Hooked on Startups

Some CFOs can’t resist the challenges of fresh beginnings and fast growth.
David KatzFebruary 18, 2016

startup CFO 16Feb_StartupsForget about organization charts and job security. Since the dot-com boom two decades ago, a new breed of CFO has emerged. These finance chiefs don’t mind jumping from startup to startup, preferring the excitement of fresh beginnings to the everyday routine of a brand-name corporation.

Indeed, the career risk is part of the attraction for finance chiefs at early-stage firms in the information technology sector. While such companies may fail fast, they can also have big upsides.

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More than that, however, the appeal for many CFOs in working for tech startups is the opportunity to create a finance function from scratch, get involved in operations, and play a key part in a fast-growing environment. To be sure, such finance chiefs retain all the traditional finance functions, including accounting, tax, financing, and risk management. But the top finance job also typically demands the flexibility to work on other corporate functions.

While maintaining adequate cash flow is, not surprisingly, high on their list of concerns, helping their companies attract top talent seems an even more critical focus for startup finance chiefs.

Such are the takeaways from recent conversations with four CFOs of software startup businesses about their current jobs and career paths. They represent a rich variety of endeavors: social-media data mining, radiology, accounts payable and payments automation, and — yes — providing grocery shoppers with detailed information about every egg they buy. Here are their stories.

Why He Left Google
Julio Pekarovic, Dataminr

Although it wasn’t exactly like working for a traditional startup, Julio Pekarovic feels he got his first exposure to life in the fast lane in 1995, when he became commercial planning director of Expo ’98, the 1998 World’s Fair in Lisbon, Portugal.

In that capacity, he built a team responsible for the revenue-generating operations of the 132-day exposition that grew from a handful of staffers to a roster of 1,000. His staff’s work included rounding up official sponsors, selling tickets, and merchandising.

“That was the first taste I got of hypergrowth and growing companies. In this case it was a World’s Fair, but it was on a fast-paced basis,” recalls Pekarovic, now the CFO of Dataminr, a seven-year-old firm that mines tweets for data that companies can use to control their risks.

Just as the dot-com boom was peaking, Pekarovic moved to Silicon Valley to eventually become senior finance manager for financial planning and analysis at Commerce One, where he ran the startup’s global trading site. After it went public in 1999, the business-to-business e-commerce firm saw its share price jump nearly 1,900%, leading Wired magazine to crown it the top-performing initial public offering of the year.

16Feb_Startups_p37_v3But by 2002, like many of its peers, Commerce One was going downhill just as fast as it had risen. “Unfortunately — or fortunately — the company was hit very hard by the dot-com bust,” says Pekarovic. “I lived through a series of layoffs until I decided to jump ship and move on to a little-known search-engine startup that became Google.”

As Google’s head of financial planning and analysis, Pekarovic was one of only a few hundred Google employees at the time. At the start of his seven years at the firm, he began hiring a finance team to support the growing business at Google. His first hire was Jason Wheeler, who is now CFO of Tesla Motors, the electric-car company.

In those days, Pekarovic recalls, sales numbers were being calculated and recorded by finance people within sales, rather than overseen by finance. To help achieve what he feels was needed separation between sales and finance, he became director of a new division at Google, which he himself dubbed sales finance, he remembers.

By 2009, Pekarovic had seen Google grow from a company with about $50 million in revenue to a $21 billion tech colossus with some 25,000 workers. But while the company was growing, the opportunity for creativity that he prized was shrinking. “The greatest value that the majority of employees at that time could provide was just to follow the established rules,” he says.

As a result, he decided to leave Google that year to become CFO of Quantcast, a digital ad audience-measurement firm founded just three years earlier. Then, after four years at Quantcast, Pekarovic took the finance helm at Dataminr in September 2015.

By a number of measures, Dataminr, which was founded in 2009, wouldn’t exactly be considered a startup. After all, it’s been valued at $700 million, lists Fidelity Investments among its major shareholders, and employs about 200 people. To Pekarovic, though, the essence of being a startup may be more a state of mind than anything else. “I think Google in many ways considers itself a startup and always did,” he says. “It’s an innovation hotbed.”

And Dataminr? “The way that I would classify us is that we’re a technology company with a huge opportunity in front of us,” says Pekarovic.

Driven by Uncertainty
Andrew Webb, Candescent Health

Two decades of working for small, midsize, and large companies have given Andrew Webb a clear sense of the kind of organization that fits his temperament.

“I figured out over time that smaller companies are where I am most invigorated,” says Webb, CFO and chief administrative officer of Candescent Health. “Part of it is that there is almost immediate feedback on the things that you do.” Moreover, he says, “you can have the most influence on the success and, potentially, the failure of certain things. And that to me is really important.”

Webb’s involvement with small firms began in earnest in 1999, when, as an associate in business development at Merrill Lynch, he helped launch a number of them. He left Merrill in 2002 to join one of those firms, a provider of capital markets data still known as Ipreo, as vice president of strategic development. Following Ipreo he spent five years as a managing director at financial services provider Knight Capital Group (now part of KCG Holdings), where he again helped launch a number of small firms.

Continuing his career pattern of moving from jobs where he provided liquidity for early-stage firms to ones in strategy, operations, and, now, finance, Webb became CFO of Radisphere, a radiology practice, in 2014. The company was acquired by Sheridan Healthcare in 2015, but Radisphere founder Scott Seidelmann retained the firm’s software, analytics, and business processes, subsequently starting Candescent Health as an independent software company. Webb took the finance helm at Candescent.

startup CFO 16Feb_Startups_p38aUnlike Radisphere, which actually provides X-ray services, Candescent provides a cloud-based system that aims to help radiologists be more efficient. Webb says that the change in his employer from health care provider to software startup has pushed him to be more innovative and find ways to make the firm more efficient.

