Edison Ventures Community: To be or not to be... the CFO. - Edison Ventures Community

Being the CFO of a complex venture capital fund organization is easily one of the most challenging, exhilarating, and satisfying endeavors I have ever been involved with in my 30+ year professional career. While each day at Edison is very different from the last, they all seem the same in one way—they all feel like they are about 5 minutes long! There is just not enough time in the day to accomplish everything you want to. I tend to use humorous little expressions when describing certain situations to colleagues. For example, when someone asks me “how are you?” related to work, I often reply, “I am fully entertained”, and they immediately get the idea of what I mean. I also generally refer to the daily “hurricane” that blows when you come into work each morning, that being the whirlwind of unexpected new issues that arise and need dealt with RIGHT NOW on top of all the things that you were supposed to get done from yesterday. But you know what? If we ever reached the end of our to-do list, what would happen? Would the world come to an end at that point? Good thing most of us will never find that out.
So with all the intense work throughout the year to keep me busy, there are 3 events that I greatly look forward to every year; our Annual Meeting in September, our Valuation and Advisory Committee meetings in February, and the annual CFO Executive Briefing (Network Meeting) in June. The Annual Meeting and committee meetings are extremely important firm functions that involve a ton work to prepare for. But to me they are also very enjoyable opportunities to meet and get to know our limited partners on a deeper and more personal basis, while giving them the chance to get better acquainted with me in person. While I communicate electronically and telephonically with our limited partners all year long, it is at these face-to-face meetings where I believe true relationships and mutual respect are forged. I highly value these times spent with our limited partners.
Being a CFO in both private companies and at venture funds, I also really look forward to getting together with our portfolio company CFO’s at the annual network meeting. I can completely relate to what they go through every day, since I have had to and continue to live it myself. I firmly believe the role of a CFO is vitally important to any company, and very unique in many ways. Make no mistake, it is a tough job to be successful at. Sometimes it is a thankless job. You put in long hours throughout the year. While some company executives want to get it close, you want to “get it right”. You deal with numbers and details. You are probably the biggest worrier in the company, and you lose sleep at night. You must be a problem solver, highly organized, an expert at multitasking. It also helps to be a cheapskate in many respects.
You need to have complete in-depth knowledge of your role and position in the company, which often spans administration, human resources, investor relations, information technology, facilities, insurance and other functional areas. But you can’t be successful if you don’t have the basic horizontal understanding of every other functional area of the company. No disrespect to other executives, but that is not necessarily true of other functional areas as far as them understanding the financial and administrative functions.
While the CFO is accountable to the company’s shareholders and board of directors, in my opinion, the relationship of the CFO to the CEO is critical. You need to have the mutual trust and respect with your CEO in order to generate the synergy and energy to take your company to the next level. The bond in many respects has to be special. You should be able to anticipate each other’s reactions to business matters as you work together. The CFO is most likely “the” right hand person to the CEO, and may be the top advisor on strategic business matters. The CFO may be the top negotiator in the company. A competent CFO cannot be a “yes” man. You have to be able to take a stand, and know how to appropriately challenge issues and other opinions. When required, you have to feel comfortable speaking your peace with valid supporting reasons. A good CFO cannot refuse to take a valid opposing position with the CEO. Remember, you work for the board and shareholders.
Many times the CFO works with a highly creative and entrepreneurial CEO who is more of an idea person than business person. I have worked with such CEO’s in my past. So, there will eventually be times when the CFO has to be able to deal with what I call a “wild ass idea”. It sounds interesting but just can’t work financially. You are required to take a stand and be professional while convincing your boss not to do something that makes little sense or has little chance to be a financial success. But with these types of CEO’s, there will be other times that will require you to be extremely creative, and develop/execute specific plans and initiatives based sometimes on vague ideas that have strong merit, in order to achieve greatness.
Yes, the role of a CFO is a demanding one, a hard one, and one that brings significant satisfaction when success is achieved. To me, being in the room with Edison’s portfolio company CFOs is a wonderful and illuminating experience. To have all of that intelligence, creativity and desire in one place is pretty special and empowering. I felt surrounded by some of the smartest business people I am fortunate to know. The future of their companies, and clearly Edison’s return on investment, depend to a large extent on their efforts. I applaud all of them for contributing to our mutual success and look forward to working with them.
At this year’s CFO meeting on June 1, we shared best practices in a number of practical areas. I discussed techniques to better manage the rising cost of health insurance including reviewing what we did at Edison. Health care cost is a big expense for the smaller business, and is an important part of employee compensation and satisfaction. Christine Mulkay and Brad Meader of PricewaterhouseCoopers, our auditors, delved into issues related to successfully completing acquisitions and divestitures. A number of our companies have augmented organic growth with acquisitions. Creating viable financial dashboards was led by Tonya Zweier, CFO of The Neat Company, an Edison investment since 2006. Tonya has played an important role in Neat’s 120%+ growth over last twelve months at 16% profit. Kevin Rhodes, CFO of Plum Choice, an Edison investment since 2007, discussed strategies to effectively communicate financial results to investors and board members. Kevin has helped his company achieve 30% growth with significantly improved bottom line and cash flow results. Nick Manolis, VP and General Manager of HighJump Software, True Commerce EDI Solutions Group, reviewed how he helped engineer transformation leading to a successful exit for shareholders including Edison in 2010.
As we have done for a number of years, we celebrated several of these financial executives by bestowing the coveted Edison CFO Hall of Fame Award on them. Taking a cue from the famous entertainment industry awards, we affectionately refer to this prestigious award as the “Eddy”. This year, we honored Nick for his successful exit for Edison at True Commerce, an investment since 2004 that returned over 4X. Nick joined True Commerce in 2008 as CFO, but because of his accomplishments was quickly appointed COO, and finally CEO. As CEO, he led a transformation that generated large consistent profits and significantly improved the value of the company, leading to the sale in October 2010 to HighJump Software. We also honored Jim Reilly, CFO of Cambridgesoft, an Edison investment since 2002. Jim joined Cambridgesoft in 2007. During Jim’s tenure, the company grew over 50% profitably. Jim successfully used a combination of internally generated cash, equity raised from new investors at healthy valuations and bank financing to accomplish a complete repurchase of Edison’s shares over a two year period, at a 7.7X return. Not bad. A hearty congratulations to Nick and Jim on their successful accomplishments for their companies, Edison and themselves.
Please visit our forum covering this year’s event and let us know what you think. While this year’s meeting was successful, I am already looking forward to next year’s meeting on Wednesday May 30, and seeing the progress these hard-working CFO’s made at helping to grow their businesses. One day, many of them will be lucky enough to receive the coveted Eddy. Good luck, my fellow CFO’s!