging in times of high stress. Savla’s favourites include pop groups Boyzone and Westlife, but says anything that can blend into the background and add a little subconscious positive vibes should do the trick. 

2. Always be puzzling 

Another tactic for keeping stress at bay is finding a soothing hobby for after hours. As a self described “numbers guy” Savla says even his hobbies include some light math, but believes any soothing, low-stress activity can aid the post-work recovery, which is vital in times of high pressure. 

“People like to binge watch Netflix, I’m not really in favour of doing that; I’d rather solve a Sudoku puzzle,” he said. “Once I sit down I solve five or six before I even get up, I love to do it. Sometimes I end up spending two to three hours just on Sudoku.” 

Even if Sudoku isn’t exactly your cup of tea, finding a hobby that melts away stress and keeping it on standby for particularly hard days can help you return to work more mentally refreshed.  

3. Know when to walk away 

When you’re operating under a tight deadline or managing a financial crisis it can be difficult to step away from work, but Savla believes you’re not doing yourself any favours by forgoing breaks, especially in high stress periods. 

“Staring at your laptop for hours and hours in a row, looking at spreadsheets, its difficult,” he said. Savla actually puts regular breaks into his schedule to keep himself honest, and believes that stepping away from work is often most necessary during those times when you feel most chained to your desk. 

“It helps me think about certain issues in a better manner,” he said. “I like to take walks every two hours just so that I feel less stress, it helps me, and of course I keep playing songs the whole time.”

4. Sweat it out and sleep it off 

When work starts piling up it can be tempting to let certain aspects of our personal health go by the wayside, but burning the candle at both ends only leaves you in a hot waxy mess. The same goes for surviving on Cheetos or whatever snacks are hidden in your desk drawer. 

“If you don’t get a goodnight sleep you won’t be able to think properly the next day,” says Savla, who also exercises for 45 minutes to an hour everyday, and refuses to let himself off the hook when work demands pile up. 

Savla adds that you can’t underestimate the power of a healthy snack, either.  He recommends sticking with yogurt, cheese, nuts, oatmeal and other nutritious treats over those of the fried, gummy and chocolate variety. 

5. Prepare for battle

Whether you’re in public accounting, corporate finance or working at a financial institution few in the industry are immune from its seasonal ebbs and flows. Fortunately finance professionals are often given fair warning before going into battle (or tax season, or audits, or year end, etc.) but it’s up to them to use that previous period of calm before the you-know-what storm wisely. 

“I’ve learned to be more self aware of those times when heavy workloads are approaching, and make sure I have a solid team built around me of people that are very capable to help manage it effectively,” said the Senior Finance Director of Our Next Energy Inc., Jody Davis.

Davis explains that while finance professionals often know when that next big storm is going to make landfall, they rarely know how much of a mess it’s going to make, which is why he advises to always prepare for the worst. 

“It’s about putting a plan in place to manage the actual workflows with the team, because a lot of variables will be coming at you,” he said. “I find the more prepared I am the less the stress I have.” 

6. Find some shoulders to lean on 

Like most things in life stress is always harder to manage alone. Davis says the best way to alleviate stress is to surround yourself with team members you can confidently pass to when the clock is winding down, knowing they wont drop the ball. 

“You have to have people that you can trust, that are accountable, that are very analytical in terms of their mindset; that ask the right questions,” he said.” If you can have your team to support you it’s actually a massive reduction in stress, because you’re in it as a team, not on your own.” 

Furthermore, while it’s important not to over-burden loved ones with the challenges of your job Davis also emphasizes the importance of finding a shoulder to lean on at home. 

“For me communicating with my wife and my family and my friends releases that [negative] energy,” he says. “I talk with my wife about all the stuff that’s going on and then I don’t feel as alone going through it.” 

7. Make friends with robots

Finance has always been a high-stress function, but it can be much less stressful with the help of some new software solutions and technological innovations. Davis, for one, says his work life has gotten a little bit calmer since he let the robots carry some of the load. 

“When I first started my career companies like Float didn’t really exist,” he said. “It’s only been in the last five to seven years that we’ve seen that level of growth in automation and FinTech and tools that can support finance leaders, and its actually made the job, not easier, but more manageable.” 

