Capital Conquest: A CFO's Guide to Mastering Fundraising
Catch Varun Gupta, MoCafi's CFO, and Jimmy Hallsworth, Spendflo's VP of Procurement Strategy, sharing the winning formula for fundraising in 2024.
KPI's that you focus on really differ based on what kind of a business and what
stage you're on.
But a few key themes that I've seen talking to investors and talking to my
other CFO friends is
one. There is a lot more focus on show as a path to breakeven, show us a path
to profitability.
Maybe when you're going into raising a series B it's not as important when you
're going into a
series C. But investors are asking what is your path to breakeven?
Hello everyone. Welcome to the Optimize Show, Ratiya Bice-Benflow. I'm your
host for this
episode, Jimmy Halsworth. I'm the vice president of Procurement at Spinflow.
Spinflow is a unified
SaaS buying management solution that enables high growth businesses to buy,
renew, and manage
SaaS subscriptions. Today we're actually joined by Varun Gupta, the chief
financial officer of
Amokafai, which is a turnkey FinTech platform for government and philanthropic
organizations
that provide individuals and families with financial programming that create
pathways to wealth.
So before we say super high to Varun, we're talking about his experience and
background.
He has 15 years plus experience as a coverage banker and credit head at Citi
and HSBC,
where he built new businesses, top performing teams, and worked with both
public and private
companies across life cycles that helped them raise capital, carry out M&A, set
up global treasury,
manage risk, and expand globally. In 2022, Varun led a series B FinTech
infrastructure startup
through a $63 million fundraising process in one of the toughest environments.
He was also a
consulting CFO advising multiple early and growth stage startups on capital
raise, FPNAs,
strategic finance related matters. Varun, welcome. Pleasure to have you on
today.
Oh, thank you, Jimmy. Thank you for having me.
Awesome. So let's just set the groundwork for this topic. Today, we're going to
delve into
your career and firing path you've taken, exploring your transition from
corporate banking to the
role of CFO. Hopefully, we can gain some valuable insights on what you learn
from your experiences
and navigating the often complex world of fundraising for growth oriented
companies.
So let's start professionally, I guess, before your stint at startups. You had
15 years in
corporate banking experience. How did it shape your path towards the roles and
responsibilities
you handled today? Yeah, that's a great question, Jimmy. I would say I'm an
accidental CFO. I didn't
think that I would become a CFO or pursue the path to become a CFO. But in
corporate banking,
what you end up doing is you are a banker and you go and you talk to your
clients, you talk to your
prospects, and you really try to understand where they are in the lifecycle.
Are they trying to grow
organically? Are they trying to grow inorganically? What kind of capital is the
right capital for
them to raise? Companies today become global much faster in their lifecycle
than it used to be,
as you can imagine. So when they go into Europe or Asia or into Latin America,
what is the right
setup for them to manage their cash? What is the right setup for them to invest
capital in those
regions? So those were the problems that I was trying to solve for my clients.
And that gave me
a very unique perspective into how finance evolved over those 15 years I was in
banking.
I saw the role of finance and the role of the office of the CFO evolve from
being
kind of an accounting, control, a ship, and treasury to a more strategic role.
And in the last five years of my career in banking, I was very fortunate to
work with a bunch of
very interesting startups. I don't want to take the names, but I was in the Bay
Area. I was
meeting all these very, very interesting, fascinating startups that became
unique
on very, very quickly. I had the honor of taking a couple of them public. And
after doing that,
I just caught that startup bug. I was like, I want to do this. I want to be on
the operating side.
I think I'm good at finance, but more than finance, I'm very good at having
that strategic mindset,
because as a banker, you're always kind of into the commercial aspect of a
relationship, a deal,
solving problems, and those were the top skills that I got to understand
startups need, right?
Solve problems, collaborate, and really just get things done, right? So I
thought, why not
take that plunge and take it now? If I don't do it now, then I won't get the
opportunity.
So look, I took the plunge. It's been two years. I don't regret a second of the
time I've spent
on the operating side. My kids still ask me, why did you take a pay cut and
work longer hours?
So that's a question I still can't answer for my kids. But look, it's been a
fascinating
experience for me. Yeah, I have that same argument or not argument, but
discussion my kids to,
I'm like, I'll tell you in five years, like, it'll all make sense, I promise.
