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Welcome to "The Optimize Show," where financial leadership meets strategic excellence. This podcast is tailor-made for finance and procurement leaders, offering expert-led episodes brimming with actionable insights designed to empower you in steering impactful outcomes within your organization.
Whether you're navigating complex financial landscapes or seeking innovative solutions to enhance organizational efficiency, each episode is a treasure trove of practical wisdom, equipping you with the tools to drive impactful outcomes within your organization. From strategic financial planning to cutting-edge technologies, The Optimize Show is your go-to resource for staying ahead in the dynamic landscape of finance.
The KPIs that you focus on really differ based on what kind of a business and what stage you're on. But a few key themes that I've seen talking to investors and talking to my other CFO friends is, 1, there is a lot more focus on show us a path to breakeven. Show us a path to profitability. Right? Maybe when you're going into raising a series b, it's not as important when you're going into a series c.
Speaker 1:But investors are asking, what is your path to breakeven?
Speaker 2:Hello, everyone. Welcome to the optimized show brought to you by Spinflow. I'm your host for this episode, Jimmy Halsworth. I'm the vice president of procurement at Spinflow. Spinflow is a unified SaaS buying management solution that enables high growth businesses to buy, renew, and manage SaaS subscriptions.
Speaker 2:Today, we're actually joined by Varun Gupta, the chief financial officer of Emokafy, which is a turnkey fintech platform for government and philanthropic organizations to provide individuals and families with financial programming that create pathways to wealth. So before we say super high to, Varun, we're gonna talk about his experience and background. He has 15 years plus experience as a coverage bro a coverage banker and credit head at Citi and HSBC, where he built new businesses, top performing teams, and work with both public and private companies across life cycles to help them raise capital, carry out m and a, set up global treasury, manage risk, and expand globally. In 2022, Varun led a series b Fintech infrastructure startup through a $63,000,000 fundraising process in one of the toughest environments. He was also a consulting CFO advising multiple early and growth stage startups on capital raise, FP and A, and strategic finance related matters.
Speaker 2:So, Abrun, welcome. Pleasure to have you on today.
Speaker 1:Oh, thank you, Jimmy. Thank you for having me.
Speaker 2:Awesome. So so let let's just set the groundwork for the topic. Today, we're gonna delve into your career, and and kind of the firing path you've taken, exploring your transition from corporate banking to the role of CFO. Hopefully, we can gain some valuable insights on what you learn from your experiences in navigating the often complex, world of fundraising for growth or even companies. So let's start professionally, I guess, before your stint at startups.
Speaker 2:You had 15 years in corporate banking experience. How did it shape your path towards the roles and responsibilities that you handled today?
Speaker 1:Yeah. That's that's a great question, Jimmy. I would say I'm an accidental CFO. I didn't think that I would become a CFO or pursue the path to become a CFO. But in corporate banking, what you end up doing is you are a banker and you go and you talk to your clients, you talk to your prospects, and you really try to understand where they are in the life cycle.
Speaker 1:Are they trying to grow organically? Are they trying to grow inorganically? What kind of capital is the right capital for them to raise? You know, companies today become global much faster in their life cycle than it used to be, right, as you can imagine. So when they go into Europe or Asia or into Latin America, what is the right setup for them to manage their cash?
Speaker 1:What is the right setup for them to, you know, invest capital in those regions? So those were the problems that I was trying to solve for my clients. And that gave me a very unique perspective into how finance evolved over those 15 years I was in banking. I saw the role of finance and the role of the office of the CFO evolve from being, you know, kind of an accounting controllership and treasury to a more strategic role. And in the last 5 years of my career in banking, I was very fortunate to work with a bunch of very interesting startups.
Speaker 1:I don't want to take the names, but I was in the Bay Area. I was, you know, meeting all these very, very interesting fascinating startups that became unicorn very, very quickly. I had the honor of taking a couple of them public. And after doing that, I just, you know, caught that startup bug. I was like, I want to do this.
Speaker 1:I want to be on the operating side. I think I'm good at finance, but more than finance, I'm very good at having that strategic mindset because as a banker, you're always kind of into the commercial aspect of a relationship, a deal, solving problems, and those were the top skills that I got to understand start ups need. Right? Solve problems, collaborate, and really just get things done. Right?
Speaker 1:So I thought why not take that plunge and take it now? If I don't do it now, then I won't get the opportunity. So look, I took the plunge. It's been 2 years. I don't regret a second of the time I've spent on the operating side.
Speaker 1:My kids still ask me, you know, why did you take a pay cut and work longer hours? So that's the question I still can't answer for my kids. But, look, it's been a fascinating experience for me.