8. If all else fails, find a less stressful job

If you do find yourself regularly struggling to manage the demands of the job you may eventually have to consider the possibility that you’re at the wrong kind of company, in the wrong role, or even in the wrong line of work. Davis explains that in order to excel in this business you need to have a thicker skin than most, as others will look to you to navigate through those storms, and some are better equipped to manage the stress than others. 

“There are a lot of different characters in finance, but the biggest thing we have in common is our stability,” he said. “That’s how you become a leader; being more stable and driving decisions with numbers.” 

Davis says that is especially true in the high growth start-up world, where he spent much of his career. “It’s just part of the game, and it’s more pronounced in start-ups than it is in larger corporations, because larger corporations have a lot of processes and infrastructure in place,” he said. 

Savla, however, says his experience in the industry has actually demonstrated the opposite. “It is indeed a very stressful job, and the bigger the business the more stressful the job becomes,” he said. 

Whether you’re working for a large organization with lots of moving pieces, red tape and a lot more stakeholders, or a smaller organization with fewer resources to lean on, a certain amount of stress is inevitable. Unfortunately finance leaders are tasked with rising above the stress more than most, meaning that if you really can’t take the heat, you might need to leave the kitchen; or at least find one that’s less prone to fires. 

VC Matt Golden on raising capital in a downmarket

Founder and Managing Partner of Golden Ventures, Matt Golden is no stranger to economic turbulence. In 2008, working as a VC, he successfully weathered the storm that came with the financial crisis and gained valuable experience that would serve him well throughout his career. At Golden Ventures, Matt and his team support early-stage founders in their journey and have enjoyed incredible success investing in companies such as Skip the Dishes, Wattpad, and even Float. 

In this interview with the Retained Learnings Podcast, Golden shares his advice for founders who are making sense of the recent market uncertainty. His core message? Double-down on core fundamentals that demonstrate a sustainable pathway to growth. Let’s jump in.

Q: Starting with an introduction, what are the size of the companies and the initial investments Golden Ventures typically makes?

A: Golden Ventures is investing out of its fourth core fund but we also have opportunity funds. We’ve been at this since 2011 and have always stayed true to our mission of supporting transformative companies at seed stage. We’re comprehensive in terms of pre-seed, seed, or seed plus, as well as the sectors we invest in. We mainly invest in Canada, the San Francisco Bay Area, Los Angeles, New York, and Boston – but we’re open to other areas too. 

A standard investment would be a seed stage company investing anywhere from $500K to $2.5M. We typically lead but are open to alternatives. Oftentimes, we co-invest with other seed funds across North America at the seed stage. To give you a sense of our range, we’ve invested in everything from quantum computing to non-permanent tattoos. 

Q: The breadth of Golden’s investing platform is certainly unique. What do you look for when you make a seed stage investment? 

A: In general, we look at a potential investment as if it were a three-legged stool, with each helping to support the whole. We look at the team and its composition, market potential, and then the traction and proof points of the business. I would say the most important leg is the team and its composition. A team’s ability to be nimble, iterate on the product, course correct, and attract talent can not be overstated. These are the pieces that help to build a successful enterprise. Without a strong foundational team, traction or early signs of product market fit don’t really matter.

We study our deal sourcing and always remain focused on connecting with potential founders, which comes from many years of network building. We have different deal sources – our existing founder network, existing executive networks, service providers we’ve worked with like lawyers, and inbound. People typically seek us out when they’re at the seed stage. Being ex-co-founders of companies ourselves, we work with founders in a way that we would have wanted back then.

Q: As for metrics, what matters most at the seed stage? And similarly, what are the metrics that don’t matter? 

A: It really depends on the stage of seeding. If it’s pre-seed, you’re likely to have zero metrics. There should be some proof points around customer traction, but you’re not looking for a huge run state at seed. By seed plus, however, you’re starting to look at the number of customers, if there’s a path to expansion, and whether or not they’re paying for it. You begin looking at cohorts, retention cohorts, sales processes, and if there’s an actual pipeline. Metrics become more meaningful as you progress through the stages. Because we invest at seed, we’re constantly helping founders prepare for Series A fundraises.

Q: Once you’ve invested in a business, how do you work with the finance team? How does planning for Series A funding happen? 

