"Run The Numbers" | Startup Finance, Strategy, and Operations Turpentine

In this episode, CJ Gustafson interviews Alex Clayton of Meritech Capital who leads the firm’s enterprise software, infrastructure, and fintech practices. They discuss the most important metrics used in the software industry, including ARR per employee, average contract value (ACV), net dollar retention (NDR), and valuation multiples. Alex also goes deeper into understanding market structure as a crucial factor to consider when evaluating whether a company will go to IPO. Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line, head to www.tropicapp.io/metrics
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SPONSORS:
Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line. By combining approval workflows, supplier management, and pricing benchmarks all in one place, Tropic makes savings opportunities easy to find and act on. 🌴 Visit www.tropicapp.io/metrics to learn how.
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X / TWITTER:
@afc (Alex)
@cjgustafson222 (CJ)
@TurpentineMedia (Turpentine)
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LINKS:
Alex’s S-1 Breakdowns at Meritech https://www.meritechcapital.com/insights/category/s-1-breakdowns
Run The Numbers episode w/ Tomasz Tungus: https://youtu.be/ExU7Muwmi0M
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TIMESTAMPS:
(00:00) Intro
(01:05) Mailbag questions - where should the customer success team show up as a cost?
(04:56) Introducing Alex
(08:19) Measuring overall efficiency of a business and rules of thumb for people out there of what good looks like?
(10:46) Can you game the gross profit per employee metric?
(11:29) Looking at operating plans, what's the metric that matters as per Alex?
(12:52) Average contract value does not matter to long term value creation
(15:31) The metrics public companies disclose
(16:48) Disclosing net dollar retention
(19:05) On the relationship between NDR and CAC payback period
(23:12) Why Alex doesn't believe that LTV or LTV to CAC ratio is a very valuable metric for many software companies
(28:18) How much revenue you should have when you go public?
(32:40) On going public after you raise a certain amount and doing it sooner
(33:55) would you say that founding teams are showing up to IPO with less equity than they used to historically?
(35:43) The average age of a CEO when when they go public
(36:42) On long-term company performance: is it better for founder CEOs or for professional CEOs?
(40:18) Alex's latest thinking on valuation multiples
(43:32) One thing Alex screwed up at work
(44:35) Tropic presents Rep Yo Stack: Alex's VC tool stack

On the 21st episode of Run The Numbers, CJ sits down with Andy Raskin, a prominent Strategic Narrative consultant to venture-backed CEO and leadership teams. They discuss the importance of strategic narrative in conveying the value of a company and tell a powerful story to investors, highlighting the approach of naming the old game and the new game, interpreting transitions in the market as 'life and death' stakes, demonstrating how old tools weren't built for the new challenges, and how to keep updating a company's strategic narrative. Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line, head to www.tropicapp.io/metrics.
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SPONSORS:

Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line. By combining approval workflows, supplier management, and pricing benchmarks all in one place, Tropic makes savings opportunities easy to find and act on. 🌴 Visit www.tropicapp.io/metrics to learn how.
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LINKS:

- Check out Andy's podcast The Bigger Narrative: https://andyraskin.com/podcast/
- Andy Raskin: The Best Sales Deck I've Ever Seen: https://medium.com/the-mission/the-greatest-sales-deck-ive-ever-seen-4f4ef3391ba0

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X / TWITTER:
@araskin
@cjgustafson222 (CJ)
@TurpentineMedia (Turpentine)
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TIMESTAMPS:
(00:00) Intro
(02:52) What is strategic narrative and positioning yourself to sell a movement
(05:54) On fundraising: category vs narrative
(08:10) Examples of a company with strategic narrative
(10:31) Naming the old game (or the old mindset as per Andy)
(12:50) Championing the new mindset
(14:48) What happens next after naming the old game
(16:48) Sponsor - Tropic
(18:00) Andy's take on naming and comparing against competitors when on a sales pitch
(21:28) The buyer mission statement
(24:16) Andy gives feedback on CJ's strategic narrative for Partstech
(30:30) How often should a company's strategic narrative be updated?
(34:22) So how should the CFO specifically then get involved in the strategic narrative?
(38:40) Where can people find Andy if they need help with their strategic narrative?
(40:49) Wrap

On the 20th episode of Run The Numbers, CJ sits down with Rohit Divate, Head of Corporate Finance at Gusto. Rohit Divate has seen Gusto 10x in terms of revenue and headcount in his six years at the company. He and CJ discuss headcount planning, countermetrics, how to set up scalable decisionmaking in hyperscaling startups, and more. Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line, head to www.tropicapp.io/metrics.
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SPONSORS:
Planful empowers teams just like yours to drive peak financial performance in every corner of your business. Think purpose-built applications for every department, from FP&A to accounting, marketing to HR, all with built-in financial intelligence. ✍️ Go to https://planful.com/metrics to see how you can tackle unwanted surprises in real-time.

Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line. By combining approval workflows, supplier management, and pricing benchmarks all in one place, Tropic makes savings opportunities easy to find and act on. 🌴 Visit www.tropicapp.io/metrics to learn how.
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X / TWITTER:
@rohitdv8 (Rohit)
@cjgustafson222 (CJ)
@TurpentineMedia (Turpentine)
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TIMESTAMPS:
(00:00) Intro
(01:17) Mailbag questions - How does ARR, or Revenue Per Employee, scale over time as a company grows?
(04:42) Introducing Rohit
(05:40) How big was Gusto when Rohit started out and how big is it now?
(08:00) How to get things done when a company grows big
(11:10) How has Gusto's finance department change over time?
(14:03) Tour of duty: handling change or roles and responsibilities in a finance team
(15:21) Sponsor - Planful
(16:20) A day in the life of Rohit: How much is spent on spreadsheets vs dealing with people
(17:41) Risks and opportunities - knowing your financials
(19:09) What are metrics that gets tracked daily and monthly?
(21:50) What's the north star metric?
(22:58) The metric that kept Rohit up at night
(24:25) On using a non-standard calendar year for financials
(25:25) Handling headcount forecasting for Gusto
(27:46) Dollar base plans and having autonomy to build your team
(29:46) Budgeting for contractors
(30:56) The new headcount methodology and dollar-based planning
(32:39) Rules of thumb for staffing ratio
(34:32) What separates the great finance leaders from the good ones?
(36:36) Qualities a CEO should test for in interviews
(38:37) What's something Rohit has screwed up before on the job?
(40:33) What's something you know now that you'd like to tell your younger self?
(41:39) Sponsor - Tropic
(42:15) Rohit's finance software stack
(43:33) What's the craziest thing you've seen someone try to expense?

At scaling companies. parting ways with an executive requires finesse, strategic insights, and insider experience. CJ invited longtime people leaders - and hosts of the HR Heretics podcast - to break down every facet, lever, and little known facts behind successfully exiting execs. If you’re looking for an ERP platform, check out our sponsor, NetSuite: https://netsuite.com/metrics

Whether its due to hypergrowth or part of an M&A process. CJ, Kelli, and Nolan describe what they've seen in Silicon Valley and what to watch out for. Kelli Dragovich has been a people leader at Pendo, Intuit, Github, Looker, Google, Hired.com and more. Nolan Church was head of talent at DoorDash and the former CPO at Carta. He is now the founder of Continuum Talent (www.joincontinuum.com)
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SPONSORS:

NetSuite provides financial software for all your business needs. More than thirty-six thousand companies have already upgraded to NetSuite, gaining visibility and control over their financials, inventory, HR, eCommerce, and more. If you're looking for an ERP platform ✅ NetSuite: https://netsuite.com/metrics and defer payments of a FULL NetSuite implementation for six months.

Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line. By combining approval workflows, supplier management, and pricing benchmarks all in one place, Tropic makes savings opportunities easy to find and act on. 🌴 Visit www.tropicapp.io/metrics to learn how. 

Planful empowers teams just like yours to drive peak financial performance in every corner of your business. Think purpose-built applications for every department, from FP&A to accounting, marketing to HR, all with built-in financial intelligence. ✍️ Go to https://planful.com/metrics to see how you can tackle unwanted surprises in real-time.

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RECOMMENDED PODCAST: HR HERETICS https://link.chtbl.com/hrheretics
Has HR gotten too soft? Nolan and Kelli have discussions with people leaders, founders and board members about important and underdiscussed business topics -- and firsthand stories from scaling companies. Highly recommend episodes with Molly Graham on early Facebook, Steve Cadigan on early LinkedIn, and Patty McCord on building Netflix's culture (and infamous culture deck).

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LINKEDIN:

CJ: https://www.linkedin.com/in/cj-gustafson/
Kelli: https://www.linkedin.com/in/kellidragovich/
Nolan: https://www.linkedin.com/in/nolan-church/

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TIMESTAMPS:
(00:00) Intro
(00:20) How to approach exiting a member of the C suite
(02:11) How to frame and handle an executive's termination
(04:19) The best way to terminate somebody
(07:30) Handling compensation when terminating someone
(08:49) The most likely way for an executive to leave a company is to get fired
(17:20) Sponsor - Netsuite | Planful
(19:40) Equity acceleration and executive exits
(23:01) What is a garden leave?
(24:28) Single trigger versus a double trigger clause
(28:00) Sponsor - Tropic
(31:52) On employment agreements
(39:40) How does a board approach firing a CEO
(42:10) Who is more successful at galvanizing a company: founder CEOs or professional CEOs?
(46:00) What if I'm the one getting fired?

