[CTQ Smartcast] The CFO of Today - Mastering Your Business Lens With Finance, With Pradyumna Nag

Pradyumna Nag is a chartered accountant turned entrepreneur and a growth-focused outsourced CFO. Founder of Prequate, he is consulting companies, unleashing the power of ‘Performance Finance’ by helping them in their growth.

In this Smartcast, hosted by CTQ co-founder BV Harish Kumar, we talked in-depth about his role as a growth-focused outsourced CFO and how Prequate helps start-ups add the finance lens to everything they do, and not just to the compliance and regulatory aspects of the business.

 
 

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(Read the shownotes below or skip to the transcript)

SOME OF THE THINGS WE SPOKE ABOUT

  • What is a ‘Growth-focussed Outsourced CFO Partner’?

  • What makes a business great?

  • How can one conduct a health check of their companies?

  • Operational blind spots: How to identify them?

  • Day Zero: What must founders know?

  • How to use a finance lens in a growing start-up?

  • Pradyumna’s three most crucial takeaways

  • Future relevance of mainstream media, traditional start-up hotspots and social media influencers

LINKS TO BOOKS AND PODCASTS MENTIONED IN THE SMARTCAST

BOOKS

PODCASTS

If you enjoyed this Smartcast, you will also like Understand The Founder's Choice Architecture With The Value SaaS Expert, With Prasanna Krishnamoorthy

TRANSCRIPT TO THE EPISODE

00:00:00
Harish: A chartered accountant turned entrepreneur; Pradyumna Nag is a growth-focused outsourced CFO. I just wanted to understand what this really means and how can start-ups look at adding the finance lens to everything that they do. But as I spoke to Pradyumna, I realised that he's unlike most finance folks that I have come across. He spoke about business metrics that a CEO wants to look at and not just compliance or regulatory requirements. One more thing that resonated a lot with me was how Prequate aims at first becoming a trusted advisor of founders, and then the work follows. You must listen to this, if you're a founder or a CXO of a start-up and want to understand how a growth-focused outsourced CFO partner can help you.

00:01:05
Harish: Hi Pradyumna. Welcome to the CTQ Smartcast.

00:01:09
Pradyumna: Hi, thanks for having me here. 

00:01:12
Harish: So, the first question is going to be a tricky one for me, an interesting one for me, but I think this is the first introductory ball that you play every time you answer questions. So, how do you define a growth-focused outsourced CFO partner and how is it different from any other CFO advisory services or internal CFOs?

00:01:34
Pradyumna: Sure. So, I think one of the biggest changes that India and our approach to financing, probably the west has adopted a lot better, is how you look at the role of a CFO. Right? So, most of the time, when you think about finance or you think about a CFO, you're thinking about control, you're thinking about risks and measures, but what the role of a CFO is, is about management. What management means is given a set of constraints, given a set of boundaries, what's the best that you can do, or what can you help achieve, which is a more critical aspect of the role that a CFO plays. In the west, a lot of credibilities has been given to the role of a CFO and how they can become partners to the CEO, right many of the CFOs, including the current CEO of Uber were CFOs earlier, how can they look at the constraints and see what's the best way or most optimal way to deploy assets and take them? So, one of the changes is that, at least when I describe myself, I use the word “Growth” because growth is a very important part of the CFO's role. But we tend to think at least in India, even I used to think, back when I was in KPMG that the role of a CFO is as a guardian, being somebody who was managing a lot less than what I know today. But the thing is that we as individuals and we as founders, you know, I'm again, bucketing myself as a founder because it is convenient right now, we as founders also need somebody to play that role of a partner with us, who is also looking at the guardrail, who is also looking at measurement, also looking at effectiveness and end of the day, that's what will lead to growth. Given the capital constraint, the asset constraints, and the talent constraints, how do we do more? So, that’s what the role that I play, for most of the organizations that we work with is how do you get more out of what you have.

00:03:42
Harish: Yeah. And usually is this in organizations where there is already an existing CFO, so do you augment that person in terms of maturity, and capability or is it where you're playing the de facto CFO because they don't have an internal CFO?

00:04:01
Pradyumna: Yeah, that's a great question. Usually, the people who join us find it very difficult to understand why we have the word CFO in our name, and why we have a lot of client-facing members who are CFOs themselves. But the idea is that with a CFO partner, what you're looking at is somebody to augment the capabilities of the CFO itself and the existing team because they are always playing a catch-up role like if you look at any organization, which is in that spurt of growth, they're not there yet and they will never be right. They are always trying to build capabilities; they are always trying to respond to changes, and they're trying to work with many investors. We become very easy plugins for them because we are very focused on certain outcomes, measurements, and initiatives and it becomes somebody that they can rely on and take them through that journey. So, a lot of the organizations that we work with actually CFOs are a large part of our client base. But we become somewhere in terms of a sounding board for them, as well as the CEO where the CEO can say, “Hey, run the simulation” or “Run this exercise for me,” which will be too taxing on the internal equipment or internal machinery in the organization. So, we come in and provide that flexibility. So, to answer that question, a large part is companies that have CFOs already, but again, groups of companies or groups of organizations where we have, for example, a very large internet publishing group, and there the role that we play is a lot more in line with what the CEO wants out of the entire group and not necessarily with each team, right. So, we somewhere fit in directly as an assisting hand for him, rather than with each of an individual enterprise.

00:05:46
Harish: Yeah. And is there any specifically pointed lifecycle of the company or a company size where engaging with your sort of makes sense? What is right? What is the sweet spot for you that you want to be in?