Speaker 2:Yeah. I I I I have that same argument or not argument, but discussion with my kids too. I'm like, I'll tell you in 5 years. Like, in in it'll all make sense. I promise.
Speaker 2:No. No. I hear I hear you on the start up bug too. Once you get into it, it's it's almost impossible, to walk away from the energy and pacing that start ups have. It's it's it's it's too fun.
Speaker 2:So Yep. So, you know, hearing your journey a little bit, do you think, I mean, obviously, as you've gone through, different organizations, you probably had some traits or or lessons learned. Right? Some qualities that you would consider essential now in in your role as like a CFO. So what are for for our young leaders out there, what are some of those characteristics that you think define a successful CFO?
Speaker 2:And this could be at, like, different stages of their career. Right? But, like, what are what are those traits and qualities?
Speaker 1:Yeah. So look. I think the public perception of banking from the outside is that bankers are just socializing with clients, dining out, drinking, or you have that image of a, you know, person sitting on the laptop and just trading and trading and trading. But if you really know how the corporate banking, commercial banking world works, the role of a banker is that of a quarterback. Right?
Speaker 1:If I can use the NFL analogy. As a banker, what you're trying to do really is you're first trying to understand what your client wants, then trying to solve that problem. And then that's the easy part, by the way. The hard part is coming back into the firm and then getting it done. Right?
Speaker 1:Banks, as you can imagine, are complex. They're very highly regulated. Capital is scarce. Right? So to get things done within the firm, within the bank, it takes a lot of collaboration.
Speaker 1:Right? You have to collaborate with multiple teams. Like, any day, you know, any typical day in banking, I was talking to risk and compliance. I was talking to credit team. I was talking to my product teams.
Speaker 1:I was talking to my wire desk in Delaware. Right? If there's something urgent to done. So in any day, you collaborate across a lot of teams. And because I worked at Citi and HSBC, which are 2 of the most global banks in the world, Any typical day I was talking to somebody in Asia or Europe or Latin America, right, to get things done for my clients.
Speaker 1:So that collaboration is extremely, extremely valuable. Right? If you think about the role of a CFO, a CFO is in is in a very privileged position. Right? Because you think about all the c suite leaders in a firm and which one person has information across the organization.
Speaker 1:Right? It's the CFO. The head of sales or the chief revenue officer knows everything about sales. Right? The chief operating officer knows everything about the operations.
Speaker 1:Right? But it's really the CFO office where you know everything that's happening across the business. Right? So you are in a position of privilege, right, where you know that other leaders don't know. So you have to really collaborate with all the leaders to make them understand what you see.
Speaker 1:Right? And then really, you know, explain why something can be done and something should not be done. And if something should not be done, then why? Right? So I think collaboration is extremely, extremely important.
Speaker 1:I won't talk about the functional expertise that you need to have to be a CFO. Right? You need to be able to understand gap accounting. You need to be able to understand treasury. You don't need to be an expert at accounting, but you need to be able to ask your controller the right questions.
Speaker 1:Right? If this is happening this way, why? Right? Just keep keep a track of everything that's changing on the accounting side, to make sure I mean, you're signing off on the accounts and the audit. Right?
Speaker 1:So you have to know all that stuff. So not an expert, but you have to have enough grounding and ask the right questions. So apart from having those functional skills that you must have, being able to think about the problem strategically and at the same time also go into details is extremely important, especially when you are, you know, head of finance or CFO of a startup. CFOs today, if you look, they many times had HR function in early stage startups because you don't want to create a lot of headcount. They had to comment.
Speaker 1:Right? They had they had vendor relationships. Many times, they are also going out and talking to partners on the revenue side. Right? Working with the chief revenue officer on on partnerships, on alliances.
Speaker 1:So you have to be prepared to put on different hats even though your core role is that of a CFO, and I think my banking career really prepared me to do that.
Speaker 2:Yeah. I think it's it's interesting. Like, I I like how you called out the, the strategy in detail. I'll I'll say, like, at my last at my last stint, my CFO was, a, one of the one of the most incredible people I've ever worked with, but, he was not afraid to get into the details and, like, figure out the nitty gritty and and and, to a fault at times. Right?
Speaker 2:Because I'm like, hey. You should go do this. Yeah. But at the same time, I I think it's, I think it's a it's a great it's a great trait. It's something that empowers your team as well to feel like, you know, you know, hey, Varun's Varun's here to play.
Speaker 2:Right? He's not gonna leave us, on our own. So that's that's awesome. Yeah. So what was the I know we talked about you went from banking into into Fintech.
