The Paranoid CFO

Alex Urmersbach: so, you know, a little bit background on me. I was born in Germany. You probably can hear this in my accent. I did move to the United States to study at UCLA at the business school, got a scholarship from the German government. And that was sort of, it did change my life because the approach in studying in the United States is different than what it is in Europe. way more practical here. People are taught to function in companies quite quickly. In Europe, it’s different. So I have quite some international background. I had the chance to work in London, Paris, and then for many years in South America, but I’ve been living in Los Angeles for the last 25 years. I’m now a dual citizen, German and American. So I’m a four time Four times CFO, primarily in financial services and Fortune 500 companies. Currently I’m the CFO for a FinTech company that is venture backed and headquartered in San Francisco. We are completely remote, so all employees work from all over the country. And some people actually moved out of the country to Mexico and Costa Rica. but we still have a small headquarter in San Francisco. So we are a FinTech company in the real estate lending space. We provide about 20,000 loans to real estate investors per year, and we are the biggest lender in this space. We have about a 10% market share of our vertical. We use a lot of AI and machine learning to make credit decisions and to, you know, really to automate processes. We can make credit decisions right upfront when the borrows, you know, put in their information and solicit credit. So it’s a lot of decisioning is moved to the front of the funnel that we efficiently deny. applications that we can’t underwrite and that gave us the ability to scale and we can see that we have a lot of market share gains over the last year. So as a CEO, we work closely with the top leadership team to make the company more profitable and more valuable. Our exit strategy is either to go public in a couple of years or work towards a takeout with a strategic investor, asset managers and those things. But I see my role really to increase the enterprise value to a certain threshold that we need to do those transactions.

Rohit Agarwal: Very cool. A lot to unpack there. Before we get into kind of the chronology of your various roles, tell us how did living in various different countries getting exposed to various different cultures, how did that shape you as a professional?

Alex Urmersbach: Well, look, first thing you learn that, you know, there are different ways to do things. And, you know, what you’re used to maybe working well where you are. But, you know, people and countries and cultures have different backgrounds and histories. And often it doesn’t make sense, you know, the way they do things. You just need to get flexible and understand that people want to do the right thing. and then, you know, do the best and be flexible in how things are being done.

Rohit Agarwal: Make sense. So out of UCLA, you ended up joining Sony, is that right?

Alex Urmersbach: Yes. I am. Yeah, go ahead.

Rohit Agarwal: . So how did that transition, I guess let’s talk about kind of the transition from Sony to then into Corp Dev at NetSmart. How did that transition happen? Although it was… Well, I guess should we talk more about the Bank of America? Because the NetSmart one was 10 months only. Let me rephrase the question. Let me rephrase the…

Alex Urmersbach: So let’s start there. So, you know.

Rohit Agarwal: Let me rephrase the question, Alex, and then you can start. So why don’t we talk a lot more about your early years in finance and how did that shape up your professional acumen? You have spent a few years at Sony, the NetSmart, but that landed at Bank of America, where you have spent a good 10 years of your career. Can you take us through that journey in terms of what were those different roles and kind of what made you hang around Bank of America for so long?

Alex Urmersbach: so I really came up through investing and investment banking and capital markets. I used to work in interest rate derivatives and those hedging products. And I also worked many years in South America in privatizations, project management and I was a first floor trader. at the Ecuadorian Stock Exchange, where I worked with international investors who wanted to invest in emerging market debt and in stocks and currency and all those things. So I had lived in South America for quite a while and then came back to the United States and I started with Sony Pictures. in the international TV finance group. So I was responsible for the TV channels in South America that Sony had and managed and worked a lot with Disney, with Universal, with Warner Brothers on distribution and making those cable TV channels profitable. So when I started with Sony, I realized that I had moved from investment banking to corporate finance, right? It was basically, you know, how can we improve profitability of those channels? How can we expand the growth? Can we do something with margins and all those things? But that was a corporate finance. But I was used to work in capital markets during a lot of trading and sales. But I think they hired me because after seven years, I became fluent in Spanish. And they also needed someone who sort of is comfortable with the South American culture. So that’s how I ended up there. And yeah, my role was to take over the, from a finance perspective, to take over the new channels that Sony built up. After the corporate development group set them up, they moved over to finance, and we really worked with local management to put them on a path to profitability and making sure that there’s not much damage to be done. We ran into a lot of political issues. Venezuela, as a country, turned somewhat antagonistic towards the U.S., and we had big satellite uplink facilities in Venezuela. we had to move this to the US or there were devaluations in Argentina and in Brazil, where all of a sudden we lost a lot of money because we had local deposits in banks and all those things. But for me, it was sort of the change from investment banking from the capital market side into just managing operations, which is just different. But at the end of the day, it’s all sort of the NPV. that you can extract from those assets and hopefully increase your free cash flow.

