the startup cfo's road map to success - kpmg · talent,” noted another cfo. “in some...

This guide is designed to help financial executives, CEOs, and board members by offering critical insights into establishing the startup CFO’s role in their organization.

The startup CFO’s road map to success

2018

kpmg.com

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. NDPPS 698931

It’s not about the titleIn this document, we use the title chief financial officer to refer to the senior-level finance professional responsible for the finance function within an organization. Titles for this role vary—some may be CFOs, others may be vice president of finance, while others may be called the head of finance. No matter the title, the responsibility for financial health, readiness, and reporting falls on them.



At some point in every successful venture capital–backed company’s path, the board and management team have to hire a CFO or senior finance professional. It is a critical point in a growth company’s journey—usually around the time that VC funds and other institutional investors are considering more significant funding. Roles and responsibilities are being formalized, processes and controls are being implemented, and cultures and capabilities are being transformed.

For a new CFO, this is a time of tremendous opportunity. The role is not just about making the finance function run effectively; it is also about clearing a path for growth, forming new relationships and partnerships, generating measurable value, and establishing and improving key processes and reporting requirements.

This document was developed to help new CFOs at VC-backed growth companies make the most of their new role. Leveraging KPMG’s experience working with CFOs and growth company leaders, it offers guidance and a potential road map to help new CFOs drive measurable value for their organizations. This document also provides insights and encouragement for those looking to take steps to define and grow their role.

The insights contained within this document are based on interviews with CFOs at VC-backed companies across the United States with revenue sizes ranging from $25 million to $100 million. Indeed, to develop this document, we sat down with more than a dozen experienced CFOs to find out what their biggest challenges were when they started their new role. We found out what they learned, what they might do differently the next time, and what they wish they had known.

This document is not a simple checklist of tasks that CFOs should complete. No two companies are the same; each growth company and each CFO will need to define his or her own road map for success. Rather, the document aims to leverage our conversations with CFOs and our vantage point in the market to offer new CFOs ideas that will help them achieve their own unique objectives.

On behalf of KPMG’s Private Markets Group (PMG) professionals, we would like to thank the CFOs who participated in our research. Your insights and experiences will be invaluable to helping new CFOs, their management teams, and their boards maximize the value of their finance function.

For additional insight or to discuss your own CFO journey, we encourage you to contact your local KPMG office or any of the authors listed at the back of this document.

Introduction

Contents

The right CFO at the right time: Are you set for success? 02

Establishing yourself in the new role 04

Building capabilities that align with the strategy 06

Turning strategy into operations 08

Key takeaways for new CFOs 11

About KPMG 12

The right range of services, right sized for you 14

Thought leadership and key events 16

1© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. NDPPS 698931

1The startup CFO’s road map to success


The right CFO at the right time

Are you set for success?

Every venture-backed company’s path to hiring its first CFO is different. Is the position needed for growth? Is the role required by new investors? How might a CFO be key to strategy?

Clearly, there is no one trigger for hiring a CFO. But our interviews and our experience suggest that in every growth company’s evolution, there are events and milestones that will require the capabilities and skills of a senior finance professional. And that means every company will have different expectations for their new CFO.

Skills and capabilities must be aligned. Companies that already boast strong management teams may be looking for a CFO who can bring technical finance experience and capabilities. Other companies may be seeking a CFO who embraces the more operational facets of a business.

As one of the CFOs we interviewed said, taking on a broader operational role comes with challenges. “That role focuses on cross-functional alignment—from product development to customer delivery, including marketing, sales, and engineering. New CFOs may find that there is lots of deferred maintenance and dysfunction there.”

Understanding the expectations New CFOs will want to start by understanding the most unique requirements of their role. “What skills and capabilities will be most important to helping the company achieve its growth and financial reporting objectives?”

“Before signing on the dotted line, you ideally want to understand the management and finance team currently in place. Will you have the budget to expand your team and build capabilities? Who will your peer executives be at the company?” asked another CFO.

As another CFO noted, understanding of expectations should be mutual. “The management team needs to understand what to expect from you as a CFO, but you also need to quickly establish what you expect from them if you want the collaboration to be successful,” he suggested.

Some want to dig even deeper. “I’d like to know what the key management issues are,” said one CFO. “How are they monitoring progress towards initiatives and cost management? Do they receive monthly budget to actuals? Are department heads held accountable for variances?”