Speaker 2:What was, like, that that motivator, that kind of get gave you that first itch to to jump in there and and see what's going on?
Speaker 1:I mean, as as I said, right, I saw a lot of my start up clients evolve very quickly from early stage to late stage and then kind of pre IPO companies.
Speaker 2:Mhmm.
Speaker 1:And I had the privilege of working with them through the life cycle. And that was just fascinating. You know, when when you see businesses evolve quickly and, again, you know, I think we all know that 99% of the start ups fail. Right? So it's only those 1 or 2% that make up to to, you know, an IPO or to a monetization event.
Speaker 1:So we we end up focusing a lot on those 1 or 2%. I also saw a few startups that did not really work out, right, as a banker. And that's where you really get the perspective. Right? That this is what successful start ups do.
Speaker 1:This is what start ups that didn't make it all the way, you know, could have done to avoid some of the pitfalls. Right? So I I just had the privilege of working with both cohorts of start ups, the the ones that made it and the ones that did not make it. And that just gave me another perspective, you know, to to to say, okay. If I go to the operating side, then I will make sure that I don't make those same mistakes.
Speaker 1:Right? Or or or I learn from mistakes that some of my clients made. And look, honestly, it's very easy for me to say, you know, all this that I had the start up page, etcetera, etcetera. But I think I was also at that stage in my life where I could take that financial risk. Right?
Speaker 1:A lot of us, we want to do something. We want to pursue something, but you have a family. You have a mortgage.
Speaker 2:Yep.
Speaker 1:You have all sorts of obligations. Right? And and you just can't do it because that's also part of your life, and that's a very important part of your life. So I was just at a point in my life where my wife has a great job. You know, I had built some savings.
Speaker 1:So I was at that point in my life where I could take that risk. And I was like, okay. Even if in 4, 5 years it doesn't work out, I can probably go back to banking and and do what I was doing. And in that process, I would have learned something new. So I I'll just say I was also very privileged to be in that position.
Speaker 2:Awesome. Yeah. I think I think that's, that's interesting in start ups in general. I think a lot of people because you're you're you're in fact you're thinking about equity. Right?
Speaker 2:Like like a long term payout versus the initial, like, hey. I'm am taking less to come here. That is a conversation that is is tough to rationalize. And and I always tell people, like, you know, some of my my employees, because I've worked in the past, because they ask about start up life now, because they they're not in start ups. They think it's interesting, and I'm like, it's a different world.
Speaker 2:And you have to be willing you have to be willing to take that risk, and you have to be you have to have a plan to manage it. That's a that that's a that's a good note for for folks as they make that journey. So let's actually jump into fundraising a little bit. I think that's something that can be overwhelming when you look at it without having experienced before, and you're you know, you watch shows and you and and and you and you watch, watch the news to try to get some some ideas, but it's it's different till you're involved. So let's create, like, a hypothetical scenario.
Speaker 2:So you're you're the finance head, brand new startup, that that's that's gonna be today. We're starting today. Let's let's name it, Varun's volume. Right? We're selling microphones.
Speaker 2:No. Not so it's it's gonna be some sad thing. Right? So, walk us through, like, the most important steps that a startup should take to prepare themselves for that successful round of fundraising, especially in, like, a 2024, 2025 market? Because the world's a little bit different now.
Speaker 1:Yeah. So so, Jimmy, I'll say fundraising is both a science and an art. Right? So when you think about fundraising, how you do fundraising drastically differs depending upon which stage you're on. Right?
Speaker 1:So if you and and before I go into fundraising, right, if you think about the the role of a head of finance or how startups think about hiring their first finance person. Typically, when you're when you're just starting a company, you are at seed round or angel round and then getting into series a. Many startups don't really have head of finance, and, honestly, they don't need a head of finance. There are lots of incredible, outsourcing, fractional CFO, businesses out there who can keep your books, who can provide you some advice, do some basic modeling for you. Right?
Speaker 1:So you don't really need to add a finance headcount when you're very early stage. It's really when you've done series a and you're moving on to series b is when you should start thinking about bringing ahead of finance because that's when you've kind of found the product market fit. Right? And and now you're making that leap from really commercializing your product and scaling the business. Right?
Speaker 1:So that's when you need to bring in a head of finance who can really take ownership of accounting, who can take ownership of the financial model, and who can bring some financial discipline. Right? Because let's let's be honest with ourselves. When fundraising environment is easy, right, people tend to invest capital, like, you know, 2 years later, they'll be able to raise the same, you know, capital in the same market. But things change.