Rohit Agarwal: Make sense. Tell us more about your time at Bank of America. You were managing the home loan division there. How did that came about? And it seemed like a pretty large portfolio of business that you were looking after.

Alex Urmersbach: so really what happened was after Sony, I signed on with an internet company. That was when there was a big first big wave of internet companies. It was a small startup company that lasted one year. And the company was held primarily by Citibank. Citibank at that time had about 100 internet initiatives, but things and growth didn’t go as they wanted. And they put the plug on the funding after one year. For me, it was the first time that I was in an organization that really went bankrupt and was shut down. So it was a very sobering experience, but I learned that… You know, even if you’re backed by big investors, you know, it doesn’t last forever if you can’t deliver on business and growth goals. So coming out of this, I started in the mortgage business and I had been in financial markets, you know, prior to Sony and in Germany and in South America. So I was well familiar with… you know, with those financial markets, but I started as a strategic planner at the headquarters. So I worked with the executives on developing strategies and strategic plans and really working with the executives to roll out those plans. So I, you know, learned to do strategic planning and strategy work. which really still helps me in my current role because as a CFO, there’s a lot of corporate strategy and the different playbooks and different approaches, how to do strategy and strategic planning. And most of all, really to realize the planned value out of those strategies. It’s easy to put things into a PowerPoint or those presentations. But at the end of the day, it comes to materializing and delivering value from those initiatives. So that was sort of very good to learn there and navigate cross-functional teams, navigate different agendas of the senior executives, but then also be part of the C-suite to really understand how they were thinking about things. That was very gratifying, but there was a huge mortgage boom. that came to an end and they really cut down the mortgage business and then I started to move on to more smaller companies because I like the more entrepreneurial aspect. Bank of America, they I think have two or 300,000 employees and it’s a huge organization and it became very difficult to fight sort of the red tape within the organization. and to get things done. And then I got interested in more mid-size companies. They can turn faster. You have way more impact on outcomes on the bottom line. And since then I have been in smaller companies, but also in other huge companies, but it’s all good because some different sizes have different advantages and different disadvantages.

Lessons from the dot-com bubble#

Rohit Agarwal: Absolutely. So you have seen the dot com bubble and the impact of that on the startup that you were at closing down. Then while you were at Bank of America, of course, you saw the 2008 financial crisis and I’m sure that had an impact on the business that Bank of America was doing, especially in your division, home loans. What did those two bubble bursts taught you? And how are you a different person having seen that, having lived through that as a professional?

Alex Urmersbach: so what I took away from that is once you are in the C-suite, you really need to live with the consequences of the decisions that you make. All right, so you have real P&L responsibility. If you are a director or VP of finance, you do a lot of work for the senior executives. but you don’t really make a decision. You probably propose certain decisions and to present the findings of what you’re doing, but you are not really, you know, you don’t have skin in the game in the sense that you are directly responsible for the outcomes. So that is sort of a real change. And as a CFO, you need to basically, you validate the financial statements that everything is correct and you take a personal risk by doing this job, but then it’s very gratifying, right? And it is very gratifying to have a direct outcome on the outcomes and it’s very gratifying to shape things in the organization. But I think the real switch is from… you know, making recommendations to making decisions. So what I learned is you gotta be very paranoid of risks that are out there. And often these are risks that are hiding in plain sight. So looking back at the big financial crisis and the big bubbles that were out there, it was all looking back, it was all there, but you are so much wrapped up in the day to day. you have a real trouble seeing those risks that are lurking out there. So that’s why I’m sort of, I’m always paranoid. Is there something that I should see, but I don’t?

Rohit Agarwal: But that’s an interesting one, right? For example, COVID-19 pandemic, no one could have seen it coming. In some ways, one could argue that the whole SVB saga, yes, it was kind of unfolded in the plain sight, but still no one really thought about covering that risk. You were at teleperformance when COVID-19 happened, right? And I’m sure you guys managed through it well. How did that kind of management of that crisis really took place in a teleperformance, if you can share something, and having experience from those other two crises, what were you able to do more effectively or efficiently or quickly that led you to better managing the COVID-19 pandemic for teleperformance?