According to some CFOs, the challenge may be particularly acute when the CEO is also the founder. “Founders often think that the brilliant thing they did to start the company translates to all areas of the business—including finance,” said one CFO. “Before joining a startup, I would want to understand how the founder CEO views the function and how much autonomy the CFO will have.”

Most CFOs whom we interviewed suggested that gaining a clear understanding of the board composition and board-level issues, objectives, and capabilities was paramount. “If the CEO won’t spend a few hours going through the board deck with me, I’m not taking the job,” said one CFO.

Others suggest that discussions with key stakeholders, including key customers and existing business relationships, will help build understanding. “You will want to know if the key stakeholders are unhappy or have concerns that will need to be addressed immediately,” said one CFO. “You probably want to assess employee motivation and the tone from management around the value initiative of finance,” added another.

Where possible, we also suggest talking to the current senior finance professional or outsourced provider that has managed the key processes to date. Their perspective on the key challenges, objectives, and requirements of the position is invaluable.

What kind of CFO will you be?New CFOs have some leeway to mold their new role to their own approach and capabilities. But such openness can also have a downside: There is no model to emulate and no formula to follow.

Generally speaking, expectations of the CFO position fall along a spectrum that has, at one end, a controller type with significant technical experience and, at the other end, an operations-focused manager with a strong understanding of the strategic value of the finance function. Knowing where you sit on that spectrum—and where the company wants you to sit—can help you start strong on day 1.

“VC investors often expect the CFO to be a mentor to the CEO, particularly when they are a founder with deep product or technical talent,” noted another CFO. “In some cases, the CFO may need to take on the traditional CEO activities so that their CEO can focus on the things they are amazing at doing.”

Your character and approach are also important to consider. As one CFO said, “You need to understand what your role is. Does the role require you to be hard-nosed, or are you going to be collaborative?”

Others noted the need to be seen as both a gatekeeper and an enabler. “You don’t want to have a ‘policeman’ reputation. You need to be able to say ‘yes’ and not be completely risk averse.” And while others agree, they suggest a balance. “You don’t want to be a bottleneck for your CEO, but you do want to be able to challenge certain things like investments and how C-level decisions impact future cash flows,” said one CFO. “Healthy and constructive conflict isn’t a bad thing.”

Most new CFOs will find that balance is key. “In an early-stage, high-growth company, you must be hands-on, but at the same time, you cannot be totally consumed by the tactical tasks—you must lead both strategy planning and execution together with the CEO,” added another CFO.

Key areas of focus — Determine if the CEO is more focused on strategy or operations. If strategy, the new CFO can expect to be taking on more of the day-to-day operations of the organization.

— Consider how the company builds in operational excellence. If the company has a president or Chief Operating Officer (COO), the new CFO can expect to focus more on the finance part of the role.

— Build out your understanding of the current management team and where their focus is. Identifying the gaps in the team will help you pinpoint areas that may create risk for the organization and opportunity for the new CFO.

— Filling gaps on your team will be key to delivering against expectations, but the new CFO must also be mindful of budget considerations and constraints.

— Learn the operating style of the board and VC investors. Understanding how they want to interact and what they want to know will be key to building trust.

For the boardBefore rushing out to hire a full-time CFO, boards and their management teams may want to first consider whether their objectives could be more easily achieved by leveraging outside service providers. In some cases, certain events and milestones can be achieved with the help of advisers and business partners. In other cases, growth companies may want to consider engaging a part-time (or outsourced) CFO who can support them during key events and reporting times.




The most successful CFOs are those who can quickly establish a collaborative relationship with the CEO, board, and management team. They understand the key performance indicators (KPIs) that matter to their organization and work closely with the management team to achieve their goals. And they are the ones who meet regularly with key stakeholders to build trust and improve communication.

Based on our interviews and our experience, most new CFOs at VC-backed growth companies need to spend considerable time with their boards and management teams in the first few months on the job.

“The CFO influences the rest of the C-suite by driving the metrics and presentation of results. They hold the management team accountable with facts. You need to be able to balance the role of being the CEO’s ‘enforcer’ against being a trusted advisor to the rest of the C-suite,” suggested one CFO.

But as confidence, transparency, and communication improves, many CFOs find ways to improve the efficiency of their stakeholder relations by developing new reporting tools, dashboards, and feedback mechanisms.

