Shownotes
Hosts Paul Chapman and Jason Ball, are joined by startup CFOs Yuki Kishi and Maurizio Raffone to discuss the role of CFOs in startups, when is the right time to hire a CFO, and how the CFO role changes over time. Founded In Japan co-hosts Haruka Takamori and Nalin Advani also lend their voice to the discussion.
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Transcripts
Welcome to Founded In Japan, where we share uncommon knowledge about starting up.
Shiba Inu:Hosts Paul Chapman and Jason Ball, are joined by startup CFOs Yuhki Kishi and Maurihzio Raffohneh to discuss the role of CFOs in startups, when is the right time to hire a CFO, and how the CFO role changes over time.
Shiba Inu:Founded In Japan co-hosts Haruhkah Takamohri and Nahlin Ahdvahni also lend their voice to the discussion.
Shiba Inu:Founded In Japan is recorded live on Clubhouse, and audio for some speakers may be degraded at times.
Shiba Inu:Nonetheless, we hope you find the content to be valuable throughout.
Shiba Inu:Feel free to reach out to us on the Business In Japan LinkedIn group.
Shiba Inu:Thanks for joining us, and here we go...
Jason:Welcome tonight, we've got a great subject and maybe Haruka who proposed this?
Jason:Nalin, who's spent time as a CFO, and Paul with a wealth of experience can kick us off?
Jason:And we'll get on to welcoming um, Yuki and Mo as well.
Jason:Good evening everyone.
Jason:Welcome to Paul.
Paul:Good evening.
Paul:Maybe we can start by asking Haruka why was this topic interesting for you?
Paul:You're working with a large number of startups.
Paul:Is this a common problem, amongst early stage startups?
Haruka:Definitely it is.
Haruka:Hi everyone, my name is Haruka, I am working for a accelerator as a investor in the company.
Haruka:I'm mostly talking to startup in early stages.
Haruka:Many of them don't have CFOs, but I've got a lot of questions like when is the proper time I should get CFO, or uh, what are the roles that CFOs are supposed to be in charge of, and stuff like that.
Haruka:Yeah, so I thought it would be a great topic, and, uh, yeah, I just happened to have my former coworker, Yuki working as a CFO, conveniently.
Haruka:I thought he can be a, a, a great person to introduce the role as well.
Haruka:For people who are in VC, many of them are also interested in uh, working as a CFO.
Haruka:Definitely love to hear the guests talk about this topic today.
Haruka:Yuki nice to meet you again on Clubhouse.
Haruka:Would you mind tell us about your background and about your career and what your current company is doing?
Yuki Kishi:Thank you very much for the introduction.
Yuki Kishi:Hi everyone, my name's Yuki Kishi.
Yuki Kishi:I am currently working at company called Sustainable Lab as CFO.
Yuki Kishi:Speaking about my career, I have three main pillars.
Yuki Kishi:One is finance, second is cross border activities, and third is startups.
Yuki Kishi:After finishing my university in London, I came back to Japan for my first career.
Yuki Kishi:I used to work alongside with Maurizio.
Yuki Kishi:We used to work in the same company.
Yuki Kishi:I joined as new grad in the German investment bank called Dresdner Kleinwort at the time.
Yuki Kishi:Unfortunately that was 2008.
Yuki Kishi:Soon after I joined, after a few months, a financial crisis happened.
Yuki Kishi:Dresdner is no longer there unfortunately.
Yuki Kishi:After that, I quickly joined the Deutche Bank Group, in Japan office and I spent about 8 years doing valuations of financial instruments.
Yuki Kishi:I left the company to pursue my MBA at University of Cambridge in 2016-17, and then once finished, I came back to Japan.
Yuki Kishi:That was a time I got to know former CEO of my previous company, Philip Vincent.
Yuki Kishi:He was about to set up Plug and Play Japan office, he was looking for someone who can lead the FinTech vertical, so I joined the company back in 20 18.
Yuki Kishi:I spent about 3 or 4 years, and starting from this year, I joined this company, Sustainable Lab as CFO.
Yuki Kishi:What we are doing at the moment at Sustainable Lab is, we call ourselves ESG FinTech company.
Yuki Kishi:We are collecting many non-financial data, and we're trying to be innovative, next gen Bloomberg for ESG data sets.
Haruka:Thanks for the self introduction and I believe you're definitely doing well.
Haruka:I just saw a picture, you were in Plug and Play a couple weeks before coming back as one of the member of Sustainable Lab.
Haruka:I joined company when Yuki was a director.
Haruka:Time passed so fast.
Haruka:What about Maurizio?
Haruka:Um, would you mind giving us your self-introduction, and about what you're currently doing?
Maurizio Raffione:Thanks, Haruka thanks everyone.
Maurizio Raffione:The name is actually Maurizio Raffione, which is a difficult name to pronounce for most people.
Maurizio Raffione:If you can't pronounce that, just call me Mo.
Maurizio Raffione:That's good.
Maurizio Raffione:I am Italian.
Maurizio Raffione:I live here in Japan.
Maurizio Raffione:I am the Chief Financial Officer of a tech startup called Credify.
Maurizio Raffione:We have few offices around Asia, including one in Japan.
Maurizio Raffione:We've built an embedded finance solution that helps financial services companies acquire clients through marketplaces, collaborations, with the most of our focus, actually Southeast Asia, a little bit in Japan, although lot of our investors actually based here in Japan.
Maurizio Raffione:I've been doing that for about 2 and a half years.
Maurizio Raffione:I spent a couple years prior to that here in Japan, strictly not doing very much.
Maurizio Raffione:Taking it easy.
Maurizio Raffione:Doing a little consulting on the side and recovering from the previous 20 years, which I had spent in investment banks.
Maurizio Raffione:Primarily in the structured finance, doing all sorts of dodgy, dirty transactions.
Maurizio Raffione:I remember Yuki's first day when he came over as a new grad, and um, I think it might have been him causing the whole financial meltdown.
Maurizio Raffione:You never know!
Maurizio Raffione:The timing was uncanny.
Maurizio Raffione:Kidding aside, I know this is probably not the sexiest topic to talk about, uh, CFOs in startups, but I'll do my best to make it fun.
Maurizio Raffione:Thank you.
Haruka:Obviously you two already have this uh, financial background before you become what you're doing right now.
Haruka:So let's say if a startup wants to hire a CFO, what do you think are the criteria for someone to be in the position, first of all.
Haruka:And what do you do right now as a CFO?
Haruka:I'll start from Mo.
Maurizio Raffione:Let's start with the easy part, which is what do we do as CFOs?
FO into three different areas:the operational area, the tactical area and the strategic area.
FO into three different areas:Briefly, the operational is really to make sure that salaries are paid, invoices are paid both from the company to clients and vice versa.
FO into three different areas:Making sure the bank account is accessible and, basically anything that deals the usage of money on a day-to-day basis.
FO into three different areas:Also make sure your CEO doesn't spend too much!
FO into three different areas:Which is uh maybe a more interesting topic to discuss later on the call.
FO into three different areas:In terms of the tactical role this is really as a support role for the functions of the companies, more on the operational side, but as a support.