A: A lot of seed companies do not have a fully formed finance function. At this stage, finance is focused on the operating plan and if the forecast can be actualized. We’ll work with founders or the Director of Finance to prepare and review the operating plan and make sure it’s consistent with the narration of the opportunity that’s being presented to a Series A fund. 

In later stages (late Stage A or B), when the finance function is bigger, this is when the business model and financials become more critical. How believable is the plan? Are they properly accounting for everything? Do they have the right systems and processes? 

At that stage, the finance function becomes more integrated into the raised process. It’s not unusual for a Director or VP of Finance to be involved in the raise, both in the process and speaking to potential investors. 

Q: Do you have any suggestions for those who may be the first finance hire or a finance executive in an early stage business? What are key things that you’ve seen go right or wrong in the past? 

A: Things can go terribly wrong if you’re not in tune with your finance function early on. At the seed stage, it’s critical to be financially fluent. We often connect founders who are not financially fluent with an outsourced company to help build an operating plan with the proper processes and systems. We’ve had situations at seed where we’re raising a Series A and realize that the way founders account for things is not particularly standard. If that gets revealed at the wrong time in a diligence process, it can create deal risks. 

Q: You mentioned that being diligent in the early stages can save you from unexpected pitfalls that might put future financing at risk. In a market downturn like today, how does this affect the expectations you have for the companies you’re invested in? 

A: I think the whole market is taking a bit of a pause, particularly coming out of the pandemic. Being on the other side now, we’re looking into a potential recessionary market. From a fundraising perspective, everyone is recalibrating. I’ve been through a couple cycles, but those founders who entered the market post-2008 have never really experienced a meaningful economic downturn. 

Interestingly enough, many founders at the seed stage who raised some capital felt their Series A would get preempted right away. The milestones required to raise the next layer of capital at all stages have shifted – the goalposts have moved to the right. 

What do you need to achieve to raise a Series A, B, C now? Whatever it was before, you’ll need to have achieved a lot more to raise that next round at the valuations that you would normally expect at those rounds. There’s a combination of needing to accomplish more and there’s a resetting of valuation as a multiple of revenue. It’s a double whammy from that perspective.

What can companies do to prepare? At the seed stage, for example, companies who’ve only raised $1.5M thinking that on that money, they don’t want to overdilute themselves to get to the next stage of capital. Previously, they only needed to hit two or three customers and demonstrate $20K MRR to get preempted at a Series. Now, they may need over $100K MRR and eight customers. So what does this mean? It means you’re likely undercapitalized to achieve those milestones that have shifted to the right. 

A number of those companies are taking additional capital on the same terms, as an acknowledgement that the market has changed drastically. It’s possible the valuation they raised last year in today’s market is high, relative to what they’ve accomplished and so they’ll take additional capital. It’s happening at seed, A and, B – and I think it’s the smart thing to do. 

Q: If a company is facing a down round, what does that look like? Do you have any advice if a business is going through that? How do they mitigate it and come out the other side?

A: It is possible to manage it down and capitalize yourself, resetting the valuation. It can create what we call an upside-down cap table where founders and employees don’t own as much as they likely should to keep everyone incentivized and building. If you can’t build that incentive into a cap table, then it’s upside down. 

I think investors need to participate in that dilution. Even existing investors who may have various terms in financing contracts that protect them from dilution, often need to negotiate and make a case that balance needs to remain on the cap table. It’s really about working with your existing investor group to ensure you can come out the other side with a cap table that keeps the founders and the team committed to building something special and transformational. 

Communication, transparency, and effectively presenting to the team and investor base is essential. It’s a really big challenge for finance to figure out exactly how to construct that round in a way that’s fair to all parties. For leadership and the CEO, it’s also a big challenge to effectively communicate that across all the constituents on the cap table. 

Q: It feels like we’re nearing the end of growth at all costs. How do you suggest management teams find the line and what is the balance? How would you advise companies to find that line, whether it’s a Series A or Series C company, as an example? 

A:  For downstream financing, in revisiting the metrics that are necessary to raise that next layer of capital, there’s more focus on the long-term health of a company’s unit economics, as opposed to believing that growth will solve all problems. Investors are wanting to see evidence that you’ll build a company and lose money until you can bring it to a certain scale, which can then lead to positive unit economics. That has worked for many years in venture capitalism and I don’t think that’s going away. What’s new is validating and being thoughtful about the unit economics earlier.

