Burkland’s Role in the $3.2B Acquisition of Segment
Segment’s acquisition by Twilio for $3.2B is another success story for a well-respected startup. Segment managed growth and scaled, and then achieved an exit many startups seek.
Since Segment was a long-time Burkland CFO client, we have received numerous queries on how Burkland helped Segment on their path to success. Burkland worked with Segment from mid-2014 to early 2019, and during this time, the company grew from 10 to 150 employees. It was a period of significant growth, innovation, and change for Segment. I sat down with Jeff Burkland, who was our lead CFO there, to find out details.
Q: How did Burkland help Segment the most?
Where I believe Burkland produced the most value for Segment was looking around corners and preparing for the future. As Segment's part-time CFO, I continuously considered and prepared for where the company needed to be in 6-12 months. I developed financial modeling based on where Segment wanted to grow and set up the kind of financial systems that would be required. I also planned these systems' priority and determined what size of finance organization needed to be in place at various milestones to achieve Segment's goals. My focus was all about scaling and looking ahead, so Segment would not get behind. I also advised on when and how much to fundraise.
Q: Can you share an example of where Burkland had a big impact?
An example that comes to mind is Segment’s annual pre-pay payment option. I saw that new contracts containing annual pre-pay were declining; instead, the company was closing more monthly and quarterly billing customers. It’s now well known the impact annual pre-pay plans have on cash at scaling SaaS companies, but this wasn’t widely understood back then. I sat down with Peter Reinhardt, Segment’s CEO, and showed him a cash flow under the different types of payment plans. Peter was shocked to see annual plans resulted in potentially never needing to fundraise again (or, at the least, to have much more negotiating leverage in a fundraise). Monthly, quarterly, and biannual payments did not make much of a difference. For a growing company, annual pre-payments are imperative for funding non-dilutive or less dilutive growth. Peter quickly saw the need to move the sales team back to annual pre-pay plans.
This was such a critical learning Peter even included it in one of his blog posts: https://rein.pk/startup-finance-for-founders-part-ii-strategic-finance
A shift away from annual pre-pays happened again later during my time there. I investigated and learned that the product had become less competitive. Sales had started offering flexible payment options to make up for the product competitiveness issues. This discovery spurred improvements in the engineering team’s ability to deliver new products on time, and Segment moved back to focusing on annual pre-pay payments again.
Q: That is a pretty powerful example; where else did you play a role?
I built Segment’s entire finance function and all the blocking and tackling that goes with it. I also worked with Segment on financing options - venture debt consideration and helping decide when to raise funds. Other strategic initiatives included helping the executive team implement Carta, building a sales commission plan, and making audit decisions. Burkland also assisted with Segment's accounting which included month-end close, revenue reconciliation, AR, AP, and collections
I enjoyed my time at Segment. The team is incredible, and it is always rewarding when strategic finance makes a substantial impact.
Burkland provides expert CFO services, accounting services, and tax services to startups across the United States. Reach out to us to learn more about how we can help your startup or portfolio company.