Alex Urmersbach: So Teleperformance is a French multinational company. They are operating in 90 countries. They support customers. It’s a customer care company, you know, offshoring and outsourcing of customer care. So a lot of call center stuff. So there are 90 countries, they support over a hundred languages, and it’s a truly global company with 500,000 employees. So I was a CFO for… you know, for all the English speaking countries, including India and APEC. And we saw sort of COVID coming over four to six weeks. So we saw that different countries would shut down operations country by country. Obviously sort of it started in Asia, you know, went around there, then it moved to South America. And it was very scary. Then it came to the United States. And it was totally, the company was totally unprepared for those type of black swan event, sort of from a probability perspective, way low probability that those things happened. So my takeaway was, you know, you gotta be fast if those things happen. And it is very difficult to make decisions if you don’t have all those, if you don’t have the data set to make good decisions. We were sort of the company moved from a profitability perspective, really to a cash and liquidity perspective. So we really, we were concerned that all the economy shut down. that our clients would go out of business. It was totally unclear what the impact was. And on a global level, what they did is they did issued massive debt just to have liquidity. The finance role sort of transitioned from budgeting, accounting, forecasting, profitability to a lot of scenario planning. led a lot of short-term cash forecasting, and it was just, you know, how would we get through the next 60 to 90 days? It was very difficult to manage through this, and profitability completely took a backseat. It was all sort of about surviving at that point.

Moving to Kiavi#

Rohit Agarwal: make sense. Moving on, tell us how did the move to Kiavi happen?

Alex Urmersbach: The move to Kiari happened. I had been working out of state for the last six years. And I had been, I mean, where I live is in Los Angeles. I had worked in Las Vegas for three years. And then I wanted to come back to Los Angeles. And then I got an offer from Teleperformance, who was a massive… company, my experience, my areas of responsibilities, basically would grow. That is the number one company in their category. I didn’t know much about them, but the more I started talking to them, I realized it was a top notch company. The problem was they were in Salt Lake City. So I just was on my way back to Los Angeles to relocate and then I got this opportunity. And then I said, I’m gonna take this opportunity. And then I worked out of Salt Lake City for three years. So I had been out of state just during the week for six years. And look, I felt it was time to come back to… to Los Angeles. But then I got a call from a recruiter if I would be interested in Kiabi, this real estate FinTech lender who was headquartered in San Francisco. But San Francisco is clearly closer than Salt Lake City. San Francisco is only a 50 minute flight and Salt Lake City is a two hour flight. So not that I don’t like to fly, but I’ve flown too much. And there, I always wanted to work for a well-funded startup that is growing fast, that has the opportunity to go public and is very sophisticated. I’m really intrigued by AI learning, all those sort of very innovative. business models. So that intrigued me and then I was back in the mortgage business if you want. The mortgage business is a very low margin business and there’s a lot of volatility in the business. If interest rates go up as say now, now our business drops by 50%. If interest rates go down, then business expands. But I felt very comfortable with the industry. and I’m very intrigued what we are trying to do at Kiavi.

Rohit Agarwal: Awesome. You have certainly managed different teams, which are both, I would imagine, housed in a particular location as well as remotely, right? Do you have certain tips on how to best manage a remote team and still get the best kind of the, you know, the winning spirit and the productivity out of them?

Alex Urmersbach: so in terms of team sizes, I’ve managed teams between 10 and 400 people in the finance, accounting and related stuff. There’s risk, procurement, IT, those things. And when I was at Teleperformance, there were 200 people in the Philippines and 50 people in India. We had You know, I had a couple of country CFOs who reported to me. You know, it was Canada, England, South Africa, Philippines, India, Japan and China. It is, you know, it’s difficult to manage because the time zones are difficult. So you either have a lot of calls very early in the day or late in the evening. look, it is, you got to create a good rapport and cadence with them. It is important that, you know, that you over communicate because people are just closer, they’re not as close, they’re not in the headquarter, they are not privy to a lot of discussions that are happening on in the leadership teams. And, you know, I have one rule that is I don’t like any surprises. So there’s an expectation if I want to hear sort of the bad things and the good things before they are being distributed within the organization. And I really try to get a friendly, a very friendly open dialogue going where people feel safe and secure. But the key is that it has to be very open. I like to be in the decision-making process. So the more senior people get, they do have, they run their business and their regions and their functions, but at the end of the day, I have ultimate responsibility and I wanna really understand what their thinking is and wanna make sure that it is aligned with what the company really wants to achieve. But it’s all about, you know, how can you create an environment where there is sort of a good open and constructive dialogue. That’s what I’m trying to do.

