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Scott Orn

Scott Orn, CFA

CFO Round Table with Evan Meagher from Logikcull and Jay Goldberg

Posted on: 05/05/2020

Evan Meagher

Evan Meagher

VP of Finance - Logikcull

Jay Goldberg

Jay Goldberg

CFO, Investor Relations, & Corporate Development -

Evan Meagher & Jay Goldberg of Logikcull - Podcast Summary

Special episode with two experienced CFOs, Evan Meagher from Logikcull and Jay Goldberg, talking about SBA Cares Act, PPP loans, and how startups can update their financial modeling to adapt it for the COVID-19 crisis.
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Evan Meagher & Jay Goldberg of Logikcull - Podcast Transcript

Singer: So, when your troubles are mounting, in tax or accounting, you go to Kruze and Founders and Friends. It’s Kruze Consulting with your host, Scotty Orn.
Scott: Welcome to Fans and Friends podcast with Scott Orn at Kruze Consulting. And before we get to an awesome podcast with Evan Meagher at Logikcull and Jay Goldberg, one of my favorite CFOs. Quick shout out to Rippling. Rippling makes amazing payroll software; amazing benefit software and they also have a really cool tool that allows you to provision new users. This means when you hire someone, you can spin them up, get them connected to all [inaudible] web services. You don’t spend a ton of consulting time like we do. We are trying to get automated on this, but we spend three hours every time we try to hire someone or bring someone on. So, I really recommend Rippling. It’s fabulous for all three of those use cases. But the cool thing is you can do them all, you don’t have to just pick one. Rippling is the full package. So, check it out. And another quick shout out to the Kruze Tax team. They’ve been working super hard. They’re amazing, very grateful for all the work. Go Kruze Tax. And now let me introduce Evan Meagher and Jay Goldberg. Welcome guys.
Evan: Hello.
Scott: Evan. While Jay’s getting situated, why don’t you do a quick intro on yourself?
Evan: Sure. I’m the Vice President of Finance at Logikcull. We’re about a 75-person eDiscovery software startup, so that’s selling to law firms and legal teams inside big corporations. And I’ve been here about three years, raised the series B two years ago, and my fifth time on the podcast. I’m the five timers club now.
Scott: Whoa. I love it. Actually though, I don’t know if the public knows that because one time… Oh no, no, we didn’t. We just cut that one. I was going to say one time we got a little snotty with a couple vendors software tools. We had to edit that.
Evan: I wanted to laugh about that because your marketing guy listened to it and said, “This is way too negative. You guys are…” Scott and I have a relationship that’s based on trust and real talk. So, we had some real talk. So, I’m sorry, I guess I was bringing a negative energy that day. That’s my bad.
Scott: Evan. Excellent summary about your career and your position. Very impressive. Jay, can we get a quick background on you?
Jay: Yeah. Hi. So, I’m Jay Goldberg. I live in San Francisco. I’ve been working in finance and technology for a long time now. I started my career, actually I lived in China for a long time. Came back to the U.S. A couple of financial crises ago. I was a banker for a while and a research analyst covering a whole bunch of networking and wireless stocks. I did about 25 IPOs. I left the Street about six, seven years ago to go work at a couple operating companies, including Peregrine Semiconductor. I helped sell them to Marotta of Japan. I went to Qualcomm for a while. And then for the last two, three years I’ve been hanging out my own shingle doing consulting CFO work. And right now, I worked for about five startups helping them with the external facing functions of a CFO. So, some bookkeeping, but mostly capital planning, financial modeling. And lately it’s all been about raising money.
Scott: You know it man. It is about raising money right now. Well thanks so much. So, Jay and I have met, worked together and then Evan and I are friends from business school and he’s super knowledgeable as well. So, we got a bunch of cool topics here to talk, and we’re basically just saying this is the CFO round table. So, you have two awesome CFOs at your disposal here if you’re listening. And we brainstormed a bunch of different topics. So, the first one is your perspective on the SBA Cares Act, PPP loans. Evan, you want to go first?
