Archive | CFO Search

Arnold Partners CFO Placements Help Push Silicon Valley IPOs to 55 since Q1

According to the Silicon Valley Business Journal (10/30/15), Silicon Valley has had 55 companies IPO since Q1 2014. Arnold Partners placed 10% of the CFOs in those companies, creating over $7B in market capitalization. While only half of the 55 companies are trading above their IPO price, all but one of the Arnold Partner client companies are above their IPO price, with two being significantly above. We are helping to form lasting value creation with the top technology and life-science companies in the Valley and throughout the country.

If you are seeking a CFO in this market, Arnold Partners is ready to help you attract a world-class leader to help drive value no matter your capital strategy or location in the U.S.

The really remarkable thing is that only 55 Valley-based companies went public in the last 21 months. If you take out the biotech blast, that cuts the number to 31.

The Value of the Right CFO—for Every Financing Event

Our observations over the course of the last few years is that finding a CFO who can help chart the course of his or her company in a collaborative way with the CEO and Board is the most valuable addition a growing company and can make a huge impact—no matter the course the company takes. IPOs are rare and may be really important steps in growing a company. But as seen in this most recent data, a CFO who can help the CEO manage the Street post-IPO is even more important. The only way to do this is by having a highly predictable business model where expectations can be managed, met and exceeded. Most emerging tech companies are highly unpredictable! The best CFOs are able to put all the business metrics in place well before any IPO talk, so that the transition to life as a newborn public company is a smooth one.

Many of the CEOs we meet with are thinking that an IPO is the next big event in their company’s trajectory. Most of those companies do not go public. That said, having a stalwart CFO in place in a growing private company is a smart investment. The best CFOs are also instrumental in positioning their companies for every conceivable financing event: M&A, growth capital, strategic partnerships, debt financing, etc.

Trouble Ahead in the IPO Market? I Think Not.

The gist of the SVBJ article was that the slowing of the IPO market and the fact that only half of the companies that went public are above their opening day price is a signal for trouble ahead. I disagree. The majority of companies we have been meeting, all over the country, have growing top-line revenue and positive outlooks for the coming year. Focus on growth and getting predictable about that growth and good things will follow.

Arnold Partners CFO Placements: 100 % Success Rate

With 100% placement success rate, we are proud of all of our CFO placements, and happy to have a spot on the roster of recent technology IPOs. More important is our measure of lasting results. The CFOs we have placed over the last 10 years have an incredible tenure in the companies they have joined. So if you are looking for a great technology or life-science CFO, no matter your stage, industry, or location, we are ready to help. Shoot me an email at dave@arnoldpartners.com or call 408-205-7373.

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A Great CFO Hire on Paper vs. a Great CFO Hire: A Tale of Two Clients

I had a client last year that kept falling in love with candidates he could not attract to his company. There was nothing wrong with his company; in fact, I think it will prove to be very successful. However, it was earlier stage than some CFOs want to get involved with. The CEO is a compelling, passionate, smart guy and frankly I think he could sell anything to anyone. But CFOs are a different breed. They do not like to be sold. They think more like engineers—the numbers drive their decision making.

 

Meet Mr. Amazing: A Great CFO Hire?

This client was easy to work with—he was communicative, open, and we really got some great talent to the finish line. But it was just not closing. There were some internal delays. The candidate who was considered perfect wasn’t so perfect after a long health delay. So along comes a CFO that the CEO considered the “most amazing candidate of all time!” This candidate looked great on paper and was coming off of a big win in the industry. He was known to the Board and it was thought he would bring an air of success, credibility and celebrity to the company. Now you can guess, my client was ready to hire; there was some fatigue on his part. And hire he did against some objections from me, but mine was a lone voice in the crowd. He hired this most amazing candidate start to finish in about a week.

Four months have passed and the most amazing candidate of all time has quit. The IPO has been delayed. The commute was too far. When the going got tough, the one with all the credentials on paper got going—right out the door. The CEO and the Board’s judgment became clouded when they got caught up in a moment of euphoria, and they rushed the process at the end. The right hire is in the wings and there will be no replacement search necessary, but now the client has a different type of credibility gap to fill.