00:06:05
Pradyumna: I mean the calling card for us as an organization or as a firm or as individuals is complexity. Second, there is a circumstance which requires you to think beyond your comfort zone, it could be, for example, adding a new vertical. Now that's very stressful on somebody who's not done it earlier. “What do I expect from this vertical? What should be my cost-benefit analysis? What should be my expected outcomes from doing it?” So, it can be as early as we work with organizations where they had nothing except for a PowerPoint presentation. And we work with organizations that are publicly listed companies as well. But between all of them, what they look for from somebody like us is a partner who can do all of these, very flexibly, in a very scalable manner and also bring in a little bit of the additional independent element into the exercise. So, the stage does not matter, but we insist that it has to be in certain stages of an organization's journey, simply because the expectations can be more easily managed or more easily covered, right? So, for example, in your zero to one stage, there are a lot of things that are happening within your organization, where the product is the primary focus. For somebody like us it might be overkill. We might be trying to bring in too much when all you need to do is sit down and grind. But when it starts hitting that one to ten is when you need to put up measurement systems, general overall operating systems. And there we get a way to partner with them, or if it's in a ten to hundred, then how are they looking at the business and how can it be made more efficient? How can it be made more effective? And that journey follows down in its line. And then if they're a listed company, they again need us for very specific initiatives. Like if I have to enter India, what should be my expectation? What could be my pricing model? So, there it becomes a lot more focused on specific initiatives, but in each of the cases, the role that we play can be very wide, and the audit can be very narrow. It depends on what the organization needs at that point.

00:08:13
Harish: Yeah. I can draw a lot of parallels with how we work because we worked with companies with six people in the team to large and listed Fortune 50 companies. On the culture front, obviously yes, every great company should have everything sorted on culture right from day one, but that's not going to happen. There will be some cultural debt that they will incur. But you need to know what is the point of no return? There are points of inflexion, like companies that are to scale 50 employees plus, and that is a time when they need to have articulated their culture. In the larger company, which has already created its culture document, it is all about bringing that culture to life. I can very nicely draw parallels with what you guys are doing. We are doing it on the culture side, you guys are doing it on the finance side.

00:09:06
Pradyumna: No, just to add to what you said, I too see a lot of parallels, for example, in the first 20 employees, the culture is in practice beyond where the employees, the culture is defined because you have to have it in such a scalable way, and it might come from systems that might come in from operations, processes or how you deal with people individually. But let's say the 101st employee, he still has to be able to gel with the same culture that comes in, which is the role that you guys play, which for us is also similar to what we do. The 101st client should feel like he is part of the first hundred clients.

00:09:50
Harish: Yeah. That's very nicely put. Before we go ahead. I had one question, which I wanted to get out of the way. So, what is the story behind the name Prequate?

00:10:00
Pradyumna: Prequate is a portmanteau for the words “Pre” and “Equate”. So, “equate” is usually a post-facto event, given the set of equations. So, you have your LHS and RHS defined. What we want to focus on, and we've always tried to lay the foundation that can you do that equation much before the event has occurred? So, which is essentially how you plan, how you execute, and how do you look at what you want to be able to achieve? So, that's the meaning of the word Prequate. A lot of people don't get it. I mean, they think it's pre-equate but there's a lot of reason and a lot of backstories to how they came over to me.

00:10:47
Harish: Yeah. So, coming to founders, right. And I think that's a great question to get deeper into your work as well. So how can founders use finance to identify operational blind spots? Because we assume that the CEO should have this overall lens and incorporate the finance view. But a lot of times it is not. Sometimes it is a gut feeling and sometimes it's more attachment to the way they see the world, but the finance lens is more of an afterthought. So, what do you say about this and how will you help founders here?

00:11:28
Pradyumna: So, see if you scrape everything off, all the bells and whistles of running an organization, the business model, the idea, the only true objective that remains is the numbers. Like, so you can say you've had a “good” year. I can say you had an “okay” year, but the only objective measure is, “Okay, did you make 10 million in revenue?” So, that number does not change irrespective of who looks at it. Most of the time when founders look at an organization or their approach to finance is usually driven by these standards, set things like income statements or profit and loss account or balance sheet and cash flow statements. They’re just prescriptions. The government has prescribed a way in which you put in information. So that information can be filed with the registrar, would be given to an MCA, or it can be given to the income tax department or whosoever. It just sets a standard way in which you talk about numbers, but that's not what the business is all about. That's not what finance is about. Finance is all those measurements and tiny little numbers and metrics that make that number, what the number looks like. Right? So, if you look at a balance sheet, there are a hundred-odd metrics that you can draw from a balance sheet. Now, a lot of them can be relevant, but a lot of them can be irrelevant to where you are as an organization. Irrelevant as in, maybe some other day I need to put it on my watch window and then figure things out. But if you need to understand what that number means and have a specific course of action that is defined by those numbers, you need to be able to do a root cause analysis using those numbers. Now, I don't see an organization being able to do a root cause analysis by purely looking at the income statement. It's a post-mortem analysis report of what happened or how that murder occurred. But if you need to get in, you have to look at all the tiny metrics that lead to you making a loss or profit, and then look back at how those numbers depend on a lot of other operating decisions that you have taken. If you get into finance and adopt finance, most of the great founders have a very good grip on unit metrics. So, if you look at one standard thing that they all have, they have numbers on top of their minds. They don’t have the balance sheet total, that's not what we're talking about. They have what is important to be measured and to have that number in their mind at all points of time because they're always trying to draw, what did they do with that number last month, what did I do with that number this month, what am I doing next? And that is what you call good governance or a good founder, because of the approach in which he thinks, because he can say that we've had a fantastic year, but if he feels that we underperformed by 50%, he's not going to say we've had a good year, irrespective of whether it looks great or not from the outside. So, it's a very subjective measure. But when you start looking at it, it gives you a decision that maybe the pricing was right, or maybe your conversion numbers were off, or maybe your user cohorts are not behaving the way you expected them to behave, or maybe the stickiness with which you set up the entire model for how your businesses are going to grow, it's not something that you're able to achieve, right? So, it gives you a decision that you need to be able to take. So, founders, when they have a lens of finance, can make very quick, simple decisions that translate down into numbers at the end of the year, but more importantly to metrics that they can understand and identify at this point. If you don't do it, what happens is you're always looking at it from a catch-up “Oh, I should have done this” If you look at it one year in, it's redundant, if you look at it one month in, you're like, “Oh, I should have done this last month,” but then you don't know what you're looking at. If you have just these, for example, your P&L and Balance Sheet, and those are throwing out numbers, you don't know what to do. You just know that that number exists.

