My good friend and colleague Nilofer Merchant (www.nilofermerchant.com) is a strategy consultant, prominent speaker and Ted Talk presenter. She coined the idea of a “walk and talk meeting” which we had last week. During our walk and talk she asked me an intriguing question about the role of a CFO and how much value had been created in the companies where I placed CFOs? I was a bit taken aback as I had no idea. So back to my office I went and with a little research, I figured that the value created is a staggering $10–$12 Billion in the last eight years. Now that seems like an accomplishment to hang my hat on!
The companies that have gone public have a combined market cap of over $8B.There have been a bunch of M&A transactions that resulted in at least another $2–$4B. Of course, the CFO cannot take full credit for all of this value creation, but certainly it speaks to having placed capable CFOs into winning companies. This is just one angle to consider, but I think it will be a useful metric to track as we move forward.
Another measure of success: creating enterprise value
Many CFOs I speak with talk about creating enterprise value through a number of methods, and revenue growth cures a lot of ills. This is timely because more and more of the CFOs I speak with are out in the field selling their companies goods and services. Just last week I met with a CFO who was headed to Wall Street to meet with a number of CIOs and CFOs of leading investment banks about using their SaaS platform—really a peer to peer sale. This is a good example of the role of a CFO on the front lines of selling.
In another case, one of my placed CFOs said she spends a great deal of her time on negotiating customer contracts. These contracts are multi-level, multi-year service agreements with large corporate and government agencies. She says after the initial sales process is done, it is actually her job to negotiate the final pricing, terms and conditions of the agreements. Certainly this is another example of the CFO driving direct enterprise value.
Other measures of CFO success
What other ways could we measure the success of a CFO? I think the longevity of employment is important. Another positive stat for my work is that at least six CFOs I have placed survived CEO transitions; this serves as a good testament as well.
While we are proud of creating real dollar increased value, we are equally proud of our long-term relationships with all of our investor, CEO and CFO partners that we have been building from day one. The core value we offer our partners is the ability to tap into an ever-growing pool of talent and resources, and find winning CFOs to help build enterprise value.
If you are interested in exploring the issue of value creation further, the role of a CFO, or if you are ready to find your next CFO and build value for your organization, email me at moc.srentrapdlonra@evaD.
I’m asked by a lot of young financial professionals what it takes to become a successful CFO. There is certainly no one right answer or one path to the top rung of the financial ladder. However, early on in your career there are distinct avenues you can follow to enhance your chances for getting to the top. Here are the two most common career paths:
Path #1: Start in Public Accounting with and earn your CPA
After you earn a CPA license, a technical accounting position such as SEC reporting is a good introduction to the corporate accounting field. From there you have two really big choices: go back to school and earn an MBA, or follow the corporate route to Controller. Once in the Controller seat, your best move is to take a job in a business function as an FP&A Leader, Business Unit Controller, or if you can get it, Investor Relations. To move forward in the tech industry, your work experience would ideally be a blend of larger public company and emerging growth company. This kind of background will position you well to become a successful CFO, but you would still need a break. We’ll get to that below.
Path #2: Get an MBA and Work in Investment Banking
The investment banking path is difficult because the work is really challenging for the first several years. (As are the first few years in Public Accounting!) And you will need an MBA to go this route, but that is nearly impossible to do while working in banking, so work that into your plans.
IF you can stick it out and succeed, many options will open up for you. With an MBA, you could go into consulting or back to banking. Most people who leave banking and go right into a CFO role will at least be a strong Vice President at the bank, or more likely a Director or Managing Director. Be aware that once a bank Director or above, the money is hard to walk away from. One good thing about this path is that you learn to sell. This skill is not commonly gained working one’s way up in corporate accounting. More on this too, below.
Both of these paths can lead to CFO, but to different kinds. And of course, neither path will equip you with the full set of skills a successful CFO will have. There is only one way to get that: by working in the role! The fun in what we do at Arnold Partners is working with our clients to flush out what type of CFO they need and why.
Behind Door #1
So let’s say you choose path number one. The challenge you will face is that a CEO and Board will still need to take a chance on you. They will need to believe that your background is really solid, and that you will make the right calls. Many times this break comes from a “battlefield” promotion: the CFO leaves the company, chaos ensues, the CEO looks around and picks the highest qualified finance person in the company and runs with it. Right place right time, but you made your own luck too! Sometimes this break comes when a CFO, who is at a new company, wants a succession plan and plucks you for that. Rarely does this break come through executive search.
Behind Door #2
Let’s say you select path number two and get to the VP level. Most likely you are going to get hired as CFO by a client who has seen you in action. Or perhaps you leave banking for an interim finance role to sharpen the skills that are missing from the typical CFO profile. If you are really well known in the particular industry you serve, companies within that industry will seek you out. Rarely does this break come through executive search either.
The Secret Sauce
The skills that separate a successful CFO from the others has less to do with either of these paths however. The sought-after CFOs have other qualities that separate them from the pack: executive presence, excellent verbal communication skills, the ability to influence outcomes with nuance and finesse, and ultimately the ability to sell. All of these abilities can be learned, primarily by being mentored by the right people. So as you progress in your career no matter your path, the most important thing you can do is to find a very successful person to help mentor you in the soft skills that will help you develop from a financial professional to a business professional. If you are coming up the ladder of a finance career and need advice on your next move, please feel free to contact me at moc.srentrapdlonra@evaD.
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 moc.srentrapdlonra@evad or call 408-205-7373.
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 great 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 great 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 to get you a truly great CFO. If you would like to share your own stories or to discuss hiring strategies, please contact me, Dave Arnold, at: moc.srentrapdlonra@evad.
The Silicon Valley Business Journal ranked Arnold Partners #10 for number of placements (11) made by executive search firms in the Bay Area for 2014. The firm, which specializes in CFO searches and Board searches, was ranked #23 in 2013.
An active venture investor and client told me about a conversation at a board meeting he recently attended. The question was asked, “Does anyone know any CFO recruiters?” Everyone around the table said yes, but not anyone they would use again! This is where the growth and success of Arnold Partners differentiates us from other executive search firms. All of our clients in 2014 (and continuing in 2015) were from previous client relationships. Whether it is a relationship with an investor, former CEO or CFO, we maintain our standing in the marketplace because we consistently deliver results.
The new rankings of the Business Journal are all about integrity. Many of the firms listed in previous years did not submit their placements for 2014 because for the first time the Journal validated the numbers. For each placement we had to submit the actual client name and the person we placed. But no problem for Arnold Partners; we have nothing to hide. We never inspired to be the biggest firm—in fact our small size is part of our appeal. But we do what we say we will do, and in looking back we are proud of our results and are happy to share them.
Arnold Partners Track Record for Placements Continues
We are on track to perform as well this year as we did last. The market in Silicon Valley remains very active for CFO recruiters and the supply of top talent does not seem to be getting any easier to find. The market does not seem to be overly frothy as some are speculating. It seems to us that the market is healthy across a wide spectrum of industries with real revenue and real customers and real growth. We are engaged in searches from manufacturing, SaaS, BitCoins, Medical Devices and Biotech and the Internet of Things.
Our laser focus on CFO and Audit Committee search results in timely searches with lasting results, and we are committed to taking on a limited number of searches at any given time. As a result, the name Arnold Partners is being bantered about in more and more board rooms when there’s discussion about what executive search executive to call. We thank our clients for the trust you show in us. We value our relationships with you above all else.