No, no, I hear you on
the startup, but too. Once you get into it, it's almost impossible to walk away
from the energy
and pacing that startups have. It's too fun. So hearing your journey a little
bit, do you think,
I mean, obviously, as you've gone through different organizations, you've
probably had some traits
or lessons learned, some qualities that you would consider essential now in
your role as a CFO.
So what are, for our young leaders out there, what are some of those
characteristics that you
think define a successful CFO? And this could be at different stages of the
career, right? But
like, what are those traits and qualities? Yeah, so look, I think the public
perception of banking
from the outside is that bankers are just socializing with clients, dining out,
drinking,
or you have that image of a person sitting on the laptop and just trading and
trading and trading.
But if you really know how the corporate banking, commercial banking world
works,
the role of a banker is that of a quarterback, right? If I can use the NFL
analogy,
as a banker, what you're trying to do really is you're first trying to
understand what your client
wants, then trying to solve that problem. And then that's the easy part, by the
way,
the hard part is coming back into the firm and then getting it done, right?
Banks, as you can imagine,
are complex, they're very highly regulated, capital scares, right? So to get
things done
within the firm, within the bank, it takes a lot of collaboration, right? You
have to collaborate
with multiple teams, like any day, you know, any typical day in banking, I was
talking to risk
and compliance, I was talking to credit team, I was talking to my product teams
, I was talking to
my wire desk in Delaware, right? If there's something urgent to plan. So in any
day, you collaborate
across a lot of teams. And because I worked at city and HSBC, which are two of
the most global
banks in the world, any typical day, I was talking to somebody in Asia or
Europe or Latin America,
right, to get things done for my clients. So that collaboration is extremely,
extremely valuable,
right? If you think about the role of a CFO, a CFO is in a very privileged
position, right?
Because you think about all the C-suite leaders in a firm and which one person
has information
across the organization, right? It's the CFO. The head of sales or the chief
revenue officer
knows everything about sales, right? The chief operating officer knows
everything about the
operations, right? But it's really the CFO office where you know everything
that's happening across
the business, right? So you are in a position of privilege, right? Where you
know that other
leaders don't know. So you have to really collaborate with all the leaders to
make them understand what
you see, right? And then really, you know, explain why something can be done
and something should not
be done. And if something should not be done, then why, right? So I think
collaboration is extremely,
extremely important. I won't talk about the functional expertise that you need
to have to be a CFO,
right? You need to be able to understand gap accounting. You need to be able to
understand treasury.
You don't need to be an expert at accounting, but you need to be able to ask
your controller
the right questions, right? If this is happening this way, why, right? Just
keep, keep a track of
everything that's changing on the accounting side to make sure, I mean, you're
signing off on the
accounts and the audit, right? So you have to know all that stuff. So not an
expert, but you have to
have enough grounding and ask the right questions. So apart from having those
functional skills that
you must have, being able to think about the problem strategically and at the
same time also
going to details is extremely important, especially when you are, you know,
head of finance for CFO
of a startup. CFOs today, if you look, they many times had HR function in early
state
startups because you don't want to create a lot of headcount. They had
government, right? They had
they had vendor relationships. Many times they are also going out and talking
to partners on the
revenue side, right? Working with the chief revenue officer on partnerships on
alliances.
So you have to be prepared to put on different hats, even though your core role
is that of a CFO.
And I think my banking career really prepared me to do that. Yeah, I think it's
, it's interesting.
Like I like how you called out the strategy in detail. I'll say like at my last
, and my last
stint, my CFO was a one of the one of the most incredible people I've ever
worked with. But
he was not afraid to get into the details and like figure out the nitty gritty
and
and to a fault at times, right? Because I'm like, hey, you should go do this.