Evan: Sure. I think there’s been so much talk and so much written about it and while trying not to reveal my partisan politics, I would say even in the best of times with the most cooperation between political parties and the best prepared political administration, trying to roll out something like this is just of staggering complexity. And so, I was just talking to friends when they announced it and I was like look, just so you know, healthcare.gov, the roll out of this is going to make healthcare.gov look the SEAL team 6 raid on Bin Laden. This is going to get bungled. It’s a very hard thing to do. I think last year the SBA did 60,000 loans or 39,000 loans and I’m guessing they’ll have a seven or eight figure number of loan requests. And of those, 1% will be fraudulent and the rest is just everybody trying to follow the guidance which changed literally by the hour throughout the course of the last 10 business days. And people are just doing the best they can. A Bay Area Operators Group that I know you’re involved with Scott, it’s got incredibly valuable resource. Very smart people, I think almost a thousand now across the country. Now it’s called the Operators Guild. And they’re going back and forth like, “Wait a minute, I’m calculating it this way. What about this?” And it was so chaotic that, ancient curse, may you live in interesting times. That’s kind of my response. Happy to talk about other legal issues, but Jay I think has probably got a lot more insightful stuff to say.
Jay: So, yeah. I’ve been working on four PPP loans this week for different companies. Four or five, kind of lost track. And it’s been, let’s call it entertaining. Let’s be positive. Been entertaining. My favorite one is… One company, I’ve got a lead for some bank on the east coast that no one had ever heard of before that had a really good site. It was available Friday. We got all the docs uploaded, we applied. We were in the first thousand people to apply there and then come back Monday morning, it’s still in process. But now they have a big red warning on their site saying we can’t guarantee we’ll give a loan to non-customers. And so that company had also gone to their own bank. That bank wasn’t ready to accept applications until Monday. And then that lead investor also sent them a link to another lender who was doing things with a really good portal as well, promising 72-hour turnarounds. And so, the dilemma was, well, do you stick with the one you’ve already submitted? But they may not fund it. Do you go with a bank you know even though they’re basically making you do it on pen and paper? Or do you go to the third one or do you do all three? Which is probably a federal crime. So, those are the options. And of course, no one’s been funded.
Evan: And no one knows the answer. Yeah.
Jay: And no one knows the answer.
Evan: Sure, go ahead.
Jay: I was going to say, there’s this guy I’ve been following on Twitter. I think his name’s Trevor Loy at the NVCA, the Venture Capital Association. He’s been doing incredible work, just compiling lists of who’s funding loans and all kinds of good resources, I’ll give a shout out to him. That’s been an incredible resource. He doesn’t know the answer either, but he has lots of data.
Scott: I had kind of the same experience of both of you guys. I mean actually so we did something like 110 or 120, or pulled the info for that. Maybe even more, I don’t even know actually. That was the count as last week. But it was a real dilemma because the banks weren’t really operational. And actually Jay, I got a couple of those emails from our clients being like, “Hey, there’s this random bank on the east coast that my VC sent me that looks like they’re open.” And I was actually saying don’t do that because I was really nervous about the fraud and sketchiness factor and just kind of maybe what happened. They might’ve set up a good webpage but actually weren’t operationally set up and we’re treating it more as a customer acquisition tool than actually wanting to do the loans. So, I was advising our clients to stick with their bank, which mostly worked out. Although SVB, I feel bad for SVB, they’ve worked really, really hard. But they still haven’t quite got it right, we’re taping on Friday the April 10th, but they were working hard. There’s no lack of effort there. And I know some people have gone through with SVB but many haven’t. But it’s been totally crazy. I think the most frustrating thing for me was just the guidance and the calculations changing almost every day. That was really tough.
Jay: Yeah.
Evan: Yeah, that’s definitely been the case for us as well. We bank with Silicon Valley Bank and they’ve done a good job I think of managing communications. There was a… I don’t know if Jay if you were on it, but there was a half hour long, open, all hands sort of for all SVB customers. And the CEO was basically like, “Hey, we know you’re frustrated, we know you’re scared. We’re technically an SBA lender but we haven’t done one in 25 years because of the affiliate rules among other reasons. So, we’re doing our best.” And so realistically, I’m not sure if SVB clients are going to be able to access. Because there’s some first come first serve element here. If you’re trying to spin up from zero SBA loans to, I think they said they’re going to probably receive 10 to 13,000 applications, while they’re all working from home. Launching a new banking product is not something you do in six days. It’s something you do in not even six months. That’s not how all this works.
Scott: I love your analogy about the Cares Act versus Obamacare. It’s so true.
