Davinder Athwal of Phenom On 5 Things You Need To Succeed In The Modern World Of Finance & Fintech

An Interview With Jason Hartman

Cultivate the Art of Selling (Ideas). Many times, after an intense, and perhaps controversial, financial analysis is complete and finally approved by everyone, that represents only the beginning of the real work to follow! I learned the hard way, earlier in my career, that approval of my financial analysis does not mean that I have actually persuaded anyone of the merits of the plan. Without this, the execution of the plan is sure to fail because no one (other than me) is personally invested. The art of persuasion is not one that comes naturally to most finance people, and is probably the one skill, if properly learned, that will have the single biggest effect on the effectiveness of finance.

As part of my series about the “How to Navigate and Succeed in the Modern World of Finance”, I had the pleasure of interviewing Davinder Athwal.

Davinder is the Chief Financial Officer at Phenom where he is leading and scaling the company’s financial infrastructure across all areas, including strategic and financial planning, tax, treasury, accounting, audit and investor relations, as Phenom rapidly expands its global footprint.

For more than 25 years, Davinder has been building and leading world-class finance teams through high-speed growth in both public company and venture backed environments. He has partnered closely with CEOs and Boards to increase shareholder value by improving operating performance, effective capital allocation and enhancing risk management and governance.

Most recently, Davinder was CFO at OSG, a global fintech company. Previously, he was CFO at Blucora, a provider of data and technology-driven solutions to the wealth management industry. Before that, he held progressively senior finance roles at UGI Corporation, Nortel, IBM and PwC.

Davinder earned his BA degree from Kingston University in London and his Masters from Long Island University, New York.

Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

You’re very welcome, and I appreciate the opportunity to share a bit about my background and career journey to date.

I earned my bachelor’s degree in accounting and finance from Kingston University in London, and later pursued a Master’s in finance from Long Island University. I worked full-time while I was taking my Master’s at a pre-IPO services company, as the assistant controller. The combination of that academic background and hands-on experience served as a great foundation to launch my professional finance career.

After graduating with my Master’s, I went to work at PwC, as an entry-level auditor, during the dot-com boom and worked with a number of disruptive companies that eventually went on to become household names. I was fortunate to work with a team of highly experienced professionals who mentored and guided me through the complexities of finance in the start-up world and bringing companies public. This early exposure instilled in me a deep understanding of capital markets and a keen interest in how finance can be a strategic partner to the business.

As I progressed in my career, I took on increasingly challenging roles within the finance departments of various companies. I gained valuable experience in areas such as budgeting, financial modeling, risk management, and mergers and acquisitions. I also sought out roles that exposed me to different situations, such as start-ups, global MNCs, turnarounds, and different capital structures. Each role presented unique opportunities to learn and grow, and I always sought to expand my knowledge and expertise.

One of the turning points in my career was when I joined Nortel, where I had the chance to provide financial leadership in the company’s turnaround efforts. The role allowed me to demonstrate strategic thinking, financial acumen and leadership abilities. It was a great platform to showcase my skills and vision for the financial health of the company.

After several years of hard work, dedication, and consistently delivering results, I was honored to be selected as the CFO of Blucora, a public fintech company. Becoming a CFO was a dream come true for me, and it has been an incredible journey of responsibility, leadership and the continuous pursuit of excellence.

Throughout my career, I’ve learned that being a successful CFO requires a combination of technical knowledge, leadership and the ability to adapt to an ever-changing business environment. I’ve been fortunate to work with talented teams and mentors who have supported me in my growth.

I’m truly passionate about finance, and I find great satisfaction in contributing to the financial success of the organizations I’ve been a part of. It’s a career that challenges me every day and allows me to continuously learn and evolve.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?

It certainly didn’t feel funny at the time, but I vividly recall my very first day at PwC, and there was a welcome lunch for new recruits organized by some of the firm’s senior partners and management. About 20 of us gathered at a local TGI Friday’s and once we’d had a chance to introduce ourselves and take our seats, our server approached to take our orders — starting with me.

In my eagerness to make a good impression, I decided on what I thought was a harmless choice — a cheeseburger and a beer. Little did I know that this would turn out to be a rather controversial decision, as I was unaware of the cultural norm in the U.S. that discourages lunchtime drinking. It was a bit like a classic scene from one of those old western movies, where the outsider walks into a bustling saloon, and the room falls into an abrupt hush and all eyes are on me!