But at the same time,
I think it's I think it's a it's a great it's a great trade. It's something
that empowers your
team as well to feel like, you know, you know, hey, Varun's Varun's here to
play, right? He's not
going to leave us on our own. So that's that's awesome. So what was the I know
we talked about,
you went from banking into into fintech. What was like that that motivator that
kind of gave
you that first itch to to jump in there and see what's going on? I mean, as I
said, right? I saw
a lot of my startup clients evolve very quickly from early stage to late stage
and then kind of
pre IPO companies. And I had the privilege of working with them through the lif
ecycle. And that
was just fascinating. You know, when when you see businesses evolve quickly,
and again, you know,
I think we all know that 99% of the startups fail, right? So it's only those
one or two percent
that make up to, to, you know, an IPO or to a monetization event. So we end up
focusing a lot
on those one or two percent. I also saw a few startups that did not really work
out, right,
as a banker. And that's where you really get the perspective, right? That this
is what
successful startups do. This is what startups that didn't make it all the way
up, you know,
could have done to avoid some of the pitfalls, right? So I just had the
privilege of working with both
cohorts of startups, the ones that made it and the ones that did not make it.
And that just gave me
another perspective, you know, to to say, okay, if I go to the operating side,
then I will make sure
that I don't make those same mistakes, right? Or, or, or I learn from mistakes,
that's some of my
clients made. And look, honestly, it's very easy for me to say, you know, all
this that I had the
startup page, etc, etc. But I think I was also at that stage in my life where I
could take that
financial risk, right? A lot of us, we want to do something, we want to pursue
something, but you
have a family, you have a mortgage, you have all sorts of obligations, right?
And, and you just
can't do it because that's also part of your life. And that's a very important
part of your life.
So I was just at a point in my life where my wife has a great job. You know, I
had built some
savings. So I was at that point in my life where I could take that risk. And I
was like, okay,
even if in four or five years, it doesn't work out, I can probably go back to
banking and do
what I was doing. And in that process, I would have learned something new. So I
'll just say,
I was also very privileged to be in that position. Awesome. Yeah, I think that
's,
that's interesting in startups in general. I think a lot of people, because you
're, you're
in thinking about equity, right? Like a long-term payout versus the initial,
like, hey, I'm
taking less to come here. That is a conversation that is tough to rationalize.
And I always tell
people, like, you know, some of my employees, I've worked with the past,
because they ask about
startup life now, because they're not in startups. They think it's interesting.
And I'm like,
it's a different world. And you have to be willing, you have to be willing to
take that risk. And
you have to be, you have to have a plan to manage it. That's a good note for
folks as they make that
journey. So let's actually jump into fundraising a little bit. I think that's
something that can
be overwhelming when you look at it without having experience before. And here,
you know,
you watch shows and you, and you watch, watch the news to try to get some ideas
. But it's,
it's different till you're involved. So let's create like a hypothetical
scenario. So you're,
you're the finance head brand new startup that's going to be today. We're
starting today. Let's,
let's name it Varun's volume, right? We're selling microphones. No, not. So it
's, it's going to be
some sasting, right? So walk us through like the most important steps that a
startup should take
to prepare themselves for that successful round of fundraising, especially in
like a 2024, 2025
market, because the world's a little bit different now. Yeah. So, so Jimmy, I
'll say fundraising is
both a science and an art, right? So when you think about fundraising, how you
do fundraising
drastically differs depending upon which stage you're on, right? So if you'll,
and before I go
into fundraising, right? If you think about the, the rule of a head of finance
or how startups
think about hiring their first finance person, typically when you're, when you
're just starting a
company, you are at seed round or angel round and then getting into series
eight, many startups
don't really have a head of finance. And honestly, they don't need a head of
finance. There are lots
of incredible outsourcing fractional CFO businesses out there who can keep your
books, who can
provide you some advice, do some basic modeling for you, right? So you don't
really need to add
a finance head count when you're very early stage. It's really when you've done
series A and you're
moving on to series B is when you should start thinking about bringing a head
of finance because
that's when you've kind of found the product market fit, right? And, and now
you're making that leap
from really commercializing your product and scaling the business, right? So
that's when you
need to bring in a head of finance who can really take ownership of accounting,
who can take ownership
of the financial model and who can bring some financial discipline, right?
Because let's,
let's be honest with ourselves. When fundraising environment is easy, right?