Evan: It makes it look the Normandy Invasion in terms of execution precision. They’re doing their best. I’m concerned that I think, for two things, number one, just because they’re trying to spin up this huge lending product from nothing. It’s on the drop of a hat. And number two, just because other banks are obviously further along, my speculation is that I don’t think there’s going to be, if any, a whole lot of SVB customers that are able to participate in PPP, but we’ll see.
Scott: I know it’s going to be tough. Jay, before we turned the mics on, you said you need a little bit of therapy. Pretend you’re just laying on a psychiatrist’s couch. What’s on your mind?
Jay: I think for me, it’s the rule changes, right? I know that one client was looking at all these different banks. And every time they did a loan calculation, it was a different number, right?
Scott: I was basically telling our clients, do the best you can. You’re certifying so it needs to be accurate, but the guidance is changing every day. So, just do the best you can and under the guidance that’s most recent and get it in.
Jay: Yeah. But it’s weird though, because some of the banks have calculators and they do it for you. And then there’s not a lot of legal language behind any of this. Are we repping that our numbers are right? Am I relying on the bank’s calculator? What if the banks calculator is a day old?
Evan: Exactly. Yeah.
Jay: And it’s first come first serve. So, you can’t really stop and think about it too hard.
Scott: Yeah. I think what’s going to happen is they’re going to do the loans and they’re going to come back and audit six months from now and they’re going to basically correct. And if the numbers are off, you’re going to be forced to pay back a certain… Whatever trues it up kind of thing. [crosstalk 00:10:35].
Evan: That’s been my naive assumption, is that I know I’m operating in good faith. So, if it turns out that I was using a calculator that was two hours old, then some portion of it will just not be forgivable and that’s fine. That’s okay. Now watch, if six months I’m getting frog walked up the front of my apartment, then maybe I’ll have a different attitude.
Jay: At least you’ll have company in jail because we’ll all be there.
Evan: Yeah, exactly. We’ll have the best parties. All my friends will be there.
Scott: I love it. All right, well the next topic we had was, are you recalculating your model? Are you adjusting your financial model doing a new plan? Jay, you want to take that one?
Jay: Yeah. My clients are going through the whole range of motions. There’s a couple that are just stay the course. Those that raised big money last year, they’re just going to ride it out and they’re not terribly exposed. I have others that are going through a complete restructuring. There’s a third one that’s just completely pivoted their product now. They have an application in virus tracking and so they’ve just completely pivoted the whole company to this whole new thing, that’s maybe there’s some code base that shared, but it’s a completely different business, so-
Scott: That’s a pretty gutsy move.
Jay: Yeah. Yeah. It’s been quite a week.
Scott: Evan, what are you seeing on the replan stuff?
Evan: Definitely, 2020 plan’s out the window. We are bracing ourselves. It’s really hard to… Are you really going to have new logo growth in this market? In theory, we sell mostly to Fortune 500 legal teams, but also mom and pop law shops. And the good news is, okay, a lot of those companies are still operating right? They can work remotely, but if their client doesn’t pay them then there’s going to be this huge slowdown. And certainly, some of their clients are Dairy Queens and the Boston Red Sox and other businesses that just aren’t really doing a whole lot right now. So, on the one hand we had really gone through this pricing pivot. You and I talked about it, that it makes us a pretty affordable option. So, in a theoretical world, revenue could through go, I wouldn’t say go through the roof, but in a real contraction, we might benefit from a revenue perspective. But it’s not enough for me. I can’t pay my employees with revenue. I’ve got to pay them with cash. My employees are funny like that. They don’t care what I recognize, they care what I take coming through the door. So, we’re really very concerned about no collections and we’re making frankly some product changes to help there.
Scott: Yeah, that’s huge. Yeah, you’re right. And Jay, I don’t know if some of your companies are recession resilient. No one’s recession-proof, but Evan you nailed that where you said you guys are a cheaper option or more attractive pricing structure so that actually can help. We’ve kind of seen that a little bit. It’s early for us, but it was very quiet for the first couple of weeks. People were kind of shell shocked. Now we’ve signed eight new clients in the last week I think, which is pretty good for us. I’ve been telling some of our clients, because we have kind of an interesting perspective on the whole ecosystem. And things are unlocking. So, hopefully your guys’ companies aren’t too far behind or hopefully they benefit a little bit from the recession, in a weird way.