Validating unit economics of the high-growth story is going to be increasingly important for businesses. There’s going to be a lot more focus on being a healthy business and how quickly you can become a healthy business. The trade-off is if you focus on unit economics, it often impacts growth. If you want to grow 3x or 4x next year, but also improve unit economics, it’s likely you won’t be able to grow at that pace. 

The market is starting to value that middle ground, but it’s really tricky to find out the tradeoff because growth still solves a lot of problems for VCs. You’re not going to win at raising capital by showing that you’re profitable without growth and vice-versa.

Q: What would that look like when a Series A company is thinking about a Series B? What does that testing process look like before you kick off a full fundraising round? 

A: We’re in constant communication with all the top funds in North America at various stages. When a company is thinking about its next round, we’re working closely with them to have conversations with who we consider to be potential funders of the company downstream at the appropriate stage for what they’re trying to raise. Having those conversations early and building out the operating plan allows us to determine the level of growth they are looking for. It allows for the calibration of where they need to be in order to hit those milestones. 

Q: Where can our readers find out more about you and Golden Ventures? 

A:  The best way to learn about us is through our company’s extensive FAQ. We think that funds should be increasingly transparent about who they invest in, what their sweet spot is, how they work with founders, and the types of deals they’ve done. Even going so far as to talk about DEI, the types of companies they’ve funded and the diversity of the founders they work with. We report on all of that and urge you to check it out.

The art of managing corporate costs amidst macro challenges

The ‘C’ in his title may not stand for “creative,” but Brian Goffenberg is a good example of a finance leader who approaches expense management almost like an artist.  

As the CFO of VitalHub, a Toronto-based provider of health-care applications, Goffenberg has learned that smart budgeting requires vision – or in other words, being able to effectively imagine what a company might need in the future. Then, as business conditions change, he works with his team to paint a picture of what success could look like, even if it means spending less money.

The result is that Goffenberg feels VitalHub is in a strong position to weather the current period of economic uncertainty, even as forces such as rising inflation put increased pressure on everything from wages to pricing.

“It’s always been our culture that we’ve been pretty tight and watch what we spend,” Goffenberg told Retained Learnings in a recent interview. “We set our budgets and we’ve managed them to the right levels. For us it’s pretty much business as usual.”

Expense management becomes a top business priority

Goffenberg’s perspective is a shining light against the backdrop of the predominant economic narrative 

According to the most recent business outlook survey from the Bank of Canada, for example, overall positive sentiment has dropped from approximately 49%in August 2022 to about 25% as of October. More firms have also said their future sales indicators look worse than a year ago.

Meanwhile, Scotiabank’s third annual Path to Impact report found that nearly a third of Canadian small businesses say their number one priority over the next three months will be finding places to cut costs.

“People have to understand that money is going to be hard to come by in the next little while,” Goffenberg said. “Interest rates are going to be higher. If you go to the market to raise funds, it’s going to be harder. So you absolutely have to hunker down and make sure that whatever you’ve got goes as far as it can.”

This reality doesn’t have to be as doom-and-gloom as it may sound. There’s a path to optimism, according to  Goffenberg. Getting a handle on expense management could help future-proof startups and mid-sized companies to be more agile, resilient and ultimately more successful.

“When you become less optimistic about the numbers in terms of what you can sell, it puts a greater scrutiny on your product,” he said. “You become much more aware of risk and how to run your business. It can actually be healthier than operating a business in the more frothy times because it’s a better test of your market.”

That said, Goffenberg acknowledged that there is a whole generation of finance professionals who haven’t faced this kind of economic turbulence before. He offered some of his core expense management principles to help guide his peers towards making the tough decisions that may come up: 

1. Draw a realistic map of your financial runway

Take stock of your existing cash flow and how long you could manage if it were to be impacted by business disruption. 

Do it sooner rather than later. According to Goffenberg, a mistake that companies often make is waiting until it’s too late to steer through economic turbulence. It’s impossible to maintain clarity with respect to expenses unless you’ve done your diligence upfront.

