Credit & Capital

From Venture Capitalist to Finance Chief

The brand-new CFO of an energy-technology firm talks about making the transition after 14 years as a venture capitalist.
David KatzNovember 14, 2014

On her third day on the job at Nextility, a five-year-old energy-technology firm, Joyce Ferris attended a board meeting where she resigned after three years as a director and officially became the company’s CFO — and got a gentle hazing.

Joyce Ferris, CFO, Nextility

Joyce Ferris, CFO, Nextility

Ferris “was in the hot seat” with her former board colleagues, who peppered the brand-new finance chief with a volley of requests along the lines of “we’d like to see this, we’d like to see that,” she says. “So it’s be careful what you wish for” if you want to be CFO.

“There was a lot of joking that they were going easy on me at this meeting, but ‘watch out’ next time,” recalls Ferris, who took on a previously unoccupied role as finance chief.

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Ferris returns to the executive suite after 14 years as a venture capitalist in the clean-energy field, having joined Nextility from Blue Hill Partners, where she was the founder and a managing partner. At Blue Hill, she raised $18 million in assets under management from public and private sources, according to a press release issued by her new firm.

All that financing experience could come in handy at Nextility, a venture-capital-owned firm which, according to Inc. Magazine, is the 688th-fastest-growing company in the United States, and one of the 10 fastest in Washington. D.C.

The firm has two lines of business: a solar hot water and electricity service and a new retail energy brokerage. Earlier this week, just her second on the job, Ferris told CFO about the challenges of her transition. An edited version of the conversation follows.

Why did you make the move from venture capitalist to CFO?
I started my career as an operator of companies. I founded and ran two different ones in the energy industry. I became a venture investor when I started Blue Hill 14 years ago. I loved it, and I still sit on two boards.

But the biggest challenge you face as an investor is that there’s only so much you can do to change or drive things. Your job is to advise, and sometimes all you’re doing is coaxing and pleading. You don’t have time to roll up your sleeves and make stuff happen yourself.

When I stepped back and looked at what I wanted to do next, I realized I was ready to get back to work and have “agency.” That’s my word for a job in which whatever happens, I’m the one who has to make it happen.

How did your focus change when you moved from board member to finance chief?
My experience on the board is that you always want more information, especially if you’re a good board. When I became CFO, that dynamic sort of flipped: part of my job will be to provide more information and material to the board.

Why did the company decide that it needed a CFO?
The company has grown tremendously, both in terms of size and complexity. Very much as a function of our growth and success, the company has ever-growing capital needs. For example, we might pay for the solar hot-water system on an apartment building. That’s money that we raise from specific types of project investors — it’s not venture-capital money. We are a capital-intensive business with a need to capture different sources of specialty capital. And continuing to source new capital and optimize the structure and the terms of that capital is a big job.

Will the traditional functions of the job of finance chief, like accounting, tax and risk management, be part of your portfolio as well?
Yes. But I am not, especially outside of our industry, your typical CFO. I’m not a CPA, although I’ve worked with strong CPAs my entire career and know my way around accounting. But we have a very strong controller and strong auditors, and the day-to-day work will be done by our existing team. And we’ll supplement that as we grow, as well.

In addition to capital raising, what will be your key areas of focus?
Developing tools that go beyond GAAP accounting to help the management team, the executive team and the board navigate our growth and make the best decisions.

Why are non-GAAP metrics so crucial to that task?
A big part of the business is project finance. For us, that means raising capital to invest in special-purpose entities that invest in the projects. We retain an ownership interest and a management role involving very long-term assets. The solar panels, for example, will be 20-plus-years assets involving tax and cash-flow complexity. Having come out of project finance, that’s sort of my core DNA.

The only way I know how to navigate such projects on a forward basis is to do cash-flow pro forma projections — in many cases out for the full 10-plus years of the asset lives. Looking at it that way, we need tools to manage and understand our need for working capital. We need construction capital to build plants and then sell them. We also have our power and gas offering, the procurement service, which is a long-term recurring revenue stream. GAAP just doesn’t tell the full story.

Part of my job is to drive down the cost of capital, but we also want to optimize how it’s available to us. What are the terms? And the best way to do that is to create clearer visibility of the need and then the risk profile of the different types of revenue streams.

Do you plan to create new non-GAAP metrics?
Absolutely. We will be creating different metrics that will enable us to make better decisions. In our business, it’s just as much about quality as quantity of revenue. There’s one-time revenue that comes when we complete an installed project. But then there’s recurring revenue, which is way more valuable.

It’s very common for small, emerging companies to be focused on pure short-term revenue. That’s critical if you don’t have capital resources available. But we have capital resources available. And now we need to be very strategic about how we invest them and how to not just improve the quantity of cash flow and revenue, but improve the quality of it.