People tend to invest
capital like, you know, two years later, they'll be able to raise the same, you
know, capital in
the same market, but things change. So you also need to have a head of finance
or someone who can
keep that discipline who can create some basic frameworks for you to allocate
capital to measure
the business performance and stuff like that, right? And it's only when you get
to series C
and you're really looking to scale up, right? That you think about building out
the whole finance
office, CFO, head of EDC finance, treasury, investor relations, etc. Because
now you start to think
about kind of, you know, an IPO or a monetization event. And once you start
thinking about that,
right? It takes about two to three years from beginning to think about it to be
prepared, right?
So that's how kind of the finance function evolves. And fundraising is similar,
right? When you think
about a business, which is very early stage, seed, angel series A, those are
very, very founder
driven processes, right? A financial model, KPIs, they don't play a big role in
fundraising at
very early stage. The things that really matter is what is the problem you're
trying to solve, right?
Do you have the expertise to build the product that is going to solve that
problem, right?
Three, do you understand what the TAM is or what you're trying to do, right? If
you can answer these
three basic questions, right? Then you're in a good spot, right? So it's a very
founder driven
process. It all comes down to do you trust the founder to have the skill set
and the drive to do
it, right? Once you get to series A, series B, then it kind of becomes a more
formal process.
So I would say if you're preparing for a series B, right, then you must have
started building those
networks and relationships with the investors in your space at least a year
back, right?
Start going out to networking events, start networking with the investors who
are active in
your space, right? So that when you do kick off the fundraising process, you
already have a slate
of key investors that you're going to invite to your data room, right? And they
already know that
you're going to launch a series B, right? Because if you just start the
outreach when you start
creating a data room, you're already kind of far behind, right? So starting
early with building the
relationships, building the networks is very critical, right? Now, thinking
about the current
environment, it's a tough, it's a tough fundraising environment, right? I think
a lot of us got carried
away that 2021 was a new normal, right? And it flipped very quickly, right? In
2021, fundraising
was extremely easy. I think within Fintech, the fundraising grew 3X, right? In
2021,
Wow. And then, yeah, 2022 was a steep decline. And then 2023 was the worst year
, right? For Fintech.
Yeah. The deals are taking much, much longer to close, right? Investors are
doing a lot more
diligence. So you really have to be prepared. And the other shift that happened
in the last two
years in 2022 and 2023 was that investors started to invest more in early stage
companies, which is
great for new founders, right? Rather than investing big monies and taking
those big bets into
late stage companies, a lot more capital went to early stage businesses. If I
look at the first
quarter of this year, I think it's normalizing a little bit. The late stage
companies are
beginning to get more capital, but the share of capital that is going to early
stage companies
is still higher than what it was in 2020, right? So that's a great thing for
the new founders that
investors are looking to spread their capital across more bets than just
putting a lot of money
into one late stage companies and then hope that it works out, right? So that's
good, right?
But it's also not that good if you're a late stage company because your rounds
are taking much
longer, right? So if we think about that, Varun, right? Like, let me ask you, I
was talking about
late stage, like, what are the KPIs and metrics that I need to do for my work?
So let's say,
you know, Jimmy's widgets, SaaS solution, right? I have to go and I have to
raise, you know,
like like $10 million in a series B or a series C, right? What are the metrics
that I need to,
as a CFO, need to be thinking about? Because, you know, me, I'm in procurement,
right? So I'm
heavy about ROI and spend and things like that. But like just in general from
like a CFO view,
like where would my brain have to be? Yeah, so look, metrics differ drastically
from
what segment you're targeting, right? So if you are an SOP SaaS business, then
churn is very,
very important because when you're in the SMB SaaS business, investing capital
into
acquiring new customers and then retain them is essentially what drives the
business growth, right?
So churn becomes very, very important for the investors. But if you are an
enterprise SaaS company,
right? Then more than the churn, it's the dollar retention. Like, I'm okay if a
big enterprise
customer keeps increasing their spend with me and I lose a couple of enterprise
customers that
were not scaling. As long as my dollar retention stays strong, the investors
would give you that
leeway, right? So KPIs that you focus on really differ based on what kind of a
business and what
stage you're on. But a few key themes that I've seen talking to investors and
talking to my
other CFO friends is one. There is a lot more focus on show as a path to break
even, show us a
path to profitability, right? Maybe when you're going into raising a series B,
it's not as important
when you're going into a series C. But investors are asking, what is your path
to break even, right?