The first lesson learned is the importance of ordering last! On a more serious note, that day taught me a valuable life lesson: in your professional journey, there will be moments when you get caught off guard and make significant blunders. And that’s perfectly okay; it’s a part of the learning process. The key is to persevere, adapt and grow from these experiences.

Are you working on any exciting new projects now? How do you think that will help people?

One of Phenom’s biggest investments in 2024 will be our IAMPHENOM conference in Philadelphia. The annual event attracts approximately 1,800 business leaders and HR professionals from around the world. The three-day event provides a forum for education, collaboration and peer networking as global organizations work to address their biggest HR challenges while balancing disruptive technologies and economic pressures. We could host the conference anywhere. We chose Philadelphia to support the local economy. It’s another example of how Phenom is different from traditional Silicon Valley startups.

Thank you for that. Let’s now shift to the central focus of our discussion. Extensive research suggests that “purpose driven businesses” are more successful in many areas. When your company started what was its WHY, its purpose?

I wholeheartedly concur with the idea that purpose-driven businesses are more successful in the long-run. Phenom’s purpose is to help a billion people find the right work. We have a fundamental belief that the traditional model of finding work is no longer effective.

For many, growing within a job has mostly come down to “resume-building” for the next one. What this means for most people is that finding a meaningful job, in which they enjoy the work, and can perform at a highly proficient level, tends to happen by chance more often than through intention. There’s a better way thanks to technology.

There’s also a higher and more profound “why” that underpins our purpose — it hinges on the fundamental importance of equal access to meaningful employment as a means to sustain our way of life. The importance of being able to do the work you love and continue to grow your desired skills cannot be overstated.

Do you have a “number one principle” that guides you through the ups and downs of running a business?

Balancing growth with returns. Markets have recently pivoted away from “growth at any cost” to efficient growth, which is good, but suffocating growth through insufficient investment is equally detrimental to value creation. I use a number of well-proven methodologies to balance growth with returns including the Rule of 40 in finance — which simply states that growth rate plus profit margin should exceed 40%.

If a fellow business leader would ask you for advice about whether to bootstrap or to look for VC capital, how would you help them weigh the pros and cons of that decision?

Investors expect organizations to invest for growth. The logical question is, “Do you need the money?” If you don’t absolutely need the money, and aren’t going to be able to accelerate growth by having it, VC capital may not be the best answer.

What measure do you use to determine the value of a company? What advice would you give to other leaders about how to get an optimal valuation of their business?

Valuation techniques are like family recipes for Sunday gravy! Sure, there’s a formulaic component, but what makes all the difference is how you blend all the ingredients together. My valuation recipe always starts with key financial metrics, which in the SaaS world are: revenue growth, gross retention, net retention, SaaS margins and conformity to the Rule of 40. There is then a set of additional metrics I use to better understand how scalable the current business is. For this I use a combination of CAC, LTV and the magic number, etc. I regularly review quarterly earnings for public SaaS companies for clues about where these metrics are trending, as well as the multiples those companies are earning on their forward results. I also speak regularly with friends in the banking industry to get a sense of how private markets are tracking their public counterparts. Doing this allows me to create a picture of market multiples by financial performance in each quartile. This serves as a solid starting point for where the business currently stands.

The art of valuation picks up where the financial analysis ends and revolves around where I believe these metrics can trend over the long-term. This involves looking at a time horizon of up to the next ten years, and involves mostly qualitative assumptions such as the quality of the product, quality of the management team, competitive position etc. On top of that, it’s also necessary to make some macro-level assumptions such as where the economy is headed, potential inflation and interest rate scenarios (which has come back into vogue recently) etc. The final part of the puzzle is how to weigh each factor. So, what you end up with is a very dynamic model that changes constantly.

My advice to other leaders would be to first and foremost understand at an intimate level the key financial drivers of valuation in your industry and think about all the qualitative resources you have at your disposal (or need to have) to move your company’s respective metrics into the top quartile and keep them there.

What would you advise to a founder who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?

Building on what I’ve said above, the discussion should begin with a careful consideration of whether more growth is the best way to create value. It’s true that company value is maximized initially through high growth rates, but that growth rate will inevitably slow, and as it does so, returns must increase. Empirical studies have shown that rates of return can be incredibly stable if a company is well managed. So, the real objective should be to transition from high growth rates to sustainable rates of return. Having said that, if rates of return are also low, likely because the business has not achieved sufficient scale, then growth should be the founder’s primary focus. Unfortunately, there is no universal way to achieve growth, as it varies depending on circumstances and stage of maturity, but as a starting point, founders may want to think about the difference between sales-led growth and product-led growth strategies.