00:15:18
Harish: Yeah. And you spoke about metrics and different kinds of metrics. For a finance guy, it is heartening to look at all these metrics because you are discussing topics that business owners find valuable and would want to understand. And again, it's not about compliance, regulatory requirements of P&L and balance sheet . Yes, I know I need to submit it somewhere, but that is not what I'm looking for. I'm looking for things like these. This is great to hear and I'm sure the founders who listen to you must be really happy that now we have a finance guy who is talking in our language. But extending that further, so, what are these quantitative and sometimes qualitative measures that founders should use to do a health check internally that, yeah, I'm going on the right track. How do you help them identify these measures and how easy or difficult are they to measure and track continuously? And if you could give some concrete examples from different industries, and domains, that would make this even more tangible.

00:16:31
Pradyumna: So, if you look at it from only the metrics lens, every organization has those quantitative metrics and qualitative metrics. Now the quantitative metrics and quantitative metrics by themselves might not mean much, but the second they're kind of combined, they weave a story. They weave a very nice tale about what happened within the organization. Now let's see NPS, right? Like, now it's expressed as a quantitative measure. It's a qualitative measure. It’s the score of how your user cohorts are behaving or how healthy are your user numbers? So, for example, when we were working with an ed-tech company, retention rates are extremely important, but when you're going on a spree to acquire customers, your CLTV is also very important because if you're going to do anything to extend the user journey, to add more products, to add more use cases, or to say that I want to be upselling a certain program, or I want to be able to reduce the price? Now, CAC by itself is not a good enough lens. So, you need to have a way in which you identify and measure CAC in its relative terms to the CLTV. So, if I'm going to let's say give a discount on a package that should translate into me having a lowered CAC and lowered CAC coming from a higher conversion. So, unless you have this whole story nicely played out your NPS numbers will not look healthy because your NPS is coming in from something that happened or the events that happened within the organization at that point. So, this is one example, right? If you look at another example, let's say an FMCG company that made multiple SKU products across multiple shelves. But when you run up your analysis of what the gross margin rate is at a per-product level, it doesn't make sense, because there are some products which are loss making. But why do I need it? But when you relate it to the emotional relationship to when you do a customer survey, and then you say, what is the most visible product, according to you in your shelf, the product that they have a gross margin, which is almost at a negative level, is a product which matches the product that you see in most digits. So, it can be, you know, for example, Tata is valuable and trusted by Indian consumers throughout the world. But if you look at Tata Salt, it might not make a lot of money by itself, but every household identifies Tata Salt with purity. So, you have to look at it from a qualitative lens as well. And when you say gross margin, I'm making a loss on a certain product, am I able to use it to sell through a different product, right. Am I able to use the trust for certain different products? Does it impact my conversion rates for a new product, or my sales and marketing spend on a new product? And that's what, from a finance perspective, you have to be able to bring the language of this is the journey that a particular user or particular product takes, and that product can carry other products into a household and be able to study them together or collected and not as individual products. So, this way each business is very different. Since a lot of work that we do, considering that we are in Bangalore, is under tech finance. A lot of it goes into the intangibles. So, for example, if you look at CLTV now, CLTV is in the process of building. You don't have your actual predictable CLTV till 3-4 years of the customer or client relationship with you, but you can make a very predictive guess about it using the kind of activation rate that they have. So, for example, if he's a DAU and he's an MAU, is he likely to stick around for longer? If he's just featuring in my MAU, I always am at risk that he's going to drop out because he's not using it as aggressively as I want him to, or the number of users per account. Right? So, each of these metrics by themselves has a small story to say, but they reflect very heavily on some of the other master metrics like CLTV or CAC recovery. And these have to be looked at from a lens. Like a company that we work with, which has a premium product. In a freemium model these days, customers come into the funnel, and you spend a lot of time educating them. You make these video walkthroughs and you put in a lot of effort, and a lot of capital to establish the systems that are going to be important to convert them into a paid customer. But if you're not able to convert them into a paid customer, then your whole business model is at risk irrespective of how much you spend on acquiring that customer. So, if they did not fix this, then they're not going to be able to establish a good CLTV because the CLTV will get averaged out by all the accounts that you have added. And then, somewhere you're going to pay the price on the valuation side, right? So, the way you look at it is all these metrics are correlated, but as you follow one metric back, then you start seeing, hey, I need to work on activation rate, I need to get that guy from an MAU to DAU. And that's going to be my focus rather than my LTV is low or it's high or is dropping or whatever it is, you have to go back because the fundamental business is built on those concepts.

00:21:48
Harish: Yeah. I think as Aswath Damodaran says, it has to be both the story and the numbers. You can't take only one at your convenience. So, you mentioned Bangalore and tech start-ups. So, one question that came to mind - we spoke about when you think is the right time for you to get in. But what is happening on the ground? When are companies and founders bringing you in? Is it the investors who are bringing you in? Has that been the case? And what is the real value that companies, whether they're investors or the founding teams, are looking for a CFO partner to deliver? Is there a worry that these people are going to come and bring in a lot more order to the chaos that defines a start-up? Is that a worry? Can you talk through that?

00:22:52
Pradyumna: So, I think most of the time founders and investors have similar agenda, like what they want. They probably have some additional agenda points for the investor that probably a founder might not have or might not see today. But together what they want to run is an efficient or successful business that's capable of adding a lot of enterprise value. So, that is foundationally what they want. Now, investors to a large extent, large accounts that we work with are investor introductions, and they bring us in and say that, hey, here's an agile or flexible way for you to add some people. And then we come inside and identify what we can do and then start the relationship. But as we keep going down that valley, the work that we do matures with every business or within the organization, because initially it will be very initiative driven, but later on, it becomes a kind of glue, like an ether within them, right? So, you need to do anything within that whole range. They say, “Oh, let me call them these days.” Can they execute it for us? Typically, the place at which we enter is when they have raised Series A. If you have to say from a funding perspective. So, the second they are about to raise, or they have raised is when they have a really important need for somebody like us to come on board because there is a huge gap in capability restraint. So, in the pre-series A stage, they're still figuring out things. They're still experimenting with things, but the second they hit Series A, somebody is giving them capitals as an injection. Now, when you have that capital, you can either be very, very prudent with it, which is also not very good. Or you can be extremely optimistic about the way things are, and then run out of capital. You don't want either case. Now what we come in to do is if every decision that you had had a cost-benefit analysis, and added an ROI mindset, what would you do? So, it just bounces things off, it becomes a lot easier when you have somebody who brings in experiences from outside of this organization that you have with just as validation and two, as some way of measuring and some way of putting guardrails, because we can flag off things very independently that they sometimes might not even have thought of. But the second we come in and say, hey, this is a risk area you are not looking at or this is a metric that we need to focus on. Like, if you say, okay, you're doing well, you're getting a lot of customers, but we see that in the seventh or eighth month, you're having a churn from a cohort. Now, when they look at it, they say, that's an eventual life cycle. What I'm looking to do is can it be the ninth month? What can we do differently in the seventh month to get it to the ninth month? Now, these are realizations that they would have had had they had enough bandwidth or time to be able to spend on doing these deep dives with somebody else's doing for you on the back. You're just focusing on important things. So, for us, I think that the first time an investor comes in, we've come in at an earlier seed. We've stayed, I think till Series F. We've even worked with organizations which are at an after-IPO stage. But typically, it's in this range and most of the time after Series F or G or H, they want a skillset like ours. The first thing that they do is call us up and say, can we acquire you? They have the money, and they can buy a team like ours. And if it's not us, then they will get somebody who has done this role for them several times over, or maybe in another organization. But it's like having a million or $2 million available to you, to just spend on getting a team on board, which a very, very large organization can do. But $2 million when you have $5 million in your bank is not worth it.

