E1: What the best run startups have in common - with Greg Capitolo

In my perspective, there's never enough cash that you can have in your business. How can you get more capital? What are those other options outside of equity that we can look at?

You you have seen many startups. What do you think the best run startups have in common?

Best service that we as a TiVo can provide to our clients is with those CEOs, those management teams, those founders that are engaged with others. It's fun to engage with those clients and see how they they think about go to market with their business models, how they might change their pricing, how they might change how they build their Salesforce.

Finance helps not only the CEO, but they they need to help the rest of the leadership team understand their numbers. And and in the end, understand their numbers. It's more about predicting the future than it is about just understanding the past only.

All of our teams to be successful, that relationship, that communication, that engagement is critical. How are we going to get from here to there? And if we need to change direction a bit, how are we going to change direction to get to there? You're listening to the 10x finance podcast. Quick, candid conversations with the people shaping modern finance.

Hosted by Albert Gozzi.

Hello, everyone, and welcome to the 10x finance podcast, where we dive into what separates good from great finance teams. I'm your host, Albert Gosi, co founder and CEO at Aleph, and I'm joined by Greg Capitolo, co founder and partner at Ativo, a full service finance and accounting firm for startups.

Today, we'll be diving into what the best run startups have in common. Greg, it's great to have you. Are you ready to jump in and start discussing?

Absolutely, Albert. Excited to be here and thank you for having me.

Thanks for being. All right, maybe just as a warm up, to introduce yourself and Ativo to our audience, how many companies does Ativo work with currently?

Currently, we work with close to four hundred venture backed companies, typically in a size from pre revenue to fifty million dollars in revenue. And we help those companies scale through their life up to that size. And then we help them in terms of our services, we help them build out their internal finance team. So we have a lot of experience working with, again, four hundred plus companies that we're currently servicing, and we have a lot of experience in that area. We've been doing this for about eight years. We service those companies with around six a hundred and six employees, and so it's been very fun scaling our business over those past eight years.

So again, have seen many startups, four hundred. I don't know if there's too many people that have seen four hundred plus startups as close as you have.

What do you think the best run startups have in common? What have you seen?

I I think if I take this from the perspective of the CFO, which is how how we service our companies, but also beyond financial advisory, we also are involved in a number of operations as well and advise on that. But my feeling is the best run companies, the best service that we as a TiVo can provide to our clients is with those CEOs, those management teams, those founders that are engaged with others. And so they engage with us to help understand their finances and know their numbers. They engage with their leadership team in terms of understanding what that leadership team is doing on a on a regular basis.

And it's through that understanding, and if I'll take it now from CFO perspective, to say, you know, CFO, finance team, help me understand where I'm going. Help me understand my numbers. And so that when they're working with others, they can talk about some assumptions that they've run, the numbers that have resulted as a result of those assumptions. And it's fun to engage with those clients and see how they think about go to market with their business models, how they might change their pricing, how they might change how they build their sales force as they play with those assumptions.

I'd say going through, know your numbers, play with assumptions, will help you know your numbers better.

Perfect. So what you're saying is when the best CEOs that we work with, you go, you present to them their financials, and it's these kind of people that can spot that something is off even without going to the detail. They just know their business so well and they know what the numbers should look like. It's very hard to put a number that doesn't make sense in front of them.

That's exactly right. And you think about not just working with the finance team, but if you go to your leadership team or your board or your investors, having a grasp of those numbers, being able to explain why they are, what they are, and if you're if there's a rough spot that the company's having, how to how you're gonna need to think about improving those numbers. Building the business, getting back on getting back on track. That that underlying knowledge and experience is super helpful in those explanations.

You you were talking before as well about engaging with others. How important is to extend that to the the rest of the leadership team and and not it be just the CEO, the one that knows the numbers about their full team?

When we're working with companies, let's say, that are more than five million dollars in revenue, understanding and engaging with the sales leadership team, for example, understanding pipeline, understanding close rates, understanding sales cycle times becomes very important when you're thinking about where am I headed, how am I going to build my financial model in terms of building out your team, setting expectations for how many customers are gonna close, what that average sales price might be, all of that comes together when thinking about and engaging with the sales leadership. Product R and D are the same way when we think about what that product road map looks like. So if we have a target to send out to present a new feature or an entirely new product, how is that going to impact the business? What resources do we have to invest today?

