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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Outsourced CFO, Lea Dessi-Olive, discusses her experience working with over 20 funded startups

Posted on: 05/18/2020

Lea Dessi-Olive

Lea Dessi-Olive

Founder - Elevation Advisory

Lea Dessi-Olive of Elevation Advisory - Podcast Summary

Lea Dessi-Olive, experienced outsourced CFO to over 20 funded startups, discusses how she is helping her clients manage through the COVID crisis. She explains how she analyzes the trade-off between conserving cash and being prepared for growth. Learn more about Kruze’s part-time CFO service.

Lea Dessi-Olive of Elevation Advisory - Podcast Transcript

Singer: When your troubles are mounting in tax or accounting, you go to Kruze from Founders and Friends. It’s Kruze Consulting. Founders and Friends with your host Scotty Orn.
Scott: Welcome to Founders and Friends podcast with Scott Orn, and before we get to an awesome podcast with Lea Dessi-Olive, one of my favorite CFOs, we’re going to do a quick shout out to our friends at Rippling. They make an amazing payroll service. It also handles benefits and it enables you to spin up your new hires very quickly and plug into all the web services So, you don’t have to spend a ton of time creating usernames and passwords and all that kind of stuff. It’s huge time savings. We did a study, it takes three to four hours every time you hire someone, So, we’re huge fans. Go Rippling, great service. Then another quick shout out to the Kruze Consulting and Tax team. Tax team’s working super hard. Even though the deadline got pushed because of COVID, they’re still busting out tax returns, So, that’s a good feeling, So, go Kruze Tax. Now I’d like to give a very nice welcome to Lea Dessi-Olive. Welcome, Lea.
Lea: Hello. Nice to be here.
Scott: It’s great to have you. You’re one of my favorite CFOs. We refer to you quite a bit because you just know what you’re talking about. There’s one of the best feelings as an accounting firm to be able to recommend someone who actually really knows what they’re doing, So, it’s our pleasure and it’s our pleasure to have you on the podcast.
Lea: Thank you. Yeah, it’s awesome to work with your team. Similarly, I love working with accounting teams that know what they’re doing.
Scott: That’s a good point. We probably make your life a little easier.
Lea: Yes.
Scott: Maybe you can kind of retrace your career and tell everyone how you became a CFO for startups.
Lea: Yeah. I am the product of two wonderfully opposite parents, to start. My dad is a big-time astrophysicist, University of Chicago grad, pretty much lives in formulas. Then you got my mom who’s high EQ, high energy, high instinct, five-foot French woman. Do you have a picture in your head? My dad also looks like Einstein, if you really want a visual.
Scott: I have a good visual now of your family. This is great.
Lea: Exactly, it’s great. It’s very family friendly. I obviously learned to get along with both personalities, but growing up I think people assumed that I would follow in my dad’s footsteps. I also went to the University of Chicago. I took heavy math econ classes. Then out of school I went to an east coast bank and then did management consulting and worked with a bunch of the big, big companies like State Farm and Nestle doing cost cutting or CBB, as they call it in the industry. Or operational efficiencies with hundred slide decks. But I hate the cold, and at this point I’m on the east coast and it’s kind of ironic because I’m from Minnesota, but luckily with the consulting firm I was able to move to California and as you probably know from living out here, it’s really not hard to find people who work at startups, who’d founding a business, working on a new idea, and that’s essentially what happened to me. I met some really incredible people who all had huge ideas to change the world and an instinct on how to get it done. My first company, StyleSeat, Melody wanted to change the way people booked beauty appointments and then I worked with Atomic, an incubator venture studio with Jack Abraham, and they just rapidly test all sorts of new businesses. That’s really when I saw the opportunity for me to partner with founders and execs to bring their companies to life. I could kind of bring that quantitative lens to balance out the art and the science that’s needed for a company to succeed.
Scott: I love how you talked about bringing the company to life, because that is what you do and it’s So, important how the financial side, not just buttoned down but know where you’re going.
Lea: Right.