Rohit Agarwal: To foster that, do you have a specific cadence with your teams and other peers that you go through on a weekly or a monthly basis?

Alex Urmersbach: Yes, I do have, you know, in my direct reports, I have two one-on-one meetings per week. One is more about the daily stuff, you know, decks that need to be prepared for the board and those things. And then the other one is the strategy that we are pursuing as a department. So for instance, what I like is some… the departments that report to me, I try to tell them that this is their organization that they need to optimize. And there has to be a strategy for the accounting department and for FP&A, for IT, and there has to be a strategic theme. At a minimum, they need to make what they do day to day that they make it better. In accounting and finance, it’s a lot about accuracy. If you look on FP&A, they need to get the forecasting error down. That is sort of a key metric for me. I’m looking for scalability. These are all indirect cost centers. They cannot increase with business volumes. By definition, they are somewhat fixed. and I’m looking for real strategies that they can scale up. In accounting, I’m looking for a key metric there for me is how quickly can they close the books, right? It is always the trade-off is the controllers want to be sort of 100% perfect, but I’m okay if certain things are getting trued up the following month for the benefit of getting more real-time reporting. You know, you have, you know, other departments, they have different key metrics. So one meeting is, you know, the day-to-day things. The other meeting is really how do we make progress towards strategic goals of the department. And then with the leadership team, I have weekly one-on-ones with my peers. And then with the CEO, I, you know, talk quite often. also through Slack and Teams and those things. There’s sort of a lot of quick conversations during the day. So it’s really important to have a good term, to be plugged in, to sort of understand what are their challenges that they work through. And then at the end of the day, finance has to help them to be more successful in their areas, right? Because it’s really a sort of a team effort. I want finance to be embedded in the market-facing functions. I want that finance is the owner of record for all the analytical stuff that’s being done. It is sort of difficult when the salespeople do financial analysis, because not to take anything away from them, but there’s a certain way to do it. And I have sort of agreement that head of sales, if there’s a more complicated project that it runs through finance, right? So that we sort of do present the findings and then the business discussion can be led by the other departments. I’m a big proponent of operational finance, sort of that finance branches out and it’s being embedded. And that is also… You know, finance, finance accounting and those, those departments, there has to be a customer orientation, right? So finance needs to be easy to work with, right? And I’m looking sort of, I’m looking for testimonials where people say, oh, you know, the finance team did a great job, but I’m looking also for feedback that they say the quality of the work is good, but it takes too long till we get those results, right? So it’s sort of the mindset of being customer oriented, and then don’t make it difficult to work with finance.

Defining the modern CFO#

Rohit Agarwal: Makes a ton of sense especially in 2023 we have seen a lot more demand for CFOs and especially from even earlier state startups In your experience, what is the best time for a company to hire a CFO?

Alex Urmersbach: I think when they can afford it, right? So look, often, I think at the beginning, they sort of, the founding team, they pretty much do everything. They do payroll, they have quick books. But then I think once revenues are coming in, once there’s some fundraising, once you have bank credit lines. those things. I think a CFO is probably, you know, it’s probably a good time to hire one, you know, and it’s often also the salaries. It’s hard to get people who are experienced, who probably also come with a little bit of limitations because they know to do certain things and startups they probably, you know, They need a lot of flexibility. But I think once you have sort of, once you get audited, once you have a board, once you have funding, venture-backed funding, those guys in the later stages are used to be a little bit more structured and formalized. But then, you know, the CFO brings some, I think brings good perspective to the business. You know, the CFO I think needs to be more than just a scorekeeper. That is sort of the minimum thing. You know, the finance organization looks at numbers all day long, and I think they need to do more. They need to enable other departments. They need to point out where there are opportunities for growth, for cost savings and all those things. So, you know, it’s sort of a broad function and everyone says the finance organization need to be a trusted partner to management. I think that’s true, but it depends how the organization is set up in the organization, in the company, right? It depends on the CEO. of the culture of the company. Sometimes it’s more narrow, then it’s just sort of more accounting centric and looking backwards. But then there are also companies and that’s what I’m trying to achieve to have a real seat at the table, to be in the important decisions, especially when you talk about capital allocation. Basically, how do you spend the money that you spend? Do you have a good… you know, capital allocation process. Do you really focus on the right initiatives? And then do you really deliver value, right, by delivering on time those initiatives, right? So I think, you know, the super CFO, and I’m not saying that’s me by a long shot, is really a proxy for the CEO, right? So if you can get as a CFO, get a real good understanding of the operating models, the wholesale strategy and all those critical things, including technology management and have really insight in technology because it drives a lot. So that would be the super CFO, but then look, we’re coming more finance accounting and more from the administrative thing. but the more you can morph into those, into advising really the top leadership team, that is sort of where the super CFO would be. And the closer you can get to that, the more valuable I believe you to the company.