Mr. Carve-out Wasn’t Carved Out for the Job

A recent client was a very different tale. He was extremely decisive and thought he knew what he wanted before he engaged us. He had one CFO candidate identified that we carved out of the standard fee. My client met with a total of three candidates in our process and decided Mr. Carve-out was right. We made him a fair and market offer but he said no. Mr. Carve-out was also was coming off a big win and I believe he is really looking to be a CEO not a CFO. This was not the right hire and I was relieved that he turned us down. It could have been a repeat of the client story above. Had the “most amazing candidate of all time” resigned prior to our making the offer to Mr. Carve-out, I would have been even more strongly against that hire.

Enter Ms. Moneyball

Ms. Moneyball is what the Board member who introduced me to the search called her. She is hungry and has all the skills and stats, but is not a proven commodity. Like Matt Duffy vs. Pablo Sandoval. (Look how that is turning out!) The offer we made to her was the same as to Mr. Carve-out, so the Moneyball analogy does not completely fit. I would not have my client hire a woman for the job for less than what he was going to pay a man. The key point is that she is the right hire for their stage and will actually do the work that “the most amazing” and “Mr. Carve-out” would probably want to hire staff to do. She is an “A” player in terms of the skills and experience we were looking for; she just did not have the CFO title. If and when the times get tough, she will fight through them. She is smart and driven and will work very hard to ensure the company success. This search was completed in 40 days start to finish.

Lessons Learned

Don’t be fooled by a big reputation. Skills, smarts and potential are more important and a rigorous process should not be rushed. Clients take note: I will be more forceful in my advising in these situations in the future. If you would like to share your own stories or to discuss hiring strategies, please contact me, Dave Arnold, at: dave@arnoldpartners.com.

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Reinventing Your Brand For CFOs

reinventI had breakfast with a fellow sole proprietor professional service provider yesterday. He was down in the dumps because his specialty (M&A Advisory) in a certain industry sector is out of favor in today’s economy. For a half an hour he mused on what used to be and how he used to provide great management advice to this sector. Finally I had enough and stopped him. Loathing and self-pity is really a waste of time. It struck me like lightning what this guy needed to do: he needed to reinvent his brand.

Just as I recently posited in a brief post on LinkedIn about how large recruiting firms are spinning the new hot industry sectors, this is what he needed to do. Case in point: In the early 2000s when the Clean Tech industry came into favor, a team of recruiters at a large retained search firm working in the Semiconductor industry re-branded themselves to take advantage of this market shift. Overnight these same recruiters became the industry leaders for the C-suite in Clean Tech. Guess what ─ these same recruiters are now repositioning themselves once again as the industry leaders in the “Internet of Things”and “Industrial Internet.” Why? Clean Tech is dead and Semiconductors have not returned. These recruiters are doing this with purpose and they are arming themselves with knowledge in these new industries, so I am not criticizing this strategy, I am applauding their moves. The white papers, thought forums and seminars they are creating are helping to build this fledgling industry. This idea of rebranding brings up two thoughts relative to my own retained search clients and CFO candidates.

Arnold Partners: Building on Strengths to Expand Services

The Arnold Partners philosophy has and continues to be a focus on the role of the CFO. We continue to find top talent in a wide variety of industries. In the last six months we have found CFOs for the following industries: SaaS, Enterprise Software, Connected Home Technology, Specialty Chemical, Biotechnology, Medical Device and Gaming. That is about as wide a mix as I can imagine. What is common to these searches is that they all needed strategic CFOs with different skill sets that were right for a certain stage of company. But here is the spin: In speaking with the investors of these companies, I mentioned that I was expanding my brand to include Audit Chair Search. Without missing a beat, EVERY investor told me this was an excellent idea and that they would be happy to work with me when the time came to look for an independent Audit Chairperson for their Board of Directors. We just completed an Audit Chair search for a hot pre-IPO SaaS company and we are now engaged on the Connected Home Technology client. So this spin is not a wholesale change of who Arnold Partners is. It is an iteration and a leveraging of our many years of hard work in building relationships in the CFO community.

CFO Candidates: Take Stock with a Personal Inventory

As a CFO you have the most malleable skill set in the C-suite. If you are a marketing professional or an engineer it is more difficult to change industries. But as a CFO (or aspiring CFO) you have an opportunity to take your core skills and apply them to a wide variety of industries. However, in terms of branding yourself and managing your own personal brand, I highly recommend that you take a personal inventory. What have you added to your skills and experience in the last year? What have you seen in your industry sector that is positive in terms of growth? Are you in a dying industry? What steps do you need to take to get into a hotter sector? All of us professionals need to manage our own brand and we owe it to ourselves and our constituencies to take inventory, perform a gap analysis and do something about it.