FO into three different areas:For example, planning your financial reporting, your investor reporting, look over your financial statements, see what's going on with your budgets, and trying to make sure the company doesn't hire too many people all at once, and you have enough money to go and get laptops for people.
FO into three different areas:Trying to take a step ahead in terms of the future usage of money.
FO into three different areas:In terms of the strategic role, I think it really comes down to two functions.
FO into three different areas:One is fundraising.
FO into three different areas:It's to help the company fundraise, meaning investors outreach, which you'll do very closely with the CEO, and then other co-founders of the company.
FO into three different areas:But also preparing the road for that, and have an outreach in terms of investor relations, creating a strategy for how the company should present itself.
FO into three different areas:Insofar as the company will have a product at some point, startups tend to have products at some point, you'll have to look into the pricing of that product.
FO into three different areas:I think as a CFO another strategic role is really to help the business development / sales team, and the management team to figure out what is the right pricing strategy, what is the market doing in that space from the competition, and whether the economics make sense.
FO into three different areas:Start looking after some of those metrics that will inevitably help you to raise more money in the future.
Haruka:I think you just mentioned that there are mostly three parts in a CFO role.
Haruka:Did you mention tactical?
Haruka:So operational, tactical and strategic role.
Haruka:How does it look, overall?
Haruka:How do you spend your time on each different roles, and could you please give us a big picture of how normally your work would change depending on timing?
Maurizio Raffione:Sure, and I'd love to hear whether Yuki agrees with my view of how the work should be, or maybe I'm missing something I should be doing.
Maurizio Raffione:Please let me know.
Maurizio Raffione:In terms of the time split, fundraising is clearly the one that once you're in the fundraising mode, it's gonna suck up most of your time.
Maurizio Raffione:You prepared the data room, you do the financial projections over and over, it's just a lot of work that needs to be looked after.
Maurizio Raffione:And that probably takes 75% of your time and the rest is taken up by mostly operational stuff that needs to get done, and make sure the company ticks over.
Maurizio Raffione:On a normal situation, I would say I'd spend about 33% of the time in all of the three areas of focus.
Maurizio Raffione:Your personal side is also just probably the boring stuff, but it needs to be done.
Maurizio Raffione:For example, every day I check the bank balances, we have different bank accounts.
Maurizio Raffione:I just want to make sure that nothing's funny has happened.
Maurizio Raffione:Maybe I'm paranoid?
Maurizio Raffione:But, I check that.
Maurizio Raffione:In terms of the tactical work, obviously closer to reporting time, at the end of the month, or the beginning of the week when we have the management rep meeting that takes a bit more time because you go over that, you make sure you're looking at the right metrics in a way that everyone understands.
Maurizio Raffione:Financial numbers can be a little bit daunting, so you try to make that story a little bit easier.
Maurizio Raffione:I would say all these things on average over a year would take a third of one's time, but obviously this is the context of my company, which is fairly small, we're about 20 people.
Maurizio Raffione:We've gone through a few stages of financing, but still fairly small in terms of what we've raised.
Maurizio Raffione:One point I'd like to leave you with is the figure of a CFO f for an early stage startup, up until series A or B, is really more of a builder than a manager.
Maurizio Raffione:Which is true probably for the rest of the C-suite.
Maurizio Raffione:Most of your time has to be spent building, whether it's processes, whether it's building relationships, efficiencies in the company and so forth.
Yuki Kishi:I was going to ask that last part to Maurizio, what's the stage of Credify?
Yuki Kishi:Because it really depends on the stage of the startup.
Yuki Kishi:As he mentioned, up until series A or B, I truly echo what he just mentioned about the building phase.
Yuki Kishi:Our company , we are pre-Series A, between Seed and Series A round.
Yuki Kishi:We only have 15 people, one, five.
Yuki Kishi:To be honest, I, I totally agree with the three areas he mentioned about operational, tactical, or strategic role.
Yuki Kishi:I truly agree with that.
Yuki Kishi:But allocation of the time really depends for me.
Yuki Kishi:What people think about the pure finance kind of role, I probably spend about 20% on average.
Yuki Kishi:For me, the rest are building the strategy, more like building the business itself.
Yuki Kishi:I also go for client meeting, sales meeting, business meeting, because in the end, creating a top line is very important for our stage.
Yuki Kishi:Then, the second point, what criteria is needed for CFO role, it really depends on the stage, it depends on the culture...
Yuki Kishi:many people think the role associated with the word CFO is purely finance, which is in one sense, yes, but it varies widely depending on the phase of the company.
Yuki Kishi:Being able to do finance is bare minimum criteria.
Yuki Kishi:For me these kind of non-financial criteria, like bus dev, leadership, management, are very important.
Maurizio Raffione:I totally agree.
Maurizio Raffione:I'm gonna take that as a segue into a couple of controversial points I wanted to raise.
Maurizio Raffione:First is, you probably don't need a CFO for your early stage startup right?
Maurizio Raffione:Unless you are a hardcore FinTech company.
Maurizio Raffione:Now, you need someone with a finance background, to get the programmers on board, to make sure that you build something that actually gets sold and makes money, right?
Maurizio Raffione:There has to be a yin & yang coming together here.
Maurizio Raffione:It doesn't have to be a CFO role.
Maurizio Raffione:You just need the subject matter expertise.
Maurizio Raffione:It does probably help if that person ends up being in the CFO role.
Maurizio Raffione:But once you do hit Series A, Series B, I think you definitely need the Director of Finance to relieve the CEO of all the pressure of having to deal with the liability side of the business.
Maurizio Raffione:Companies are split into assets and liabilities.
Maurizio Raffione:If you're the asset side, you have the products that you sell and, the interesting cool stuff, the still liability side.
Maurizio Raffione:Normally, early stage startups, everything's done by the CEO or the co-founders.
Maurizio Raffione:So a CFO at Series A, Series B, when you're a real company, you're running around with a set of products that you're selling, and you have, maybe 30, 40, 50 people, it's good to have someone taking the reins of of the financial side of the business.
Maurizio Raffione:Not necessarily sure whether you need, you need a C-suite, but definitely a Director of Finance.
Maurizio Raffione:The other point in terms of the skillset, and I think Yuki and I are examples of that, is you don't need an accountant to be your CFO!
Maurizio Raffione:Now, the CFO does need to understand accounting, and trust me, I think both you and I understand too much about accounting, that we care out, right?
Maurizio Raffione:But we're not accountants.
Maurizio Raffione:We are builders rather than managers, and frankly early stage startups up until, maybe Series A and B, the accounting is easy.
Maurizio Raffione:You can delegate it out to some smart software, and an accounting firm, just to get your end of year accounts done.
Maurizio Raffione:You don't need, someone who's done all sorts of qualifications in whatever country that knows how to run through our P&L backwards in his sleep.
Maurizio Raffione:So a couple of controversial points thrown out there.
Maurizio Raffione:Let's see if anybody agrees or disagree.
Yuki Kishi:I totally agree.
Yuki Kishi:Yes, I do have the title CFO, but I only do 20% of financial role at the moment.
