On the Fast Track: NineSigma

CFO Bill Chorba tells how an innovation company looks at growth.
Alix StuartDecember 8, 2011

Innovation — as in, Where’s the money coming from next? — is an inescapable topic for most CFOs today. That includes Bill Chorba, CFO of NineSigma. He has one advantage, however: innovation is his company’s core product.

NineSigma, an 11-year-old privately held firm with less than $50 million in annual revenues, specializes in a field known as open innovation. In essence, the company acts as an agent for a client’s new-project needs, bidding out the problem to be solved to a network of in-house engineers and Ph.D.s and outside contractors. NineSigma has so far shown strong growth: revenues increased over 20% last year, and the company expects 25% to 35% growth in the years ahead. “We are continually driving toward ways to do things better and faster for our customers,” says Chorba, such as helping them get products to market faster and more cheaply. “We have to be innovators in the space of innovation, as clichéd as that sounds,” he says.

Chorba joined the company in December 2009 as CFO. He oversees global financial management and strategy, risk management, accounting, treasury, and administration for NineSigma’s operations in the United States, Europe, Japan, and Australia. Chorba recently spoke with CFO about his top areas of focus going into 2012; an edited version of the interview follows.

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How are you thinking about growth these days, and what are the key drivers for your company?
Europe is a key driver of our growth, because they’re about two to three years behind us in terms of open innovation. We can take the model we’ve developed in the U.S. and apply it very efficiently there.

The second area, of course, is to increase our breadth and depth with existing clients. And a third area [is through motivating our employees]. As a management team, we made the decision we were going to lift the veil on where we were with financials with our people, so we developed a three-year rolling forecast and share it with our teams regularly. There’s a premise behind this that I feel strongly about: the fear of the unknown is paralyzing, but the fear of the known can be motivating. [With the financial information], we can work together to help make up shortfalls or reduce surprises.

To what extent is the European debt crisis affecting your business?
We do have an eye on it, because obviously the economy is global, so whatever is happening in the EU will have an effect on the whole world. But we have a strong presence in the Benelux region, Germany, and France, and clients in those regions have a deep appreciation of the importance of innovation. So we’ll keep a sharp eye on it, but continue to expect good results from the region.

So much of what you do is virtual. Why open offices in other countries?
We are collaborative, and collaboration is enhanced when you can get together. Body language and emotion and excitement can get lost in electronic interactions. Also, we’re not going to profess that everything we do here is something we can impose into a new marketplace. There are cultural differences that we want to be part of, not ignore.

So do you travel a lot?
To date I have not; a lot of our people come here.

What does your finance team look like?
We’re very light when it comes to administrative staff. We have a treasurer in the U.S., one office manager each in Japan and Europe who handles A/P and A/R [for those regions], and myself. That’s it. I’m the liaison with legal, and I handle IT and HR. Philosophically, we really don’t want a lot of roles that are not revenue touching. [Editor’s note: Overall, NineSigma has about 60 full-time employees on staff, plus a variable workforce of specialized contractors.]

As the CFO of a private company, to what extent does your role involve investor relations?
We have almost 100 private investors, including a significant number of founding and angel investors, so I spend a lot of time talking to them. We don’t disclose our full capital structure, but we have a pretty fair blend of different types of capital. [Editor’s note: The company has raised more than $10 million total to date, including a $2.5 million debt financing earlier this year.] It sometimes requires a psychologist’s hat. They all have a common goal — to get a return — but very different perspectives. So we have an annual meeting for investors, and then do a lot of e-mail communication and phone calls throughout the year.

What projects are top-of-mind for you at the moment?
One of them is rolling out a new wellness program. It’s not to decrease health-care costs; the data on that is not even clear yet. Instead, we feel a moral responsibility. Everybody works really hard, and this is a way to incorporate some teamwork and give employees access to resources they might not otherwise have.

It’s still early-stage, and we’ve formed a committee [to work out the details]. Obviously there’s going to be some cost, but it doesn’t have to be overwhelmingly costly. And if you get a by-product out of it — like increased presence, lucidity, or teamwork — that’s a great bonus.