00:27:04
Harish: Again, a follow-up question on that. How does your sales cycle work then? What are your insights into how your customer acquisition channels are working?

00:27:18
Pradyumna: I would say it’s fortunate till some stage but it's unfortunate at some point, right? The fortunate part is I think a lot of the work that we get is from referrals. So, a lot of people inquire whether we can work with them, participate with them or do some bits for their organization. And most of these are either investors-based connections or sometimes the portfolio company that we have worked with, the founder makes a recommendation to another founder. Right. And since it's something very specific to them as a business and it works completely with them, the team again is heavily jumbled. And one thing that we as professionals do is if you want any data about any company that works with us, you won't get it. It's simple. And at the same time, the experts that we consult, even though they're from the same business, the experts that we consult on, both of them are very different. So, I can have one expert who is working with me on, let's say one micro-mobility start-up, and I can have a completely different expert on another micro-mobility start-up, just because the business model is different. Right. So that way you can trust that one organization will be able to fill that vacuum for multiple such founders. And that's also the curse of consulting that you have to kind of rely on that to be the primary channel. But we have started seeing that spending a lot of time and energy on content and thought leadership, that's also providing a lot of benefits and even if not directly, I would say indirectly. Like all the alma mater organizations that I have worked with they also say, hey, I've been following you guys. I saw this thought leadership thing, or I saw this white paper, it's very interesting. Do you guys want to come down and have a chat with us? Again, it’s luck. A large part of it is luck which is what we're trying to shake off. We're trying to be more organized and then create a process out of it, simply because you have to be able to operate in a lean fashion, you don't want to set up a 10-member sales team, what a consulting company until and unless it's a very large consulting company that works on those kinds of projects. But I would say two to three months is the amount of time that it requires from the first connection to us working. If it's urgent, it's as short as we got a client call in the morning and that evening, we finalize and start working with them. But it's very specific, like get me a valuation that I can use to discuss with an investor or a potential strategic partner, right? So, the urgency that they have and whether or not you have the ability to fulfil it and the trust plays a larger role, so, I would not say it's a typical sales cycle compared to most of the other larger enterprise sales business models, but it will be more focused and more specific to the use cases.

00:30:19
Harish: Again, I can see so many parallels with what we do. The way you have articulated this, I think you could have just…

00:30:32
Pradyumna: Sold for you.

00:30:32
Harish: And all of that would have been true. So, I was intrigued by this line on your LinkedIn profile. It says “Good businesses are built with good people, and great businesses are built with good people armed with great systems.” So, let's just dissect this. What do you mean by this and where is it that people lack in terms of building these great systems, is it intended, is its capability, is it the ability to follow those great systems? Where is it that people go wrong?

00:31:08
Pradyumna: So, if you go down to dissect, I will just borrow something that we were talking about just a few seconds back. From zero to one phase, all that matters is a great founding team and how we can get a product out, how you're able to get your MVP out, that's what establishes whether or not you have a business to start with. And the one to ten stage your early team members are your champions because they're working on getting all the bits that require validation or the hypothesis that you have on the market, they are looking to establish all of that. Now, if you don't set up great systems then, it will only be born to be a zero to one, right? And then from a one to ten company, you would barely make it, but the cracks will start showing when somebody puts in the money and just takes it to a hundred. So, you'll have a great organization, but from ten to a hundred, you have to work backwards and say, we've made big mistakes. But the guys who have built successful businesses, at least at the ten to hundred are the guys who started putting in these systems at the one to ten stages. They started saying, oh, this is how you measure success, or this is how you measure a failure, right? Or for example, if there's a growth experiment that I want to run right, then this is what I expect as an outcome, until and unless they are doing this as a practice, it loses its cause along the way, and then you end up doing way too much because you have several people. You have several corners that are all operating simultaneously. And unless you have that already built, it's all going to go down because you're going to do everything inefficiently. And when you do everything inefficiently, your runway is always a problem. You are always raising capital, which means your founder is continuously doing the task of going and selling the organization as compared to selling the product, right, which is a very difficult cycle to kind of get out of. All of these guys have intent. No founder will say that I do not want great systems to exist in an organization, but when it comes to prioritization, right, if I have to prioritize between growth and if I have to prioritize between systems, if I do not have the equipment or access to machinery or access to talent or people, then I'm going to be left with me making choices purely on growth and growth is a choice that is easy to make. That's what I do, bread and butter. I know how to sell the organization and I know how to sell the product, right? So, when it comes to these, these are difficult decisions for them to make and they will spend, like we all do, you know, if it's too complex or too hard on, it requires us to learn a new skill, we put it aside and say at the right time, I will get that right. So, I think everybody has an intent, but when it comes to deploying or working to deploy it, what they require is somebody who they can trust and say it could be an internal person within the organization, the champion or it could be an external agency, like ours or the Big Four who are called to put up systems. But if they have access to something like this, they will do it, again provided that they also have the buy-in to make that system work. And if there is no buy-in they are looking at one of the early days, before the mistake that we used to make, coming out on the Big Four is also that we used to take these heavy, massive presentations and go to the client and say, this is how it needs to work. So, what you're trying to do is you're trying to force-fit a process that worked for somebody else and say, this is best practice, right. It's not the right fit, it’s fit, right? As for your industry, it's a good fit. But when you come down to the next step of what will ensure that they can maintain their leanness or they're able to maintain the speed at which they operate is that you tailor it so that you can give them the guardrails within which to operate, but then they're free to use it and not have it hamper the speed at which they respond. So, I think that's one of the key things that makes a great system. One of the big differences is how responsive it is to where you are as an organization and to your needs.