Scott: As you bring it to life. I think that’s such a cool analogy. Didn’t you work with RocksBox too?
Lea: Yeah, So, I mean I’ve worked with over 20 companies at this point. I’ve definitely worked with all different industries. RocksBox, near and dear to my heart. I rolled off of them in January. Yeah, consumer businesses, SaaS businesses, marketplaces, but really, really amazing founders who are excited to kind of get that financial diligence in place.
Scott: Yeah. I was just thinking of RocksBox because it was every month getting the package delivered, because Vanessa was a subscriber, still is a subscriber, and actually it was kind of fun for me because I’d get to see what she got and it was such an affordable price point that I wasn’t stressed out [inaudible].
Lea: Yeah. Let me tell you, So, the time that I was working at RocksBox I was also working at a company called Stable and they do robotics and charging operations, like data science for electric fleets, and So, I would go in the morning to RocksBox where you’re walking in to a beautiful office with jewelry everywhere and it’s like a full woman exec team, everyone was wearing crazy jewelry, to then taking the bus down to the Mission to a garage where there are robots everywhere and it’s like a bunch of engineers and the only place you can take a phone call is in a car where the robot is testing on. Yes.
Scott: You lived both sides. You’re not afraid to get your hands dirty I guess in the robotics. Like literally get your hands dirty.
Lea: Literally, yeah. You really got to watch out for the bots to not hit your head.
Scott: You brought up you worked for e-commerce companies, you worked for robotic companies, you worked for SaaS companies. Maybe a little bit we can cover kind of some of the different business models and what founders should be thinking of for those, but COVID is one of the big things that everyone’s thinking of right now.
Lea: Yeah.
Scott: We’re dating this April 14th. What are you seeing out there? How are you advising your companies?
Lea: The one thing I’ve noticed across pretty much every business model in every industry is everyone’s feeling something. One, if you’re starting and feeling like a CEO you failed, you haven’t. Everyone is feeling the pain. But I will say that if you haven’t already, you should start planning now and you should be okay with letting go of your original plan. Really what I would say is take a look and build a scenario, identify uncertainties. For instance, I have one company that is highly dependent on trade shows and So, we pretty much had to build a full new model thinking about well what happens if the trade shows are canceled even in October? What does that mean to sales? Or what if you’re launching a new product? Or how does consumer demand change based on unemployment? You can bucket those scenarios into best, worst, and middle and then craft responses for each. What happens in the worst case with headcount and revenue targets and runway? I think the important part is being able to iterate and be flexible. You look at these scenarios week over week and find trigger points at which you may need to flip a switch and do something else.
Scott: Yeah. I didn’t mean to interrupt there. I was going to say, I just love scenario analysis and it’s such a really great point because I find it helps founders, and even we do scenario analysis for Kruze internal, it helps you think through what could happen, what could go right and go wrong. When you’ve already done the kind of pre-thinking and encapsulated that in a model, you’ve done the hard work. You’ve done the mental energy, and So, when whatever direction happens you can just react to it and not have to try to cope with a huge challenge like COVID simultaneously making decisions. You’ve kind of already made the decisions. Is that what are you kind of seeing with your companies?
Lea: Exactly.
Scott: It must be nice to walk in and be like, or virtually walk in through Zoom, and be like, “Hey, remember we had that downside scenario? We can put that into play right now. We know what to do.”
Lea: Yeah, and I think a big part of that is making sure that the team feels connected and that there’s transparency. I think there’s So, much uncertainty that the least you can do is create some form of certainty of like we are aware of the different directions we can go and we’re communicating that with the important stakeholders of our company to make sure that we have some confidence of the direction we need to go. I’d say beyond just the numbers of scenario planning, there’s really a delicate balance between cutting costs to survive today and investing to grow tomorrow and I think that that actually post scenario planning is really the strategic piece where the executive team should be getting together and finding that balance So, that they can come out of the presumably recession strong.
Scott: Yeah, that’s a really good point. Are you having that discussion with them where you say, “You know, hey, if we need to go in a super survival mode we can do deep cuts but we want to preserve as much of the team and as much of the fabric of the company as possible So, we can come out strong”? I think your point about coming out strong is a really good one.