Earnings calls. If you’re at a pre-IPO company, the' before, during, and after' of an earnings call can be a black box. That's why we brought on Sonalee Parekh, the Chief Financial Officer at RingCentral, for a masterclass about the best ways to prepare for an earnings call -- down to the most granular details and pitfalls to avoid. Along the way she dispenses some excellent career advice to CFOs and those aspiring to the seat. If you’re looking for an ERP platform, check out our sponsor, NetSuite: https://netsuite.com/metrics
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SPONSORS:

NetSuite provides financial software for all your business needs. More than thirty-six thousand companies have already upgraded to NetSuite, gaining visibility and control over their financials, inventory, HR, eCommerce, and more. If you're looking for an ERP platform ✅ NetSuite: https://netsuite.com/metrics and defer payments of a FULL NetSuite implementation for six months.

Planful empowers teams just like yours to drive peak financial performance in every corner of your business. Think purpose-built applications for every department, from FP&A to accounting, marketing to HR, all with built-in financial intelligence. ✍️ Go to https://planful.com/metrics to see how you can tackle unwanted surprises in real-time.

Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line. By combining approval workflows, supplier management, and pricing benchmarks all in one place, Tropic makes savings opportunities easy to find and act on. 🌴 Visit www.tropicapp.io/metrics to learn how. 
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X / TWITTER:
@cjgustafson222 (CJ)
@TurpentineMedia (Turpentine)

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TIMESTAMPS:
(00:00) Episode Preview
(01:55) Mailbag question
(05:15) Sonalee's first earnings call as a public CFO
(07:30) Handling curveball questions
(09:06) The planning process for an earnings call
(14:15) Messaging and metrics
(15:50) Sponsor: NetSuite
(17:00) Division of responsibilities
(23:30) Sponsor: Planful
(24:30) Disclosing ARR
(26:40) Prepping for analysts
(29:55) Who's actually in the room?
(34:30) Making the jump to public company CFO
(35:45) CEO - CFO relationship
(40:30) What separates the great CFOs from the good CFOs
(45:00) Rep Yo Stack sponsored by Tropic - Sonalee's tech stack

On this episode on Run the Numbers CJ and Erik Torenberg welcome Tomasz Tunguz from Theory Ventures for an in-depth conversation about building businesses, how CFOs can evolve with realtime needs of venture-backed companies, and an investor’s lens on what makes a great CFO. If you’re looking for an ERP platform, check out our sponsor, NetSuite: https://netsuite.com/metrics

Tom Tunguz is the founder of Theory Ventures. Prior to that he was a GP at Redpoint for 14 years, and worked at Google prior to that. He is the author of long-running business newsletter found at www.tomtunguz.com
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SPONSORS:
NetSuite provides financial software for all your business needs. More than thirty-six thousand companies have already upgraded to NetSuite, gaining visibility and control over their financials, inventory, HR, eCommerce, and more. If you're looking for an ERP platform ✅ NetSuite: https://netsuite.com/metrics and defer payments of a FULL NetSuite implementation for six months.

Tropic is the next-generation Procurement Platform that’s helping modern CFOs take control of their budgets and bottom line. By combining approval workflows, supplier management, and pricing benchmarks all in one place, Tropic makes savings opportunities easy to find and act on. 🌴 Visit www.tropicapp.io/metrics to learn how. 

Planful empowers teams just like yours to drive peak financial performance in every corner of your business. Think purpose-built applications for every department, from FP&A to accounting, marketing to HR, all with built-in financial intelligence. ✍️ Go to https://planful.com/metrics to see how you can tackle unwanted surprises in real-time.

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RECOMMENDED PODCAST:
To go deeper in all things Venture, check out Turpentine VC on audio (https://link.chtbl.com/TurpentineVC) or YouTube (https://www.youtube.com/@TurpentineVC)

X / TWITTER:
@ttunguz (Tom)
@cjgustafson222 (CJ)
@eriktorenberg (Erik)
@TurpentineMedia (Turpentine)

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LINKS:
Tom’s blog: https://tomtunguz.com/ 
Mostly Metrics: https://www.mostlymetrics.com/
Theory Ventures: https://theory.ventures/
Tom’s interview on HR Heretics: https://open.spotify.com/episode/1B4aYWnV9pJkcQuCgq1tTy 

TIMESTAMPS:
(00:00) Intro and CJ’s personal news
(01:00) Tom Tunguz intro
(03:50) Tom’s idea maze in getting Theory Ventures off the ground
(05:40) What differentiates Theory from other VCs?
(07:29) On bringing in someone more experienced to replace or level up a founder
(09:10) Patterns that show a need to bring in a seasoned operator
(11:28) What it takes for a founder to make it all the way through IPO
(13:19) How long should company runway be?
(15:05) Sponsors: NetSuite | Tropic
(17:32) Counseling portfolio companies in hiring VPF or CFO
(18:47) A good CFO vs a great CFO
(24:13) Why now is a good time for young, ambitious people to step up and take a bigger role within their organization
(26:02) Sponsor: Planful
(27:08) The future of Theory Ventures