00:35:19
Harish: And how do you introduce that sense of urgency? As you said, people have great intentions, but they want to do it at the right time, when I'm ready for this, right? How do you introduce that sense of urgency that yes, it needs to be done, but it needs to be done now, how do you do that?

00:35:38
Pradyumna: Okay. So, I'm going to give you a little bit of a business secret. Now a large part of the relationship building that we do, is getting to the stage where founders can rely on you for anything, irrespective of the complexity, at 10 or 11 in the night, text me, if you have something. And when you get that buy-in from a founder or from an investor or a board member or anything like that, they tend to trust you and take your feelings on whether or not they should do something about a particular system, right? So, it's not about you selling a package or selling a service or you're trying to push something down, it just has to be a natural growth of the relationship itself that I'm going to also do these processes for you or maybe for the large part we don't do pure risk advisory set up or any of that because we say, if you can do it efficiently with somebody else, don’t do it with me. I'm honestly interested in how you do as an organization and what goals you can get because I'm here for the long run. You might have auditors, you might have consultants, they will keep churning, they will keep doing whatever it is. But if your processes need to be built to suit, then let me be the point of contact that ensures that it happens for you. Now that urgency can only come if they have that buy-in or the trust in you and a large part of the tech founders when they, just like you guys are having this conversation with me, and I don't know, but if you see, for example, a marked difference between me and another finance professional that you spoke with, right? Maybe this guy gets it this way, or maybe this guy understands what I need to do at this point, and they open up and say, is this a process? And if you say this is a priority for you now, then it's finally a decision of can I afford to make this work or not? And if I can afford to make it, then I should just go ahead. And it's not a question of should I be spending this much time and energy because when you have somebody to rely on, they want to do it for you. Like if you have one neck to catch on, no better way to put it, but let's say, you have my neck to catch if a process doesn't work out the way it's supposed to work. And you've done everything as an organization to make it work. Then you can always come back and say, it's not working and somebody like us would fix it, help solve the situation, rather than saying that you should be spending more time on something like this. This is typically the problem that most of these founders have, I don't have enough time to respond to things. I'm having a hard time trying to catch up with things that are happening on the business side. I can’t sit and focus my attention on something that's operational or that's something that's not an immediate priority for me. So, I guess that is important to do with any client or any relationship that we have is at the stage that they feel comfortable which at least we have noticed is fairly easy, once you start getting into the first month or 45 days into it, they see that you guys are very different from anybody that they've interacted with. It becomes easier or a lot more comfortable for them to rely on you. And that's when you need to be able to introduce urgency. But from the outside urgencies are only stage pushes for which these guys don't have time, and they want to drop it.

00:38:58
Harish: I think this is becoming eerier and eerier, as we go along. This is like me talking about myself, right? So, the next question that I had, it's an interesting one because this is something which we are seeing in a slightly different context as well. So, the question that I wanted to ask was based on your experience with a variety of businesses, what should founders know on day zero? And the lens that I want to add here is that given our work around culture and I'm sure that is something which you also probably are seeing around systems is that the seasoned founder has a different take because they've gone through the cycle. Once they know that these are the things that I should not be delaying too far. Do you see that, and do you see the difference between a first-time founder and a slightly seasoned founder? And what are the things that the first-time founders should know and should not be after having made mistakes, right? What is the thing that they should know from day zero?

00:40:02
Pradyumna: One good thing that I find about the overachiever founder is that they have very less hesitance and they are more open to giving a new relationship a try if they find an intellectual match. If they don't find an intellectual match, write it off. They will probably not respond. But the second you're able to trust somebody to the level that, okay, there is potentially a way for this person to provide value. Now they're happy to trust that guy and then give them the responsibility of an initiator itself. And they are very happy to also participate with you on what those outcomes are, but they don't micromanage. They are not coming down to what happened this week or next week. They will say, this is the outcome that we have, we have three months, give me a way in which you are going to establish ROI on what you're doing or what you're thinking about. And they want to participate in that ROI setting, even though we are somebody on the outside, they want to include us, which is what I think great founders do well. And if you can run something as an initiative, because even that whole process of expectation setting, that it can be a five-minute discussion, but if you don't have the patience to even have a five-minute discussion, then you're setting it up for failure irrespective of who the vendor is because the priority at the end of the day is yours. It's not of your CFO or head of finance or COO, it's not anybody's. You, as a founder, have the responsibility to do it, which means that you need to spend that five minutes because that five minutes can significantly save you a lot of time in terms of governing or managing how things are. But the other bit, I think that great founders also do is how to run controlled growth experiments in perpetuity. So, I think that's also very important, apart from growth experiences, it could just be relationship experiences, is this going to work out. It’s like here's the fees, tell me how it will work out and have a go at it because it's not going to hurt anybody. It's honestly a small cost to make for a big benefit. Right. But they're able to make that. And they're able to say that this is what I want out of this particular initiative and lay that in front of you and then say, do what you want or do what you can, as long as you're able to justify that this is within this parameter, you're able to achieve X number of outcomes and that's even internally launching. If I am launching an app, they have measurements of what that app can do. Is it going to help me with better stickiness or is it going to help me with better marketing or is it going to help me improve the quality of my lead validation process? Whatever it is, they have to be able to put that goal or objective very clearly, defined with certain metrics that they want to hit, and that gives a direction for the entire organization to also follow suit. The other thing is how your relationship is with loss and cost, right? Loss is a definition that has been given in the P&L statement, it's not a true indicator of what the business is capable of doing or delivering. And a lot of it is based on the future of the business itself. So, for example, Zomato. It might be making a loss today, but the relationship that it has, the stickiness that it has, that it can command continuous revenue and also be the largest player in the multi-trillion-dollar food industry is massive. It's very hard to create, the moat that they have can’t flinch, right? If you're valuing them for a small sliver of that trillion-dollar opportunity, then you see that it's valuable. The fact that they're making a loss because a loss by itself as a word is I would say transient and also extremely subjective. If you ask a founder if you are loss-making as an organization, he will say yes. But I am making investments into developing a new culture, developing a new habit, developing my customer profile, and giving them something that they've not experienced earlier. If it requires a cost, so be it. I have all of the other metrics to show how that's going to translate back into revenue over time. So, I think the founders that get it, they're not worried too much about this loss and cost concept because they're mostly worried about cost rather than the loss.