What are the most common finance mistakes you have seen other businesses make? What should one keep in mind to avoid that?

Every company that’s ever failed has failed for one reason only — running out of cash. There are myriads of ways they arrived at that point, but ultimately it’s an inability to make payroll or pay bills that kills them. The most common finance mistake I’ve seen companies make is not properly monitoring cash until it’s too late.

I would urge all companies to get into the habit of forecasting and analyzing cash flows just as meticulously and rigorously as they review sales or EBITDA. I like to look at cash at three levels:

1. My expected cash balance a year from now, which is very high-level and I’m looking for accuracy of +/- 10%;
2. My expected cash balance six months out, with an accuracy of +/- 5%; and finally;
3. Detailed cash flow projections for each of the next 13 weeks, which should be pretty much spot on, since I am using known cash receivables and payables to develop this projection.

The first two are early warning indicators and the last one is a tactical execution plan. During the onset of the pandemic this process worked flawlessly as intended and prevented what could have been a catastrophic liquidity crisis for my company at the time.

Ok, here is the main question of our discussion. Based on your experience and success, what are the five most important things one should know in order to succeed in corporate finance[the modern finance industry]?

1 . Always be Curious. This is all about keeping an open mind, and truly listening to others before jumping into your own perspective, and being receptive to fresh ideas and viewpoints. I’ve figured out from my fair share of trial and error that there’s more than one path to most outcomes. Recognizing this leads to the kind of humility that fuels an open mind, always ready to learn. Finance is a logic-based profession, and requires advanced mental processing speeds, which means that we can very often out-think others in the room. But here’s the kicker — that sometimes gets in the way of learning new things, especially those that are not discernible from analytical review alone. So, enter every discussion with the objective of learning something new, give yourself at least a minute to think about ideas you don’t agree with before responding because when we are challenged, our frontal lobe takes 45 seconds to realize we are not in a fight-or-flight situation.

Curiosity also extends to learning new skills that make you more effective in your job. So, keep attending those brown bag lunches, keep firing questions at your colleagues, and tap into the wealth of information and education available online, as well as old-fashioned reading. When something intrigues you, go beyond just skimming the surface — dive deep. A solid foundation of knowledge is what sets an expert apart and earns trust from others, placing you right in the heart of decision-making and control. Keep that curiosity alive!

2 . Create an Agile Finance Function. As corporate finance continues a transformation journey from being a tactical function to a strategic one, a new type of organization design has become necessary and leading-edge CFOs are applying agile methodology, particularly the scrum framework, (both popular in software development) to finance and accounting processes. The agile finance function is characterized by operations that are efficient and scalable; accessible financial data with self-serve capabilities; regular review of the function for fitness-for-purpose; quick adaptation to changes when necessary; and empowered finance roles that are closely tethered to the business. This approach streamlines routine tasks, enhances analytical results, and fosters alignment and ownership across the organization, and without this type of set-up it’s impossible to move finance into a strategic position within the business, and too easy to remain stuck in the tactical realm.

Common examples of these techniques include: rolling forecasts, and finance operations benefit from task organization and sprint backlogs to reduce handoffs and eliminate silos. Scrum delivery is particularly useful for responding efficiently to unplanned requests for insights in analytics.

3 . Take the Lead on Driving Sustainable Enterprise Value Creation. Basic finance theory holds that enterprise value is ultimately the sum of all future net cash flows a company is expected to generate over its lifetime, therefore to create enterprise value, you must sustainably grow future cash flows, and this is a key task for the modern CFO who aspires to be seen as a strategic business partner to the CEO and Board. There are three broad strategies that can be used, each of which is heavily dependent on finance to be effective:

Optimizing the existing business, which might involve pricing adjustments to reflect market dynamics; identifying and eliminating waste in operating costs; accelerating cash conversion cycles; and implementing technology to streamline processes. Meticulously tracking, monitoring and reporting of KPIs by finance is critical to identify areas of opportunity and measure progress against targets.

Investing in organic growth initiatives through a process that funds the most promising and highest-return projects submitted by managers across the business. This is a key objective of the annual financial planning cycle, which ties the company’s strategic plan to its financial plan.

