2023 was quite the year. So much happened so fast. While there were many lessons learned, as a startup CFO, these are some of the main ones that stood out for me.

Funding markets are still tough

As always, liquidity is on top of mind, even when you have plenty of runway to go. 

Fundraising in 2023 was still tough, which on the positive side meant that basic finance fundamentals are back in fashion.

No such things as how quickly you can spend the money you have raised, but rather try to extend the runway as much as possible and focus A LOT on your path to profitability. Yes! Finally, after a couple of years of madness, market participants are interested in not only top line growth but also bottom line feasibility again.

Having said that, top line growth seems to still be the one key factor the VC market is focused on for any company's ability to raise.

Interest rates are up

Easy to miss in the day to day chaos of financials, but with interest rates being back at decent levels, cash management should be on the front of mind. Most startups raise their funds and then deplete them over time. Not getting interest for those funds is no longer optional.

At Bound, we had quite a few discussions on how to best manage our cash after the SVB insolvency. In the end we decided to open up a brokerage account and invest in short dated US Treasuries (we are USD functional), which has served us well as we receive decent returns with immediate liquidity if we do need to pull funds back for operations.

SVB collapse

As with most VC backed startups, we at Bound also had quite a bit of cash at SVB. So when the news came in that their share price had dropped by 30% overnight, we pulled out all available funds immediately. Unfortunately, we had some money stuck on 30 day notice accounts, so it was quite stressful until HSBC bought SVB UK and First Citizens bought the US part.

Still not entirely sure what the lessons learned are, sure you should always diversify your banks (which we had) and keep your cash as liquid and safe as possible. So maybe even 30 days' notice is just too long to predict any bank’s failure. 

I don’t agree with people who claim they have seen the collapse coming (after the fact of the collapse), no bank is strong enough to sustain a bank run. 

SVB has in my opinion done a very decent job to distribute available funds to companies in the speed they did. The main thing that has changed since the Lehman failure is that information travels even faster now and the pulling of funds by customers from their bank is instantaneous.

Stress Testing and Scenario Planning - Especially Uncertain Times

In a rapidly evolving business landscape, CFOs play a pivotal role in navigating uncertainties and mitigating risks. This was important in 2023 and will be key in 2024 as well given the economic and geopolitical environment we find ourselves in.

Through scenario planning and risk assessments, I anticipate potential hurdles, allowing the company to pivot swiftly when required. Collaborative efforts with other leaders enable the formulation of agile strategies that are resilient to market fluctuations or unexpected disruptions.

An example of this would be working together on best-case and worst-case scenarios, and determining if ideas can withstand adversity. Stress test assumptions and have contingency plans that protect growth trajectories and capital reserves even if projections fall short.

Collaboration as a Key Driver

Effective collaboration between CFOs, founders, and executives is key for success. It entails fostering an environment of open communication and mutual respect (easier said than done), where financial insights merge seamlessly with broader strategic goals. 

By aligning financial metrics with the company's vision, CFOs can facilitate informed decision-making across departments, ensuring that financial strategies align with operational realities.

Some keys to effective day-to-day collaboration between CFOs, founders and executives:

• Ask each other probing  and challenging questions.

• Dig into what metrics and benchmarks are used to target new initiatives and goals.

• Are the metrics rooted in company data and industry research?

• Challenge overly optimistic assumptions with additional analysis bringing financial guardrails.

• Connect Vision with Financials.