Yuki Kishi:Rather, 80% it's spent outside typical finance related roles.
Yuki Kishi:Yeah, so I totally agree.
Yuki Kishi:In terms of criteria, a success factor of CFO performance, the relationship with the CEO is very important.
Yuki Kishi:CFO is a position which is very close to the CEO, and it's necessary for CFO and CEO to have mutual understanding of what the CEO is aiming for, and what the CFO is expected to achieve.
Yuki Kishi:I think that building relationship is very important.
Yuki Kishi:Harmony is truly important, and I think if there's any sort of discrepancy in the perception, think it's very difficult to deliver results.
Yuki Kishi:In that sense, I was very lucky to have that strong relationship.
Yuki Kishi:At my previous company Plug and Play, we supported the company Sustainable Lab for three months in the acceleration program.
Yuki Kishi:I knew about the company, I kind of got to know the CEO in depth, as well as other team members.
Yuki Kishi:After finishing the three month program, we went out for drinks, we get to know each other, disclosing with our personalities.
Yuki Kishi:With that I was able to build a strong bonding with the CEO.
Yuki Kishi:That's affecting my performance as CFO.
Jason:On the previous subject about the size of a company and what a CFO does.
Jason:If I'm a startup founder in a growing startup, how do I know when it's time for more than just someone doing planning an analysis and finance?
Jason:How do I know when I need a CFO?
Maurizio Raffione:I think the moment you ask yourself the question, you probably need that person, because you have identified a lack of something, which is usually time, and the ability to get over your, maybe investor outreach and relations efficiently.
Maurizio Raffione:You feel swamped that you can't keep up with the product development, sales and internal operations and fundraising and all that.
Maurizio Raffione:These are not hard and fast rule.
Maurizio Raffione:My experience, having worked a little bit as a consultant to startups, and having worked at one in this role, is I think things can be on rails financially speaking with little supervision from the CEO, let's call it that, and a little bit of support from an accounting firm and software up until probably Series A at that point, you gotta ask yourself, all right, now we have substantial amount of money to manage, do I have the expertise to do that as a CEO, and some don't.
Maurizio Raffione:If you have raised a substantial amount of money, you need to have a treasury policy in place.
Maurizio Raffione:You need to make sure that spending's under control.
Maurizio Raffione:That's more on the operational side of things, but then it can take a little bit of time to set up the right framework.
Maurizio Raffione:On the fundraising side, if your business is very fast growing, you're not gonna have a lot of time for the fundraising stuff because you're gonna chase the growth in the business.
Maurizio Raffione:If you are in that enviable position that you're doing really well from business perspective and fighting off your competitors, and not finding yourself a lot of time to do, to manage the liability side of the business, maybe that's the time.
Maurizio Raffione:As Yuki mentioned, it really varies between company to company, but I think financial expertise is something that some point, the management team in the company needs to have.
Maurizio Raffione:Discipline to look through the numbers, understand the numbers, being able to extrapolate them in a sensible way to help you guide your decisions.
Maurizio Raffione:That varies, but once you start getting substantial VC money, that's a skillset you need to have somehow.
Yuki Kishi:120% agree with what Maurizio mentioned.
Yuki Kishi:In general, from like investor's perspective, up until let's say Seed stage or like very early Series A, investor invest in the founder's vision and dreams.
Yuki Kishi:Starting from let's say series A or B or later, they look more rigorously on numbers, on KPIs.
Yuki Kishi:It depends on the skillset of the CEO but if it's beyond of his or her capabilities of managing these numbers accurately, tracking these numbers accurately, that would be a right time to hire someone.
Yuki Kishi:It doesn't have to be CFO, but someone who can actually do that kind of roles.
Haruka:One thing like one of the biggest point right here we've been discussing about is the CFO's duty or the work really, differs depending on the startup stages.
Haruka:With that being said, I would like to ask Paul's viewpoint on these as a later stage CEO.
Haruka:What are your experience with the CFOs?
Paul:Thanks, Haruka.
Paul:First of all, Yuki and Maurizio, where were you guys 8 years ago?
Paul:Why didn't we know each other??
Paul:We struggled for a long time to find our first CFO.
Paul:We had quite the credibility gap being foreign founders in Japan.
Paul:Let's just say that in 2014, 2015, 2016, it was tough to get investors to trust us, because no one who succeeded in Japan looked like us.
Paul:VCs are pattern matching machines, and if there's no pattern to match, they don't match it!
Paul:So you gotta keep trying to find another pattern.
Paul:Going through the later stage, a lot of it comes down to, like everything, with your technology, you might have a great CTO, but you're gonna have technical debt.
Paul:You might have really talented salespeople, but perhaps your pricing sucks.
Paul:It got you to where you are, but it doesn't look like it's gonna get you to where you're going.
Paul:Finance is no different.
Paul:You're gonna have a lot of legacy that you need to get rid of, assumptions, compromises, tradeoffs based on what was important at the time.
Paul:But before I go into that a bit more, I'd like to ask Mo and Yuki some questions.
Paul:Yuki, you mentioned that, bus dev, leadership and management are also the roles of a CFO.
Paul:What's been your experience outside of pure accounting and finance, with things like business development, leadership management?
Yuki Kishi:In terms of our product voice, we do have our product, but I think it was launched last year in December.
Yuki Kishi:So now the company itself we are in the phase of selling this product.
Yuki Kishi:Given we are only 15 people, and half of us are either data scientist or engineering, it's only a few people who can actually go and speak to the clients, who can actually do the sales pitch.
Yuki Kishi:Back in Plug and Play, or the previous jobs, I did both front office as well as middle and back offices.
Yuki Kishi:It was no choice for me, do the sales activities as well.
Yuki Kishi:Also given my previous role, I have another hat as a board of director at the FinTech Association of Japan.
Yuki Kishi:I have many networks with financial institutions, FinTech areas.
Yuki Kishi:Trying to utilize my network and do alliance, partnerships, these kind of activities.
Yuki Kishi:Of course other, more like leadership management kind of layers.
Yuki Kishi:This year since we've done fundraising this February, we are in a stage of a hiring aggressively.
Yuki Kishi:One of the main agenda for a company, but at the same time I personally know that they are growing the company organization that rapidly there are many hurdles, especially the culture perspective.
Yuki Kishi:I'm also leading that culture buildings, drawing mission, vision, values kind of activities.
Yuki Kishi:Have I answered your question?
Paul:You have.
Paul:I'm just wondering, is that typical?
Paul:You're like a super CFO.
Yuki Kishi:Yes, I am the super CFO!
Yuki Kishi:Is that typical?
Yuki Kishi:Good question.
Yuki Kishi:The company that I'm working, we already had a guy I already had a COO, which usually does bus dev and we, also have another C, Chief Revenue Officer.
Yuki Kishi:He's the main person doing the sales activities.
Yuki Kishi:But having a few rounds of interviews and discussion with my CEO, he can see that my skillset shouldn't be limited to finance function, it can be applied to other roles.
Yuki Kishi:If I'm the sort of person who's not really good at sales pitch, I'll probably be focusing more on the finance as well as other corporates kind of activities, et cetera.
