Businessman with suitcase

UB Insider #60: When and Why to Bring on a CFO in a Startup

About this episode:

When it comes to starting a tech startup, you need a great idea, sharp talent, and a winning business strategy. But there’s also a lot to be said for having someone with a keen eye for finance. Greg Woodward, CFO of Sorenson Media, talks about the value bringing on a CFO can give a company, especially as it starts to grow.

Subscribe to UB Insider or download this episode on Apple Podcasts, Stitcher or Google Play.


[The following has been edited for grammar and clarity.]

Lisa Christensen: Hello and welcome to UB Insider. I’m Lisa Christensen, online editor at Utah Business magazine. When it comes to starting a tech startup you need a great idea, sharp talent and a winning business strategy. When it comes to growing a tech startup there’s a lot to be said for having someone with a keen eye for finances. Greg Woodward, CFO of Sorenson Media is here to talk about the value bringing on a CFO can give a company, especially as it starts to grow. Welcome.

Greg Woodward: Thank you for having me, Lisa.

Lisa Christensen: So this is a topic that you try to go around and talk about a lot. Why is it so important for you to talk about this? Why is it kind of a mission statement of yours?

Greg Woodward: Earlier in my career I worked for a private equity fund and we were doing buyouts, leveraged buyouts, of much larger companies. And oftentimes we saw the spillover effect of not addressing the financial talent at an organization early enough. It literally ended up costing owners millions of dollars in the end. So it’s something that should be addressed at the right stage.

Here in Utah we have a lot of growing companies. I grew up here and I’m really passionate about trying to give back to the ecosystem here. So I’m really just trying to apply that forward thinking. What does a company look like at scale? What are the things that you need to be aware of early on so that nothing, especially on the financial side of the house, gets in the way of realizing value as an entrepreneur in your business?

Lisa Christensen: So you’ve come from the financial sector. What are you doing now at Sorenson Media?

Greg Woodward: I’m still in that same financial sector. I’ve been in the private equity world and this is my third stint as a CFO in more of an operating seat. There is a big difference when you’re working with management, kind of locking arms with them, to build something with them. Before I joined Sorenson Media, I specifically looked for an opportunity with an emerging growth company. I really enjoy that kind of run up and all the craziness that comes with it in terms of laying the foundation, the process, the systems and tools to really allow a company to scale and grow.

At Sorenson Media, our passion and purpose is around making television better. Maybe that seems like a broad vision right now, but the television and the broadcast media industry is really ripe for disruption. And we have a technology, a software, that allows broadcasters and other content owners to really understand who is on the other side of that broadcast. That just hasn’t been possible before.

Lisa Christensen: So between the financial sector and your experience as CFO, and now with this more technology-minded job, you’re perfectly poised to tell people about this.

Greg Woodward: Yeah, absolutely. I mean, prior to joining Sorenson Media I was the CFO and COO for Pluralsight, another success story here in the state of Utah. I’ve seen businesses scale outside of the state of Utah as well. As I said, much of my career was spent with larger companies. And so I’m really, really passionate and find joy in helping those emerging growth companies. I like to help them work through the questions associated with scaling their business. Sometimes it’s the financing, the talent that you need in place, or the systems and tools. I like to help companies figure out the true performance metrics at different points in time that that they really ought to obsess about.

Lisa Christensen: When it comes to startups, what is the general attitude that people have toward financing?

Greg Woodward: Well, there’s financing and then there’s finance. Everybody needs finances to get off of the ground. Entrepreneurs go about that in different ways. There are a lot of them that do what’s called bootstrapping. That’s where they don’t really seek any external resources. They’re using their own sweat equity, their own capital and then at some point they start branching out and needing additional dollars to fuel the idea. That’s typically how that works. There are examples here in the state of Utah of companies that really didn’t need to seek outside financing but they did anyway. What they wanted was to bring more strategic thought to the table for them to ultimately realize the full potential of that company from a value perspective.

As it relates to the finance function within those organizations, some entrepreneurs here in the state have been fantastic. Some of them have their MBAs or have a really keen business sense and they’ve really known enough to get their businesses off the ground. And for some it’s just a complete afterthought. Some entrepreneurs are completely passionate about this thing that they’re building and trying to get off the ground.

I’ve seen companies that have driven quite a bit of scale without really bringing in a whole lot of talent in the back office in that finance function. But at some point you kind of have to pay the price. You have to invest in that function to continue forward. You need the right kind of talent to be able to communicate with your external stakeholders and to be able to strategically partner with those entrepreneurs within the business too, there again, to drive the most enterprise value that you can out of the business.

Lisa Christensen: You mentioned that when people don’t consider finance when they’re considering their early suite of experts within the company that it can cost them millions. How does that happen?

Greg Woodward: Well, it really is kind of simple math, right? As you’re getting something off of the ground the company is worth something less. A problem that could arise is the entrepreneur not being familiar with terms that capital providers are trying to put into play. They may make a decision to take outside capital too soon.

There are a lot of companies, tech enabled companies specifically, that are growing in an exponential way. I’ve seen some companies that over the course of two years have increased in equity value by over a billion dollars. If you were able to rewind two or three years before they grew to that stage, they may have given up say, 10% of their company in a financing round. That results in them essentially giving away $100 million that otherwise would be in the entrepreneur’s pocket.

Lisa Christensen: You also mentioned that there is a difference between finance and financing. So how can focusing on finance help with financing and help to make sure that they’re financing wisely?

Greg Woodward: Correct. So the finance function includes the traditional things. Most people view it as an accounting function, and a lot of small businesses will hire a bookkeeper to do that. That’s kind of just the blocking and tackling of paying bills and making sure that you’re billing your customers and those types of things.