Before the sale of Radisphere, the combined company was much bigger in terms of revenue and staff. “Not to take away at all from the team that we had at Radisphere, but that got people into a mindset … of doing things just because they had been done in the past,” says Webb, who went from overseeing 10 finance staffers to just 2 at Candescent.

That shrinkage prompted the new company to simplify its processes. Thus, even with a smaller finance staff, Candescent was able to slash the time needed to close its books from seven to eight business days to three to four days.

Webb attributes the efficiency to two changes generated by the launch of the new company and the separation from the old one. For one thing, shedding Radisphere meant that Candescent’s finance team no longer had the burden of having to process the billing necessitated by thousands of radiology studies a month.

The second change involved the winnowing down of the company’s personnel to a smaller team more attuned to the life of a startup. “People who choose to work at a startup generally have a certain personality type,” says Webb. “And we actively go out and try and find those people.”

What kind of personality type is that? “For a startup you want to find people who are really motivated to be in an environment in which there’s always an element of uncertainty,” explains Webb.

That uncertainty may range from where the next round of financing may be coming from to the nature of the work itself. Webb wants to hire people who are flexible enough to adjust when he says, “I know we told you your job was this, but today it’s going to be this, too.”

Smaller Is Better
Bill Price, Mineral Tree

In 1991, after eight years in public accounting at now-defunct Arthur Andersen, Bill Price had an opportunity to join one of his clients, MediQual.

Bain Capital had just invested in the medical software firm, which had a newly installed chief executive and was looking for a CFO. The leadership of the then-$2 million company “reached out to me, and the timing was right,” recalls Price.

Thus began his current 24-year run as a finance chief of nascent software firms. Following MediQual, where he led and managed the company’s IPO and helped sell it to Cardinal Health in 1997 for $35 million, Price moved on to stints at NextPoint Networks, MarketSoft, and Zoominfo. Since 2013, he’s headed up finance at MineralTree, a venture capital-backed software-as-a-service (SaaS) firm that sells accounts-payable software.

Comparing the desirability of working at larger, well-established companies and emerging firms, Price says: “I’ve worked for both. I much prefer smaller.”

But there are pros and cons to both. “At an early-stage company there are certainly fewer resources to get your jobs done — not as many systems, certainly not as many people,” he says. “But on the positive side, everyone at our company is doing original work. There’s no such thing as a pure manager at Mineral Tree.”

16Feb_Startups_p38_v3That gives him the chance to get involved in activities outside the realm of “straight-up finance.” In January 2015, for instance, MineralTree entered into an agreement in which e-commerce giant First Data is investing in the smaller firm and helping to finance the sale of MineralTree software to First Data customers.

In the wake of the deal, Price is currently working with First Data to make sure that MineralTree has “policies, programs, practices, and operational steps in place to ensure that [First Data] customers’ data is secure” and that the software firm is complying with regulations.

Among the traditional bread-and-butter tasks of a finance chief, Price is most concerned with weighing the need for speed in raising cash against that of investing it wisely. “It’s always a challenge financing a growing company,” he says, along with that of “balancing the responsibility of managing cash and maneuvering around the ever-changing financial landscape as well.”

Now is a good time to raise cash, he observed late last year. Venture capitalists are doing more deals, he says, adding that “private equity is definitely getting involved in the right-sized company. And strategic investors have a ton of cash and are looking to put it to use.”

Like other software companies, MineralTree’s most important accounting metric is annual recurring revenues. “With a SaaS-based company, it’s really all about signing up customers to a subscription, whether it is monthly or annual or multiyear,” says Price. “If you can do that, you’ll have a very successful software company, with significant growing revenues.”

Guaranteed Fresh
Daren Schultz, TEN Ag Tech

“I like transparency, and I don’t like that things are being hidden from people,” says Daren Schultz, CFO of TEN Ag Tech, explaining what most appeals to him about the agricultural technology startup’s business model.

Schultz, who has been finance chief and treasurer of the private equity-owned firm since July 2015, was referring to the difficulty shoppers might have in determining the freshness of each egg in the cartons they buy in supermarkets. In environmentally conscious Southern California, that’s a big concern, he says.

startup CFO 16Feb_Startups_p39v2Indeed, the San Juan Capistrano, California-based company aims, via its cloud-based technology, to partner with food retailers and farmers to get them to offer eggs that each have a use-by date and a code unique to the farm where the egg was laid. “We can trace your egg’s moment of packing to within 180 seconds,” the firm’s consumer website boasts.

“Everyone deserves accountability, and everyone’s going to be able to understand whether there’s freshness, transparency, certification,” says Schultz. “They’ll be able to understand where the animals are, how they’re being treated, and, ultimately, the safety of the food they’re consuming.”

The finance chief notes that it’s still early days at TEN Ag Tech — and that’s precisely one of the things he likes about it. He defines the five-year-old firm as a startup because it’s in a “test mode,” having spent the bulk of its efforts on research and development and patent work before 2015. It was only last year that the firm did a “soft launch” of its application, he says.

“We’re still very young, and we’re not quite out to market yet in full capacity,” notes Schultz, who joined the firm in 2014 as director of financial operations before being promoted to his current post.

Previously, he was director of finance at Mitchell International, a provider of insurance claims handling technology owned by private equity giant KKR. Referring to Mitchell as a “more established” company, Schultz feels he has more leeway to make a mark at TEN Ag Tech. “In established companies the business model and a lot of the processes are in place already,” he says, “whereas here, I’m going to be able to add a lot more value.”

One area in which he feels he’s making a difference is in closing the firm’s books. “When I joined the company the close process wasn’t very thorough,” Schultz recalls. Now, “we are taking steps every day to improve and speed up the close.”

David M. Katz is a deputy editor of CFO.