Yuki Kishi:It really depends.
Yuki Kishi:Whether it's typical or not?
Yuki Kishi:I hope it's not typical.
Paul:Exactly.
Paul:And if you want to contact Yuki about his next CFO role please do in private, not on Clubhouse.
Paul:Just joking, I'm joking.
Paul:That's great.
Paul:Just throwing to Maurizio.
Paul:So Maurizio your background, could you remind me again what you were doing?
Maurizio Raffione:I'm not proud to say that, but if you watch the movie The Big Short, I was doing that sort of thing.
Paul:It's a good movie.
Paul:I like your work.
Paul:Hopefully you weren't the greater fool!
Maurizio Raffione:I cannot watch the movie.
Maurizio Raffione:It gives me PSD.
Paul:Yeah, I hate Photoshop too!
Paul:I think there's two phases for startup CFOs based on my experience, that I've seen in other startups as well.
Paul:You could describe it as in the early to middle stage, you need a, almost like a post factum founder.
Paul:So Someone who acts like a founder after the fact, but is a lot more credible than the CEO who is the guy or the lady with the vision, and is dreaming and talking and selling, but isn't looking at all the details of the numbers.
Paul:You, you need like a number oriented, highly credible person who can also talk to clients, who can talk to stakeholders, who can sit in front of the the investors with the CEO, and probably help teach the CEO, unless they've already raised money and exited before, how to talk to investors, how to talk to bankers, how to be in that world.
Paul:To educate not just the CEO but the executive team.
Paul:I think that's the first phase.
Paul:Your first phase CFO, and as Yuki and Mo have pointed out, you probably don't need a CFO before Series A.
Paul:If you have one, that's better if it's someone who, like these two gentlemen who can contribute in many other areas, then that's great.
Paul:Perhaps you got them on board as a founder?
Paul:If they didn't join you as a founder, then most likely you hire that person when you hit the wall on fundraising.
Paul:As I think as Yuki pointed out, Seed, A, beyond that you really need some help to get bigger investors, bigger checks.
Paul:The due diligence gets harder.
Paul:You need someone to sit down and talk through the Excel spreadsheet or the Google spreadsheet.
Paul:You have to have someone who can answer all the little questions that the CEO typically wouldn't answer.
Paul:When you get to a later stage and you're starting to scale your business, you need real pricing, like long-term pricing with the benefit of not just, generalized knowledge, but specialized knowledge.
Paul:I think Maurizio and Yuki and people I've worked with as well at the early stage, have a common background in banking and finance.
Paul:That's really great, because you learn about money, you learn about finance, I hope.
Paul:But you learn to talk to money; to bankers and to the money people.
Paul:So that's super important to learn.
Paul:If you're a CEO founder, you don't have that.
Paul:You should seek to learn that from a very talented CFO.
Paul:In the later stage, you need greater specialization, is my belief.
Paul:As you're lining up for a future IPO, you want someone who understands corporate finance deeply, someone who understands governance, timely disclosure rules, how to put together an accounting process and manage that, not as the accountant, but having an accounting manager, and knowing how, knowing what a good job looks like from having managed people like that before.
Paul:I think the later stage CFOs often have a much stronger accounting and finance background.
Paul:I've seen CFOs of listed Japanese startups where they've moved into corp dev roles, because they've come out of M&A in international banking and finance, and then they became a CFO.
Paul:Post IPO, you need someone who's just really operationally excellent around accounting, finance, talking to auditors and investor relations.
Paul:I'll tell you what it's like when I experience it, but post IPO investor relations is quite formal and intensive.
Paul:That also is a process that needs staff and someone has to manage them and they do stuff and you hold them accountable for their KPIs and hopefully do a great job.
Paul:To summarize, the way I've seen this, and I'd love to get the insights of of Nalin, and of course Yuki and Maurizio, but that early stage, trailblazer CFO type typically from banking and finance, versus early growth stage CFO usually has an accounting and finance background.
Paul:If you are a technology company, maybe they come from a tech company, and they have experience there.
Paul:That's probably an easy way to, to divide them up.
Paul:We haven't heard from Nalin much.
Paul:You've seen a lot of later stage companies and also early stage companies.
Paul:What's your view?
Nalin:Thank you Paul, first of all, and um, I agree with everybody here.
Nalin:The nature and the skillset and capability of um, your CFO will change depending on the stage of the company, and also will change depending on the nature of the company, and the other members on the management or executive team.
Nalin:One thing missing from the conversations is usually the CFO is also gonna be responsible for things like HR legal and governance, especially of the legal entities.
Nalin:When you have things like, IP and intellectual property, that might fall to a CTO or a product management person.
Nalin:But all other legal issues, compliances, complications, usually come to the CFO, until you're big enough to have a legal counsel, or be able to pay for fancy lawyers on the outside.
Nalin:That's one that's good to be mindful of if you're scaling beyond one geography, and you have multiple legal entities, whether it's for financial reasons or a customer and go-to-market reasons, usually your CFO is also going to be the one charted with setting up those entities and balancing everything between them.
Nalin:Then on the HR angle this is in many ways I think this is a mistake a lot of startups makes which is, you leave the CFO in charge of HR for too long.
Nalin:Because one of our differentiators as a startup is finding and securing and engaging good people.
Nalin:With all due respect to Yuki and Maurizio, I'm sure both of you are great at this, but not all CFOs are well inclined towards engaging employees.
Nalin:Sometimes they come at it too much from the cost point of view and not so much from the capability and skillset point of view.
Nalin:It's important to very early on, because people have a, and especially if you're a software business, people have a very big impact on your cost base.
Nalin:So your CFO will be heavily involved in who you hire and what budgets you allocate.
Nalin:As your company scales, your CFO will focus more on communications with the shareholders, communications with future investors, perhaps banks, and also perhaps customers.
Nalin:Yeah, so what's my initial reaction.
Paul:Thank you.
Paul:I think That's a very good point.
Paul:The corporate functions typically will fall under the CFO and like you said, sometimes HR could be stuck under the CFO too long, or in the case of other companies under the CEO for too long!
Paul:Not pointing any fingers, at myself.
Paul:You have to wear many hats in the early stages.
Paul:In the early days of Moneytree, I split the the legal role with the CFO to some extent, but ultimately it's his responsibility, but I had HR.
Paul:Longer term, when you get closer to IPO, CEOs not allowed to have any functional staff reporting to them.
Paul:When you get closer, you can have the heads of the groups report to you.
Paul:So you don't want to be too hands on anyway, you've gotta focus on building.
Paul:A good CFO will help you do that!
Paul:What are some of the things that successful startup CFOs have in common?
Paul:Of course, you can look at yourself and say I'm good at this, but perhaps you've got some reference to peers as well, emphasis on startup CFOs.
Paul:Maurizio, do you want to have a shot at that?
Maurizio Raffione:I see that Yuki just gave up on us, on that question.
Paul:I'm outta here, exactly.
Paul:Oh, he's back.
Maurizio Raffione:Okay, he's back.
Maurizio Raffione:I don't really have a peer group that I refer to mostly because I've been winging it for the last 2 and a half years, in all honesty.
