Finance chiefs at some startups are turning to their venture-fund counterparts for steerage through the coronavirus pandemic, which for some executives triggered the primary financial disaster of their skilled lives.
Chief monetary officers and finance executives at funds not solely handle their very own firm’s stability sheets. In addition they advise the finance chiefs at companies they’ve invested in, serving to them to attract up monetary plans, making introductions to banks and making a community for executives to share information and greatest practices.
That is helpful in right this moment’s financial local weather, with the trail to restoration unclear and lots of companies persevering with to wrestle. The influence from the virus varies throughout industries, and a few startups are doing even higher than earlier than the disaster, however navigating the pandemic-hit financial system nonetheless presents a problem for these overseeing firm funds.
With the ability to name an skilled CFO helps, finance chiefs at startups say. Nonetheless, finance chiefs at portfolio corporations should do the arduous work themselves, as there are limits to what fund CFOs can do for them.
SoftBank Group Corp.’s
Imaginative and prescient Fund, the world’s largest tech funding car with greater than $90 billion in investments, CFO Navneet Govil has had extra conferences with finance chiefs at portfolio corporations for the reason that virus began spreading. What was once annual or typically quarterly in-person conferences have turn into extra frequent digital discussions. “Over the pandemic, it has taken a unique format,” Mr. Govil mentioned, including that he now spends about 30% to 40% of his time shepherding the finance heads at portfolio corporations, in contrast with 10% to 20% earlier than the pandemic.
Bessemer Enterprise Companions, a New York-based agency with greater than $7 billion underneath administration, additionally has dialed up the frequency of digital gatherings with portfolio firm finance chiefs. “What Covid has accomplished is accelerated the change,” mentioned working associate Jeff Epstein, who previously held the CFO position at
and different companies. “When you’ve accelerated change, particularly while you by no means went by means of this earlier than, it’s much more invaluable to have a peer group,” Mr. Epstein mentioned.
CFOs at enterprise funds advise their startup colleagues on matters reminiscent of methods to construct a finance crew, which instruments and applied sciences to make use of, the place to increase the enterprise first and, in right this moment’s world, methods to handle the enterprise from the house workplace.
On the Imaginative and prescient Fund, Mr. Govil and his crew have helped with establishing three-year plans for portfolio corporations, defined income accounting guidelines and drafted an audit committee constitution, he mentioned. He’s aiding with questions round capital construction and financing, foreign-exchange hedging and dealing capital, he mentioned.
Enterprise-fund CFOs additionally help with suggestions for banking companions for credit score strains and money administration. This information—for instance, on pricing for financial institution companies, time period sheets, foreign-exchange charges and different prices—may also help younger corporations lower your expenses that may be spent on increasing the enterprise as a substitute.
Zymergen, a San Francisco-based biology startup, was launched to a financial institution by Mr. Govil’s crew when it wanted a debt facility, mentioned Ena Singh, vp of finance. “It helped us run a extra aggressive course of,” Ms. Singh mentioned. With the ability to faucet right into a wider community of contacts has confirmed helpful on a number of events, she mentioned, including that the fund’s executives “open up their Rolodex and make themselves out there.”
SoftBank first invested within the enterprise in 2016 and transferred its stake to the Imaginative and prescient Fund, which was based in 2017, in 2018. A 12 months later, the fund led a Sequence C spherical during which Zymergen raised $440 million.
Ms. Singh mentioned she valued the chance that funds which have invested in Zymergen have supplied to question finance executives at different startups, particularly in instances “the place there isn’t a trodden path.”
In an organization’s early days, finance heads should reply quite a few questions, and you will need to lay the proper foundations, mentioned Benjamin Solar, co-founder and basic associate at Main Enterprise Companions, a venture-capital fund that targets early-stage investments. Main has three working companions that advise founders and entrepreneurs, and is trying to rent one other one as a result of demand, Mr. Solar mentioned. “Our guys are hands-on and fill the position earlier than the startups have a CFO, a controller or a bookkeeper,” he mentioned.
For enterprise funds, having a CFO or working associate to assist portfolio corporations generally is a aggressive benefit as they’re scouring the marketplace for their subsequent funding goal, mentioned Rhoda Longhenry, head of the chief monetary officers follow at True Search, an government recruitment agency. “It could possibly be a differentiation or promoting level for an funding, to not solely supply cash, but additionally companies and insights,” she mentioned.
However there are limits to what fund CFOs can do at portfolio corporations. They often don’t personal controlling stakes, and even when they do, they most frequently don’t actively handle startups’ funds.
“We’re not right here to run their firm; we’re right here to help them,” mentioned Mr. Solar.
On the Imaginative and prescient Fund, Mr. Govil mentioned there are boundaries round what he would do. “To be clear, my full-time job is CFO of our fund,” he mentioned. For corporations that require extra hands-on assist, the fund has an working group that may become involved, he mentioned.
That group took motion final 12 months, along with others, when co-working firm WeWork, one of many fund’s largest investments, bought into hassle round issues about its valuation and pulled its planned initial public offering. Regardless of losses at a few of the fund’s investments in current months, Mr. Govil mentioned he wouldn’t run the funds of startups on a day-to-day foundation.
“I can’t see how he would have time…to supply emergency administration for these in dire monetary conditions,” mentioned Dan Baker, a senior fairness analyst overlaying SoftBank Group for Morningstar Australasia Pty Ltd., a analysis supplier.
Having a venture-fund CFO and community of different finance executives to show to gained’t resolve all points, mentioned Igor Beckerman, CFO of Gainsight, a startup specializing in buyer retention. “This could’t ever assist with the final mile,” he mentioned, including that each CFO has to use the information gained from the community and fund CFOs themselves. Bessemer first invested within the firm with $25 million in 2014 and has taken half in two extra funding rounds since then.
Write to Nina Trentmann at [email protected]
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