Partnering with the CEOAs the CFO or senior finance professional, you proactively develop partnerships with your CEO or founder. In fact, our experience suggests that the strongest CFOs are those who quickly partner with their CEOs to drive growth, manage costs, and communicate with the board and investors.

Such CFOs have to go beyond just developing a collaborative relationship with their CEO. As our interviewees said, CFOs and senior finance professionals will need to understand (and often share) their chief executives’ objectives, challenges, and ambitions. And they will also need to play a mitigating role as a balance in the partnership.

“Having a trusting partnership with the CEO is critical,” added one CFO. “Start-up CEOs will be trying to navigate relationships with their board and investors. And that means they will require a CFO who can be a sounding board, advisor, and mentor they can trust and listen to.”

Many interviewees suggested starting with the most basic understanding of their CEOs’ overall expectations. “What does the CEO—usually the founder—hope to achieve from the company? Are they hoping to eventually sell the company, or do they expect to raise more funds and retain control of the business? You need this context to make sure you are pulling in the same strategic direction as you make your early decisions,” said one CFO.

From there, new CFOs will want to create strong alignment on key operational and finance fundamentals. “VC-backed companies often have many different financial plans floating around,” said one CFO. “You need to not only know which one is right and what alternatives you have, but you also need to assess which options the CEO thinks are reasonable.”

The relationship must be symbiotic. CFOs must also be able to communicate their needs and objectives for the organization and the function. And they must be able to influence the CEOs’ decision making.

“CEOs and founders have spent so long selling the story and focusing on revenue growth that they often lose track of the rest of the financials—key fundamentals like unit economics, leverage, and cash positions,” said one CFO interviewee. “That’s where a good CFO steps in to influence the shift from growth mode to scale mode.”

Establishing yourself in the new role

Think like the CEO, anticipate his or her needs, and be proactive in recommending relevant KPIs for the organization.

Talking to the boardWorking in partnership with the CEO, the next step for a new CFO is to build and grow trust with the board. Communications with the board of directors is essential, and your CEO must trust you to interact without him/her around.“ It is the CFO’s job to build the board decks and decide how best to present the key metrics and context,” said one CFO. “You need to understand the board’s strategy, how they measure success, and where they want to focus,” added another.

This awareness will influence how CFOs present their data and metrics to the board and management team. “Different board members sometimes want to see different KPIs on their monthly or quarterly dashboards, so it’s important to know what each stakeholder is focused on,” said one interviewee.

Based on this knowledge, the new CFO may want to ensure that they are working toward building alignment between the board’s expectations and those of management. “Particularly when it comes to timing and liquidity, it’s important to make sure the expectations are well aligned between the board and management,” said one CFO.

According to our interviewees, achieving such alignment may require frequent meetings with the board as the CFO builds trust and alignment on objectives. “I try to meet with board members and key investors once a month to capture their perspectives and to build their trust,” said one CFO. “Venture capital investors should be seeing your numbers more often than at the board meetings,” agreed another. “That’s how you avoid surprises, provide context, and ensure that board meetings are as productive as possible.”

Other CFOs suggest preparing the board ahead of their meetings so that the board can focus on decision making. “Our approach is to provide a detailed report containing all the critical financial and nonfinancial metrics a week before every board meeting, along with any operational issues, growth challenges or risks,” noted one. “When key information is provided up front, it allows the board more time to discuss strategic matters”.

Improving communication In the long run, most CFOs tend to find that their interaction with the board gains a regular and reliable cadence. “The less interaction I have with the board outside of our scheduled meetings, the better. It means I’m doing my job,” admitted one CFO, however.

A number of interviewees also noted that the number of face-to-face meetings with the board often declined as reporting tools and processes improved. “We came up with clear financial and nonfinancial metrics that the board and investors could focus on, and that told a very clear story about the strength of the business,” said one CFO.

“It’s really about deciphering what the board wants to know and then communicating what you need back to the board,” said a CFO. “I always review the board minutes to look for any items that may come back to bite me,” added another.

Key areas of focus — Building a partnership with your CEO will require alignment on key objectives and expectations. What matters to your CEO?

— Create alignment between management and the board by determining the most appropriate and effective way to influence decision making at the management level.

— Be clear on what matters to the board and investors. Tailor your communication with board members to target the issues that matter most to them.

— Regular, reliable, and transparent reporting and communications are keys to building trust with board members and investors.