Lea: Yeah, I definitely am. I think a lot of panicked companies are like, “We need to cut everything,” and the worry there is that you just don’t want to cut to the bone. There’s a lot of really interesting date out there about what companies have done in historical recessions. Obviously, this is a little different. We’ve got a global pandemic, but you can still categorize companies into three different exec team strategies. One is prevention exclusively, where they’re really trying to avoid losses, and the problem is that you’re ignoring key initiatives if you’re just doing across the board cuts and you’re essentially expecting to do the same with less, rather than going back to your numbers and saying, “How can we become more efficient?” I’d say more importantly obviously with cuts is that it permeates in the organization. Layoffs obviously reduce costs quickly, but they also make recovery more difficult. That’s generally what I advise, looking at that extreme and saying, “Yes, of course we could give ourselves several more months of runway but here are the risks.” Then on the flip side, there’s kind of the promotion-focused companies that play offense and invest a lot more than their peers. They may have just raised a round and they feel like they’re doing well. The risk there, and I have a couple companies that fit in this bucket, is that they may be adding bells and whistles to their products and essentially missing early customer warning signs where even if they’re doing well, they may have just raised a round, but their customers are cutting budgets. You need to make sure that even if you’re fine, you’re adapting to the environment So, that you’re not doing something and suddenly by the time you realize it’s not clicking, it’s too late to really catch up on costs.
Scott: You made So, many good points there. The making sure you’re paying attention to your customers’ early warning signs is such a good one because you may be selling into a market, your end customer may be feeling it but it hasn’t worked its way through the supply chain or [crosstalk].
Lea: Right. Right.
Scott: Yeah, that’s super smart. The other thing you said I think that was super smart was, and I’m kind of paraphrasing, but maintaining the team and not cutting to the bone and being respectful of all the investments that it took to get there. Even like us, it takes a lot of effort to hire and train people.
Lea: Yeah.
Scott: It may look nice on a spreadsheet to let a few people go and trim some costs, but that’s real work and if you’re going to need those people long term, and hopefully you will or you wouldn’t have hired them in the first place, retaining them can actually be a more cost-effective approach.
Lea: Right. The saying there is when it comes to layoffs, measure twice, cut once is the first piece, and ideally you just pick really the low hanging fruits. You should be looking at software subscriptions, all your vendors, recessing retainers, thinking about rent abatements, all while looking at your headcount. Obviously, cuts are necessary, but recruiting fees are really expensive and So, if you have an awesome team, there are plenty of other directions you can go to try and save costs. I know some teams that have done salary decreases. I think that’s a little controversial. Some teams really don’t like it, some teams it’s worked really well. You don’t always need to go down the route of cutting half of your head count.
Scott: Yeah, and you talked about the salary reductions and how that can be perceived as controversial. What’s your opinion on that, because I see both ways too.
Lea: Yeah. I’m really torn. I think that if I had to pick between letting go a ton of people and doing a larger exec cut first, I think that’s a very important piece is that the executive team needs to come out first and say, “We’re taking a significant cut.” Even the founders, if they’re able to, to say, “We stopped paying ourselves.” And you’re able to trade that salary decrease with equity, I think that that’s a nice trade off. No one likes to get a pay decrease, So, that is going to hurt some morale, but if you’re able to couple it with some of these other things that might help, versus cutting your buddy in the office and suddenly you’re left at a desk that has no one else around you.
Scott: Yeah. One of the justifications I’ve heard for doing a pay decrease, it’s a little bit of like the collective taking the pain instead of just, not a few people, but more of fewer people, So, as a way to preserve as many jobs as possible. What’s your take on that?
Lea: I agree. I think generally the executive team should be taking on more of the risk. It depends on the stage of the business. I think that if you’re a 10-person team and you’ve got a decent share of the company, that type of sentiment makes sense. You’re like, “Yeah, we’re all in this together. We’re all going to do the … We believe in taking a salary cut to make us live on,” but if you’re at like a LinkedIn or a large, large company I think it’s harder because you’re working with some folks that frankly just don’t have that risk tolerance and don’t feel like they should be taking on that much risk for the business.