Jay: Yeah. I mean for us there’s a lot of… We’re worried about third and fourth order consequences, right? We know what’s sort of going on with our end customers at this point, right? We have a decent idea. We don’t know what they haven’t forecasted. And so, I’m sure at one of my companies, one of their big clients is going to blow up and we just don’t know what’s coming yet.
Scott: Yeah, that’s a really good point. So, then seguewaying to the next topic which was runway, how many months and burn rate adjustments. What do you guys see in there?
Evan: I’m modeling a bunch of sensitivities as to what happens to days sales outstanding. But as with any financial model, the hip bone’s connected to the knee bone, right? So, if we don’t hit revenue targets then there’s less they are to collect and everything kind of spirals. Typically, in my experience in past downturns, you can basically just expect churn maybe to double but it’s probably pretty low in the enterprise space. But it could go from 10% to 40% in the SMB space because they’re just thinner capitalized businesses that don’t have pools of capital to draw from. And DSO typically doubles. And so that’s kind of where I’m looking at. And that’s when you say, “Oh yeah, this PPP program might make sense.”
Scott: Jay?
Jay: Yeah. For me it’s kind of all over the map. A lot of my clients right now are a little bit earlier stage and so the working capital is less important than the venture capital. And so it depends a lot on the stage they are at fundraising. Companies who were down to the wire and didn’t raise enough money last year, it’s looking pretty grim. Those who raised money are fine. They’re actually pretty good.
Evan: They’re looking great and they probably… I hate saying this because it sounds like your Monopoly man, “Ha, ha, ha, the levers of power have shifted away from labor towards capital.” But there are going to be some very high-quality people available because not every company is going to make it. And what I’m seeing on the Operators Guild is definitely… There’s sort of like three or four camps. The people who raised money last year are just patting themselves on the back of very happy. And that’s great. Good for them. The two groups that are more panicked are one, those are in the travel hospitality space. And so, their entire business, just zero all of a sudden. And then it’s the ones that were expecting, or that were already in a fundraising process or knew, “Hey, I’m raising money in the next six months.” And those are very terrified. And God forbid if you’re in the travel and hospitality space and you were one of those companies that had to raise this year, I mean my heart goes out for you because you couldn’t have anticipated this Q2 of 2019 and said yeah, “I should really raise money now.” You just didn’t know that.
Jay: Yeah. So, I have a couple companies that make hardware components that go into phones. Fortunately, I don’t have any travel or hospitality clients but I have two that are hardware companies selling to the smartphone complex. And they don’t know what to do. They’re getting really, really mixed signals from their big customers, right? Apple, I mean just, I’ll say it. Apple is the worst customer in the world to have. Because they always tell you they’re going to ship a billion units when they know they’re only going to do half that. And so, these guys are really scared because they have to actually spend a lot of on inventory of working product. And how much are they actually going to have to ship? How much does, I mean Apple doesn’t know what it’s going to look like. Samsung doesn’t know how many phones are going to ship this year. It’s going to be down, but is it going to be down 50% or down 80%? That difference can break a hardware company. Even a decently capitalized one.
Evan: Yeah. Which just to me this is just really revealing the difference between us and them. And by us and them, I mean us being small startups and them being [inaudible] the public markets, right? I was just chatting with a buddy I used to work with at SigFig, actually. He’s a super smart finance with PhD. And he was like, well, if you have a discount rate of whatever it was, 5%. You have a dollar of earnings cash flow this year growing at whatever, Y percent, so 5%. some reasonable assumptions for the next 30 years. And if you just push all those… You basically don’t start the exponential growth of the earnings cashflow for another two years. You literally push it out two full years. Instead of being worth that $1, the net present value goes from $28.50, it falls more like 15%. If you do that and you cut the annual growth rate of the cashflow from 5% to 3%, it still only goes down to around 20 bucks. It was 29%, not quite a third. So, markets theoretically should not have gone much below a 30% dip. But the market can remain irrational for longer than you and I can stay solvent. So, that’s what every startup is looking like, “Oh my God. My generations of future cash flows have always been theoretical and optimistic in the future.” So, things are dicey.