For the boardVC-backed growth companies should act like the companies they aspire to be in the future, rather than the companies they are today. Growth company boards may be able to “get by” with fewer KPIs and metrics at the start, but the best boards and management teams focus on creating a comprehensive and scalable reporting approach that can grow as the company evolves.




Growth companies do not hire a new CFO just to keep the lights on in the finance department. Rather, they expect their new CFO to deliver immediate value, to contribute to the long-term growth objectives, and to help improve overall business flexibility. For most CFOs, this will require a keen focus on identifying, developing, and managing new capabilities within the finance function.

Having the right people with the right skills, enabled by the right technologies and supported with the right controls and processes, is key to financial performance. New CFOs will need to develop a clear road map that integrates talent, technology, and governance considerations to achieve their target operating model for finance.

Create your road map As a new CFO, you will likely need to start by building a clear understanding of the systems, processes, technologies, people, and capabilities already in place and in development. You will want to know what accounting systems are in place, what capacity they have, and when they might need upgrading or removing. You may feel pressure to make big changes quickly.

However, as our interviewees suggest, new CFOs should take a strategic approach to transforming their function. “Particularly when it comes to financial processes and controls, you need to be able to look across multiple horizons,” said one CFO. “You need to know what you have today, what you will need in the medium term, and how you will get from here to there. You need a really smart and well-integrated road map.”

As another CFO noted, managing the long-term planning will be key. “Investors will want to see a three-year model, and if the company receives M&A interest, that long-term view will help ground the conversation and process, particularly when there are conflicting views.”

Many suggest that new CFOs start to develop their road map for transitioning their function. “Especially from a people and IT systems perspective, you don’t want to overbuild too quickly. You need to understand how it will fit in the next two to three years as you build scale,” advised one CFO.

Others note the need to fully understand the long-term strategy for the organization. “It’s important for the CFO to understand the intentions of the CEO and board about what kind of company they are trying to create,

at the strategic level, with respect to business model, P&L implications, and capital requirements,” suggested one CFO. “Is the company seeking to be a ‘capital light’ play or a ‘platform play’? Each requires a very different strategy and approach.”

CFOs will also need to understand whether they need to move quickly and break things (in other words, “front-loading” the pain) or whether they can take their time and follow a phased approach, recognizing that some tools will be easy to “graduate from” while others may prove more pernicious to remove. Creating a road map that allows changes to be made at the right time and in the right way—without losing valuable history and experience—will be key.

Bridging the talent gapOne of the first challenges most CFOs will face will be ensuring they have the right talent with the right capabilities to implement their goals and objectives. This will require new CFOs to create a plan for developing, attracting, and retaining key talent.

In the early days as a new CFO, this can be a challenge. Key leadership positions (such as a controller) may be vacant, while at the same time, less strategic positions (such as an accounts payable clerk) may be urgently needed. New CFOs may face pressure, particularly from the day-to-day business, to focus on the latter. Despite this pressure to be tactical, make sure to stay focused on being a strategic advisor for the CEO and the board.

According to our interviewees, new CFOs may want to start by hiring the key positions and then allowing them to hire their own teams. “You need a core building block—often a single hire like a controller—that has the capability and vision to then assess, build out, or prune the rest of the team as needed,” advised one CFO.

However, many of our interviewees warned of potential challenges in achieving the talent requirements. “When you are working and hiring in a competitive market, you really need to make sure that your HR decision-making process is swift,” said one CFO. “You may have the opportunity to grow, but your own hiring processes are slowing you down while people sit on requisitions. If you’re in a growth window, this can be a killer.”

Building capabilities that align with the strategy

Many suggest that new CFOs take an active role in developing the hiring plan. “As the CFO, you really need to be very close to the hiring plan so that you can plan your space and capabilities accordingly,” added one CFO. At the same time, others suggest working with Human Resource (HR) to ensure the onboarding process is as efficient as possible. Some also suggest taking time to consider the relevant state and federal incentives that may be available.

On automation and outsourcing Our interviews and our experience suggest that at the confluence of improved process and transformed capabilities, there is an opportunity for automation. “Moving accounting from a manual process to a more automated process is critical,” said one CFO. “You need to start by investigating the current manual process and controls. Find ways to increase automation and efficiency,” added another.

This requires new CFOs to consider key service expectations and priorities. “When it comes to processes, your priority should be accuracy first, followed by quality, and then timeliness,” advised one interviewee. “You also need to understand if your current processes are scalable, if there are proper checks and balances, and if there is discipline within the finance department,” noted another.