00:45:02
Harish: So, one thing that you mentioned in this answer was how it is eventually the founder's responsibility, right? But is there a case for others in the organization, the CXOs, and the leaders, as time goes on, to become more and more financially aware of everything that they are running? The head of marketing might want to think about finance as well and not just respond to a founder's questions about CAC, right? Is there a case for others to also become more and more financially aware and start thinking about these kinds of systems?

00:45:43
Pradyumna: Absolutely. So, I think what you just mentioned is where the kind of culture meets finance, right? So, from a cultural perspective, for every person within the organization, you want them to feel a sense of ownership for the outcomes that they can deliver. But those outcomes are not necessarily defined at any point in time. You have all of these metrics that you have to get X number of new accounts on board, but why do you have to get that account onboard, what is the value of that account from an organization? Most of these guys, let's say even a marketing head knows from a stock option perspective that a lot of things would have been at the cap table level and that my value of stock options, but that's not the case. What you should be looking at is me in terms of me, adding a new account. Why is it so important for me to put in the additional effort to close a large enterprise account or to close multiple smaller amounts, right? What does that lens that you provide them with which to move within the organization until and unless they understand the story down and up, it's very difficult to get them to buy in on what you are doing as an organization because they will just be a call that plays a role, which is limited to their current opportunity and will kill all the leadership potential that they already have, which you may not have realised? And all of them to some extent, have to take ownership, but they don't need to take ownership of the process of setting those measurements, or of the process of driving those numbers or those metrics. They have to be more enrolled in what those metrics mean to the organization and why it's important today, specific to the metrics that you have proper control over. This is the foundation, we had OKRs. I mean, the reason that OKRs can drive agile decision-making in most of these start-ups, which have an extremely quick cycle for decision making, is because you're able to drive that concept of what you're doing and how that relates to the overall organization plan. So, I think that the way we are trying to do this is to get the culture in place that everybody feels accountable for the outcomes of the organization and second thing is to have these metrics already placed before them so that they know what they're working towards. If you don't have either of them then what's the point.

00:48:04
Harish: Now it's getting scarier because you're using words that my customers are also using with me. So, the reason why I said that is a Series C funded company, said that we want to sort of rework our culture because they have this value of ownership. And he said I want my people to know that ownership doesn't mean ownership of their own KPIs. But the way the founders see or define the word ownership is that whatever is best for the companies, is what they should be owning and not their personal KPIs. So, it again boils down to that. How am I fitting into the larger picture, and if they get that whole thing and that bought into the whole vision that's when they're going to do that, right? Otherwise, they will just see their KPIs and deliver on that. It doesn't matter whether it's going to be at odds with what the company is looking for, this is a great example that you've given here. Thanks for that. So, over the last few years of your experience, from your experience with KPMG and now what you are doing with the Prequate, so, if I were to ask you, what are the three things that you know about finance and start-ups that others don’t, what would those three things be?

00:49:32
Pradyumna: That's way too many things I have to try and prioritize. So, I think one of the biggest realizations which I also did is in order for something to work in order for something to be valuable, you have to also have the operational bandwidth. It's great if you have great advice. When I came in from the Big 4, the last part of what I thought was real about the world was that you have to be very good technically in order to provide great advice. But now, over the last 10-11 years, what I've also realized is unless, and until you are able to actually work with them, to execute advice and put it into action, it's very difficult to really have a lasting impact on the organization or any business. And if you're not working with impact as a lens, your relationship length with a business is always going to be short. And that's not going to be sustenance until and unless you have a regulatory body that imposes that you have to do this every year or quarter and so on. So, if you have to really work well in consulting, that's one thing that you have to keep in mind is what is the impact that you've been able to deliver. I think the second thing that I would think from start-ups and finance elements is how closely you hold numbers and topics and ideas to yourself; is how small you will be as an organization. Unless and until you're able to provide these numbers, ownership, and accountability to people within the organization, you're not going to be able to control all the things that happened and be able to respond on time, right? So that's personal learning that we as an organization also had is that we won't invest so much in operational machinery, right? But today, if you look at us, we're a rhombus shape structure, we are not a pyramid shape. Most people have ownership of the outcomes that they work with. Clients can perceive the difference that even at 11 o'clock somebody is responding to an email or when they're making a pitch event somebody here is observing the call. They don't need to. I mean, it's not necessary, but it makes things more valuable for them as an organization that you have the buy-in continuously and with an external vendor or a partner to be able to get the same buy-in as somebody within the team itself, I mean that's a great gift, right? If I were on the client-side, I think that's the main thing that I would look for from a vendor, as well as how motivated they are for the outcomes that I am getting as an organization or a business. I think the other thing is, at every business level, at every initiative level, at every organizational level, if you don't have an ROI mindset on what you're able to add, what this decision is that you're taking in, what you expect out of it, it is going to run at length with you're doing a lot of inefficient or ineffective choices, which actually can be avoided completely just that you have to spend five more minutes on planning what you're doing and visualizing what you want as outcomes. I think that's another important learning that founders and professionals need to have is how can you visualize objectives or results with them before you start embarking on something else and these are the truths that I would say those founders, probably have in the back of their head but it's not something that is glaringly upfront. They want to think ROI. But when they get into day-to-day ops, they're like ROI can wait. Right now, I have more to do than to think.

00:53:30
Harish: Yeah. And we'll get to that in some time is how they think. So the last couple of questions and we're going to go slightly away from all that we have discussed till now. So, we read your LinkedIn post about not reading newspapers but reading extensively about business and current affairs. So, what has that experience been like?

