From his former role as CFO of Oracle to his current position as co-CEO + CFO of a SPAC, Jeff Epstein has earned plenty of scar tissue over his 30+ years in the technology industry. With invaluable experience as a CFO for both private and public companies, Jeff joined The Circle this week to share insights and field questions from his CFO peers in our “Ask Me Anything” (AMA) Circle|Call Series.
A Rollercoaster Story
Jeff shared a story from his “most dramatic day” of being a CFO to kick off the conversation, a story he noted would make a great first chapter of his biography. Setting the scene, Jeff described how as CFO of DoubleClick, an early-internet advertising company, the FTC shut down trading of the company’s stock in the middle of a roadshow where Jeff and his team were trying to raise nearly $700 million. Trading had been halted due to an imbalance of buy and sell orders that stemmed from an FTC investigation into DoubleClick, but Jeff and his team knew that they had done nothing wrong and that the company was not in danger. While some recommended that DoubleClick pull back on their money-raising efforts, Jeff remained calm, expressed confidence in his assessment of the situation, and decided to go through with the deal and secure the funds. As the market entered the “nuclear winter of the Internet” over the next few weeks and months, DoubleClick was able to weather the storm, and Jeff used this experience to highlight a key lesson that CFO’s should take to heart: raise money when you can, not when you need it.
“Raise money when you can, not when you need it.”
CFO Best Practices
Jeff offered two more leadership best practices that he personally developed over time as a CFO. First, Jeff described how early on in his career, he would share every idea he thought of with the team, regardless of whether the ideas were good or bad. After realizing that his peers weren’t focusing only on the good ideas and instead were most likely keeping track of the percentage of ‘good’ ideas he presented, Jeff learned to hold back on sharing half-baked ideas until he had at least thought them through for a day. In addition to spending more time editing his ideas, Jeff also described the importance of envisioning how certain ideas might fit into a larger framework. Just as an improv actor would say “yes, and” in a scene in order to build off the work of another actor, Jeff recommended that CFOs think of their ideas as a piece of a mosaic that might lead to a larger solution.
Over the course of his more than three decades in the field, Jeff maintains that the most important aspects of the CFO’s role have not changed much: indeed, the CFO must be technically good at what they do and must act as a good business partner for the CEO. Using children’s tendency to neglect their positions and all chase after the ball in a youth soccer game to illustrate his point, Jeff emphasized how the CFO, and the rest of a company’s CXOs, need to play their positions in order to give the CEO the diverse opinions that he or she needs to make decisions. Jeff described how the CFO should always play the more conservative role in discussions, as the marketing and sales teams will always take a more aggressive stance. Overall, for a successful business partnership to flourish, the CFO must provide the conservative influence to balance out the more ambitious ideas of the CEO.
When asked about shared attributes of some of the best CFOs he’s worked with as a board member, Jeff shared the importance, for anyone in an executive role, of acting as a “shock absorber” rather than a “shock transmitter.” Acting as a shock absorber requires leveling the emotional ups and downs that can befall a company. For example, when the company is doing well, the CFO must find ways to improve and not allow his or her team to get complacent, and when the company is not doing well, the CFO must remind his team of how good things have been in the past and how things will recover. Further, Jeff also talked about how great CFOs fill the role of the “player-coach,” simultaneously giving the team direction and figuring things out themselves under the CFO’s guidance. Indeed, the CFO should be a player when he or she needs to be, but should also play the coach/teacher role for the team, especially as he or she gains more experience.
“Great CFOs fill the role of the ‘player-coach.'”
During a discussion of the notion of a “strategic CFO,” Jeff presented what he sees as the two components of the CFO’s role: decision making and execution. While the execution aspect is more straightforward, the decision-making side is full of judgment calls. Indeed, given the number of decisions that come down to resource allocation, the CFO can end up having a hand in many strategic decisions over the course of a year. Further, in terms of best practices for determining strategy, Jeff described his annoyance over the fact that most board meetings end up being mostly “show and tell” sessions where the CEO merely describes what has already happened rather than consult the board on important decisions. In Jeff’s ideal world, a board meeting should spend two-thirds of its time discussing decisions that have not yet been made and one-third of its time on “show and tell” in order to gain the board’s input and buy-in for potential actions.
Finally, after a question about how companies dealing with rapid growth should manage scaling their team effectively, Jeff presented his best practices for scaling both people and processes. In terms of scaling people, Jeff recommended sitting down with the CEO, reviewing the current organization structure, imagining that the company will double or triple its value in 1-2 years, and then seeing which roles will remain and which roles need to be created. After having a forecast of what things may need to be changed, you can more effectively search for those specific roles and people as you scale. For scaling processes, Jeff describes how he creates a two by two matrix and arranges all of the company’s current processes based on their size and whether or not they work; Jeff uses this model to determine which large processes are broken, and then endeavors to fix said process before scaling.
Navigating the Transition from Private to Public Life
Having moved between private and public companies throughout his career, Jeff has unique insight into how a CFO’s role is different in each scenario. Whereas a private company CFO must execute a large amount of finance work amidst a small and scrappy team, a public company CFO needs to learn to delegate effectively to a larger organization and dramatically reduce their role in execution so they can focus on leading the function.
Jeff noted that the transition from private to public life can be daunting, especially in the age of social media, where a single misstep can be amplified without context and affect the public trading price. As a general rule of thumb for public CFOs, Jeff recommends never saying or writing anything down that you would not want to see published on the front page of the paper. Further, Jeff described the CFOs role in a public company as educating the public shareholders of the company; fundamentally, the CFO needs to be objective and not over-hype certain events in order to build credibility amongst the public over time. Indeed, by treating public shareholders as partners and giving them all the information they need to understand the company, a CFO builds credibility that will help the company weather any unexpected storm in the public eye.
“Never saying or writing anything down that you would not want to see published on the front page of the paper.”
The “Why” of SPACs
As the current Co-CEO and CFO of a SPAC, Jeff has unique insight into why the market seems to be gravitating toward the mechanism as opposed to an IPO, and he closed the conversation by presenting his view. As Jeff described, individual investors cannot invest in venture-backed companies; while the SEC intended this rule to prevent individual investors from losing money, it also prevents individuals from investing in “high-risk, high-return” companies. A SPAC merger allows for individual investors to invest in these companies, often multiple at a time, and generate a portfolio return similar to that of a venture investor. Further, the IPO process has not innovated, and SPACs offer a number of competitive advantages, such as the ability to pull out secondary capital, the ability to forecast, and the ability to talk publicly about what you’re doing.
For More Takeaways from our “AMA” Series:
Tim Bixby of Lemonade
Criss Harms formerly of Forescout
Lee Kirkpatrick formerly of Twilio