However, our experience suggests that many growth company finance departments are working with unreliable data, drawn from out-of-date or adapted systems that have been “cobbled together” as the company grew. For some, the first challenge will be in creating some standardization around their data and getting key areas such as billing, revenue recovery, contracting, and revenue management completed accurately and on time.

Many interviewees also suggest that new CFOs explore the potential to leverage third parties to help bridge capability gaps and drive improvement. “Don’t be afraid to use advisers. You don’t need to do everything in-house immediately and run the risk of overbuilding. Start by using third parties, and then, you can bring the function in-house as you scale,” suggested one CFO.

“You may not even need a full-time accountant at the beginning; part-time may be enough to help manage the books,” noted another CFO. “Using a part-time adviser that works with other high-growth companies means they can also usually bring in some useful and helpful perspective from the outside.”

Key questions include: — Take the time to assess your current capabilities and systems before making big changes.

— What is your three-year target operating model? Knowing where you want to be is critical to developing the road map to growth.

— Can you improve the talent acquisition process? Being able to quickly hire the right talent in a highly competitive market is key.

— How can technology and third parties improve performance? Finding opportunities to automate or outsource can help bridge caps and drive efficiency.

— What is broken and needs to be fixed immediately? This might include people, processes, or technologies.

For the boardAs the new CFO maps out his/her objectives, the audit committee of the board (or the board’s financial expert) should work closely with the CFO to establish the cadence of communications and the plan for building out the finance organization. What are the capabilities in the finance organization that the company needs today? What capabilities will the company need one, three, and five years out? What resources and personnel will be needed to get there?




As a new CFO establishes his or her role, key finance functions and responsibilities must be assumed, maintained, and—where possible—improved. From budgeting, cash flow, and forecasting to tax strategies and risk assessment, new CFOs will be expected to deliver on the business strategy, transforming and growing the finance function while simultaneously improving operational control.

To start, new CFOs will want to create their financial strategy, including metrics and cash flows. “My early focus is on prioritizing the issues and dealing with cash flow and risk assessments,” said one CFO. “But then, I’ll quickly move on to more strategic levers that will move the needle for the business.”

Next, they will need to explore their current operational capabilities and assess the controls. They will want to understand the budget and assess the accuracy of forecasts. They will want to track cash flows and improve working capital. They will want to review their reporting processes and find areas for improvement. And they will want to make sure they are closing the books on time and as efficiently as possible.

“You should know your numbers at all times: actuals, plan, and latest best estimates/forecasts. As CFO, you need to be able to provide early visibility into the financial risks, cash requirements, working capital optimization strategies, and financing options,” suggested one CFO. “Your command of the numbers is key to effectively navigating the ship.”

Maximizing working capital efficiency As our interviewees suggest, most CFOs will want to start by gaining a solid understanding of the underpinnings of their working capital. “You really want to understand how the company operates—how cash flows, when it comes in, how it moves through the operations, flows through the supply chain and value chain. You need to be looking for holes,” said one CFO.

“Look for opportunities where core blocking and tackling—better collections, better inventory management, or better payables management, for example—could help free up a lot of cash,” said another CFO. “Don’t overlook the simple stuff that could add significant cash to your balance sheet quickly and potentially delay the need for another round of financing.”

New CFOs will also want to assess the strength and reliability of their budgeting and forecasting processes. “As the CFO, you really need to understand the backup and support that went into creating the forecasts and budgets to make sure they are supported by independent evidence from the market and customers,” suggested one CFO. “You should be looking at everything—from whether your account reconciliations are well controlled through to which accounts impact the life cycle of the company.”

Ultimately, the goal is to gain control over the key operational processes and create alignment with the key performance metrics. “You need to be on top of your financial performance, both in terms of key metrics such as losses, burn rates, and revenue growth, but also in terms of the finance department’s own performance, such as quality, accuracy, and timeliness of reporting,” said one CFO.

The right financing at the right time For many new growth company CFOs, one of the first items on their agendas will be to help structure new rounds of funding and financing. “It’s worth thinking about early. Fund-raising always takes longer than anticipated, and you never want to be in a position of weakness where you only have a few months of runway,” said one CFO.

