Sigal is well travelled and contextualised when it comes to the global nature of a CFO in high growth startups. Originally from Israel and with a strong background in audit, Sigal realised her passion lied within the commercial and operational side of business, and being a growth enabler. In 2011, along came Envato - an Australian digital marketplace, and overnight success story that was able to create a marketplace flywheel effect and help its sellers community to make a living doing what they love. Before Sigal knew it, she was the CFO of a global organisation of 450 and a team of 40 looking after finance and analytics.
Sigal shares her advice as a CFO on the importance of decision making and how to manage the balancing act between speed, cost and processes - all whilst scaling the finance function and making it an enabler. Here is our interview with Sigal:
Dan: You’ve worked with a lot of founders. How would you describe the founder / CFO relationship as part of your career?
Sigal: Founders are people and as such they differ from one other. Having said that, there are some universal qualities. What’s always worked well for me is being aligned with regards to values and beliefs, and of course managing the financial challenges swiftly.
I see myself as an enabler to the founders. I am there to provide insight, educate, support, and partner with them to overcome any challenges.
Diversity of thought is very important to the success of any business. Finance and founders can come to various topics from different points of view. For example, issues related to processes are common within start-ups. Founders want to move fast. Finance people want things to be done properly and correctly - meaning processes, so the two can contradict each other. Building a balance so the process doesn’t impact speed, but that the lack of process doesn’t become a waste of resources is the answer. People will find themselves out of their comfort zone, but that’s the nature of the beast. If it’s in your comfort zone, it’s probably too rigid.
Dan: Going back to Envato, a founder-led, founder-funded business which is an incredible story - how do you think the CFO role contributes to that kind of success?
Sigal: I made sure to have a really good understanding of the business and have wide insight and visibility over topics beyond just financial aspects. Overseeing topics such as tax, system analysts, fraud and analytics helped. You don't need 20 people in the room, you have one person that can amalgamate five or six different points of view and distil them into one coherent perspective.
Another point was to create a cost-conscious environment. Instilling the notion that we needed to be cost-effective and be smart in how we make decisions, even if we could afford otherwise. Especially for team members who were experiencing this type of business for the first time because they don't understand why you're being so stingy. Necessity is the mother of all inventions.
Dan: How would you communicate rationality when founding teams may have unrealistic growth plans and are investing in shiny new things?
Sigal: It depends on the founders, but I use data. For example: If we were going to create a new line of business, it's going to cost us X to bring in a customer. What percentage will join organically versus by acquisition? How do we expect it to change over time? What will this look like in 18 month’s time? What if we're wrong about the assumption in terms of the cost by 5% or 10%? Always go back to the data, do the numbers and run scenarios to trigger a conversation.
Another method was to try and test things on a smaller scale. If we want to launch a project that will cost a bomb and take a long time, is there a way to test it on smaller scale? Is there a way to validate some of our assumptions? Can we get data from other companies?
For example, building a payment collection system would be okay for a small number of subscribers and be quick to deploy. Only once it was established, we can determine there is demand for the product, we can then strengthen the compliance, automation, fraud, etc, to enable scaling. This can be uncomfortable for finance people because you have to be prepared to go over the same things again and again… But, that’s the nature of a growing business.
Dan: You've worked for some amazing, fast growth tech businesses. What would be your advice to founders and CFOs of startup businesses? In particular, in investing in a finance function for the first time, whether that’s skills or processes.
Sigal: You need the CFO earlier than you think. I’ve heard it’s a common issue that CFOs are being hired way, way too late due to a misunderstanding of what a CFO does. They just have someone to crunch the numbers, but that's not a CFO. A CFO can add much more value in a growing business.
My advice is when you do make that hire, hire for what you need in 12 months from now to accommodate the growth journey….if not you’ll have to go through the process again which is disruptive and costly.
My other thought is around tools. Assess whether your CFO’s and finance team’s time is being spent in the most beneficial way. Are they so busy just crunching the numbers that they can’t provide insights, strategise, and help educate the business to promote financials and commercial acumen? Are you using them in the best way possible or are they doing a job that can be automated? There are so many amazing tools out there so it’s worth your while investing in the right ones.
Dan: In your first tech job at Envato, there were 30 people. You didn’t have a lot of tech experience, but they hired you. Why?
Sigal: There was an alignment in terms of fit, we met and clicked, and we had good chemistry. I was looking for somewhere that would provide me with the chance to stretch my abilities. I can say that in seven years, I had so many opportunities to rise to challenges and learn new things, which was really important to me. For the business, they got someone who had much more experience than what they needed at the time and was able to scale with the business.
Dan: So should Founders be open to CFO’s who don’t have direct tech experience?
Sigal: I am a strong believer in hiring based on capabilities and attitude rather than direct experience. I think this is even more true for fast growing businesses. It is impossible to know what the business will need in 12-24 months and no one has experience in everything. What you want is someone who has a growth mindset and the business’ best interest at heart.
Key takeaways for founders:
Key takeaways for startup CFOs (current and aspiring):
An interview with Shanyn Payne, CPO at Finder
The psychology of compensation is an interesting challenge we face.
Before answering that question lets pause for a second and reflect on the last 24 hours.
An Interview with Jacqueline Purcell, CFO of Deputy, who shares her career advice for aspiring CFOs and tips for founders raising capital.
A few days ago we received some exciting news, a new category of visas will be created specifically for startups.