Scott: Yeah, good job touching on both sides. I can see the benefit of that. Then also sometimes you worry if you do a salary cut maybe some of the best people end up leaving because they can [inaudible].
Lea: Yeah. Definitely.
Scott: Yeah, these are the hard decisions. This is why it’s So, valuable to have you working with a founder because these are, I mean I’ve got 20 years in finance and accounting and everything and investing and I still don’t know the answers and I know you’re a humble person So, it’s like, you have opinions, but these are tough things to work out for each company.
Lea: Well especially since we unfortunately just don’t know how long this is going to be. I’m looking at the charts every day. I know a lot of people are, and it’s like is this going to be through the end of the year? Is this going to bleed into next year? Obviously, that has a huge impact in how we’re able to fundraise and if you need to extend runway even more, and So, it is tricky but that’s why I think the most important thing is having these scenarios laid out and then looking at them on a weekly basis. Even if you’re really cash strapped, I mean I built a daily cash model for one of my companies. That’s one great way to understand exactly who you’re paying and when.
Scott: Yeah. That’s really cool. There’s another, and I love the scenario analysis, there’s another tool I like to do which is, I think you probably do this for all your clients, which is just the budget to actuals So, they can see exactly what they were actually spending money on, because I find that a lot of people, they don’t really have it dialed in and they’re kind of surprised sometimes of what’s going out the door. What’s your experience with doing budget to actuals and do you do that for your clients?
Lea: Yes, I absolutely do. I think the nicest part about doing budget to actuals is the variance that comes out of it. It’s just puts a little bit more accountability on teams. If you’re budgeting things and you’re not actually looking back on a monthly or quarterly basis to see what happened, you’re not going to learn. I think that’s the biggest learning not only within finance, but product or data where you could be tracking all the data you want, but it doesn’t matter if you’re not tracking what you planned for and what happened. That is definitely one of the table stake activities I would say, if you have a CFO they should be doing it. If you don’t have a CFO just build up a simple model that could follow your exact chart of accounts if you’re using QuickBooks or Xero or NetSuite and just look at that variance on a month to month basis.
Scott: Yeah. That’s one of the advantages of working with a CFO like you, is that you bring some discipline to the process and I’m sure you have the weekly meeting, the second week of a month you’re going over that variance analysis.
Lea: Yep.
Scott: In depth with the CEO. I find that sometimes if they don’t have that kind of, it’s almost like going to the gym and having a trainer that you work out with. You get those extra bench presses and steps with the trainer. It’s kind of like that with you. They know they’re going to look at it, they’re going to be held accountable and it makes their decision-making a lot faster because they know they’re going to be held accountable.
Lea: Right, right. There’s obviously a lot to budget to actuals. The controller type CFO may exclusively look at each chart of account and say, “Oh, well why did we spend more on professional services?” I also think it’s important to look at the metrics that are driving revenue and cost to understand. Maybe our unit costs were totally off, and that’s a huge flag for the business to try and operationalize that or focus in on it.
Scott: That’s a great point. What are you seeing in the VC world right now? You’ve got a lot of clients. Are people raising money? Are they kind of going quiet? What activity level are you seeing?
Lea: You know, we’ve had a hard run I would say. Before corona was WeWork and So, -
Scott: Oh yeah. Yeah.
Lea: That actually-
Scott: Feels So, long ago.
Lea: It feels like a long time ago but I’m remembering it obviously because I was fundraising then too and it was incredible the shift of what happened after WeWork where suddenly, we’ve been spending a decade of, I mean slowly shifting out of it, but growth at all cost, to suddenly unit economics matter, [inaudible] probability, that’s all I want to see. It made for a very different financial diligence process when you’re trying to raise.
Scott: Yep. Yep.