“While the natural reaction is to look for new equity, you need to consider that there is also “good debt” out there—including revolving debt options—that could be a good alternative for your company at a particular time,” said a CFO. “Debt may not be a ‘bad’ financing option,” agreed another.

Turning strategy into operations

Talking to the board and existing investors will be key. “Don’t just assume you need to live with the preference terms you already have with investors. Everything is negotiable. It may be in the best interest of current investors to renegotiate those terms in order to bring new funds into the company and drive growth,” suggested one CFO. “You need to understand what type of investments your board will want,” pointed out another.

At the same time, our interviewees note the value of moving quickly once a funding or financing decision has been made. “View the process as a call to action and avoid delays. Aim to close the round within a month of announcing your intentions,” suggested one CFO. Another suggests maintaining a data room that can be used to speed up activity. For the board

As the company builds out the finance organization, is the board focused on understanding both the strategic and operational risks inherent in growth, including customers and employees, as well as processes and controls?

How does the board and other senior executives stay informed while the CFO and finance organization stay focused on execution?

Are there key metrics, controls, or disclosures that are critical to future investment?

Are they reasonable and well understood?

Key areas of focus — Budgets should be developed in partnership with the business and should reflect realistic expectations. Are current budgets and forecasts reliable?

— Small risks and process errors can create significant challenges down the road. Identify the biggest problems that require immediate attention.

— Focus on working capital improvements. Finding ways to improve cash flow and collections can help to delay the need for new funding.

— Plan the company’s funding and financing requirements to maximize investor returns and speed up implementation.




Never lose sight of the risks Gaining confidence in the company’s risk assessment processes and frameworks is also critical. As one CFO said, new CFOs should start by taking stock of what is broken and whether immediate action is required. While this is a tactical approach, it may actually be the tactical issues that create the larger risks, particularly when it comes to issues such as fraud, illegal acts, insurance gaps, cybersecurity, or HR and payroll compliance.

Companies with overseas operations may require additional rigor, said one CFO. “You need to make sure your finance employees are adequately trained in the requirements of the Foreign Corrupt Practices Act,” he suggested. “Revenue recognition will also be important—making sure your sales force avoids common pitfalls like side agreements, promised upgrades, and future deliverables that can ultimately blow up your revenue recognition model.”

Our interviewees raised a range of potential risk areas, including:

— Outstanding litigation or potential claims: Are there any open claims or lawsuits?

— Debt agreements and covenants: What are the clauses that could trigger a debt recall?

— Employee payroll and benefit programs: Are we in compliance with state and local tax withholding rules?

— Local and sales tax compliance: Do we know all the states where we may have nexus? Do we know the taxability risks in each state?

— Transfer pricing: What is our current international tax structure? Are transfer pricing agreements in place?

— Tax incentives: Are we missing out on any tax incentives?

— International operations: What is our current international structure? Are we deficient on statutory filings?

— Financial impacts: Are sales contracts and other contracts being assessed?

— Audit requirements: When do we need to hire formal auditors or other service providers?

— Employee incentive and reward programs: Are incentives out of alignment with the current marketplace?

— Ethics and fraud reporting: Do we have a whistleblower hotline? Are there any reports that have been ignored? Does everyone understand the Foreign Corrupt Practices Act (FCPA) and its requirements?

— Customer data privacy and compliance: Are there any reports of loss of protected data? Are we doing enough to protect customer data?

— Cybersecurity and resilience: Are we ready for a cyber attack?

— Insurance gaps and regulatory requirements: Is our insurance sufficient? Do we have Director & Officer insurance?

— Customer or vendor concentration risk: Is our supply chain diversified and resilient?

Many also recognized the potential for the sales force and marketing organization to create particular challenges. “How are the sales commissions structured, and are the sales teams being utilized appropriately? Are the commission plans focused on ensuring client acceptance or bookings?” asked one CFO. “If the business model or customer targets change, you may need to consider modifying commission plans or targets.”

Our interviewees suggest taking a close look at the way sales are made and recorded. “You want to know if the sales teams are achieving their targets through larger customers who get larger discounts or through smaller customers. That will help you understand if the focus is economically feasible,” suggested one CFO.


Key takeaways for new CFOs1. Be the CEO’s trusted partner.

Establish this on day 1.