Scott: Now. Are you guys telling your clients… And Evan, you have one client, your company, but telling friends to go back to the VCs and ask for a bridge round? Or how are you trying to deal with the projected cash shortfall presumably of all these companies?
Evan: I’d say nothing’s off the table. We’ve been in touch with our board. Board, we hope to be supportive. No plans to. I would just say the situation is changing so quickly that anything I say is going to look silly in 48 hours. But any piece of cash that we can get our hands on to ensure the company’s long-term viability, which we all believe in. Whether it’s from customers, debt lenders, the PPP program, existing investors, other outside VC. Nothing’s off the table.
Jay: Yeah. I mean that’s what I’m telling people to do. Same thing. Any source of money you can get your hands on is worth pursuing. And that’s why that one company I talked about, that was doing the big pivot, that was in part led by… An investor came to them and said, I’ll give you a half a million dollars to go build this new thing. And it was an obvious choice for them to do. It was that or shut the doors.
Scott: Yeah. That’s amazing. Hopefully that turns into the next Airbnb [inaudible] or something that.
Evan: Yeah, I’m rooting for them. That’d be awesome.
Jay: Yeah.
Scott: One of the other things we talked about was… Evan, you brought this up. What do you do about quota relief for your salespeople if you have done a replan?
Evan: I don’t actually have a good answer on that. Because we’re basically a product led growth strategy and so we don’t have big enterprise SAS team. We actually just hired a enterprise sales team rather, we just hired a chief revenue officer and that’s obviously the CEO, CRO and I will be intricately involved with making those new commission plans for the sales team we will build out. But that’s kind of a tomorrow problem for me. I just know it’s a today problem for a lot of other people.
Jay: I know what not to do. This is actually not personal example. This is my wife. She’s a sales woman for a company that sells in the biotech labs. It’s this old European company and they’re just not quite… They’re just not used to moving fast. And so what they’ve done is, nothing. So, she and her colleague just sit around on Zoom calls all day saying, what’s our quota? Is there quota change? They just have no idea what to do.
Evan: Oh wow.
Jay: [crosstalk] just hasn’t gotten around to communicating what the new plan is.
Scott: Yeah. That’s tough.
Jay: And it’s wearing them down. And if they just come out and said, look, this is a new plan, right? Everyone’s coming down, comp and quota. You deal with it, you move on. But now it’s just uncertain. They all know they’re not going to hit their number, but it hasn’t been officially revised. Direction and leadership are important now.
Scott: Yeah. That’s a really good thing to say. It is all about leadership and communication and setting a course so that everyone can get behind it. Evan, you were going to jump in there?
Evan: Oh no, I was just saying that uncertainty can be more corrosive to morale than actual pain. There’re all sorts of research that the uncertain anticipation of pain, whether economic or physical or emotional is actually more detrimental to one’s morale and general, state of wellbeing than the actual pain itself. Because invariably the human mind is capable of conjuring no shortage of fresh new horrors. This parade of imaginary terrors that are lurking in the night. And so, you just have to make a call quickly and kind of live with it I think. Again, it’s not logical, doesn’t have this… With a product led strategy, we’re a little bit out of the woods there. But it’s a real problem for other companies for sure.
Scott: Yeah. What do you, guys, are doing for pricing? What are you seeing? Are you seeing… Evan, I think you brought this up before turning the mics on, but creative pricing approaches. How are you handling price reduction requests? How are you handling some creative stuff to bring more money in?
Evan: For us… The core values of the company are always put the customer first, do the right thing. And customers frankly have not been super unreasonable. So, far people honoring… like “Yep, I’m still using the product, I’m honoring the contract.” We’ve had some hardship requests and we just try to put the customer first knowing that we want this person… You know the old saying, you don’t sell a guy a car, you sell a guy five cars over 20 years. So, you do a good job, provide value, make sure your product is so good that they’ll never want to leave you. We can get through this together with our customers.
Scott: I love it. Jay?