Show us that, show us that levers that you're going to pull to get there, right
? So it is
important to think about that question. I think in 2023, the shift to
profitability was an extreme
shift. I think investors are becoming more reasonable and they understand that
if you're going from
series A to series B, then asking you that question is probably not fair. But
they will still ask
you that question and you need to know what is that path, right? How much
capital you need to raise
to get to that, you know, break even or cash flow. Well, it's real quick, like
you talked about
churn, right? And that's, it's interesting that that's like, I mean, I think it
's important, we see
it as important. My previous company was very important. And one of the things
I saw that
what, which to me, you mentioned the slowdown in late stage investments was you
saw more churn
during 2022 and 2023, because people were responding to the macroeconomic
environment, right? And there,
and so a lot of tools that once were necessities in the SaaS landscape became
nice to have. Can we
do it internally? Can we offload? So I, I assume that probably had some
correlate effect into that
slowdown as well. I think people now have kind of rationalized what their stack
should be.
Right. Because when you have a lot of capital, right, then it's very easy for
the head of finance
to say, okay, if you need it, you can buy it, right? Okay, I'm gonna pay, you
know, $5,000 a year.
You don't even realize that there's just one person in the company who uses
that once
in six months, right? Yeah. And then over time, you end up with, you know, 10,
10 such
softwares or 10 different tools that frankly, nobody is using, right? And then
the cost add up,
right? So you're absolutely right that there is, I think that the shift to very
specialized
softwares and specialized tools that you can very easily integrate, it's been
great, right?
It's kind of democratized software back in the days, if you go back 10 years,
right? You had to
have a lot of capital to buy servers, to buy an ERP system, to do basic stuff
if you want to start
a business, right? But the shift to SaaS has really allowed people to start a
business with a laptop,
right? You just have to have a laptop. You can go to AWS or, or, or, or
Microsoft, right?
You can buy all sorts of SaaS softwares and you can literally start a business
within a couple
of days, right? With very little capital. So that's been a great shift, right?
But then what has also
happened is that over time, people have lost control of how many software they
've subscribed to,
right? It's the same thing, right? I don't know how many streaming services I
have subscription to,
Netflix, Amazon. Listen, I still can't get rid of Hulu. I've been trying, but
it keeps
renewing every month. I don't know. Right? So, so you lose track of how many
streaming services
I have subscribed to. I have no idea how many I've never, ever watched, right?
But hey, there was
this one baseball game that was streaming on that. So I subscribed to it and
then I forgot about it,
right? So I think it's, it's, it's, it's what's happened. I think on the
business side as well.
And, and what you guys do and, and what a few other startups have come in this
space to try to do
is to help the CFO's office to try and correct that problem, right? And by the
CFO's office is where
a lot of funding is going in fintech. If you look at the last quarter, a lot of
startups that are
getting funding that are getting traction are startups that are focusing on
selling
the right tools and the right software to the CFO's office so that you can, you
know,
automate your AP, automate your receivables. You can do reconciliation using AI
and a bunch
of those things which makes the CFO's office a lot more efficient. Thanks for
the plug on our
industry, by the way. I think, I think it's, it's an important space and, and I
'm, I'm excited to see,
you know, CFO is even like outside of my network really engaging it. This is,
this is something
of approach. Varun, I want to thank you so much for joining us today. Your
insights, your experience,
it's been fantastic to listen to and kind of hear your journey. I think this
has been great for my side.
I know that our listeners will have enjoyed it thoroughly. Like hearing your
experiences talking
about going from corporate banking into startups and on into the future as we
all become AI.
But thank you so much for joining. I think if Varun allows it, guys feel free
to, to find Varun
Gupchon on LinkedIn, but make sure you reference, you saw him here so that he
knows you're a person
who saw him here and not an AI LinkedIn bot, just trying to say hello. I'm sure
you'll be happy to
share some advice or some of your experiences with people if they'd like to
connect.
Thank you, Jimmy. And thank you, Anjali and spend floating for having me. Thank
you.
All right, awesome. All right, guys. Stay inspired and keep thriving in your
financial journey. Thanks.
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