Lea: You’re no longer just being expected your annual financial forecast. You’re suddenly sending out detailed unit economics. I would say it started in the fall where suddenly companies were still fundraising but the way they were fundraising was a little different. People were a little bit more hesitant, they wanted to do a lot more diligence. It wasn’t just like a strategic like, “Yeah, I like your business idea.” Then obviously with corona, I think it almost feels like people are on vacation. They’re checking their emails, there’s definitely activity with my companies and fundraising, but for the most part I think things are just taking longer. If you are trying to fundraise I would add like six months to the process. I think it’ll be interesting, if you’re a larger company you may have a little bit more luck with fundraising out in Asia where their markets are starting to pick up again. On the flip side, if you’re a really early stage company where the VCs may not be, they don’t have LPs that are heavy in the public markets, that may be okay as well. I think there are definitely pockets of venture groups that have availability and are excited to invest, but it’s a little slower.
Scott: Yeah. You made a bunch of great points there. For just the WeWork to summarize, I agree with you. I saw it getting tighter.
Lea: Yeah.
Scott: I saw, I mean this is kind of a plug for you, I saw investors asking for real diligence, like real financial models, the scenario analysis you talked about.
Lea: I know, at seed stage. I mean quite literally I had a seed stage company and I’ve got a template in my mind that I know that we can raise with this type of content, and it didn’t work. They were like, “No, we need more.”
Scott: Yeah. We’ve been seeing that too. Also, just the general hygiene. We saw some clients that hadn’t invested enough time answering our questions and things like that.
Lea: Yeah.
Scott: At the last minute, like oh my gosh, I need to get six months of questions that … We ping people every, like we have a set cadence too and they were kind of trying to play catch up because people could just get away with that for the last couple years. I definitely saw that. I think also it’s a time where I’ve been through a bunch of these cycles and having an expert like you to help the company is actually really valuable because there’s also just a lot of [inaudible] that happens and a lot of … When the processes go slower you’ve got to be on your toes, you’ve got to get information back to the VCs So, they don’t drag out any longer.
Lea: Right.
Scott: It’s just kind of where experience really comes in. It’s very helpful.
Lea: It’s like the time of the CFO, I would say.
Scott: It really is. I’m seeing it all over the place.
Lea: Yeah.
Scott: I’ve actually, in our client base we’ve seen a lot of companies going back to their existing investors and doing a bridge round or a convertible note.
Lea: Yes.
Scott: We’re seeing that in droves. It’s happening quite a bit. What are you seeing?
Lea: Yes, that is a great point. I think actually most of my clients have done that at this point. I think it’s just a better route if they’re able to bridge a little capital. Obviously raising debt is another option, it just depends on the stage too. You don’t want to be trapped with huge interest rates over a [inaudible] but yeah, I definitely think that if you can go to your existing investors and say, “Hey, can we do a bridge round?” I think that’s a really great route to go.
Scott: I’m seeing terms kind of like the 20% discount in the next round kind of stuff.
Lea: Yep.
Scott: Or reverting back to the previous price was pretty recent.
Lea: Yes.
Scott: To me that’s a signal that, and I’ve been around, I’d be curious to hear what you think, but to me that’s the investors being pretty nice, frankly. I’ll know things have gotten really serious when I start seeing a liquidation preference applied or warrant coverage applied. Things are pretty friendly still in my opinion. What do you think?
Lea: I think things are pretty friendly. I mean, people want the economy to succeed. Everyone’s looking at the markets right now even being like, “Why?” [inaudible] like what happened to Tesla yesterday?
Scott: Yeah.
Lea: I think generally people are very optimistic still and maybe that’s just because we’ve got this extra dynamic that you don’t normally see in a recession, which is that people around us are getting sick and So, you kind of need to try and take a little risk and help your neighbors out.
Scott: Yeah. Yeah.
Lea: Yeah, I do think it is nice though given that I think, especially with WeWork and all of the companies that have recently gone public, valuations appear to be inflated and So, going back to a prior round is essentially saying, “We’re fine with valuations at a time where the market was much higher.”
Scott: Yeah. Flat is the new up. I’ve heard that at different times in my career.
Lea: Yeah.