Rohit Agarwal: I guess that’s certainly the way the role is evolving and would be more aligned in the next five years, especially with all the technology advancements that we are seeing.

Alex Urmersbach: Yes. Yeah, it is some, they’re now better tools also, right? You can, especially on the finance side, the BI, all those BI applications. So basically what that does is the finance teams can turn around faster for forecast budgets, analytics, scenarios, and all those things. We have morphed, we have really embraced

Rohit Agarwal: Awesome.

Alex Urmersbach: BI tools, which enables the finance team to be more involved in really the high value analytics and high value projects. On top of that, those systems, they can integrate closely with Salesforce, with enterprise systems, with the accounting systems, with all types of other systems. And I think that enables the CFO organization to be way broader and to be way deeper in those other processes. So that’s really great. And then you have way better reporting capabilities with Microsoft BI and Tableau and all things. You can have standing reporting and you can see real time. how the business comes in. You can monitor where sort of, if you lose market share in some regions, or sort of for us, our applications and submissions, trend on a daily basis and you can react much faster. So and I think really finance has a real, can be very helpful if finances leverage the right way.

Inside Kiavi#

Rohit Agarwal: Makes a ton of sense. Why don’t we move to a little bit more on the Kiavi business side? It was intriguing when you said that you provide short-term loans related to homes, right? Which is home loan in general is a category that is associated with way longer term loans. So can you kind of unpack that mystery for us as to how does short-term loans fit into the world of home loans?

Alex Urmersbach: Yes, so the home loans market in the United States is a business between two and $3 trillion per year. And the biggest part, and this is what you are thinking about, is 30-year mortgages to people who want to own a home. That is the biggest part. But then you have more… you have more segments into that market. And where I am, we are catering to the $25 trillion market of old homes. The housing stock in the United States is about 25 to 30 years old. And you have a lot of homes that need to be fixed up and then being sold. and our investors, they buy all the homes, they fix them up, and they sell them in the market for someone else to buy. So that is probably a $50-60 billion market. And the time horizon is very short. It’s a little bit like on TV, fix and flip. So you’ll see people buy this rundown house, they trash everything and then they fix it up and then they sell it. So this is, we have from off those TV shows, we have a lot of customers who do the fundings with us, but we are in the market for people or companies who do 30 or 40 of those projects per month. So the market has very institutionalized. It is not anymore where the plumber is fixing up a home. These are companies who are very well integrated. They have artificial intelligence themselves. They know how to buy the homes and they want to turn over the homes quickly. And typically they buy, fix them up and get bridge loans. That’s what we are providing and sell those loans within six months. So that is the business that we are in. And it’s a very, you know, the economic trends or the secular trends are good because the housing stock is aging more and more. And there’s a huge demand for homes in the United States, but home prices are so expensive that people can’t buy homes anymore. So we have come to the point where the average income in the United States. doesn’t allow people to buy the average home, right? And that is sort of, that makes it very difficult for people because there’s a lot of need, but it’s out of reach for people and we are sort of more at the entry level at the less expensive homes.

Rohit Agarwal: super exciting. And, Kiavi has been around for 10 years now, so it’s not like an overnight success that has been a lot of blood, sweat, and tears, I’m sure, that has been put into it.

Alex Urmersbach: so we are still venture backed. We added D round in terms of funding, raised over I think 120 or 130 million dollars. And the company, the strategy is very interesting. Do we position ourselves as a FinTech company or as a traditional lender? So as a FinTech company, When the market returns, when the market returns, right now the market is very difficult for fintech companies. The multiples have really, you know, have really obliterated. When you look at, when I look at certain fintech companies that are public, when I look how they went public, how they’re valued now, it’s just a fraction of what they were, or you market yourself as a traditional lender. So as a lender, you get lower multiples. So the question is, what is it? What is it? And we have a lot of data scientists, we have a lot of software engineers, but they come also at a cost. So we know that the market is commoditized. Our borrowers are very cost sensitive and to carry technology cost, we pursue a differentiation strategy. But it depends on the market. If the market is really a commoditized cost driven market, we have to make sure that our borrowers pay up for the differentiated product offering. So, and that really puts the spotlight on the additional technology costs that we are carrying. How much return on investment do we get from our technology investment? So this is sort of the, this is sort of from where I try to, I think a lot about that. try to frame this in terms of what do we really get from the technology spent? Is it really, does it make us more competitive? Can we do smaller loans because we are more efficient in the fulfillment processes? Can we drive down the unit cost? Can we expand our TAM, our Total Addressable Market because others can’t do those loans at their cost structure. But it’s sort of, you know, what company do you want to be? It is very difficult to be a fintech lender in our space. But, you know, we have shown that we can scale the company growth by 20 to 30 percent in revenues. So it’s a high growth company. And we know, you know, we’re going to We’re gonna amortize our fixed cost based over the higher business volume.