Jay: I like the philosophy. Some of my guys are early enough stage that they’re being asked to be very flexible. And so, for some of them it doesn’t matter because their revenue is not going to save them… They need capital, right? So, it’s not as big a deal. And in those cases anything goes, like “Sure, you want it free? Sure, we’ll discount it heavily.” In other cases, what we’re seeing is customers come saying, “Hey, times are tough. I’m going to negotiate hard with you. I want a discount.” And I think the ask we put in place then is say, “All right fine, but you got to pay up front. We’ll give you that 10% 15% discount, but we want a three-year contract paid now.” If you have large customers heavily relying on the capital markets themselves, those kinds of things have worked out okay so far.
Scott: Yeah. It’s one of my favorite tricks too, is to do the multi-year deal and get it all upfront and give them a discount and everyone wins in that situation. And I’ve seen that done very successfully in the dotcom blowup and also 2008 timeframe. So, I’d highly recommend that the companies, approach it that way.
Evan: Yeah. I think the number one thing is just to have your response, your yes and counter ask. Okay, if you need a price reduction, okay pay up front. Or is it actually the payment terms? Well that’s fine, I can maybe give you payment terms if we lock you into a longer-term contract. Or alternatively, one thing we’ve done with great effect, is like look, you need whatever X number level of usage, but the way your usage is growing you’re going to need Y next year. What if we made this a two-year deal where you get Y right away, but the payment is $50,000 this year and it automatically ramps to 150,000 next year. And you just do things that are win-win and [inaudible 00:25:44]. But you have to have those responses ready.
Jay: Yeah. The one thing I’m very wary of though is payment terms. Like if somebody comes to me and says, “Yeah, we’ll sign that long-term contract but we don’t want to pay you for 90 days.”
Evan: That’s a concern.
Jay: Yeah. I’m reluctant to take those because I’m thinking about… Because that’s basically what I’m doing to all my vendors, all my suppliers, is I’m pushing out payment terms just to save cash. And if it gets really egregious, then I’d have to start worrying about whether this customer’s going to be there in 90 days.
Evan: Yep. No, that’s a concern for sure.
Scott: Also, you’re spending money getting ready to support them or getting them up and running in those 90 days. That was like a double whammy if they don’t deliver. This is some good stuff. Let’s wrap it up with one tip from both of you. Like your best tip. You got your grandchild on your knees 25, 30 years from now and you’re saying, “Boy, that COVID-19 stuff was pretty crazy. But the one thing I did right was X.” Evan, you want to go first?
Evan: Sure. I think it’s communication to the team, that we’re all in this together. And I think you earn a lot of trust deposits when you don’t sugar coat stuff, but you also don’t… Like they can’t see the leadership team panicking, right? So, it’s kind of paying attention to your emotional wellbeing and just communicating as open as possible. I sent this email to the company that, I told a very quick story. I’m going to tell this quick story. Is it all right? I’m going to tell this story. You can always edit it out. So, in 1996, the Cal Stanford rivalry was quite heated. And after the 1996 big game, Stanford when into Cal and they beat them, something like 41-21 or something like that. And my friend Christopher Carey, I don’t know if you know Chris? Now a middle school teacher in [inaudible 00:27:39]. But then the Stanford tree was nearly killed at midfield, the Cal fans… And by the way he probably incited them. So, I’m not trying to cast dispersions on Cal fans. But basically, he was wearing a football helmet because you always wear a football helmet when you’re the tree during big game. Because they used to throw frozen oranges at you from the stands. So, anyway, and he was in this football helmet and he got overrun by 10,000 Cal fans and they were kind of tearing the costume apart. Well a lot of Cal people still have pieces of the tree in their office cubicles, right? Anyway. And the tree protection services at the time was the Stanford wrestling team. And all wrestlers, they are in sync. And I’ve lived with many of them so I know him very well and so 10 of them go storming out to midfield, they tear Chris apart, they tear him out of the costume. And they’re like, “Are you okay?” And Chris has got a split lip and he’s out of it. When they were pulling his costume apart, the chin strap on the helmet was cutting into his air passageway so he couldn’t breathe. So, they get them out of there and they’re like, “Do you want us to save the costume?” And he’s like, “No man, it’s already gone.” And so, they looked around and it was like number one, this is terrible. This is really dangerous, really uncertain, unfortunate situation where innocent people are going to get hurt and there’s nothing I can do about that. And it’s powerless