How are we gonna see the return on that investment once it's out in the marketplace?

And the same thing with marketing. So if we think about bringing that customer acquisition cost all together, we're thinking of sales and marketing, and we have to understand what marketing is planning to spend to bring in those customers. And so it really is a team effort to or working with that full team to bring those, I guess that financial outlook together. So I think of the finance team, we have a responsibility for developing a map, let's say, of where we're going to head financially. And we do that based on knowledge that we get from that team, and we do that from understanding historically how we've performed. And so that becomes very important in bringing that together, going back to knowing your numbers, and letting us move forward in terms of the forecast.

Nice. So you're saying finance helps not only the CEO, but they need to help the rest of the leadership team understand their numbers. And in the end, understanding their numbers is not just understanding it for understanding them per se. And it's more about using those numbers and like historicals in order to understand where the company is going. And it's more about predicting the future than it is about just understanding the past only.

Correct. I mean, and if we think about it, I'll go back to that sales example specifically.

If we're setting a target, let's say, of a hundred moving forward, we need to understand what we need today to get to that hundred. And working with that sales team, working with that marketing team, you know, do we have the numbers today?

And how if we need to course correct, how are we going to course correct between now and whatever time frame we have to get to a hundred? And that is I mean, for both of our team or all of our teams to be successful, that relationship, that communication, that engagement is critical from my perspective. And going back to that original question, what drives successful companies from a finance perspective is that engagement and understanding how are we going to get from here to there? And if we need to change direction a bit, how are we going to change direction to get to there?

Maybe one more question on this idea of collaborating with other executives and goal setting. Who do you think should set the goals? You're talking about collaborating with sales teams, maybe a spicier question. Do you think it should be the CEO? Do think it should be a finance team? Do you think it should be the sales leaders?

In terms of setting goals, I think I think it is a combination of if we say if we're talking about revenue, it's a combination of the CEO, sales team, marketing team, and finance team. Ultimately, I think the CEO is going to be held accountable by the investors, and so and has to communicate those goals to the board. So it's ultimately the CEO that may I think makes the final decision. I would say when you talk about spiciness, I would be concerned about a sales leader, if people understand the term sandbagging their number, and putting a lower number so it's easier to achieve.

I think it's good to put goals out there that are hard to achieve but attainable. So let's say a seventy percent, eighty percent probability of I'll take that back yeah, eighty percent probability of attaining, but there's some difficulty in attaining that number. And so that there's a stretch for the team to hit those goals. Ultimately, think the CEO needs to set that goal.

And I think finance can be definitely good in assisting, getting what's that eighty percent, right? And providing the numbers and the context to understand, hey, this is actually a ninety nine percent goal. We're not being aggressive enough. This is actually practically impossible.

What you need to believe to leave this goal is so far of a stretch that it doesn't make sense.

Right, and I'd even say, depending on the team and how the leadership team drives themselves, it might even be a sixty percent attainable. And so it's like, hey, we're really gonna push. We've got a strong team behind us.

We've shown that we can prove our growth at the rate that we want to, and let's set this higher goal for us.

As a result, there's going to be more rewards in terms of the business itself, as well as assuming financial rewards for the team as well.

So we've been talking a little bit about finance in some way being the function that brings cohesion and helps coordinate numbers among the different functions. You've seen companies all the way from pre seed or even before that all the way to scale.

When do you think the best companies start investing in building out their finance function and having a proper function?

I think that happens at the very earliest stage. And it can, with the ease of implementation, with the lower cost platforms that are out there, I think beginning setting up that foundation at the very start, certainly once you get outside funding, it's very important. Now the complexity builds over time, and so you might start with a bank account and an expense and credit card management system when you receive your pre seed or seed round of funding. But as you receive your seed round of funding, you might move into a broader accountingERP system, And as you go to market, you should have a revenue system that helps you do invoicing and collections.

But I'll say, and certainly it's our perspective, that you begin to build that out initially. And with a firm like Ativo or other fractional firms that support accounting and finance, you can have a team that is very knowledgeable in that area at a very early stage. So it's not just the simple platforms and tools that are reasonably priced, but it's also, know, say the fractional services out there that you can get at that very early stage that make it you know, I think in terms going back to to know your numbers, you'll have better reporting. You'll understand where your spend is, where your revenue is if you set that up, that finance platform up earlier in your life cycle.