What we’re talking about with a true finance department is something beyond that. A true finance department is able to run financial models and help you take a look around the corner based off of the way that your business model works. Ultimately, when a company hires a CFO, they’re really trying to look for somebody that is a strategic partner. They want someone that can help them understand strategically, how do you place that company? Not only from a financial position, but in whatever market opportunity that they’re trying to attack. How do they actually find that seam and are they going to have the right capital resources to be able to execute against that strategy?

Where a lot of companies stumble is that they hang on to a bookkeeper too long. That’s a function that’s needed, it’s an essential function. But problems occur when they try to bridge that person over into more of that corporate finance type of role. It’s a completely different skill set.

So oftentimes what you have is a company that hasn’t even architected their backend systems, their data flows, the way that they connect into the rest of the operational systems of the organization in such a way that they can get meaningful information out of the company. They can’t even say, “Do we have an opportunity that we can take advantage of? Or even avert danger?” Sometimes entrepreneurs don’t realize that they’re three months away from running out of cash. They may be doing well and may be driving equity value, but they may not have any more cash. It may dry up.

I’ve been in the private equity world in the past and I used to go help companies continue to scale. These are bigger companies. I’d go in and help those management teams continue to scale. And oftentimes what would happen was there was a price to pay, an investment that still needed to be made in that finance function. So I can tell you that our investment professionals in that private equity world ended up paying less for those companies if they didn’t have their act or house in order.

Lisa Christensen: So at what point do companies need to, you know, stop making everyone wear so many hats and say it’s time for a dedicated CFO.

Greg Woodward: You know, it’s really unique to the business itself and the industry that they’re in. A lot of the tech companies right now that are really taking off in the state of Utah, it really is when they’re on the front edge of that J-curve, that growth curve. When they know that they’re on target with their product-market fit and it’s just a matter of getting that product rolled out even more. So it’s pretty typical to see companies in that $10-$20 million range actually hire a CFO.

Being part of the financial community here in the state of Utah and beyond the state here as well, entrepreneurs should know that there are a lot of people who have CFO for hire services. There’s also a lot of folks here in the state, specifically, that want to see businesses succeed, such as myself. And this isn’t a free offer necessarily, but we will have conversations or go to lunch and help entrepreneurs shape some of the different things that are coming their way. We do this specifically as they’re taking their first round of finance beyond a seed or an angel round. They’re really doing a true Series A. It’s really, really important to get those terms right and make sure that you’re partnered with the right person.

Lisa Christensen: You mentioned that a lot of these entrepreneurs do have good backgrounds. They have MBAs or what have you. They have a working knowledge of all of the different parts of a business. But then for others, they’re incredibly intelligent but very specialized. How can an entrepreneur find the right CFO? What kinds of things do they need to look for when they’re finding a CFO?

Greg Woodward: They should look beyond somebody that’s already at the organization that can just do the accounting side of it. Like I said, I’m not trying to minimize that. That’s an important thing. You never want that to kind of trip things up. Your CFO is your strategic advisor that looks through the lens of a financial person. That person is helping you understand strategically where you can go and what finances, what capital is going to be required to ultimately realize your dream as an entrepreneur.

When looking for a CFO you want to look for somebody that’s operationally focused. Especially early on, you want someone that can help wear some of those hats and understand your core processes and systems. You want someone who can really understand how it all ties together and how to interpret those financial data points and help reshape those as necessary. And it’s always necessary as you scale a business to reshape those.

You want somebody that can build a team. They know when it’s the right point in time to build out their team. The tendency for some folks is to build everything out all at once, but it can really be done in a stepped, economical way that grows with the business. So you want a CFO that knows what that looks like and how they can build a quality team around them. Then I always point out that you want somebody that you can trust that insists on integrity.

Lisa Christensen: Why do you think this is such a misunderstood necessity?

Greg Woodward: I think it’s a bit of an afterthought for a lot of businesses because I’ve seen it play out a number of different times. You get your entrepreneurs that are focused on the sort of core thing that they’re passionate about. They may have developed some new piece of technology, they’ve written some code, they’ve got a new algorithm and they’re applying that to some sort of business case out there. That’s the thing that they’re so focused on and passionate about.

The thing that is really difficult to understand sometimes is how quickly a business can scale. We’ve got a number of examples here in the state of Utah, a number of unicorns that are making a ton of lists nationally. Of those companies, within a two to three year period of time they’re completely different than a startup company. You’re at a company that is at significant scale, and to continue scaling and growing to realize more value you need to make those investments early on.

Lisa Christensen: So it does seem like kind of a hefty investment at first. But it’s getting your house in order, so to speak, to let you grow.

Greg Woodward: Correct. And I think there’s economical ways to do it as well. There’s this notion that you have to go after Silicon Valley proven CFOs. A lot of those folks have already had big wins and can be very expensive. Some of them may not be engaged anymore either. We have a lot of really great homegrown talent here, as well.

We have individuals that have learned from some of that Silicon Valley talent, or talent here locally that’s being developed. And I would look as an entrepreneur to give one of those guys a shot as well. I would consider a number two or number three in some of these success stories around the state. They’ve been there hand-in-hand with somebody that knows what that scale looks like. And in reality they are doing a lot of the, for lack of a better term, the dirty work. So there’s a lot of knowledge gain there and they’re not as expensive from a base and a bonus standpoint. You can also incentivize them from equity.

Lisa Christensen: Well, thank you so much for coming in and talking about this today.

Greg Woodward: You bet, thank you.

Lisa Christensen: Thanks also to Mike Sasich for production help. You can contact us at or keep up with us on social media at @utahbusiness or on our website, You can also subscribe to our podcast on Apple Podcasts, Stitcher, or wherever you get your podcasts. Thanks for listening.