How to transform your high-growth social venture with strategic finance

Nexleaf’s business has been booming. Nexleaf focuses on global health and climate change interventions through the use of sensor devices and a cloud-based monitoring platform. To date, Nexleaf has deployed over 13,000 sensors and currently monitors vaccines protecting 12 million babies born each year.

In the past two years, Nexleaf has expanded to 9 countries and more than doubled the size of its team, which is spread across 4 countries. While incredibly exciting, Nexleaf was feeling the pains of rapid growth as previous processes were no longer working. Nexleaf knew it needed to better use financial planning and forecasting to drive its impact and growth, but needed guidance on the roadmap to tie its organizational goals with its financial realities.

Working with RippleWorks Expert-In-Residence Laura Hazlett, a seasoned CFO who currently leads financial operations for the Pac-12 Conference, Nexleaf set out to build a strategic finance mindset throughout the organization. Through the course of 5 months, Laura guided Nexleaf through a journey that resulted in strategic decision-making, which Nexleaf CEO Nithya Ramanathan describes as now being a “fundamentally different, coherent process.”

RippleWorks Expert Laura Hazlett (middle) with the Nexleaf team

“Before we were just planning for impact, and now we are planning for impact and long-term financial sustainability hand-in-hand,” Nithya said.

Here, Nexleaf shares the key insights that it learned as it started to incorporate strategic finance into its organization, and what other similar ventures should keep in mind:

Capture your impact and business with clear and simple metrics

Social ventures, especially non-profits, tend to be clear on what kind of impact they aspire to have. But what can be less clear is what will be required from the finance and operations side, such as financial costs and budgets. That’s where strategic finance can drive decision-making.

“At the end of the day, if there’s no margin, there’s no mission,” Laura told Nexleaf.

Nexleaf had spent several quarters tracking different metrics to try and understand how the organization was performing, but the team wasn’t getting a clear picture of how to drive strategic decisions to grow its sustainability and impact. Sometimes decisions were made based off of a budget, and other times it was by looking at what was happening on the ground.

With Laura’s help, Nexleaf rolled up its sleeves and got to work, digging into how it measured performance — financial and impact. Nexleaf created internal and external Key Performance Indicator (KPI) dashboards in order to track and report against annual goals.

The most important step in tracking performance is to identify the right KPIs. Nexleaf used a lean mentality by testing and iterating. Nexleaf first pinpointed KPIs it thought it should be tracking and created a mock dashboard with made-up numbers. This allowed Nexleaf to simulate the use of the dashboard in making decisions, which showed which KPIs were most useful, and which KPIs were missing.

A key insight for Nexleaf was to avoid adding so much overhead that gathering the metrics would outweigh the value of the metrics. Laura challenged Nexleaf’s new ideas for KPIs by asking, “Does this new variable give you the information you need? What about it is valuable? What exactly are you trying to learn?”

Strategic finance isn’t just additive, it’s redefining

As the team worked with Laura, Nexleaf learned that strategic finance isn’t just a new lens to use in its organization, it is the lens. And when it is done right, it will cut across all aspects of the business.

“There were partnerships that we previously didn’t pursue because we were only thinking about impact on its own and were optimizing for one variable,” Nithya said. “Because we are now thinking about finance and impact in one picture, these partnerships suddenly rose to the top. Now, we find ourselves asking, ‘How did we not see this?’”

In order to make sure that the right KPIs were being tracked to drive both longer-term and day-to-day decisions, Nexleaf included its whole team in creating the dashboard. The Nexleaf team gave input on what questions people would need answers to in order to make decisions. Then, Nexleaf defined roles and responsibilities within the team for who was responsible for maintaining portions of the dashboard, as well as a calendar on how to update and review it.

Strategic finance isn’t just about setting up dashboards, but connecting them to the operating plan. For Nexleaf, this approach has, as Nithya put it, “seriously shifted how we operate.” For example, upon using metrics to look at the relationship between impact and the business, Nexleaf decided to integrate the sales and program teams into a single team.

Build yourself permission to plan aggressively

Nexleaf created a consolidated budget, and doing so gave Nexleaf the freedom and flexibility to plan aggressively. Without a forward-looking consolidated budget, it is easy for organizations to fall into the trap that Nexleaf was finding itself in: concerns about upcoming one-off expenses (whether emergency or opportunistic) were impacting Nexleaf on how it thought about its business goals and the ongoing expenses that would drive them.

With a consolidated budget, ventures can plan strategically without having one side drive the other. Nexleaf devoted portions of its consolidated budget to strategic funds, allowing it to think independently about the rest of its operating plan. A couple of key additions Nexleaf made were:

  • Contingency funds: Funds that could be tapped into in case of an emergency, like a major equipment breakdown or an unexpected maintenance fee.
  • Innovation funds: A reserve for appropriate strategic investments, such as a website redesign.
  • Carry-forward surplus funds: Funds left over from the previous year to carry forward. Separating the surplus funds helps keep track of them so they doesn’t get absorbed into the next year’s spending without awareness.
  • Separated restricted funds: Funds fenced off that have stipulations for how they must be used.

Social ventures, and non-profits in particular, tend to budget conservatively. But Laura, who has extensive leadership experience with non-profits, challenged Nexleaf that if it was always hitting its budget, Nexleaf was not being aggressive enough. Nexleaf had been mulling whether and when to make bigger investments as it eyed the growth of its impact, and now was their chance to plan more aggressively on making them. Nexleaf incorporated those future investments into its consolidated budget, giving itself the permission to proactively invest in its future, rather than being reactive along the way.

Moving forward

Nithya describes Nexleaf as feeling “powerful” as it now plans for impact and business together, all in a clear, metric-driven way. Nithya and Nexleaf will be the first ones to say that getting to a place where strategic finance is driving your organization is a challenging process with a learning curve. Nithya’s advice for leaders of high-growth ventures who are starting on that journey: Sometimes you can’t do it all. Be open to failing and be willing to ask for help.

RippleWorks Foundation connects leading expertise from Silicon Valley and the larger tech sector with social ventures for short-term, high-impact volunteer projects that unlock the ventures’ capacity for growth.