Raising debt and equity for a lender#

Rohit Agarwal: Make sense. Tell us as a lender, I’m sure you are constantly raising either its equity or debt, right? What do you do to be prepared for, if I may call it, perpetually raising funds for the company?

Alex Urmersbach: So we finance the company through issue of bonds. Basically what we do is we originate a billion dollars and then we issue bonds. So we bundle those loans into securitizations. We are highly dependent on the capital markets because that’s where the cheapest funding is. We also, we had diversified, we have other credit lines, we have corporate debt that we issued to fund our growth, and then we have a lot of warehouse credit lines. And the Fed has increased interest rates quite a bit over the last two years, that has increased our funding costs. We can pass them on. in a way to our borrowers, but we got to be careful that, you know, that, you know, their projects, you know, fixing up and selling homes also needs to return a profit, right? If it doesn’t pencil out for them, then, you know, then it’s very difficult for us. So we try to diversify our funding sources. We also sell loans to big hedge funds to private equity funds and investors. But we are highly dependent on capital markets and we need to be cash flow positive because we have some equity in those bonds that are outstanding. There’s some credit enhancements and those things where we need to hold cash. And we are growing business and we gotta be… you know, generating the cash that we can keep our growth. And the market has become very challenging in mortgages. Everyone knows this in 2023, here at the end of 2023. And we are watching the Fed very, very closely if they keep increasing the rates or if they put it on hold or if they put it, if they cut rates, hopefully next year. Once that happens, we know business is going to be very sensitive for that. And then our strategy is basically to be ready when the business comes back. All right. And then you will see if some companies, if their technology enabled or not, if they can handle the higher volumes, if they, if they are not, then they need to hire people and that. that takes a long time and they’re always gonna be behind the curve. And our intent is that we can take the volumes without really trying to hire more headcount, which is very difficult because it takes so much time to get the people acclimated and make them really useful.

The first 100 days#

Rohit Agarwal: Makes sense. Why don’t we move to a hypothetical now? So assume that I’m joining a company as the CFO tomorrow and that would be my first day. So what would be your advice to me for my first hundred days?

