An IPO without a CFO? No, No, No, No, No, No, No …
It’s one of those basic rules like “i before e except after c.” Only in this case it should be “c-level hires before IPO buyers — always.”
And yet, due to a reported shortage of qualified CFOs (color me skeptical), some companies are ignoring this hard-and-fast rule.
That’s crazy. It would be like taking off on a transatlantic flight without a navigation system.
You can’t conquer if you divide
An anonymous executive at an unnamed tech company that was contemplating an IPO told The Information that they planned to spread the CFO’s responsibilities out among other finance officers.
I wish the article had named the company. I would short their stock so fast.
Good CFOs can sell a dream. They can sell a vision. Their single greatest strength is their communication skills. Any CFO with the same numbers in the same quarter can make a company CEO look like a hero or look like a failure. It’s all in how they interpret the numbers and present them. Those who do it correctly inspire constituents to believe in them.
To think you could just cobble together a CFO by committee is incredibly shortsighted. It means you’re thinking of a CFO as simply the head of finance as opposed to somebody who can help transform the business. A high-level CFO does way more than crunch numbers. In fact, that’s the last thing they try to do. There’s nothing worse than a CFO who just throws a cold, wet blanket on the enthusiasm of an early-stage venture by saying, “Let me just talk to you about beans.” That’s such a buzzkill. It’s really hard to survive that. In the ’70s and ’80s, that was the classic CFO, but those days are long gone, at least on the tech side.
Today’s CFOs have their finger on the pulse of what is truly the lifeblood of the business. They create a believable and reliable and replicable story about how things will happen. And they keep it Fisher-Price simple. That’s how they get Wall Street to support their stock.
A CFO’s CFO
One of my earliest investors and a great sage, Paul Hirschfield, was on the board of Dell for many years and helped them through a very troubled time. Through Paul, I met a lot of Dell’s board members and c-suite and senior executives.
One was Tom Meredith. Simply put, Tom is one of the best CFOs ever.
Tom is a brilliant guy. He has a law degree and extensive experience in corporate finance, manufacturing and global financial markets. That’s the kind of expertise a good CFO brings to the table because a lot of the challenges an early-stage company faces involve compliance and legal issues. The CFO needs to react to whatever you throw in front of them, get it organized and dealt with — from the highest level strategy to the worst kind of legal issue.
And yes, they must have a good grasp of the financial side, too. But the best CFOs don’t just curate the financials — they reimagine them. With Tom Meredith as CFO, Dell shortened its cash conversion cycle from 40 days to minus-5 days. The brilliant thing Tom did was to eliminate the cash cycle, inventory holding time that was crippling the company. He accomplished that by integrating the vendors into the supply chain, putting the cash flow burden on them and having their customers prepay when they ordered.
In other words, instead of just holding inventory and eating that cost, Dell started building on demand. The results: ROI improved 154% in one year, and the stock price climbed 200% within a year.
As one of my mentors always said, you can sell the numbers or you can sell the story. You need the leadership of a strong CFO like Tom Meredith to figure out which path to choose and then follow it to success.
#startups #IPO #CFO #TomMeredith #finance #business