Maurizio Raffione:The CFO role has to combine two worlds, right?
Maurizio Raffione:It needs to combine the world of numbers and the boring things that start most startuppers don't want to do.
Maurizio Raffione:They want do the cool, idea generation, and selling the clients and building product, but also with a deep understanding of the subject matter.
Maurizio Raffione:Someone that has I think Paul, as you mentioned, particularly for later stage companies, that have very specific skillset in preparing companies for IPOs, that's something you really can't replicate.
Maurizio Raffione:For earlier stage companies though, I think the outstanding qualities come back to the ability to build.
Maurizio Raffione:To build efficiently, to bring processes in place, both from day to day management of the company, to how we think strategically.
Maurizio Raffione:Be a little bit more of an advisor perhaps than just a, regular person doing their job.
Maurizio Raffione:That's why I think a lot of early stage startups, rather than take on a CFO full-time, actually hire a Director of Finance on a part-time basis, or an advisory basis.
Maurizio Raffione:To summarize, you want someone that really knows their numbers and they've proven that they're able to do what they say they do, whether they've done fundraising for other companies before, whether they've worked for M&A companies, advisors, they have to have a certain pedigree.
Maurizio Raffione:I wouldn't hire 23 year old, frankly, as a CFO.
Maurizio Raffione:Nothing wrong with 23 year olds, but I think you just don't have that experience.
Maurizio Raffione:At the same time, someone who has taken the time to learn about the subject matter, and the area they're in but particularly for early stage, later on we all seem to agree, the skill sets are different.
Maurizio Raffione:Say you're, in the AI space, for example, I'd love my CFO to have an understanding of AI and how that's applied in that specific field.
Maurizio Raffione:Then all the discussions about the strategy, the pricing what kind of people we should be hiring and how much should we should pay paying for for them, it all makes sense.
Maurizio Raffione:Otherwise they're always gonna be a big divide between the business people and the CFO.
Maurizio Raffione:Remember, the CFO's always the bad guy, right?
Maurizio Raffione:He's the guy that tells you not to spend.
Maurizio Raffione:He's the guy that tells you that investors want more.
Maurizio Raffione:He's the guy that tells you that we're not selling enough.
Maurizio Raffione:He's the bad news guy, generally.
Maurizio Raffione:They need to bridge that gap of understanding of the underlying asset that you are selling or service, as much as possible.
Paul:I think it's it is definitely important to not be the CF-no.
Paul:You gotta aim to be the CF-yo!
Paul:We make that joke a bit.
Paul:It's tough being in that role, it's like being a CISO, a Chief Information Security Officer, your job is really to stop bad things from happening a lot of the time.
Paul:People get the feeling that's all you do.
Paul:Thanks, Maurizio.
Paul:That's insightful.
Paul:Yuki, how about yourself?
Paul:What are some of the things that you think successful startup CFOs have in common?
Paul:Perhaps with your background at Plug and Play, you've got a wider peer group that you can draw upon there.
Yuki Kishi:I've been thinking while Maurizio is speaking in, in the end, I think it kind two words popped up in my mind.
Yuki Kishi:Three words actually.
Yuki Kishi:One is leadership and second is how do you call it in in English?
Yuki Kishi:Human humanity.
Yuki Kishi:Human humanity.
Yuki Kishi:Human.
Yuki Kishi:No.
Yuki Kishi:Yeah.
Yuki Kishi:Yeah.
Yuki Kishi:I dunno how to explain that.
Nalin:I think it's probably empathy, humanity, empathy.
Yuki Kishi:Yeah.
Yuki Kishi:Okay.
Yuki Kishi:Yeah.
Yuki Kishi:That's another word.
Yuki Kishi:And the third is commitment, the level of commitment.
Yuki Kishi:I think these are three factors that I think is also not only CFO but in general it's very important as CxO as a board member, I guess in, in the end, so as a CFO of a startup company, I think the mindset you have to have is you never let the company fail.
Yuki Kishi:And and in a way that you'll be the sort of you'll be the last one to be on that ship.
Yuki Kishi:So that, that shows a level of commitment because in your startups like not only early stage startup, but even in general, I think start there many up, up and downs in the startup journey.
Yuki Kishi:For example now, like who you would expect this last year the, suddenly the the IPO market has changed.
Yuki Kishi:The venture capital, the fundraising market has really went in a different direct direction since this Q1 Q2.
Yuki Kishi:In this bad timing, of course you can be, in a way thinking everything in negatively, but as leadership, you have to show the guidance.
Yuki Kishi:You have to show the direction to the team, the employees not only CEO, but of course in CFO as well.
Yuki Kishi:That really depends on, as mentioned, the commitment, leadership and empathy, these kind of wordings.
Yuki Kishi:As Mo mentioned as early stage startup, yes, you need to have more roles as a builder, but more, as the company grows you need to have more sort of subject matter experts in each field.
Paul:That's great.
Paul:Thank you.
Paul:So on chat, we had a question.
Paul:When looking for a CFO, what are the critical questions to ask them when interviewing?
Paul:Maurizio gave an answer there as well, which is show them your company financials and ask them to tell you what you think you're doing well, and what you think and what they think you're doing not so well.
Paul:It's a pretty good way to look at it.
Paul:I probably wouldn't show them the financials in the first interview.
Paul:But, if you're interviewing a CFO, assume that you're gonna tell them a lot at some point.
Paul:So as soon as you get past that first stage, get an NDA, probably one of the first things that I do once we get past the initial screening.
Paul:One other thing is, the CEO should do the screening.
Paul:Not your HR department, not your internal recruiter.
Paul:Well resume screening they might do.
Paul:Whenever we hire a senior role, I'm the first person they meet typically, if it's a C level.
Paul:Because, they are going to be my hire.
Paul:If they're a senior candidate, you want to show them respect from the very start.
Paul:Don't put them through 17 levels of other people and process before they get to meet the big guy or the big gal.
Paul:Going back to the question, what are some of the questions we should be asking?
Paul:Yuki and Mauria and perhaps also Nalin.
Maurizio Raffione:Just to follow up on that, never said those have to be your true company financials.
Maurizio Raffione:You know what I mean?
Maurizio Raffione:You gotta throw a test to people, see how they react.
Maurizio Raffione:But another thing I think good question is about the product pricing and the unit economics and have, obviously they, by the time they interview, the CEO or their big interview with the CEO or managers, they should have done their homework and understand about the company as much as possible.
Maurizio Raffione:So they should know about your products and how you're selling them and what you're charging.
Maurizio Raffione:There should be an area discussion to see if that person one, understands the economics of your business, two, sees opportunities for improvement in what you're doing or positioning of that product, and three, tests their flexibility.
Maurizio Raffione:Which is the other thing, and a lot of people that have studied extensively, very boring subjects like accounting, they do tend to fall into a certain general approach to life, which is, keep it steady, keep it going.
Maurizio Raffione:But for startups, you need a lot of mental lateral flexibility to address issues and unexpected situations, and I think you want to have that kind of discussion.
Maurizio Raffione:I want to say confrontational discussion, but a very strong discussion to see how they would react if you'd asked them, look, we're planning on raising our prices 50% from next month, what do you think?