“Most entrepreneurs, and people in general, are pretty optimistic by nature,” he said. “If you’ve got a business that’s generating cash, then make sure that it’s generating the right amount of cash. And if it’s not generating cash, then you’ve got to be pretty sure how long your runway is because you’re going to have to go to market somewhere to get financing. And the sooner you start doing it, the better.” 

2. Gain visibility into current expenses and spending trends

Sometimes when economic turbulence nears, leadership teams gather to review where their money has been going. If the result is a lot of surprised or even horrified expressions on people’s faces, Goffenberg said it can reflect a corporate culture where tracking and clear accountability have not been adequately developed.

“You have to start that (culture-building process) way earlier,” he said. “If you’re not yet making a profit, you’re sending shareholder’s money, or the bank’s money. You can’t run a business that way.”

While expense management might have been more difficult to do in the days when the work involved a lot of paper and manual effort, Gottenberg said technology is offering a better approach for businesses of every size.

“I mean, the fact that you can see spending happening in real time means there is less that slips through the cracks – fewer issues that you would otherwise only find out about a month later,” he said. “That has definitely helped.” 

3. Prioritize the expenses that contribute directly to customer experiences

You might need to pull back on how much goes towards office supplies, but there will be other areas where the decision to spend is less cut and dried. That is why Goffenberg likened the role of finance leaders to being a sort of chameleon. 

Much like the way chameleons change colours depending on their environment, for example, working in finance means occasionally looking beyond the bottom line and putting themselves in the shoes of those they’re serving. Some expenses are important investments, especially with respect to converting prospects into buyers or building customer loyalty.

“I think you want to safeguard the customer experience as much as possible,” he said. “You definitely don’t want to erode that, because this is what’s keeping the lights on, for the most part.”

Not a customer experience expert? That’s okay, because organizations like the Customer Strategy Alliance have done research that ranks areas of investment and common priorities. 

4. Empower and advise (but respect) the CEO

CFOs don’t oversee expense management entirely on their own, of course. Beyond their finance team, they also have to collaborate with many other stakeholders, including the most influential leader of all — the CEO.

Recent data from market research firm Gartner found CEOs and CFOs are aligned on many areas of cost-cutting, such as M&As, but they’re not always going to agree. That’s actually a sign of a healthy relationship, according to Goffenberg.

“The CEO and CFO have to challenge one another,” he said. “At the end of the day, though, I think the CFO needs to understand that they’re the No. 2 person, not No. 1. If a CEO decides to go into a direction they disagree with, they’ve ultimately got to support that decision, even if it’s not their decision.” 

5. Combine numbers with business acumen to separate needs from nice-to-haves

When employees sense that CFOs are tightening up the ship, there can be a natural impulse to become defensive about the spending within one’s own business function. Finance leaders need to navigate that by reminding everyone of the organization’s core mission and breaking down which expenses most directly advance that mission, Goffenberg said.

This is an art because some areas offer potential, but not guaranteed, results. He used a trade show as an example. A marketing department might argue exhibiting at a trade show will bring in more leads for the sales team. CFOs might want to ask to look at any data that shows the revenue that can be attributed to those activities in the past.

In the end, it’s a judgment call, and Goffenberg offers a handy “50%” rule of thumb to help make it. “You have to ask yourself the question, am I going to get the return? And if the answer is no – or if you’re less than 50 per cent positive it will – then you probably shouldn’t be spending there,” he said. 

Final thoughts: The one expense everyone cares about

It’s one thing to say no to certain business trips or a team lunch. It’s quite another to have to start looking at headcount, Goffenberg said. Finance leaders who have never had to worry about making payroll will quickly learn that it’s far better to make strategic cutbacks in other areas before pruning the talent among your team.

This is a final way in which expense management could be thought of as an art form: no matter what you do, you’re going to have your fans and your critics. Goffenberg said focusing on the people you’re able to work with and mentor helps provide the kind of fulfillment that makes the more challenging times easier to ride out. 

“Business is business. Sometimes it’s fun, sometimes it’s more stressful, but I’m fortunate that I’m in a business that’s growing and that operates in a nice field,” he said. “As long as I’m learning and I’m being challenged, I’m happy.”

Raising a Series B round in Canada

Chief Financial Officer at Coconut Software, Matt Petrow has always had a knack for numbers. In 2021, he led his team through a very successful $28 million Series B financing round.