and painful to know how powerless you are about that. Number two, this is what I’ve been training for. And so basically riding out at Helm’s Deep, they basically take Chris and the dollies and they’re in this chaotic environment. All of the double two-a-day sessions that they had trained for, doing decks of pushups in the saunas that prepared them for this moment of chaos. And so what I told the team was like look, this is what you’ve trained for. If you’re a business person, anyone can succeed in good times. And when you were running your own finance team or marketing team or product team in five or 10 or 25 years, you weren’t going to tell them stories about this time, about how this was what your training was for and you pulled together and you made it through. And I hope we all make it to the other side so you can tell those stories. Because there’s a lot of companies that aren’t going to make it and it takes shit, grit, and mother wit to get through the hard times. That’s it.
Scott: I love it. Great story. I love it. And it’s very true. Jay, I don’t know if you could top story involving the Stanford tree on a podcast hosted by a Cal alumn.
Jay: Yeah, I can’t top that. I’m a Cal alumn too, so.
Evan: I’m outnumbered.
Jay: I will neither confirm nor deny my possession of any pieces of any tree. But I’m going to be a bloody capitalist about this. I think now is the time to go all in, right? I mean it’s terrible, and it’s tragedy and the world is not in a good place. But we’ll get through this and I think we’ll get through this sooner than we really expect. And careers and reputations and investment track records are going to get built now. And now is the time to… Don’t be timid except with going outdoors. But in terms of investment, if you can do it, now’s the time because great things are built now. And I just think of what came out of 2003, 2004. What came out in 2008, 2009. Now’s the time to be buying and investing, right? By when there’s blood in the streets.
Scott: I love it. I love it. I’m also optimistic. I’ve switched. Over the last week I’ve steadily gotten more optimistic every day. I don’t know if it’s that because of the accounts in New York have come down, or people are just getting used to it. Or maybe it’s I’ve seen our business unlocking, but I feel like I can see the other side a little bit. And I do think the PPP is really going to help. It’s going to keep people in jobs for two months where it wouldn’t have and it’s going to let everyone kind of ride out the uncertainty. At least in two months from now, we’ll know what’s going on. So, and I agree with Jay. I think this is a time where amazing things are built and I look back on 2008, 2009, that time period and it was a great time to be investing, great time to be working with startups, great time to be taking equity in startups if you’re an employee. And I think the probably other thing I just say to folks is just keep the lights on, do what you need to do to keep the lights on. Live to fight another day. As Evan said, this is what you trained for. And things are going to work out for good. People who know what they’re doing or working hard, I think good things will work out.
Jay: Can I add a message for venture capitalist investors who may be listening?
Scott: Absolutely.
Jay: I’m a University of Chicago MBA, big believer in data. And I’ve seen all these studies showing that the best indicator of the future success of a private equity or venture capital fund, it has nothing to do with pedigree or who you are or where you come from or what size companies you invest in or what stage, it all comes down to the year in which the fund starts.
Evan: The timing.
Jay: Timing. R-squared of 60%.
Scott: I agree. I joined rejoined Lighthouse at their business school and end of ‘08, or end of ‘07, early ‘08, and we had just raised a new fund. And we complained for nine months because up until [inaudible] crashed, the market was totally insane and valuations are [inaudible 00:32:46], and there’s too much capital. And then all of a sudden, the market shut down and we had a new fund and we really did well. And I like to think it’s because we were smart, but I think it’s probably what Jay is saying is timing and having capital and being willing to take some risks.
Jay: I mean if you look at all the sort of the tier one venture names now, they all are there now because of investments they made in ‘08 and ‘09.
Scott: Yep. I agree.
Jay: So, now’s not the time to mess around with a small company’s valuation or the nitty gritty of the terms. Just invest.
Scott: Let’s do it. All right guys, thank you so much for coming by. I really appreciate it. And thanks. This is our inaugural CFO round table and you guys rocked, really appreciate it.
Jay: Thank you.
Evan: It was great, Scott.
Singer: So, when your troubles are mounting, in tax or accounting, you go to Kruze and Founders and Friends. It’s Kruze Consulting. Founders and Friends with your host, Scotty Orn.

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