Maurizio Raffione:Do you think we're doing the right thing?
Maurizio Raffione:How would you go about validating that or not?
Maurizio Raffione:And, see how the reason through.
Paul:On that point, Maurizio, when you are, when you want to give them the fake books, right?
Paul:I think you're gonna need a CFO for that anyway.
Paul:So it's gonna be CFOs all the way down man!
Yuki Kishi:Yeah, for me, it's similar to what Maurizio mentioned, but as CFO, he or she needs to have a good understanding of business model, and how how we make money on the costs associated with that.
Yuki Kishi:So I think the first question I usually ask to the potential CFO, or someone who can work with me is that I usually ask, hey, have you done your four homework?
Yuki Kishi:Yes.
Yuki Kishi:I usually say, yes, I've checked the website read all the articles, blah, blah, blah.
Yuki Kishi:And based on that, I, my next question, follow up question is, so tell us about our business model.
Yuki Kishi:How do we manage how do we make money, and what's the costs, as well as how much do you think we are making?
Yuki Kishi:Yeah.
Yuki Kishi:So these kind of uh, business model related questions it's kind good start for me to test their sense of the business itself as well as more like intellectual ability as well.
Yuki Kishi:Of course when I got the, this job offer from the current company, yes, they, they did show me the PL, cash flow statements, their projections in Excels, and yes, I think I do remember that I did point out several formula errors, and they're pretty much impressed.
Paul:Your Excel-fu is strong!
Paul:That is always a good sign.
Paul:Tools of the trade.
Paul:So if you are fundraising, if you're looking to raise funds in the future if you're challenged by any kind of shall we say, debt raising as well.
Paul:When I said fundraising, that could be equity or debt, Japanese banks will lend you and that, that might actually be a good question.
Paul:Have you had much experience with debt raises?
Paul:And I would say specific to Japan, since it's probably a bit of a unique beast, but if there's something general that we can learn from experience overseas as well, willing to hear that as well, any debt raising experience?
Maurizio Raffione:I did that for the most part in my previous career, where that's all I did essentially is raise debt financing in the hundreds of millions of dollars a pop.
Maurizio Raffione:In the startup world, not yet, although I've personally engaged with venture debt companies.
Maurizio Raffione:So my experience in that respect is limited, I think if we're trying to generalize in terms of how you go about debt raising versus equity raising, just to put some pointers out there for people who may not be familiar.
Maurizio Raffione:Debt is really money that you need to repay back.
Maurizio Raffione:You can't just keep it.
Maurizio Raffione:I think most people know that.
Maurizio Raffione:But the way you underwrite that from a lender point of view is really based on cash flow.
Maurizio Raffione:And the ability of a company to generate enough over and above their expenses to some extent, at least at the top level to be able to repay that debt or to keep it going so far to get the refi which is more the high yield case.
Maurizio Raffione:But anyway if we're talking about venture debt what's very interesting is in my experience at least, it really is more vague.
Maurizio Raffione:Support to an equity financing rather than outright standalone financing than you do just with debt.
Maurizio Raffione:And by debt real debt, not convertibles that turning into equity anyway.
Maurizio Raffione:I'm talking about loans, and yeah it has become quite normal for people to go and raise a series A of, I dunno, 10, 20, 30 million, and maybe have a 5 million kicker, one to 5 million kicker in, in debt to minimize dilution, but still get some cash in.
Maurizio Raffione:And as a rule for, as a CFO, if you can get money, get it, from investors, don't hold back.
Maurizio Raffione:At least, if the terms aren't too bad.
Maurizio Raffione:However, what's very interesting is in the last few years what we had is revenue financing.
Maurizio Raffione:Which is a form of debt, but where you go and raise debt to be repaid directly from your revenues.
Maurizio Raffione:And structurally a little bit different in terms of the priority of payments and your, liability waterfall, but it is that you are revenue generating company.
Maurizio Raffione:You don't want to dilute your equity holding.
Maurizio Raffione:You have an ability to tap into traditional debt providers, but also these innovative revenue-based financing that tends to be done mostly by other startups or some more, I think forward-looking, companies out there.
Paul:You're talking about companies like Pipe in the United States?
Maurizio Raffione:I'm not aware specifically of Pipe.
Maurizio Raffione:There are a few companies here in Asia that...
Maurizio Raffione:because I get emails every so often from companies say, we'll give you, up to 30 million, and it's not gonna dilute any of your equity.
Maurizio Raffione:But the idea is that every time there's revenue that you book, you actually have to pay, I don't know, 5 cents of that, 5 cents a dollar back to debt provider, or, 20 cents of the dollar depending on how much you've raised.
Maurizio Raffione:And the idea is that it helps you it helps the underwriter because they are somewhat protected from you spending money that doesn't generate revenues, per se, in a sense.
Maurizio Raffione:So it's not general liability of the company.
Maurizio Raffione:In time it helps you as a company because again, you have raised money and it's easy to raise.
Maurizio Raffione:They have fairly, straightforward processes, fairly decent amount so you can raise.
Maurizio Raffione:But again, it really needs to be a SaaS business.
Maurizio Raffione:If your startup has more lumpy income or product development that creates uneven cash flows, that becomes a little bit trickier.
Paul:Yeah.
Paul:It's interesting.
Paul:There are a lot more options.
Paul:I remember when we got our first loan that wasn't from Japan Finance Corporation, which is the government backed quasi-bank that will lend to lots of small businesses in Japan, including startups, although it was very challenging to get it from them.
Paul:Despite the fact that we were in Shibuya.
Paul:And I remember the person that we were meeting with was saying, oh, we should be able to lend to companies like you, but we can't because our policies and . Behind, because Shibuya was where all the startups were.
Paul:And I think he was in the business of turning them away.
Paul:But I, I'm pleased to say they did give us a loan and that helped a lot.
Paul:uh, Years later we got a much bigger loan from them.
Paul:So getting debt funding is not a, not a bad thing.
Paul:In fact, it's a pretty necessary thing.
Paul:But before I go on my tangent, Yuki I reckon you've had some some experience in Japan working with banks.
Yuki Kishi:Yeah, not much to add, to be honest, but in Japan there's typical perception from Japanese bank's perspective is that they, maybe venture that is, of course they it's there in the website, but it never gets loaned out to the startups.
Yuki Kishi:So there really needs the fundings.
Yuki Kishi:But I think the momentum has really shifted let's say for the past few years.
Yuki Kishi:It's, my, my gut feeling is that I read many press release of the companies doing the fundraising activities and, we start to see more and more press release saying that some of the money actually came as a loan from X, Y, Z banks in Japan.
Yuki Kishi:So I think the momentum has really, definitely has shifted.
Yuki Kishi:As Mo mentioned, there are many other options like, revenue based financing.
Yuki Kishi:But also, not as common compared to other markets, but crowdfunding, those are another way for people to do the financing activities.
Yuki Kishi:As a startup, there are many opportunities, much more options in Japan market, which I think in general is a good thing.
Yuki Kishi:Also it, it's great to see that the banks are putting more efforts in terms of their loan activities to startups.