Scott: Before I let you go, it sounds like you were working on the [inaudible] loans and the SBA loans with some of your clients as well, right?
Lea: I was, yeah. It was a lot of hurrying up and waiting.
Scott: Yeah, So, it was a roller coaster.
Lea: Yeah.
Scott: I just counted actually, we did 100 of them. But actually, that’s only the ones that we did, but we have a bunch of clients doing it by themselves too. It’s [inaudible]. Any takeaways or was that just a period of your life you want to forget, those two weeks?
Lea: You know, thankfully I actually think the process was relatively easy. There were like two weeks where no one knew what was going on, which was [crosstalk]. Every law firm was submitting an email being like, “This is my interpretation,” and then sending it out to the entire list host. Now we know what the application is, it’s two pages long. Gusto, if people use Gusto, literally creates a form. They’ve adjusted it. That was part of the whole interpretation problem, but they have a form that will directly tell you what you need to put in the form. For people who are still thinking that it’s going to take too much time and it’s not worth it, I would think again. Especially for PBP if you qualify, given that you may be able to get that forgiven. Then there are plenty of other opportunities out there to try and get EIDL, an EIDL loan, or deferral on taxes. It was painful at first but actually all things considered it ended up being pretty easy, especially now that [inaudible] is settled.
Scott: Yeah. I think everyone in our value chain did a good job.
Lea: Yeah.
Scott: Gusto, Rippling did a really good job. The Gusto reports I think, and Rippling reports changed like five times at least and they were like, I’ll never forget that Friday when the applications were first due. We were going back and forth with Gusto and we were like, “You guys were reading this wrong.” They were like, “Well it’s AICPA’s guidance. That’s what we’re following.”
Lea: Yeah.
Scott: Then sure enough it changed over the weekend. But that’s not their fault. They were following very clear guidance from the national CPA organization.
Lea: Right, right. Well it’s [inaudible] fact sheets at that point.
Scott: Yeah, and I think both payroll firms did a really good job working super hard and engineering teams busted their butt and the overwhelming amount of support that was, it was just crazy. Then I think the banks did a pretty good job too. I know First Republic was first out of the shoot for the banks we typically work with, even for startups.
Lea: Yep.
Scott: SEB struggled a little bit the next week but it wasn’t for lack of trying. SEB was trying really hard. They were building a process from zero. I give them a lot of credit. I think both banks did a really good job.
Lea: I agree, I agree. I think they didn’t have to. None of these banks had to do that.
Scott: Yeah, that’s a great point. Yeah. They were just helping their clients out.
Lea: Yeah.
Scott: Well I am looking forward to seeing you in person because we are taping this remotely over Zoom and Zencastr, but it’s great to hear your voice. It’s great to hear all your advice for startups because like I said, I have [inaudible] respect for you and I really trust your opinion. I think if you’re a startup out there looking for a CFO, I think Lea is an amazing choice. You’re like one of those people who pays for themselves. You pay for yourself.
Lea: I hope So.
Scott: Money’s saved and up rounds and getting deals closed quickly.
Lea: Yeah, thank you. I appreciate that.
Scott: Oh, my pleasure. Well do you want to let everyone know how they can reach out if they’re interested in working with you?
Lea: Yeah, absolutely. I’ve been told I need to work on a website So, that [crosstalk] quarantine.
Scott: That’s an inside joke. That’s an inside joke.
Lea: You can find me on LinkedIn or Kruze’s site. I feel really blessed to have worked with over 20 founders helping raise over $250 million in rounds. Essentially the way you like to think about me is I can take you between stages, So, for early companies I am your zero to one. Now more than ever companies need to be financially diligent and I’m happy to help.
Scott: Amen. You said it perfectly. Well definitely check Lea out on LinkedIn or the Kruze website. Lea, thanks So, much for dropping by. I really appreciate your time.
Lea: Thank you So, much.

Kruze Cares More - We take our clients’ success - and happiness - seriously. Kruze has worked with hundreds of early-stage companies, many of which have gone on to raise tens to hundreds of millions in venture financing - and a number of which have been successfully acquired by major public companies.

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