00:54:00
Pradyumna: A lot of people also asked me that in the office. So, I'm the only one who doesn't have a newspaper or doesn't touch the newspaper, when he comes in and my partner is a reader. He reads stuff, he has this application which sends him the news. I used to be that too, maybe about seven or eight years back, but then I realized that I mean, there's a lot of research that is as limitless as your brain is, it's also very structured. A lot of information doesn't necessarily need great analysis because you're moving from one article to the other article and most of that information is just points of data, which are structured into a paragraph and presented to you about a certain topic. Now that topic probably has no relevance or has a lot of stories, which are yet to unfold or have already unfolded. Now, for you to be able to understand or read, I spend a lot of time with alternate media, which talks about analysis, which talks about why a certain piece of news is important because I don't believe we're all sitting here playing KBC and that nobody's going to want to come up and ask me what the capital of a country is, and I don't need to know it either. That stage of you retaining information is over now. It's about how you can process information at a certain age and a certain time is how you can process deeper views or deeper analysis, and that's going to be more critical. So, if I see 10 bits of information, I might skim through all 10, but read only one article. But when I read that article, I read that subject matter, I don't read that specific piece of news or information. So, if I find something interesting, I will read about the journey of how they came up with the concept, and what it's going to mean for the Indian consumer, rather than reading facts about it. So, I feel that we spend way too much time trying to absorb information and very little time trying to absorb analysis and analysis is not probably as efficient as consumption of more data points, but again, nobody on the street or no founder is going to ask me what you read about the tax law that has come up. He is going to ask from a foundation perspective, what is the decision that I need to make? And that's where you need to be valuable, or you need to be something, somebody who can add a lot more perspective than what he's already carrying. So that way I think, I feel it's better to read. So, if I like a certain topic, for example, when Airtel changed its logo, I read a book about the science behind logo design, because it didn't seem like a very big change, right. But if you're spending millions and millions of dollars to rebrand, there has to be a story. Now, when I read biology, I started to be okay, there is a lot more depth to how brands want to be perceived or visualized. And when you do that, now, I might not have known all the companies that changed their branding, but neither does anybody else. Because your RAM refreshes, right? Only what is important or necessary. But, if you ask me how a logo is important, or if you ask me how Prequate branding is for example, then I can tell you the story behind the branding, why we use certain colours, why you use certain cues within the branding, and that's more useful to the world at large than you just having the same information that everybody else has. I don't know if that's a very long answer to a very short question. 

00:57:45
Harish: That leads to the next question. So, you mentioned a lot of alternate sources of alternate media. So, what are these books, podcasts, courses, and people that you follow on social media who have really influenced your thinking and who would you recommend to our listeners?

00:58:04
Pradyumna: Sure. So, most of the use of social media for me is very specific to, let's say LinkedIn and the world around me. These are people that I already know. And then I want to see what they're up to on this potentially a client that I would love to work with and then I'm following them and trying to understand what's happening with them. So, I would say the value of social media is kind of reserved for that. But when you look at, for example, I listened to How I Built This by Guy Raz, it's a pretty popular podcast, but the real way in which a founder thinks or the stories and the journeys is very valuable, then you can see the pivots and why they thought through those pivots. And then you can develop a genuine appreciation for them as a business or as an organization. And another one that I listen to is Planet Money again from NPR, which talks about some of the things that are happening in the economic stream. One of the episodes that I listened to a couple of weeks ago was - is GDP the real indicator that we need to be looking at and other alternative indicators in order to measure productivity as a country? That gets you to think a lot about that. So that's another one that I follow. There's one more called Invisibilia, which talks about the science behind a lot of the everyday choices that we make and also has a lot of great case studies and examples of things, and how they function and how they work. There's another one from Reid Hoffman, it's called Masters Of Scale, which I listened to when he goes through a particular topic or particular phase in a business or an organization and how they dealt with it and what assets did they rely on? What did they try to build? And how did they find out that, I find it extremely valuable. So, when it comes to podcasts again, it's driving time that I spend most of the time consuming or it's sitting in the backseat or when a colleague is coming into the office with a colleague. So that's the time that I spend basically the non-productive time that I can’t really read through the book. But apart from that, there are several other books, like, one of my favourite books of all time, it's called Nudge, it's a beautiful book about how, how to construct decisions, right? Like, even writing an email gets so much more refined, the second you learn that choice architecture is behind most of the decisions that we've made. Right. If I use a certain phrase in a request, I'm able to get the other person to be able to make a decision, and that's not going to be useful today or it's not only useful tomorrow, but also going to be useful for life, right? Another great book is The One Thing, Garry Keller, which shows how you can focus on the thing that matters and scrap out all the noise and get to that single point that requires fixing or get to that single leaky tap, in order for you to fix everything within the organization, it's a beautiful perspective or a beautiful way to look at things because we need to be able to declutter, there's so much, especially when you work with; I've probably consulted maybe more than over 200 businesses and with more than 200 businesses and with each business being completely new, it's very easy to get just kind of embroiled with everything that's happening. And then your decision making becomes very clouded and very difficult, the second you start thinking about everything in its totality. And when you start identifying and narrowing down those specific things that you probably need for the organization, then it becomes a lot more valuable, right? So, I think Gary Keller's book is another important thing. And one more book is Range, in which I believed right from the Big Four days that generalists are going to play a very, very vital role going forward like everything else around in the world is trying to become easier and more friendly, become less complex, become more transparent. I think generalists are going to play a vital role because they are the guys who could connect the dots. Across the world, they're the ones who are playing one of the key things that, for example, we, as an organization, have a selling point to a large number of clients that is visible is T-shaped learning. Why should you work with a consultant? Why don’t you build these capabilities in the house? You don't have this bunch of guys, spend half a million dollars, a million dollars to get a team in-house and dedicate it to work with you. But what you're not able to do is T-shaped learning. This is where McKinsey, BCG, and Bain have their whole business model, right? Like a person with, let's say 50 odd organizational experiences, when he comes down within an organization, he's carrying from blocks of expertise of what work, like for a business, and then trying to bring it to you for zero learning curve. And he's not going to spend two years with him too, for you to get that benefit he's coming in with on day one. So, you can go really deep into an organization, get the right block and it becomes even better if you have four or five people with T-shaped learnings coming together and collaborating and providing you with a solution and you're just sitting on the outside or are you hiring your team and say, this is what you need to be doing or this is the organization, go, figure things out, right. And then over here, you're saying that, hey, help me with profitability and you've got four guys all with their experience across 50-60 organizations coming in, working together, collaborating for you with a specific outcome as the answer, right? So, you're digging into years and years of learning, which is available in one single place. So, unless, and until that kind of an approach is really there, which actually true-blue generalists are able to bring into an organization. It's not very valuable because everything your systems have replaced a lot of the things that were done, badly, right? Your efficiency and effectiveness at an operational level are at an all-time high, right. Now, you have to concentrate completely on effectiveness and that's what generalists are trying.