Maurizio Raffione:Can I just add one thing which is important I think to clarify, is that as a company, and it doesn't matter whether you're a startup or a large company, whenever you take on debt, you're also taking on certain terms that you need to stick to unless you want things to go bad.
Maurizio Raffione:For example, the lenders may insist you have certain financial ratios.
Maurizio Raffione:They may insist that you have certain spending limits.
Maurizio Raffione:And these are conditions that could lead to bankruptcy, if they're not a adhered to.
Maurizio Raffione:Obviously, I suspect a loan to an early stage company will be much more flexible in terms of these criteria than, the bigger companies.
Maurizio Raffione:But it's a reality that you don't really have with equity financing or of course you have, shareholders reserved rights, but they tend to be fairly, high level, fairly easy to deal with compared to hard terms that you need to stick to as a company if you take on that.
Yuki Kishi:Ultimately, I think it really depends on the strategy.
Yuki Kishi:I mean, I think this falls to CFO skillset, but it really depends on the company's strategy in terms of its financing activities.
Yuki Kishi:So depending on that, you choose the right ways of financing, it could be debt, it could be equity, it could be other forms, convertible notes other ways of doing financing.
Maurizio Raffione:I mean, these days you have the whole crypto world, that has opened a potential avenue of fundraising.
Maurizio Raffione:And now I'm opening a kind of worms here, guys, shut me down very quickly.
Maurizio Raffione:But it is now something that people are looking into.
Maurizio Raffione:Some of the big companies like Tesla for example, even have some some of the treasury positions in Bitcoin, for example.
Maurizio Raffione:Is it good thing, bad thing?
Maurizio Raffione:I'm not saying, but there are opportunities out there to, particularly when the market was a little bit better than now to actually get crypto based financing.
Maurizio Raffione:Obviously depending what your line of work is as a company, if you are DeFi protocol is one thing.
Maurizio Raffione:If you are, I don't know making sausages is different, but we live in a world, awash with money.
Maurizio Raffione:I don't know how long that's gonna go on for, but if you are a startup founder out there, or thinking about starting up a company, just now is possibly the best than it's ever been up until a few months ago.
Maurizio Raffione:I think the wave is starting to turn a little bit.
Maurizio Raffione:Lots of options for you out there.
Paul:Definitely.
Paul:I was looking at 2022 from mid 2021 thinking, how long is this party gonna go on for?
Paul:I thought well, it could finish as early as January or February, or it could go until 2023.
Paul:And it looks like the January, February guess was right, but I'm not gonna say I called the bubble bursting or anything like that, but it just seemed like the market was really hot and things were getting a hundred million dollar valuations with no revenue that weren't even necessarily blockchain.
Paul:Because of course that's good and proper in blockchain!
Paul:One of the interesting things about raising debt financing in Japan is the insane amount of paperwork.
Paul:Of course I love to mention the fact that the definition of a banker is someone who lends you an umbrella when it's sunny and take it away when it rains.
Paul:Definitely when you've raised money through venture capital, as Yuki pointed out, banks are willing to throw in some debt funding there as well, that's the time to really borrow, when you have a lot of cash in the bank.
Paul:I haven't seen a great deal of focus on things like corporate governance, restraints on spending and so on, but we have a lot of bank VCs and some of them are observers on our board.
Paul:So I think that gives them confidence that they've got, at least there are a lot of outside adults who are watching what we're doing.
Paul:And ultimately that's the thing about bankers is they expect their money to come back.
Paul:I mean with a high degree of certainty.
Paul:On the other hand, VCs famously say 90 something percent of their investments go to zero, and it's the remainder that make their portfolio.
Paul:Although that strategy in Japan is perhaps a little bit more conservative, especially since Japanese VCs don't try to get 20% of the company in a round.
Paul:I haven't seen that very often, whereas I hear that the MO, the modus operandi for, uh, a lot of US VCs is to get that much money to make their model work.
Maurizio Raffione:I'm interested from your perspective for the four of you who are more in a investment role or CEO role, what have, what you've found to be traits and characteristics of CFOs that you've appreciated and some that you've found difficult deal with?
Paul:Nalin, did you want to go first?
Nalin:Okay, let me have a shot at this.
Nalin:I feel that in many cases, the CFO is the counterbalance to the CEO.
Nalin:It depends on who and what your CEO is like.
Nalin:Very often you want somebody who's a very positive, upbeat, and forward-looking CEO, especially in the early stages of the company.
Nalin:And somebody has to act as a counterbalance.
Nalin:And in my opinion, that's in many cases the CFO.
Nalin:So early stage, depending on who the CEO is, you need to be a counterbalance.
Nalin:You're probably the only other C-suite member who can actually almost veto what the CEO's gonna be saying.
Nalin:And you do it based on Excel sheets and, and numbers.
Nalin:As the company grows, that changes.
Nalin:I really want to highlight, because, this is mostly about startups.
Nalin:I do want to highlight that the CFO is probably the single C-suite member who can veto or do something close to vetoing the CEO.
Paul:Yeah I've heard that too, that the the CEO is the accelerator and the CFO is the break.
Paul:As long as the, they're not faulty brakes, you're gonna be okay.
Nalin:Paul, I think, actually, I think the CFO should not be the brakes.
Nalin:He should be the clutch.
Paul:That's exactly right, not the brake!
Paul:The person who said that, I didn't quite agree with them.
Paul:When you're fundraising, and this isn't news to Marurizio or Yuki, the role of the CEO is to have the vision and to make a credible case for the future of the company.
Paul:The CFO is to provide credibility today.
Paul:They're the person who's gonna be talking about the numbers and the investor can say, yep, I can believe this because you've given me a very detailed explanation and answered all my difficult questions.
Paul:One's near term, one's long term.
Paul:One is more vision, the other one is more facts and data.
Paul:It depends also on the kind of CEO that you are, but as a good team, especially when fundraising, and this is more just general advice, make sure the roles are clear, don't have the CEO and the CFO trying to be the same persona.
Paul:If both are competing to tell the investor the vision, you're missing out on the opportunity for one of them to talk to the numbers, or to establish more credibility.
Paul:But typically it's the job of the CEO to show what that vision is and explain that in detail.
Paul:It's the job of the CFO to validate that.
Yuki Kishi:Very interesting comments.
Haruka:I would say I totally agree with what Paul and Nalin mentioned that I think a lot of time CFOs has to be someone to make the vision more realistic and more make the business more and more on track and tell the story that added credibility on, on their story to make their story more how do you say it?
Haruka:Like more, makes more sense.
Haruka:I actually have a question because I think like we have been talking about cases where companies are hiring CFOs as a full-time employee.
Haruka:because I'm based in Kasai and sometimes where startups I, I've met do not hire full-time CFOs, but they have CFOs as a advisor, or like sometimes, ex-VC, people would be CFOs in multiple companies.
Haruka:So in that cases I have heard, you know, like some people said it's not the ideal way as a startup that you want to have a CFO role in your company.
Haruka:What are your thoughts, especially to Yuki, Mo, and Paul, and Nalin as well.