2. Be self-aware. Know your strengths, weaknesses, and what kind of CFO you will be.

3. Be operational as well as financial. Know your operational metrics inside out.

4. Gain the trust and insight of key investors and stakeholders.

5. Establish key milestones to maximize valuation, manage dilution, and optimize capital sources.

6. Move quickly to fix broken things that will derail your strategic initiatives.



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Risk management, including fraud and forensic services

Transaction services

Closely held business & owners services

Economic and valuation services

Federal tax

International corporate services

International executive services

Regulatory change and public policy

State and local tax


We provide integrated audit, tax, and advisory services customized to meet the unique needs of privately owned companies. Some specific areas where we offer support include:

Audit

Adv

isor

y

Tax

KPMG’s Audit Methodology (KAM) for private companies ensures that we meet all professional standards, but through a tailored private company lens. KAM for private companies encourages our engagement teams to draw upon their skills, experience and judgment to develop the audit approach for each client, resulting in a more efficient, higher quality audit.

KPMG’s Closely-Held Business & Owners Network is a national network of professionals providing sophisticated, integrated, and proactive business, individual income, estate, gift, and trust tax advice and compliance services to private companies, their owners, their senior executives, and their families. We know the importance of closely-held companies in today’s economy, understand the attributes that make them unique, and recognize their challenges. Closely-held businesses in many industries choose to work with KPMG because we have the skills and knowledge to help them accomplish their strategic objectives throughout the business life cycle as well as their individual and family goals.

Financial management, including quality close and reporting

Financial statement audits



The Entrepreneur’s Roadmap: From Concept to IPOKPMG, in collaboration with the New York Stock Exchange and additional contributors, developed The Entrepreneur’s Roadmap: From Concept to IPO. This guide is designed to help entrepreneurs by offering critical insights from concept to taking a company public and gain an understanding of both the benefits and challenges through each stage.

The Pulse of FintechCreated as the sister series to the Venture Pulse Report and leveraging insights from KPMG Fintech and KPMG Enterprise Innovative Startups network, the focus of this quarterly report is a deep dive on fintech investment, trends, and analysis from a global and regional perspective including North America, EMA and ASPAC.

Venture Pulse This quarterly report analyzes the latest global trends in venture capital investment data and provides insights from both a global and regional perspective. The report provides an in-depth analysis on the lifecycle of venture capital investments including a look at investment activity such as valuations, financing, deal sizes, mergers & acquisitions, exits, corporate investment, and industry highlights.

Thought leadership and key events

Privately Speaking SeriesKPMG’s PMG understands what it takes to drive private company growth. In each edition of Privately Speaking, we share our insights—along with practical and actionable tips—to help boards, executives, and management grow, strengthen, and transition their privately held businesses.


https://www.kpmg-institutes.com/institutes/global-enterprise-institute/articles/2017/07/the-entrepreneur-s-roadmap-from-concept-to-ipo.html

https://home.kpmg.com/us/en/home/insights/2016/03/global-analysis-of-venture-funding.html

https://home.kpmg.com/us/en/home/insights/2015/07/privately-speaking.html


https://www.kpmg-institutes.com/institutes/global-enterprise-institute/articles/2017/07/the-entrepreneur-s-roadmap-from-concept-to-ipo.html



https://home.kpmg.com/us/en/home/insights/2015/07/privately-speaking.html


SponsorshipsNasdaq Entrepreneurial CenterKPMG is a founding sponsor of the Nasdaq Entrepreneurial Center, a San Francisco–based nonprofit organization designed to educate, innovate, and connect aspiring and current entrepreneurs from all industries and stages of growth. KPMG works with Nasdaq to develop meaningful entrepreneurial education and host differentiated events for entrepreneurs at Nasdaq sites in San Francisco and New York. Some of the topics addressed include:

— Navigating tax for startups

— Navigating finance for startups

— International growth strategies

Learn more about the Nasdaq Entrepreneurial Center and KPMG-hosted events and programs.

QuantumShiftLaunched in 2016 by KPMG’s Private Markets Group and the University of Michigan’s Ross School of Business, QuantumShift annually challenges 40 of America’s top CEOs and entrepreneurs to hone their leadership skills, inspire their people, and maximize their company’s growth.

This rigorous, five-day program provides an opportunity for participants to learn from a wealth of talented professionals—including distinguished faculty members from the Ross School of Business—and offers graduates access to the Fellows Network, an exclusive peer-to-peer network focused on ongoing problem solving, development, and mentorship. Visit www.quantumshiftus.com for more information.