In his recent interview with Float, Matt shares his experience raising new rounds of capital, walking us through how each round is different. Matt also provides advice to others who are planning to do the same, along with valuable insight on choosing the right investors.

Q: For those who are not familiar with Coconut Software, can you give us an introduction to the company and its mission?

A: Coconut Software helps financial institutions enhance and improve how they connect with their customers. Our core product is a digital scheduling solution that makes it really easy and frictionless for customers to connect with an advisor, primarily at their bank or credit union. We also have a digital queuing solution, which helps to manage in-branch traffic. We recently rolled out a video banking platform as well. I like to describe it as kind of like a Zoom or Microsoft Teams. However, it’s built with features that are specific to the needs of financial institutions and their requirements to complete transactions with customers – like mortgages and setting up accounts.

Q: Tell us a bit about your Series B raise and how that came together. Why did that start and when did it start? 

A: We raised a $28 million Series B in September 2021. We completed a new three-year plan as a team and aligned on hitting some aggressive growth targets and wanting to capitalize on some trends in the market. Of course, doing that was going to require a lot of investment, scaling up the team, and bringing on new resources. While putting the plan together, we realized that we needed more capital. This was the motivation behind wanting to raise and accelerate growth. Initially, it was planned for Q1 2022 but looking ahead, we had seen a correction was likely coming down the pipeline, along with forecasts of rising interest rates. So we actually decided to do it six months early, which in hindsight ended up being a really good decision.

Q: What were the key areas of the business you wanted to invest in? 

A: There were two pillars of growth behind our plan. First, we wanted to accelerate our growth and penetration in the U.S. financial market – accounting for 95% of the financial institution market in North America. Second, we wanted to introduce more products to our platform and enable our team to sell more to existing customers. With that, the major areas we were looking to invest in were growing our sales team and building our marketing team and resources to fuel our go-to-market strategy. We also wanted to focus more on hiring and investing in our product and engineering teams as well as our senior leaders. 

Q: What happens next? How did you think about that timeline and what are the key milestones that you worked through before going to investors?

A: Our first biggest milestone was building out our plan and aligning around what we wanted to accomplish over the next three years. Once we built that out, converted it to a model, and understood the resources we needed and what it looked like from a financial perspective, we then needed to determine how much we wanted to raise and the best time to do it. From there, it was time to get alignment from our investors and the board because they play such a key part in a transaction like this. After that, we focused on the process of talking with investors. Our mindset at Coconut is that we build relationships with potential investors and potential partners early in the process so we can prove that we can deliver on what we commit to. We had a favourable network of investors already and it was just a matter of connecting with them and sharing key information and data to start the diligence and evaluation processes. After that, we collected offers and evaluated them to ensure they aligned with our terms. 

Q: How many funds or investors did you approach initially? 

A: A couple years after our last round in 2019, we had many conversations with investors, but I’d say we narrowed it down to a group of 10 to 15 that we were really interested in. We reconnected with them and shared the information and discussed what a potential partnership could look like. 

Q: How involved were your Series A investors in the process and how did you bring them along to make the right decision for the business and all the stakeholders involved?

A: They’re definitely highly involved in the process. They’re part of the approval of the transaction so obviously there’s a lot of work that needs to be done to ensure they’re aligned as a team and on board with the plan. They were very involved in the three-year plan we created and we ensured they had input and that there was buy-in. We also consulted with them when making decisions on who to work with, considering if offers were presented competitively, and analyzing if terms made sense. 

Q: What was the criteria or philosophy that you took when picking the right partner? What would you suggest for people that might be looking at financing? 

A: Some of the things we talk about as a team are looking for an investor who has expertise in our space. We’re a B2B SaaS company so having investors who have experience and success in our business model was key for us. Other things to consider are whether or not they are connected to the customer base you’re selling into and if they have connections to potential customers. As well, some investors will offer in-house resources such as recruiting. Given the competitive state of the talent market today, that’s a really valuable resource if you can have that help. 

The most important thing that often gets overlooked is making sure that your investor is someone you enjoy spending time with. It’s almost like a marriage. There’s a lot of calls and you’ll be working through the ups and downs, so it needs to be someone that you’re going to partner well with. 

Q: What are potential investors looking for in a company in a Series B round compared to a Series A?