My Colleague: Got the Kick in the Butt He Needed

So my breakfast buddy reached out to me later in the day. He said I motivated him to get in gear and he was voraciously reading material about a new industry sector into which he feels he can parley his deep M&A advisory experience. He started to do research into the industry leaders and found one of his old mentors in a key leadership position. Talk about epiphany. What are you doing to manage your brand? Is it time to reinvent or at least iterate?

If you need a CFO or an Audit Chairperson, or have your own story about rebranding yourself, let’s talk. Contact me at Dave@arnoldpartners.com or call 408-205-7373.

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Market Outlook for CFO Talent in the Bay Area

red-hotThe market outlook for CFO talent in the Bay Area is red hot in 2014. We expect this trend to continue for a variety of factors: the IPO market continues to be open in most industries, the aging nature of our population headed to retirement, and the lack of a deep talent pool of experienced public company CFOs. As the broader economy in the U.S. continues its crawl out of the great recession, the tech-heavy local market has been expanding for the last two years. Certain sectors do seem overly frothy, but time will tell. Clearly this is not another dot-com bubble, but what goes up, does come down. With the global and national markets on the mend, there is more growth opportunity for technology companies and more pressure on the talent pool both locally and nationally.

Ruling out some sort of global calamity, we expect the market to remain very tight in the Bay Area, and expect other markets to tighten with the improving economy.

Increased Competition for Talent

So if you are a company seeking a CFO with public company experience or specifically IPO experience, what can you expect? The fight for talent is intense. Be prepared to pay more than you planned, be ready to move quickly when top talent is in front of you, and keep an open mind to creative solutions. Recently we a recruited a sitting public company CFO out of his current role for a client ready to IPO; fortunately our client was attuned to all of the advice above and made a compelling offer in a timely manner. Of course it is always much more than a financial decision─the courting process made sure of a good fit between CEO and CFO and the team as well.

Advice for Companies Looking to Hire a CFO

It is always the case that the number of “A-Players” in a given market is finite, and the number who want to make a change is also finite and shrinking. This is where creativity can come to play. Thinking outside the specific industry confines, or bringing in the “A-Player” step-up candidate are two possible alternatives to calling the same five industry-leading CFOs in your space. Sometimes the “Best Athlete” model is the right one in a tight talent market.

Advice for CFOs

If you are a sitting public company CFO you are getting calls from people like me. In the Biotech sector, a public company CFO told me a couple of weeks ago that he is getting an average of three calls a week. He said the only reason he called me back was because of our relationship spanning over the years. If you are a CFO without public market CFO experience, how do you get it? The key is to work under a CEO who has been in the public limelight. Investors, both private and public, don’t like it when both the CEO and CFO are without public company experience.

Clearly, whether you are a hiring company or CFO candidate, having a dedicated resource that is focused on the role of the CFO is in your best interest. A CFO recently told me, “You know Dave, the reason I like working with you is because you think and talk like a CFO. It’s really great the way you size up your client opportunities and are able to present them to me in a way that highlights all the things I’m concerned with.” It was a kind comment, but instructive too; if you are a company seeking a CFO you want an expert on your side. And if you are a CFO with too few hours in each day, you want a search partner who understands what’s important.

It’s going to be a long hot summer that will continue into the fall. To be prepared and keep cool, call Dave Arnold at 408-205-7373 or email me at Dave@arnoldpartners.com.

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CFO Search: Quality vs. Quantity

qualWhat are the most important factors when embarking on a CFO search? More importantly, what are the most important qualities you should look for when hiring a search firm to help you hire a CFO? Three quantitative measures are frequently cited as the most important: time to completion, longevity of the placement, and re-placement rate.  I’ll give you my perspective on these measures based on many years as a CFO search consultant.

CFO search begins with a clear target

The process for a CFO search, or any search for that matter, must begin with a very clear understanding of what you are searching for. Fortunately when it comes to CFOs and Audit Chair Directors, the definitions are usually pretty crisp. Nonetheless, there are critical subtleties in the definitions for CFOs, the culture of each company is different from that of another, and the blind spots of CEOs will differ. These considerations must be weighed and sorted, so at kick-off we have a strong, common understanding of the specific must-haves and nice-to-haves.