Semiannual Venture Capital Industry Update Webcast Series and Pulse SurveyThis Webcast series provides an update on recent VC activity, including IPOs, as well as in-depth presentations from KPMG professionals and external speakers on hot topics ranging from updates on the JOBS Act legislation, exit activity, recent Securities and Exchange Commission (SEC) IPO focus areas, valuation of common stock leading up to an IPO, and much more.

During each Webcast, we conduct a survey that polls hundreds of entrepreneurs, investors, and industry players to highlight key trends in the investment and startup space.

KPMG IPO Boot CampsThese one-day seminars held in many cities across the United States provide educational insight into the current state of the IPO market and what management and boards must do to ensure a company is ready to go public. KPMG frequently works with leading law firms and other industry leaders to provide thorough guidance. Visit the IPO Boot Camps Web page for upcoming dates.


https://www.wework.com/

www.quantumshiftus.com

https://home.kpmg.com/us/en/home/insights/2016/03/venture-capital-practice-ipo-bootcamps.html

https://home.kpmg.com/us/en/home/insights/2016/03/venture-capital-practice-ipo-bootcamps.html

Thank you

Thank you to the startup CFOs representing various industries across the United States in the San Francisco Bay Area, Los Angeles, New York, Boston, and Philadelphia for contributing to the development of The startup CFO’s road map to success.



Brian HughesNational Partner in Charge of Private Markets & National Venture Capital Co-LeaderE: [email protected]

Brian Hughes is the National Partner in Charge of KPMG’s Private Markets Group & National Venture Capital Co-Leader. Brian has over 30 years of diversified experience in public accounting, and his career has been focused primarily on public and nonpublic technology, software, business services, and venture capital and private equity backed portfolio companies.

Brian has significant experience with initial public offerings, as well as acquisitions and divestitures. Brian’s client experience includes working with high-growth companies in the development stage, through subsequent rounds of financings and other capital formation transactions, or to an initial public offering or acquisition by a strategic or financial participant. He has extensive experience with revenue recognition and stock based issues.

Sal MelilliPartnerNational PMG Audit LeaderE: [email protected]

Sal Melilli serves as the National Audit Industry Leader (NAIL) for Mid-Market, Private Markets Group and leads KPMG’s Venture Capital Practice in Metro New York. Sal has more than 20 years of experience in serving public companies with SEC filings, mid-market private companies, private equity portfolio companies, venture-backed start-ups, and subsidiary audits of significant multinational corporations. He has a thorough understanding of SEC rules and regulation, U.S. GAAP, and IFRS.

Conor MooreNational Venture Capital ColeaderE: [email protected]

Conor Moore is a partner in KPMG’s San Francisco office and also serves as the national co-leader of the Venture Capital Practice. Conor has more than 25 years of experience, including extensive experience with venture-backed technology companies, from startups through to IPOs and other exits. In addition, Conor has responsibility for the firm’s relationships with many of the premier venture capital firms in the Bay Area. His strong skills include significant experience with revenue recognition, equity accounting and stock compensation, and financings.

Joseph YuenPartnerE: [email protected]

Joe Yuen is an audit partner in KPMG San Francisco’s emerging technology practice with a combination of industry and public accounting experience. Joe has more than 26 years of experience working with high-tech and life sciences companies, including 18 years with KPMG and 8 years of operational experience in product management and sales at public and early-stage internet and software-as-a-service (SaaS) companies. Joe focuses on serving high growth technology companies from early venture-funded, pre-IPO, through the IPO process, and post-IPO. Joe’s KPMG experience also includes 3 years in the firm’s national office where he focused on complex technical audit and accounting matters.


mailto:bfhughes%40kpmg.com?subject=

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Bill JacksonPartnerNational PMG Tax LeaderE: [email protected]

Michelle WroanPartnerE: [email protected]

Shivani SoporyManaging DirectorE: [email protected]

John KlanjacPartnerE: [email protected]

Katie HilkemeyerManaging DirectorE: [email protected]

Chris CiminoPartnerE: [email protected]

Janel RileyPartnerE: [email protected]

Erika WhitmorePartnerE: [email protected]

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.


Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.

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For more informationregarding KPMG’s Private Markets group, visit kpmg.com/us/privatemarketsgroup.

https://home.kpmg.com/us/en/home/industries/private-markets-group.html

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the startup cfo's road map to success - kpmg · talent,” noted another cfo. “in some...

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