A: I think it’s really about showing that you’ve learned more and refined your operations since that last raise. They’ll want evidence that there’s a repeatable go-to-market process in place. Assumedly, your revenue would have grown from the last year and that helps but they’re going to want to dig into more of the underlying “how” factor. Another thing is looking at what your customer base has done over time. Are they leaving or are they continuing to buy your products? This shows there’s value in the problem that you’re solving and that you know how to meet the needs of your customers.

In Series B, you’ll have a deeper understanding of your market. Obviously, investors want to know that you understand the potential market size but this time around there are more questions digging into that and understanding not just who your competitors are, but how you are winning against them. What things do you do differently and do you clearly understand that? Investors are also eager to know how you’re going to use the funds. Given that it’s a larger amount, there’s more scrutiny in the investment plan. They want you to prove that the business is scalable and that the money being put in is going to scale the business further. This involves looking at things like your profitability and efficiency metrics, customer acquisition costs, and payback ratios. 

Q: What would you recommend to someone who wants to calculate some of those ratios and wants to familiarize themselves with the methodology?

A: Talking with your existing investors is a good way to understand how other investors are going to look at these ratios and the most credible way to calculate them. One metric that I’ve found to have the widest calculation methods is LTV:CAC where some just use their churn ratio to come up with an expected lifetime. This can generate numbers like 15 x LTV:CAC ratio but it’s not believable if you’re a business that’s been operating for five years. To calculate that on the assumption that your customers are going to stay with you for 15 to 20 years just doesn’t make sense and it’s hard to defend that in conversations with investors. So this is an example of knowing where to cap your metrics and tie them back to your business model. You have to build up that rigor ahead of the process as you’re putting your data together, and talk with your team about what makes the most sense in the assumptions you’re applying when presenting these metrics.

Q: From a timeline perspective, how long did it take from start to finish?

A: All in all, the total timeline was about seven to eight months. Typically, it takes three months to do the planning. After that, there was a one and a half to two-month lead process to get buy-in, put the plan and materials together, and refine our story to potential investors. Then we began speaking with investors and doing the preliminary diligence and term sheet, which was probably another one and a half months. Once we signed a term sheet with Class Capital – who ended up leading our Series B – there was about a two-month process to close the transaction. Overall, I’d say the last three months were a real sprint where it felt more like six months of work. 

Q: What’s one piece of advice you would leave based on your whole experience?

A: I think it’s important to be prepared and do as much work as you can before the process begins. Once you get into contact with investors, timelines are tight and requests and conversations move quickly. Having the materials and your story put together is key – ensure that you’re confident in deeply answering their questions. Remember, there’s work to be done probably a year before you even decide to raise to ensure you have the right people, processes and systems in place to support a large fundraise. You’ll want to hire a good team that you’re confident in – one that can help you through the process and ensure that your systems are reliable and generate good data. Then, focus on creating a story that really communicates your company’s value and explains why people should be excited about what you have planned for the future. Investors really like to hear where you’ve been and want to see the success you’ve been having so far. They also want to see that you’re confident in where you’re headed. Another piece of advice as a finance leader – put numbers to that story to give it credibility and make investors even more excited and interested. 

Q: For those wanting to become a CFO, grow into a VP of Finance, or maybe just someone early in their career, how would you suggest they find the right mentor? 

A: In a SaaS company or any fast-growing startup, things move so quickly that there isn’t always the time to make mistakes and learn from them. Having a mentor who’s been there and done that and can give you insight into what worked best for them is a valuable resource to have. It enables you to move a lot quicker and avoid making costly mistakes. There’s many events that provide the opportunity to meet other finance leaders that you can network with, make connections, and bounce ideas from. You can also speak with existing investors and board members. They typically have other portfolio companies that would be further along in their growth story or they might have connections to other leaders from previous portfolio companies. In my case, one of our board members was able to connect me to a mentor who I meet with once a month – he’s been extremely valuable and really helped me in my career development.

Q: Is it safe to say there was a celebration when the transaction closed?
A: Absolutely! Interestingly enough, because we did this raise right through COVID, we met in Toronto where Coconut has an office, and part of our executive team lives there, too. That was the first time we gathered as an executive team since before the pandemic – it was almost two years in the making. So yeah, quite a lot of celebrations and good times were enjoyed.