Alex Urmersbach: so I mean, obviously at the beginning, it is meeting people, understanding the business model and the financial model, right? So how does a company really make money if you’re from the same industry? I think it’s much easier. So spend a lot of time, obviously, with the finance and walking through P&Ls and reporting and balance sheet and cash flow and all those things. And then I would spend as much time with the CEO to understand what is the whole vision for the company, what are sort of the pain points of the company, what is a growth strategy, is an exit, sort of what are the hot buttons or the things that the… that the CEO is passionate about. And then it really is finding out what the CEO wants from the CFO. So how is this function being positioned in the company? So that’s because the CFO is really also an enabler. for the CEO and often they would like to get, you know, distribute responsibilities more evenly because a lot of things roll up to the CEO. And I think CEOs also wants to have sort of an independent opinion from someone who is not driven by commissions and all those things, right? So I think it’s, you know, have a good relationship being on one page, good rapport. lot of trust and really understand where they’re coming from. The next thing I would do is really assess sort of the financial status of the company, right? Are we sort of even making money? Where do we lose some, where do we leave money on the table? And then understand how come up with a plan to create more enterprise value, right? So then the question is, What is really the growth strategy, right? Are there new products? Do they have new markets? Do they wanna cater to new clients with the same product? Is market share sort of distributed evenly in the markets where they are, where they’re underperforming? Is there any margin sort of expansion or margin management that you can do? So that’s sort of on the revenue and growth side. But then it’s also about understanding if the opportunity is on the operational side. So there are probably some headcount and capacity models. Really, the variable cost centers, they have to be truly variable in both directions. If business goes up, you’ve got to be quick in ramping up with capacity. But if certain things don’t come through, then you know, then you also need to right size, you know, that is true, that is true that these are true variable cost, right? And then it’s also, you know, what’s really the funding plan, you know, the capital plan for the organization is a capital, is a balance sheet, is it optimal? Can you take on more debt or do you have too much debt? You know, you’ll probably have covenants and all those things. And then, you know, I like to go into sort of product, client, channel profitability. Do you get really the return of what you need? Right? You have certain cost of capital and you need to beat the cost of equity. If you don’t beat it, then you’re destroying value, right? At the end of the day. So it’s sort of, you know, come up with a plan where you think, you know, the company can increase value over the next couple of years. And, you know, I mean, that obviously is sort of in conjunction with the overall leadership team. Very important to talk to all the stakeholders, the internal and the external stakeholders. It’s, you know, obviously with your peers. So I do have weekly meetings with the chief revenue. officer and then you know I’m on a cadence with the legal officer to see if there’s some you know there’s some lawsuits pending you know a lot of talk with the COO head of head of people and those things but then there’s also you know got to meet the board members right audit committee risk committee then you have the bankers right So the, you know, everyone who gives you a working capital line because they want to meet and have a personal relationship, meet with the auditors. So I like to spend time with the auditors. I feel that they’re a little bit in insurance policy, right? So they can help you or they can have, you know, finance people with… also wear wrists, right, wear wrists because they have good perspective and I like to pull them in. The audit companies, they typically have consulting arms and I really like to pick their brain, right. For instance, the question that I have, how much of revenue should we spend on technology, right? or sort of from other companies in terms of commissions, how much is that, you know, that we pay out in commissions is that within market. So then you have also typically the insurance function rolls up to the CFO, gotta really make sure that you’re not overinsured. If you’re overinsured, you pay too much, but that you can’t be either underinsured. So there’s a whole sort of set of network. that you need to build and that it has to be very constructive, right? That this is a very open dialogue. And then, you know, it’s like, you know, assess the talent of the finance and accounting team or the teams that are reporting up to you, right? You know, if the decision is that’s a good team, you’ve got to empower them and make sure that… you know, when they go in meetings and when they do their work, that they really come on behalf of the CFO, right? That they really, you know, that they are empowered to have the right conversations and to ask the right questions, right? But often they’re a little bit timid if they are sort of also hierarchical differences. But, you know, I want everyone to know everything that we do. is to make this a better company, right? And really sort of that the company can realize the potential that it has, right? And then I would just go to the internet and would Google what do CFO should do in the first 100 days and it’s all laid out there, right?

Rohit Agarwal: Awesome. That was quite a comprehensive explanation. Makes a ton of sense. Tell us before joining a company, right, there is only a limited set of information that is available, right? Once you join a company, of course, you have a lot more to look into and get yourself acquainted with and so on. What can a person do before joining a company to make very cautious decision about joining a particular company as a CFO.

Alex Urmersbach: so, you know, if you’re in the industry, sort of in that industry, sort of you know who are the top players and you also most likely know people who know the company, right? So that’s sort of, that’s a way to do it. Once you are more in negotiations, typically… you meet the top players there. It was, I met, Kiavia was great. I met all my peers and the department heads that would report to me. It was very interesting because you also learn a lot when they, things that they don’t talk about, right? So I thought it was interesting. And then, I asked for financials. Once you’re after an NDA, they often give you access to financials and try to figure out as much as you can. But typically it’s sort of a process that, they are also vocal on them what they want from you. And then, You’ll see if there’s a good fit also culturally, right? So companies are very different from each other and they have strengths and weaknesses. And you got to see sort of how you fit in there in this whole, in the whole team there. But try to find out as much as you can. And there’s often, there’s a good data set that you know what you’re getting into.

Career reflections#

Rohit Agarwal: Makes sense. Changing gears a little bit. CFO role is certainly quite a demanding one. Tell us what keeps you going, what keeps you motivated.

Alex Urmersbach: Look, CFO is a very influential role. You can impact a lot of things and that’s interesting. You also get a very holistic view of the company. So I think that is intellectually very challenging. And I just like to be able to talk to everyone in the organization. I’m sort of curious how things work. And it’s very gratifying when a company works, it’s very successful. So I do like it. You give up a little bit, work of life balance, right? There is some… You are basically available 24 seven, right? It doesn’t really matter if these are weekends and if they’re board meetings on a Monday, right? Most likely you’ll need to review and prepare over the weekends. You know, the key people, you know, everyone is doing this. I am being from Germany, they… They don’t do it, you can’t send emails on a weekend that’s sort of like they’re not doing it. But in the United States, it’s different. So that comes a little bit with the territory, right? You try to surround yourself with the best team that you can and once you have a top notch team, it is very helpful to work through things. So look, it’s just a very interesting position that thought of keeps me going.