Because of our long-time focus on the financial function, helping clients define what is needed in the role is second nature to Arnold Partners. We act as a management consultant specializing in executive search, adding value from day one, even in the pre-search process. The average time it has taken us to complete searches in the last year is just under three months, proof positive that this value creation also has the benefit of saving time as well.

Watch out for too much speed

bestSpeed in search is important to most clients at the onset because some event is pending, or the client realizes that the decision to hire a CFO should have been made months before. Perhaps a budget was blown, or a market shift could have been anticipated if there had been a CFO in the seat.  But moving too fast may result in a hire that doesn’t stick. Then you are back to the drawing board. After digging back into all of the CFO searches I have completed, I am proud to report that the average tenure of the CFOs I have placed is 38 months. This includes a number of placements where the companies ended up getting acquired in fairly short order. Of those companies that have not been acquired and are still in operation, the average tenure is 48 months. These CFOs are sticking in place because time was correctly invested.

So the averages are good, what about the mistakes?

Nothing is more demoralizing and costly than a bad hire. A bad executive hire is even worse. Can you expect success on every search? You can if you choose the right firm. To date, Arnold Partners has a 100% success rate, meaning the CFO was in place for a minimum of a year.  We have been rehired to conduct replacement searches twice – once after the CFO was on the job for three years but developed a health issue, and once because the client moved from Seattle to the Bay Area.  As we guarantee our work for a year, we are proud to say we have not had to employ that guarantee.

In Sum

Every CFO search firm should have a score card on these three measures.  If you like our top marks for quality, speed, and longevity, call me, Dave Arnold at 408-205-7373 or email dave@arnoldpartners.com.

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How to Hire a CFO: Process vs. Results

I was in a client meeting this week and was taken aback by my client’s view of retained search professionals. Maybe he was burned a few times by executive search firms?  Not sure, but out of our conversation, what differentiates my firm Arnold Partners from most other retained search firms became clear.

While at an investors’ conference the week prior, my client ran into a partner from a large executive search firm and they got into a debate about the relative value of the search process vs. the outcome of the process. The search exec. stressed the value of the process and the insight gained, but could not sway my client; the only value he saw in the search process was the end result – a great hire.

Gems gleaned from the process

I agree that the search process itself can provide a great deal of valuable information to a company, specifically discoveries about how the company is perceived by the professional community and how the specific role is received by the potential candidate pool. These are truly important things; the candidates you are seeing and the prospective candidates your search partner is approaching are not yet “drinking the cool-aide” as we like to say here in the Valley.  If the response to the company story is not positive and needs to be re-tooled, this is valuable insight especially when the story is being presented to CFOs, who are by their nature conservative and a tad skeptical, in my experience.

Beware the purple squirrel

purple-squirrelAnother possible discovery that can be a real show stopper: the person you are looking for does not exist!  I have heard this called the unicorn or the purple squirrel. This is a frustrating discovery, but it can also provide insight for the executive team and board.  If the specification for the role is too far outside the lines or tries to combine too many “must-haves” there needs to be a reconfirmation with the search partner and the client to reassess the needs of the business and the goal of the search. I like to say, “In search, you cannot find what you are looking for unless you know what you are looking for, but, if you are looking for a purple squirrel, you may be looking forever!”

Where the rubber meets the road: completion and stick rates

My view is that process is important and discoveries can provide insight, but the real drive and goal is the successful hire ─ to find a CFO that who will create a lasting, positive impact for all stakeholders in the organization.  A process without consummation is a failure. This is where I pride myself in our 100% completion rate. Yes, searches can be tough; in fact most of them are. But for the best outcome what should a CEO or VC look for in a search partner? Two metrics: completion rate and stick rate (how long the placed candidates stay in the roles). One national firm boasts on their website of a 77% completion rate, which means they do not complete 23% of their searches ─ almost a quarter! And yet their clients are out 100% of their fee for service.

If you are contemplating how to hire a CFO and  seeking a search partner for your search, you will find Arnold Partners to be 100% committed to both a useful process AND a successful outcome with long-lasting results. If you would like to share your experience on how to hire a CFO, or want to learn more about how Arnold Partners hits its numbers, call me, Dave Arnold at 408-205-7373 or email dave@arnoldpartners.com.

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