Haruka:As for early stage startup I do understand that this is probably one of the choices that they can go for, but what are the what are advantage and disadvantage for hiring a CFO that's not full-time?
Maurizio Raffione:Yes.
Maurizio Raffione:I'm volunteering here.
Maurizio Raffione:So I speak in terms of my experience as a consultant, which I mentioned earlier for a couple years in between, lifestyle changes.
Maurizio Raffione:That's what I did.
Maurizio Raffione:I provided consulting services mostly on financial aspects relating to startups.
Maurizio Raffione:And I think it's great, frankly for a startup to engage someone on the financial side on a part-time basis.
Maurizio Raffione:One, so you can test them out and see if there's a good fit.
Maurizio Raffione:Two, if you can actually see if that person generates the interest, if you're fundraising, or does the work that you've asked them or her to do properly, within a certain timeframe.
Maurizio Raffione:And hopefully in that relationship, even though it's part-time, the CEO or the co-founder, co-founders are able to absorb some of the information that person shares with them, right?
Maurizio Raffione:So they can get educated if they're missing that skill set of that perspective.
Maurizio Raffione:This is assuming the COO or the other co-founders don't have a strong finance background.
Maurizio Raffione:If they do different story, you probably don't need or anyone part-time.
Maurizio Raffione:But I think actually the part-time makes a lot of sense for a lot of roles in early stage startups.
Maurizio Raffione:Until you really get your key early stage team, you'll go through people anyway.
Maurizio Raffione:So why not someone on the finance side, just like someone on the programming side or I don't know the sales side?
Maurizio Raffione:Obviously there's sensitivity around opening up the books, uh, of your company to a person, but that can be taken care of with proper contracts, which is something by the way, the startups need to do from day one.
Maurizio Raffione:I think if that person is judicious and they know what they're doing and you've vet them through an interview process and got references, they're able to manage their time.
Maurizio Raffione:Now, obviously if they were consulting for 15 different startups, they'd be worried.
Maurizio Raffione:But yeah, I think that's just common sense.
Paul:Maurizio, on that point, verbal contracts do have a rather long history in Japan.
Paul:And you can even verbally modify a written contract, apparently.
Paul:I've had someone try and claim that, although we just dismissed that claim and they didn't follow up on it.
Haruka:Nalin, do you have any thought on, on the question?
Nalin:I have a very clear opinion on this, I don't like part-time anything at the C level, but having said that you have a choice, right?
Nalin:You can, you can have three part-time of something where you can have one guy or person wearing three hats.
Nalin:And I would rather have that, I would rather have one person wearing three hats than having three part-timers, three people with half a hat.
Nalin:If and when the company grows, rather than having that one person wear three hats, you have them wear two, then you have them wear one, and you have three people wearing one hat each.
Nalin:But I'd rather have these people fully engaged rather than spread between multiple companies.
Nalin:If they're spread between multiple companies, they become me.
Nalin:I get to do what I do because I'm okay with it.
Nalin:I'm fairly decent with it, but you know, I don't think a CFO should be part-time.
Haruka:Yes, definitely.
Haruka:I'm, I'm actually surprised to hear Mo's answer, but I think if you see like a long-term relation with this person, and maybe he or she can be doing part-time for now and, if your relation is gonna be like, long term, long term and you see the future hiring he or she in the future, then I guess it's definitely feasible.
Nalin:I mean as a chemistry, as a chemistry check, starting out with somebody who's not necessarily full-time, I totally agree with that because, you don't want somebody like fully locked in who you discovered 3 months later is not compatible.
Nalin:So spending 3 months to understand whether there's a compatibility, I think is absolutely fine.
Nalin:But then to go 6 months a year with somebody being.
Nalin:Part-time or, working on three different CFO roles, I'm not sure if that's the way to go.
Nalin:And usually if your company's growing fast enough you wouldn't be able to, to sustain having a one third of a CFO.
Jason:We really have to ask ourselves, is there a good CFO out there who works part-time?
Jason:There must be one for every hundred who's a full-timer.
Jason:And they would have very specific personal reasons why they're fine to work part-time or as a consultant to multiple companies.
Jason:And is that the type of CFO that really fills the CFO need you, you think you have?
Jason:Are there part-time CFOs out there, and do we call them that or are they just consultants?
Paul:Perhaps the role of the CFO that Nalin's talking about is is more really deeply understanding and representing the company, and it's not something you can do part-time and, and also helping to steer day-to-day so you can outsource your accounting and finance, and as Maurizio said, in the early stages of a startup, it's simple.
Paul:But the true role of the CFO goes way beyond that.
Paul:A good CFO is probably not doing the accounting and finance hands-on, you've got a bookkeeper, you've got accounting manager, others, maybe a project manager there as well to keep things moving and processes humming in the company.
Paul:On the other hand, yeah, the orchestra doesn't conduct itself!
Haruka:You totally makes sense, and I don't think I've ever seen any successful CFOs that are part-time, but obviously I was doing some event with some of the ex-VCs are doing multiple CFO roles at the same time, so I was just wondering the background reasoning for a startup hiring a CFO that's doing different companies at the same time.
Paul:I think if you're struggling and you have a CFO, so a consulting or advisory CFO, that's better than no CFO, because they'll be able to give you all sorts of insights.
Paul:But ultimately these processes are things that you want to bring in house and have the relationships and insights so that they can do their job.
Haruka:Yeah, totally makes sense.
Jason:Bottom of the hour, I guess we're wrapping up.
Jason:Yuki and Mo, any final wrap up comments on the role of the CFO in startups?
Yuki Kishi:Yeah.
Yuki Kishi:One final comment that hasn't really been touched is that I think recently I see more and more bilingual CFO talents coming into this field because there are many venture capital funds, not only from Japan, but also international, investing into Japanese as startups.
Yuki Kishi:I see many people are looking for CFOs who can actually speak both Japanese and English.
Yuki Kishi:So that's one newer trend that I see.
Yuki Kishi:I'm lucky, but myself, Maurizio lucky to be the both bilingual.
Paul:Maurizio, any final comment?
Maurizio Raffione:Nothing specific guys and gals, I just wanted to thank everyone for listening to the conversation.
Maurizio Raffione:Just remind everyone, CFOs are tough people, but they do have feelings, so treat us nicely.
Maurizio Raffione:And we'll get you next big check.
Maurizio Raffione:Thanks everyone!
Paul:All right, so we'll be lobbying the Japanese government for the official 'Hug a CFO Day' for 2023.
Paul:Until then please feel free to come back to Founded in Japan.
Paul:It was great to have Maru and Yuki as special guest tonight.
Paul:Thank you so much, gentlemen.
Yuki Kishi:Thank you everyone.
Jason:And thanks to Haruka for the suggestion and pulling this together.
Shiba Inu:Thank you once again for listening to Founded In Japan.
Shiba Inu:This episode was recorded live on Clubhouse on May 16, 2022.
Shiba Inu:Founded In Japan is part of the Business In Japan Clubhouse and Linked In group.
Shiba Inu:Follow us on Clubhouse or Linked In to join our live audio events, or subscribe to us on Apple Podcasts or Spotify.