Rohit Agarwal: Alright, makes sense. What advice would you have for young professionals who want to become CFOs one day?

Alex Urmersbach: So look, I think I’m looking for people that sort of, I wanna promote and bring up, do they really think like owners, right? Do they have sort of the mindset of what would they do if they would run the company? You know, obviously, you know, if they’re emerging finance people, they don’t have, they don’t see all the information, but you know. I always, what I always do is when I pass out project or some things to do and they work through this, I ask them, what did you find? Right? And there are people who have sort of, they look at you with empty eyes and they say, what do you mean? Right? And then I say, yeah, well, what did you find out because you were supposed to look into this? And then you have other people, right? That really sort of think about and connect the dots, right? And I’m looking for people who have good perspective on things. Right? Once you’re more elevated, there’s a lot of management discussion. Right? It’s not just stating the facts and read out where the variance analysis, you look at the P&L, when you go through the finance review meetings, you know, say the differences are here and there, that’s not what it is, right? It’s sort of the, what does it mean? What is the context? What do we have to do? And why is it even important what you’re saying, right? And you can see sort of people, some people are like this and other people are like that. And you can see people, the way they ask questions, right? You can see… people sort of who outgrow their areas of responsibilities, they just make them better, right? They think sort of as an owner there, right? They have full ownership of their role and it is really well managed, right? I’m looking for people who sort of outgrow what they were tasked with at the beginning and try to give them more areas of responsibilities, but then you also need to protect them, right? So you want to have them, you want them more exposure, if they have more exposure. And once you talk about promotions, typically it’s sort of a group discussion, right? And if people are not familiar with those people you propose to be promoted, it’s very tough, right? They, you know, I want them to have wins, right? To have wins and be recognized. And then they sort of, you know, they just want to grow. But look, it just, you know, maybe it sounds boring, but they got to work very hard, right? There’s nothing for free. There’s a lot of people who want to grow, right? And they need to prove themselves, right? So, but you know, I think it’s gratifying. And I like to bring up people, right? Just to promote from within. I think people should have a talk or have an ongoing dialogue with their managers of the career path and the goals that they have. And the company will try to find the best fit for the person in the organization. So it’s much easier to promote from within than from the outside. It’s also, it’s more cost effective too, right? So probably we all know that external salaries, they grow faster than internal salaries, right? And it’s such an advantage because people have the internal connections, right? They know people and it’s much easier to get them up to speed. So it’s, you know, maybe they short term find a mentor in the company, not with the aim to get promoted or to move up, but it’s just sort of to bounce off ideas and get sort of more perspective, right? So when it’s sort of, look, it’s very easy to spot those people, you know, who have those credentials, right? You also see sort of… you know if they work from whatever from 9 to 5 right or if they have sort of if they feel if they are vested in the company vested in what they you know and what they’re doing right at the end of a day how much skin in the game do you have and how much do you feel vested in what you’re doing so this is sort of how I look at people and then once I see them You know, I talk to the managers and then sort of we try to move them along and just give them more exposure and, you know, give them some wins that they can put under the belt. And, you know, that feeds on itself. Right. It really feeds on itself. They want to do a good job. They get recognized and then they sort of keep going.

Rohit Agarwal: Awesome. Makes a ton of sense. Tell us, how do you think about a successful career? What is your definition of a successful career?

Alex Urmersbach: Look, I, you know, personally, I’m sort of motivated by personal growth. All right. So I, you know, I do like sort of challenging and unstructured environments. And so what I like is when I can bring some experience. to a situation that I’ve seen before and then sort of bring in things that I’ve done before. And I, you know, I said, I do like innovative business models that attracted me to Kiavi. And I like to really have a seat at the table and, you know, have impact on outcomes, right? So it sort of, once you move up a little bit, sort of the day to day and the grant work, so to speak, you know, it’s being done in your organization and you can really work with the outcomes of all that work, right? It is, you know, in the senior leadership team, there are a lot of smart people. And it is just very interesting to be part of those, out of those discussions. And look, if you look back, you know, later on, you just want to think that you spent your time in a smart way, right? And that you’re somewhat at peace with yourself and what you have and have not achieved. So that’s sort of how I look at it. Okay, sort of money and equity and all this stuff, right? that comes along, but I don’t think it’s gonna be the primary driver because if that’s what it is, I don’t think it’s gonna work out, maybe for other people, but not for me.