01:04:39
Harish: Yeah. Like the book said, Federer's experience in so many different ball sports is what makes him Federer.

01:04:47
Pradyumna: Absolutely.

01:04:51
Harish: So, we've come to the end of our conversation, but we will not let you go without your hot takes on certain things. So, this is our last section in all our conversations, where we ask you what you think is the future relevance of certain topics? So, the first one for you is what do you think is the future relevance of mainstream media, now that you have almost sacrificed it and you are not to use it anymore? What do you think is the mainstream media?

01:05:23
Pradyumna: No, I think the role that the media used to play is always going to remain, but obviously the formats in which they would be disseminating information has changed. They have now moved to digital, but the role is of that guy who is coming into town and then beating the drum and saying that this is the set of activities that have happened. Whatever is relevant out of it, please absorb. It is going to continue. There was no way of bypassing it. The second thing is it is always going to stay relevant because the advertisers that build the industry, who will need this circulation, are not going to want to give up that circulation to let's say Google or something, which excludes a lot of people, right? So, that's going to be another big thing. But if you look at it, let's say, 10 years, 15 years, digital is going to be the way the whole world operates. Right. And you are going to have a lot more funded projects. The fact that like NPR, one of my favourite publishing houses is able to create content or the way individual guys like you or guys like Vox or Vice are able to create content, I think the quality of content, the quality of investigative journalism, the quality of research is only going to improve because now you have people who are viewing it, who are going to be spending money rather than, an advertiser who is going to be spending money, right? So, which means you have millions across the world who could potentially be patrons to your content as compared to just a couple of them. So maybe 10 years and I would find that they would be redundant, but I would say at least in the near future, the fact that there's no better distribution channel, I think it will ensure that they sustain.

01:07:06
Harish: Yep. Okay. The next one is, what do you think is the future relevance of traditional start-up hotspots, like Bangalore, Hyderabad, Pune, and Gurgaon? Are they still going to be relevant, is it going to go to other cities?

01:07:24
Pradyumna: So, though the world has been talking about flattening, I think it's still going to be a hub. For example, Bangalore is a hub or Pune is a hub or Hyderabad is a hub. So, now between them, I think the hubs themselves are going to continue because they serve as great catchment areas for talent. Now, in order for talent to come and visit and spend time, they should also have the ability or flexibility to move from one organization to the other organization, which is like, again, the ouroboros, right? So, you have all the companies which are set up in a cluster which has talent, all the talent coming, because all the companies are setting up in a cluster, but what you have been seeing off late is a lot of talent, which you're always comfortable working out of these metros simply because there's a lot of access to technology, access to the internet and, like Mysore is a developing hub, right? I mean, who would have thought that a tier two city in Karnataka can also be a technology hub. But it's becoming a technology hub and all the hubs that are there today, I think they will continue to grow, but you might have a lot newer hubs. It's because the overall size of the pile is increasing rather than them replacing each other or them getting dissipated into a lot smaller hubs.

01:08:50
Harish: Okay. And the final one is slightly off-topic. What is the future relevance of social media influencers?

01:08:56
Pradyumna: So, influencer, right, that's a beautiful part. I mean, forget about social media, the world that we live in is going to be led by somebody saying something and with social media, there are a lot more people who are providing their opinion about recent things about social media led commerce, a huge number of start-ups that are growing because earlier you wanted a celebrity to endorse a product. Now you want yourself to be endorsing a product. You yourself, not me as an individual, but I want somebody like me endorsing the product because I need to trust that somebody else is also going to be able to provide the same kind of validation that a celebrity would, because the celebrity doesn't care. I mean a celebrity is doing it for a large format, a massive media format. So, since the whole world is switching to buying things based on recommendations and experiences, simple indicators, the amount of effect that reviews have made on the way you buy. So, I think social media influences will continue to dictate, but their role is going to become a lot broader because now their audiences will be engaged rather than just content, will also be engaged in commerce, right? So, I mean, earlier you would have merchandise from companies coming in and they would usually buy my t-shirt, support my channel and then you have the guys into Patreon who would say, why don't you create followership, and you have many of the other models that you know obviously they're not used for completely nice users but there are other platforms where you can pay a subscription in order to, you know, like OnlyFans. I mean, when you can pay a subscription to follow a particular person. So, I think influencers are going to go down that route because the quality of the content is going to define who really finds it relatable. And then their relevance to you is going to spread a lot deeper into what you do on a day-to-day level, apart from just consuming content. Today, they are just consuming content. This is what is happening, right? So, a lot of media and advertising agencies are kind of pumping money in, but the second you are not being paid for reviews anymore, I think you're going to start looking at alternate ways to monetize your followership.

01:11:22
Harish: On that note, I think this is a fantastic conversation, Pradyumna. I think we covered a whole range of topics from what a growth-focused outsourced CFO partner is? How does it fit into the realm of a founder? What value do you add? How do you do business development? We spoke about a variety of things. I think this is one of those conversations where we've done justice to the whole topic. Yes, there were a lot of eerie moments for me because there were a lot of things that you were saying, which would have been completely true for Choose To Thinq as well, but I think this was one of the best conversations that we had. Thanks a lot.

01:12:11
Pradyumna: Thanks Harish. And I'm really happy because we didn't spend too much time on finance. I was wondering if I alienated myself from the objective of this conversation itself, but I'm happy if you more than anything like this conversation.

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