Author: mikekaswan

 Make sure you fill those crucial initial spots with a great team that will take you places.

Congratulations to the Houston Astros, 2017 World Series Champions, and to the city of Houston who can use the win after a rough summer of devastating storms.  How did the worst team in baseball in 2013 with only 51 wins turn it around so quickly and reach the pinnacle of their sport?  They committed themselves to building the best possible team using all means available.  The Astros beat the Los Angeles Dodgers, another great team that also had a great season.  Both teams won over 100 games and survived a tough run through the playoffs.  Also, both teams made major in-season moves that just may have been crucial to getting them to the World Series.

Assembling the best team

Like every other major sport, it’s now conventional wisdom that to win a championship, you do everything you can to put the best team on the field. The Astros traded for Justin Verlander, who went a combined 9-1 in the remainder of the regular season and playoffs and was key to all three of their playoff series wins.  The Dodgers picked up Yu Darvish who helped solidify their rotation and get them to the World Series.  Last year, it was Aroldis Chapman joining the Cubs and Andrew Miller joining the Indians.  In 2015, it was Johnny Cueto and Ben Zobrist for the Royals and Yoenis Cespedes for the Mets.

This lesson applies just as well to startups and to companies as a whole. The best team wins, and the question to ask is: are you doing everything you can to put the best possible team on the field?

I spent 13 years as a venture capitalist and during that time we had a saying.  If the three most important factors in real estate investing are “location, location, location”, we often said the three most important factors in VC investing are “management, management, management.”  We would take an “A” management team with a “B” idea over the reverse every time.  Why?  Because we had confidence the “A” team would be able to handle all the twists and turns required to successfully navigate the startup minefield and eventually find the “A” idea.  While the “B” team might just get stuck and fail to execute.

As a founder and entrepreneur, I had the same experience regarding the importance of having the right team. No matter how novel the idea, there were always multiple other companies chasing the same goal.  With the proliferation of startups, accelerators, incubators, seed funds, crowdfunding, etc, this is likely more true today than ever.  There is no doubt that timing matters.  Market size matters.  Business model matters.  But all else being equal, the better team has a much greater chance at winning.  I’ve seen it personally from both sides.  Bet the jockey, not the horse.

The relentless pursue of opportunity

Of course, as a startup you don’t have unlimited funds to pay seasoned leaders to join your team.  So, you need to be creative and grab talent whenever and however you can.  Probably the best definition of entrepreneurship I ever heard was from legendary Harvard Business School Professor Howard Stevenson, who defined it as “the relentless pursuit of opportunity beyond resources controlled.”

I joined Burkland Associates about a year ago and one thing that has surprised me so far is how many founders I’ve met who spend their time building Excel models, creating pitch decks and even doing journal entries and reviewing expense reports instead of leading their companies. At a stage where assembling a great team is crucial, a great founder focuses on setting the vision, charting the course, motivating the team and assembling the resources to be successful.  Recruit a team of experts – full time or part time, employees or consultants – to help you execute.

Justin Verlander and Yu Darvish may only take the ball every fifth day. They may not even be around 2-3 years from now, but this year, they made all the difference. The lesson to learn from this is: who can you add to your team to give you the cover you need to put you over the top?

Think about it.

Renting a CFO can help you have a strategic partner to realize your vision (photo courtesy of Silicon Valley entrepreneur and photographer Christopher Michel).

Startups are hard.  Most fail.  Even ones with great ideas.  So, how do you maximize your odds of success?  Hire the best team you can afford.  Including a Strategic Chief Financial Officer with the skills, experience and vision to be your business partner and trusted advisor.  Muhammad Ali had Angelo Dundee.  King Henry VIII had Thomas Cromwell.  Luke Skywalker had Obi-Wan Kenobe.  Who’s got your back?  It could be your part-time CFO.

Can’t you get away with just an accountant?  In a word, “no”.  Accountants are important and help you figure out what’s happened in the past and report the same to your internal and external stakeholders.  But you are an early-stage company.  You need to drive the bus by looking ahead through the windshield, not behind in the rear-view mirror.  Smarter finance is forward looking – it helps you chart the best course.

Shouldn’t you be doing this yourself as the CEO?  Again, “no”.  Best case, you are actually capable of filling this role.  But this isn’t the best use of your precious time. You need to drive the company’s product and sales, build the team and be the company’s face to the outside world. Time spent in finance is time spent away from your highest and best purpose.  Worst case, you screw it up.

But can you afford and attract a top-quality CFO?  Yes!  Because you don’t need this resource full-time and can pay only for what you need.  We live in an on-demand world.  Don’t buy servers – rent time from AWS.  Don’t buy a car – book an Uber.  Don’t buy a vacation home – go on Airbnb.  And don’t hire a full-time CFO (yet) – rent one from a reputable On-demand CFO firm.  You probably only need 0.5-2.0 days per week, can find A-list talent with expertise in your field and be up and running in days.  And when you’re ready to make a change, it’s simple to move on or upgrade to a full-time resource.

Here are 5 key things you get from a part-time Strategic CFO:

  1. Build and maintain your business and financial model. How will you monetize your idea?  How should you price and deliver the product or service?  How much cash is required to hit your next milestone?  When do you need to raise your next round?  What resources can you afford and when should you deploy them?  How do you know if it’s working and when/how to pivot when the market gives you feedback?  Your CFO helps you answer all these questions.
  1. Leverage your management team so you can punch above your weight. The CFO is a core member of your team even if they are not sitting in your office 50 hours per week.  They bring expertise, contacts and credibility to your company and can help you manage all the internal/administrative functions so your time can remain focused on building and growing the top line.  A proven CFO also gives board members, investors and other outside stakeholders confidence in you and the company.
  1. Be your strategic partner and key sounding board. CEO is a lonely job, even in the biggest companies.  The best CEOs have trusted strategic advisors that they can rely on to help them execute their plan and give them honest feedback.  This is hard in an early-stage company where you can’t really afford to build a large team of experienced talent.  And more times than not, the rest of your senior team is drinking from the same Kool-Aid jug that you are – that’s why they’re there.  Your investors and advisors can help play an important role here, but they have lots of other demands on their time and priorities.  Your CFO is dedicated to your success and can bring critical outside perspective.  Most likely, he or she has seen many of the issues you’re facing before – and can access the knowledge of the rest of their firm on your behalf.
  1. Increase your access to the capital you need. Cash is the lifeblood of your company.  Most likely you will want to tap external sources now or in the future.  This could be from equity, debt, strategic partnering, public offerings, M&A or some other source.  Your CFO can help guide you on how to approach these capital sources, how to craft the right story, answer their questions and due diligence requests, negotiate and close the right deal and maintain good relationships with these new partners post-closing.  He or she will also make sure you’re always ready to raise the next round – preferably before you need it.
  1. Immediate return on investment. Because you only pay for what you use, a part-time CFO can be surprisingly affordable.  And if they deliver on even a subset of what they have to offer, they should pay for themselves many times over in terms of both your bottom line and your probability of success.

Rent the CFO cover you need. No-brainer.