Speaker 1:So you also need to have a head of finance or someone who can keep that discipline, who can create some basic frameworks for you to allocate capital, to measure the business performance, and stuff like that. Right? And it's only when you get to series c and you're really looking to scale up, right, that you think about building out the whole finance office. CFO Yeah. Head of strategic finance, treasury, investor relations, etcetera.
Speaker 1:Because now you start to think about kind of, you know, an IPO or a monetization event. And once you start thinking about that, right, it takes about 2 to 3 years from beginning to think about it to be prepared. Right? So that's how kind of the finance function evolves. And fundraising is similar.
Speaker 1:Right? When you think about a business which is very early stage, seed, angel, series a, those are very, very founder driven processes. Right? A financial model, KPIs, they don't play a big role in fundraising at very early stage. The things that really matter is what is the problem you're trying to solve?
Speaker 1:Right? Do you have the expertise to build the product that is going to solve that problem? Right? 3, do you understand what the time is for what you're trying to do? Right?
Speaker 1:If you can answer these three basic questions, right, then you're in a good spot. Right?
Speaker 2:Mhmm.
Speaker 1:So it's a very founder driven process. It all comes down to, do you trust the founder to have the skill set and the drive to do it. Right? Yeah. Once you get to series a, series b, then it kind of becomes a more formal process.
Speaker 1:So I would say if you are preparing for a series b, right, then you must have started building those networks and relationships with the investors in your space at least a year back. Right? Start going out to networking events. Start networking with the investors who are active in your space. Right?
Speaker 1:So that when you do kick off the fundraising process, you already have a slate of key investors that you're going to invite to your data room. Right? And they already know that you're going to launch a series b. Right? Because if you just start the outreach when you start creating a data room, you're already kind of far behind.
Speaker 1:Right? So starting early with building the relationships, building the networks is is very critical. Right? Now thinking about the current environment, it's a tougher it's it's a tough fundraising environment. Right?
Speaker 2:Yeah. I
Speaker 1:think all of us got carried away that 2021 was the new normal. Right? And it flipped very quickly. Right? In 2021, fundraising was extremely easy.
Speaker 1:I think within Fintech, the fundraising grew 3 x, right, in 2021. Wow. And then
Speaker 2:Yeah.
Speaker 1:2022 was a steep decline, and then 2023 was the worst year, right, for Fintech.
Speaker 2:Yeah.
Speaker 1:The deals are taking much, much longer to close. Right? Investors are doing a lot more diligence. So you really have to be prepared. And the other shift that happened in the last 2 years in 2022 and 2023 was that investors started to invest more in early stage companies, which is great for new founders.
Speaker 1:Right? Rather than investing big monies and taking those big bets into late stage companies, a lot more capital went to early stage businesses. If I look at the Q1 of this year, I think it's normalizing a little bit. The late stage companies are beginning to get more capital. But the the share of capital that is going to early stage companies is still higher than what it was in 2020.
Speaker 1:Right? So that's that's a great thing for for the new founders that investors are looking to spread their capital across more bets than just putting a lot of money into one late stage companies and then hope that it works out. Right?
Speaker 2:Yep.
Speaker 1:So that's that's good. Right? But it's also not that good if you are a late stage company because your rounds are taking much longer. Right?
Speaker 2:So you But if we if we think about that, Varun. Right? Like like, let's let let me ask you as I was talking about late stage. Like, what are the KPIs and and, like, metrics that I need to like, for my work? So so let's say, you know you know, Jimmy's widgets, SaaS solution.
Speaker 2:Yep. Right? I have to go and I have to raise, you know, like, like, like, $10,000,000 in in a series b or series c. Right? Yep.
Speaker 2:What are the, what are the metrics that I need as a as a CFO need to be thinking about? Because, you know, me, I'm in procurement. Right? So I'm heavy about, ROI and spend and things like that. But, like, just in general, from, like, a CFO view, like, where where where would my brain have to be?
Speaker 1:Yep. So, look, metrics differ drastically from what segment you're targeting. Right? So if you are an SMB SaaS business, then churn is very, very important. Because when you're in the SMB SaaS business, investing capital into acquiring new customers and then retain them is essentially what drives the business growth.
Speaker 1:Right? So churn becomes very, very important for for the investors. But if you are an enterprise SaaS company, right, then more than the churn is the dollar retention. Like, I'm I'm okay if if if a big enterprise customer keeps increasing their spend with me, and I lose a couple of enterprise customers that were not scaling. As long as my dollar retention stays strong, the investors would give you that leeway.
Speaker 1:Right? So the KPIs that you focus on really differ based on what kind of a business and what stage you're on. But a few key themes that I've seen talking to investors and talking to my other CFO friends is, 1, there is a lot more focus on show us a path to breakeven. Show us a path to profitability. Right?