Considering inorganic growth means, such as acquiring value-accretive businesses that align with the strategic direction of the business and fill a gap in existing capabilities, quicker and more cost-effectively than building those capabilities in-house. Rigorous due diligence is essential to ensure that the assumptions used to estimate value are sound, and to uncover potential post-integration roadblocks and value destroyers. While diligence is conducted by functional experts in areas such as sales, marketing, product, legal, etc., finance usually project-manages the overall effort.

4 . Embrace Risk and Failure as Pre-requisites to Success. In today’s fast-paced and volatile business world, there is a trade-off between speed-to-action and the veracity of information available to inform the decision-making process, with a strong bias for speed. Because finance is a logical-thinking process, it can become easy to get stuck when there is insufficient data to support a decision. However, rather than simply avoid all risk and decline the opportunity, I would suggest that finance takes the lead on working with other business leaders to frame the consequences of these risks and then caucus with the other leaders on potential mitigation plans. This partnering approach ensures that the organization’s best judgment has been applied as well as broad ownership of any risks being taken. There will of course be misses and unexpected failures along the way, but these will also be the lessons-learned that will aid future decisions.

5 . Cultivate the Art of Selling (Ideas). Many times, after an intense, and perhaps controversial, financial analysis is complete and finally approved by everyone, that represents only the beginning of the real work to follow! I learned the hard way, earlier in my career, that approval of my financial analysis does not mean that I have actually persuaded anyone of the merits of the plan. Without this, the execution of the plan is sure to fail because no one (other than me) is personally invested. The art of persuasion is not one that comes naturally to most finance people, and is probably the one skill, if properly learned, that will have the single biggest effect on the effectiveness of finance.

Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?

Know yourself and what makes you happy. Don’t fall into the trap of confusing success with happiness. Only you know what motivates and excites you. First find out what that is, and then discover how you can get more of that in all aspects of your life, including the work you do. If you are happy doing what you love, success will follow.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

What I’ve learned about myself is that I’m really attracted to disruptive companies that are trying to make a difference. My journey to Phenom was actually unexpected. I wasn’t looking for a new job when I was contacted about the CFO role here. To be honest, the only reason I took the call from the recruiter was because I was really intrigued by the fact that there’s a venture-backed high growth software startup in Philadelphia, and that just doesn’t happen very often.

My meeting with the CEO went well obviously. When I got home later that night, I began to think about the fact that we’re all surrounded by people we know personally who, for whatever reason, are just not in the right job. As a result it’s affected them and their families and their aspirations in incalculable ways.

Just think how much happier we would all be if we were doing what we were truly called to do.

How can our readers further follow your work online?

I’m on LinkedIn at:

https://www.linkedin.com/in/thesavvycfo/

This was very inspiring. Thank you so much for joining us!

About The Interviewer: Jason Hartman is the Founder and CEO of Empowered Investor. Jason has been involved in several thousand real estate transactions and has owned income properties in 11 states and 17 cities. Empowered Investor helps people achieve The American Dream of financial freedom by purchasing income property in prudent markets nationwide. Jason’s Complete Solution for Real Estate Investors™ is a comprehensive system providing real estate investors with education, research, resources and technology to deal with all areas of their income property investment needs. Through Jason’s podcasts, educational events, referrals, mentoring and software to track your investments, investors can easily locate, finance and purchase properties in these exceptional markets with confidence and peace of mind.

Starting with very little, Jason, while still in college at the age of 19, embarked on a career in real estate. While brokering properties for clients, he was investing in his own portfolio along the way. Through creativity, persistence and hard work, he earned a number of prestigious industry awards and became a young multi-millionaire. Jason purchased a California real estate brokerage firm that was later acquired by Coldwell Banker. He combined his dedication and business talents to become a successful entrepreneur, public speaker, author, and media personality. Over the years he developed his Complete Solution for Real Estate Investors™ where his innovative firm educates and assists investors in acquiring prudent investments nationwide for their portfolio. Jason’s sought after educational events, speaking engagements, and his popular “Creating Wealth Podcast” inspire and empower hundreds of thousands of people in 189 countries worldwide.

While running his successful real estate and media businesses, Jason also believes that giving back to the community plays an important role in building strong personal relationships. He established The Jason Hartman Foundation in 2005 to provide financial literacy education to young adults providing the all-important real world skills not taught in school which are the key to the financial stability and success of future generations. We’re in a global monetary crisis caused by decades of misguided policies and the cycle of financial dependence has to be broken, literacy and self-reliance are a good start. Visit JasonHartman.com for free materials and resources.