Managing Hypergrowth and Becoming a Unicorn, with Alka Tandan of Gainsight
“What normally happens in a process like this one is that everyone just drops what they're doing, and really focuses on the acquisitions. And so, typically, finance and accounting is at the heart of it all.”
Alka Tandan has been passionate about the IT industry from a very young age. Growing up in Silicon Valley, the daughter of Indian immigrants, she's now Senior Vice President of Finance & Strategic Programs at Gainsight, and had a front row seat to witness the software industry skyrocket.
20 years later, Alka has a wealth of financial experience, has made a career pivot towards the SaaS industry, and has helped bring Gainsight to unicorn status.
In this episode of the CFO Yeah! podcast, she shares her journey through the SaaS industry. We also get her insights on how finance leaders can support their company’s scaling efforts, and what qualities are required to make it as a unicorn.
Table of contents
Blue Ocean Strategy: building a market around customer-centricity
"I joined Gainsight about two and a half years ago to help scale the company. Last year, we announced a majority investment by Vista, and it's been quite a journey ever since!
"Gainsight is a very special company, because it actually created a new customer success industry. Our software helps our clients track current customers’ lifetime and optimize it. So, instead of going for basic support features, we decided to align our entire company around the customer and make it customer-centric.
"For us, support is not simply a function -, it's sort of the central place for everyone in the company to focus on.
"Many companies are starting to catch up on it, but we were among the first to embrace customer obsession. And this approach works, because financially it takes a lot more money to acquire a new customer than to retain one.
"Today, the market seems to agree, since we’ve been valued at $1.1 billion - making Gainsight a unicorn. What made it incredibly special was that the majority investment was from our current partner. It was a real validation of not just the business, but also the industry."
The finance department: a team at the heart of the investment process
"The investment process was of course stressful, but also very exciting. I've done a lot of M&A since this is where I started my career, so I’ve seen a lot. But this one was certainly special because I was part of scaling it and part of the executive team at that time.
"What normally happens in a process like that is everyone simply drops what they're doing and just focuses on the acquisitions. This is especially true at the senior level. Typically, finance and accounting are at the heart of the process, as we’re running due diligence. So in a nutshell, during this process you're not sleeping a lot because you're working hard, but it’s also a great bonding experience for the team — everyone is working towards the same goal."
Bottom-up financial analysis & zero-based budgeting: Alka’s secret weapons for efficient management
"I rely heavily on two approaches in my team, which are bottom-up financial analysis and zero-based budgeting. Bottom-up means that you're looking at every single line item as you're doing your budget. Zero-based budgeting is where, even if you have a prior budget, you still start every year from scratch — it’s basically a subset of the bottoms-up approach.
"I think zero-based budgeting is important, because it really helps you look at the business with fresh eyes every year. This is especially true when you're in an industry like tech, where things are just constantly changing. It helps you ask the right questions:
Is this process still needed, is it useful?
Are there better vendors or better tools out there?
"Upon asking those questions, you end up with a budget that’s much more solid, and much more efficient. So on our end, we continue to do it. We're actually starting our planning cycle right now!
"And the other pillar of this approach is to keep looking at real-time data. During COVID for example, this helped us see the right things. And what it means is that you need to have real-time access to all that data, which is the biggest hurdle if you want to be bottoms up in terms of your financial analysis."
How the finance team works and measures success at Gainsight
"In my experience, finance teams generally take two main forms, and I’ve worked with both.
"In the first kind, someone owns revenue and top lines, and other people own expense lines. But then I've also seen teams where people own lines of businesses. That really works well if you have General Managers for different product lines, because they become sort of 'mini CFOs.'
"Currently, at Gainsight, we have someone who runs our entire P&L, and then there are other collaborators who own different expense departments. But as we grow, this will probably need to change because there always comes a point where each General Manager needs to own a line of business and its full P&L.
"In terms of running activities and measuring the performance of our team on a daily basis, we rely on “vital metrics”. When you work in finance, there's a lot of numbers you can run... So it’s crucial to know which ones to focus on. At Gainsight, we use the term ‘North Star Metric’, which is the most important metric to measure. For us, it's still all around top-line growth.
"But even if you look at public company comparables, they're valued on top line growth. So, for private companies, this means looking at revenue growth, and more specifically MRR (Monthly Recurring Revenue) growth. Another important metric we look at is GRR (Gross Renewal Rate), which is very near and dear to Gainsight, since it’s what our product helps with. We also take a close look at our NRR (Net Retention Rate), which includes upsell. Last but not least, we look at profitability as well. There's a very popular metric called ‘Rule 40’, which takes top line growth and profitability. If both of those equal 40-40%, it means you're running a very efficient company.
"Then, of course, each department has their own metrics. Customer Success looks at leading and lagging indicators and metrics. Lagging indicators for CS are GRR and NRR, and leading indicators would be things like adoption percentage and NPS, as well as verifiable outcomes that we measure. So, overall, we believe it’s essential to constantly look at our vital metrics as a company, but also to dive deep into department’s specific metrics too."
A piece of advice for young finance professionals
"The biggest piece of advice I could give younger finance professionals, based on my own experience, is to choose your investors wisely. I believe early investors can really help you shape your business and who you have on your board. And that's literally, probably the best piece of advice I can give you.
"If you’re working in tech, there’s a lot of money in this market. So, I think that you can be really picky and have the luxury of bringing the right people in. Having a board with really savvy investors that can also open doors for you can completely transform your journey.
"Besides that, and in terms of things one should master, I think the best asset you can grow is your ability to look at the business cross-functionally. As a VP of finance, I run strategic programs because I sit across the entire business. This allows me to bring a global perspective when we need to make decisions which will affect the entire business. That makes me a thought leader for the CEO, and allows me to help people connect the dots internally.
"Being that thought partner — this is what I believe makes us very powerful, in addition to running the numbers of our companies."
The importance of defining your leadership style
"Leadership is something I often talk about, as I consider it an essential skill required to build a solid career in finance. How does this manifest itself for me? I aim to really lead with wisdom. And what that means, is to lead with compassion and empathy, even when mistakes are made.
"I like to think that I’ve created a safe space for my team members, which enables trust. I also am their biggest supporter — I'm very fortunate to have an incredible team across the board. I try to ask on a very regular basis what they need, not only work-wise, but also just professionally-wise. I always tell them they should be taking me out of my job!
"At Gainsight, we put a lot of emphasis on empathy and on caring, and we do that by stating things, telling people what they can do to improve, rather than sugar coating everything and working around the edges. I really appreciate that as a leadership trait.
"Our CEO Nick actually even coined a term, the ‘Human First Leadership Movement,’ which follows the idea that treating everybody in a ‘human first’ way, with humanity, will help us win in business. Practically and tactically, it means we work with our customers with as much humanity as possible, and as a consequence, they trust us more and we’re in a better position to help them grow their businesses.'"
A few thoughts on the future of FP&A
"Even before COVID, I've been asked to advise several FP&A startups. And then, during COVID, we also saw finance take a really central role because all of a sudden, everybody had to pivot. So, what I think this means is that, as the market is going, FP&A is just going to continue to be super central. It will probably even become more strategic and more central to the organization.
"This implies some critical things that an FP&A team needs to have to be a key pillar for a company:
The numbers have to be right, because that's how you build trust.
You have to deliver what you say you're going to deliver.
Then you have to bring additional value on top of it.
"All in all, it's very similar to being a strategic advisor to the business, as all finance leaders should be. But it's also about fostering trust and delivering what you promised. Actually, I think it's very similar to what we do with our customers. And if you can do that internally, people will start bringing you to the table, because they really value your advice."
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