Speaker 1:Maybe when you're going into raising a series b, it's not as important when you're going into a series c. But investors are asking what is your path to breakeven. Right? Show us that show us that levers that you're going to pull to get there. Right?
Speaker 1:Mhmm. So it is important to think about that question. I think in 2023, the shift to profitability was an extreme shift. I think investors are becoming more reasonable, and they understand that if you're going from series a to series b, then asking you that question is probably not fair. But they will still ask you that question, and you need to know what is that path.
Speaker 1:Right? How much capital you need to raise to get to that, you know, breakeven or or cash flow, break
Speaker 2:And and real quick, like, you talked about churn. Right? And that that's it's interesting that that that's, like I mean, I think it's important. We see it as important. Yep.
Speaker 2:My previous company was very important, and and one of the things I saw that which to me, you mentioned the slowdown in late stage investments was you saw more churn during 2022 and 2023 because people were responding to the macroeconomic environment. Right? And they're and and so a lot of tools that once were necessities in the SaaS landscape became nice to haves. Can we do it internally? Can we offload?
Speaker 2:So I I assume that probably had some correlative effect into that slowdown as well. I think people now have kinda rationalized what their stack should be. Right? And so it
Speaker 1:basically because when you have a lot of capital, right, then it's very easy for the head of finance to say, okay. If you need it, you can buy it. Right?
Speaker 2:Mhmm.
Speaker 1:Okay. I'm I'm gonna pay, you know, $5,000 a year. You don't even realize that there's just one person in the company who uses that once in 6 months. Right? Yeah.
Speaker 1:And then over time, you end up with, you know, 1010 such, softwares or or 10 different tools that frankly nobody is using. Right? And and then the cost add up. Right? So you're absolutely right that there is I think that the shift to very specialized softwares and specialized tools that you can very easily integrate, It's been great.
Speaker 1:Right? It's kind of democratized software back in the days if you go back 10 years. Right? You had to have a lot of capital to buy servers, to buy an ERP system, to do basic stuff if you want to start a business. Right?
Speaker 1:But the shift to SaaS has really allowed people to start a business with a laptop. Right? You just have to have a laptop. You can go to AWS or or or or Microsoft. Right?
Speaker 1:You can buy all sorts of SaaS softwares, and you can literally start a business within a couple of days, right, with very little capital. So that's been a great shift. Right? But then what has also happened is that over time, people have lost control of how many software they have subscribed to. Right?
Speaker 2:Yep.
Speaker 1:It's the same thing. Right? I I don't know how many, streaming services I have subscription to. Netflix, Amazon.
Speaker 2:Listen. I still can't get rid of Hulu. I've been trying, but it keeps renewing every month. I don't know.
Speaker 1:Right? So so you you lose track of how many streaming services I have subscribed to. I have no idea how many I've never ever watched. Right? But, hey, there was this one baseball game that was streaming on that, so I subscribed to it and then I forgot about it.
Speaker 1:Right? So I think it's it's it's it's what's happened, I think, on the business side as well. And and what you guys do and and what a few other startups have come in this space to try to do is to help the CFO's office, to try and correct that problem. Right? And by the CFO's office is where a lot of funding is going in Fintech.
Speaker 1:If you look at the last quarter, a lot of startups that are getting funding, that are getting traction, are startups that are focusing on selling the right tools and the right software to the CFO's office so that you can, you know, automate your AP, automate your receivables. You can do reconciliations using AI and a bunch of those things, which makes the CFO's office a lot more efficient.
Speaker 2:Thanks for the plug on our industry, by the way. I think I I think it's an it's an important space, and and, I'm I'm excited to see, you know, CFOs even, like, outside of my network really engaging. And this is this is something to approach. Varun, I wanna thank you so much for joining us today. Your insights, your experience, it's been fantastic to listen to and kind of, hear your journey.
Speaker 2:I think this has been great from my side. I know that our listeners will will have enjoyed it thoroughly. Like, hearing your experiences talking about going from corporate banking into startups and on into the future as as we all become AI. Manu, thank you so much for joining. I think if Varun allows it, guys, feel free to, to find Varun Gupta on on LinkedIn, but make sure you reference you saw him here so that he knows you're a person, who saw him here and not an AI, LinkedIn bot.
Speaker 2:Just trying to say hello. I I I'm sure he'll be happy to to to share some advice or some of your experience with people if they'd like to connect.
Speaker 1:Thank you, Jimmy. And thank you, Anjali and Spendflow team for having me. Thank you.
Speaker 2:Awesome. Alright, guys. Stay inspired, and keep thriving your financial journey. Thanks for