So if what you're saying is the best teams start very early, at the same time, do it progressively. It's not starting early and trying to build a full fledged team and full sort of processes from the get go. It's about how can we start with like something small, but like helps for what you want and then like keep stacking on top of that and making processes more sophisticated and more complex.

Absolutely. And I'm trying not to mention specific names here in terms of tools and platforms. As we look at maybe firms that are coming out of incubators, there's a couple platforms that we might look at at that very early stage when they're three people, they've raised a million dollars that are very simple and easy to use and understand. Then as people go to market or they get to ten million in revenue, there's different systems and transitions we'll make because the business has become more complex. There's more activity that needs to happen in terms of engaging with customers, engaging with employees, engaging with vendors, and these more complex systems can handle that. It's very much automated, so I'm talking about complexity, but that complexity is automated within the system itself, but there's definitely different systems for different stages of life cycle of a business.

Perfect. Greg, this has been great. We like to end with a rapid fire set of questions. So if you're ready, we'll go into that.

Sure, absolutely.

All right, first question is, what's one mistake you see finance teams make over and over again?

They don't plan for the downside. And so as we come into companies, every time a company raises capital, we say, especially as a CFO, how can you get more capital? What are those other options outside of equity that we can look at? And I think that's very important for companies to look at that, not just throw it off and say, I have enough cash.

My perspective, there's never enough cash that you can have in your business.

So you to see all the different futures. Yes. Doctor Strange kind of, like, a goal here. Alright?

Yeah. Yeah.

What's one piece of advice you would give to other finance leaders that are scaling their team?

I think it's understand your the platforms and tools out there and how you're going to build your team around those platforms and tools. The office of the CFO is changing so rapidly today with AI native platforms, it's understand what's happening today and the type of leaders that you need on your team and the type of team members that you need on your team to run those new systems that are coming out that are AI native. And it's a very different way of thinking than we have in the past.

So you're saying it's it's not only about the people anymore, and I think, like, people and tools, and and tools can take take a bigger portion of the of the work that they did, like, five, ten years ago.

Absolutely. I our business just as accounting and financial advisory shifting significantly into systems managers.

And how do we set up a system properly to get accurate and timely and efficient information? And it'll be more and more of that as these tools and platforms become more sophisticated, as AI agents get incorporated, we'll be managing we'll be system managers.

You might have gone up into that, but what's one trend in finance and accounting that you believe will shape the next five years?

I think that's it. We alluded to that. So it is how AI is going to change the work that we I'll I'll say it's the rote work, the repetitive work that we do so that we, as team members, can take numbers and become better advisers to our companies that we're working with and the management teams that we're working with. And I think that's going to happen very, very rapidly. We're we're seeing that.

We at Ativo, we're investing a lot in tech and innovation and understanding those tools out there, how to put them together to better service our clients as they scale their businesses, and that it's changing monthly and maybe even weekly in some cases.

Maybe the final one, a good segue to a final one, is things are changing very quickly. Who do you like to follow for staying up to date with the latest finance news?

In terms of the people that I follow, I kind of put that into three categories. I'll start with because we've talking about the office of the CFO. We have a number of great partners at Ativo, and so I I work with those with those partners and follow them. And if I think of Ali Hussein at Tabs or Nick Kopp at Rillet or Albert Gozi, who I'm talking to here at at Aleph, those are all partners of ours that are leading the way in building AI native platforms. And it's really fun to see that the work they're doing and what they've accomplished and then read and learn from them about where the future is headed there.

A couple other areas, though, if we think about just being a CFO and being a financial advisor, I follow Ben Murray at SAS CFO, and I follow CJ Gustafsson at MostlyMetrics, which they have a lot of fun things that come out. And then just from a macro perspective, I like to read Ray Dalio. Although right now, he's very down on what's gonna happen in the future, but he's fun to read and and very insightful.

Nice. This has been great. Thanks so much, Greg, for taking the time.

Alright. Thank you, Albert. Really appreciate the time here. Have a great day.

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