The heyday of Main Street is over. The spotlight now shines on Digital Street.
Curt Sigfstead has been long drawn to the power of entrepreneurs and the opportunity they present to transform the world. After leading the prominent West Coast technology investing division at JP Morgan, Curt joined Clearco. Clearco is at the forefront of digital growth, where they are busy building out the capital infrastructure for the internet in the realm of embedded finance. Working with digital founders, software platforms, and financial institutions, Clearco is helping to revolutionize how founders raise capital.
1:44 - Providing capital based on data
Digitally-founded businesses often don’t have the traditional assets required to raise capital. By providing capital based on more diverse factors, Clearco is serving a new, data-driven market.
“It means that we can, in a very innovative way, provide capital, provide advice, provide benchmarking, provide a means by which entrepreneurs can improve their business with capital by using data. That's an important core of our business; our ability to leverage third-party data sources to create a modern finance platform that can serve these digital founders. As you were getting to Andrew, [Clearco is] serving what is a global transition from Main Street to Digital Street. And as more and more businesses are founded, at least initially, online--as businesses become less and less geographically constrained--they don't have the aspects that typical financing institutions like banks or credit unions are looking for. They don't have collateral. They don't have inventory. They don't have the assets. But they do have a lot of data. And their data is very revealing with respect to how the business is performing, what the opportunity is for that business. So, what we found is this vast, global underserved market.”
3:32 - Helping entrepreneurs retain ownership
As a rule of thumb, entrepreneurs don’t want to give up equity. Clearco gets that, helping businesses get off the ground by focusing on repeatable processes.
“So we're part of a spectrum. We're not in the business of competing with venture capital or with seed investors or with friends and family. We're in the business of being a complementary pool of capital for entrepreneurs to leverage as they grow their businesses. And in any business, there are aspects that are repeatable. So, you have an understanding of how the business is actually going to perform based on data, historical data, and how you might project that--like your return on ad spend, or how much inventory you need relative to your sales growth. There are other aspects of your business that are not repeatable. It's innovation that you may have underway. It's actually kicking off a very early-stage business."
4:19 - Creating repeatable actions to grow your business
Clearco understands what entrepreneurs need--helping them control their destiny through repeatable aspects of the business.
“Where Clearco comes in is in those aspects of the business that are repeatable. Our perspective--and what we found product market fit with--is the fact that entrepreneurs don't want to give up equity in their company, and therefore ownership, for aspects of their business that are effectively repeatable. It's, ‘okay, I know if I put a dollar here, I will get $3 in revenue. Why should I give up equity for that?’...As businesses grow, ownership is important for entrepreneurs. It's part of the economic puzzle. And so if we can help them control their destiny, if we can help them access lower-cost capital effectively, and maintain ownership, then we think we’re doing our job.”
7:06 - The three benchmarks of success
Curt says that success comes down to three things: a bulletproof process, strong performance, and a solid market backdrop.
“For me, there are really three aspects to a successful process and this is obviously something I learned over many years helping companies to access the market. Which is: 1) you have to have a bulletproof process. You've got to start with a large funnel. You've got to work that funnel and you're eventually going to have a number of investors who come out the bottom of who are committed to funding the company at terms that are acceptable to the board and to the founders of the company. 2) You've got to have performance. Investors really want to understand, at least at the Series C level, how $1 of investment turns into $5-10 of return. It has to be a very repeatable process, i.e., in the Series C you're not introducing new operational risks, you're introducing scaling risk. There's product market fit. Your business works. It's got a huge TAM and really, it's about scaling the company...3) You've got to have a solid market backdrop. None of this happens in isolation. Investors are influenced every day by what happens in the capital markets and what's going on with their investments, as well as how other businesses in their portfolios are growing.”
9:39 - A conservative-aggressive approach
It might sound like an oxymoron, but Curt says that the best forecast is optimistic while also building out realistic benchmarks based on market share.
“My job was to ensure that our forecast was bulletproof. It was highly conservative, yet aggressive. What do I mean by that? Our job is to express the business in the most optimistic way that we can as a company. That's why we're here. We've got a big opportunity, but at the same time, building in aspects to the forecast that are not leaps of faith. I.e., for us, the size of our marketplace: If there are 10 to 12 trillion of GMV globally, which is cited in a bunch of market forecasts, then trillions of dollars, tens of trillions of dollars - us saying that we can get to 20, 40 billion, 100 billion of GMV, well, that's pretty conservative. We don't have to get a lot of market share. Those are the types of aspects to set the context of your forecast conservatively relative to a lot of external metrics. I think these are important aspects to getting investors to buy into your forecast. [The second factor] is based on your existing business, and so we were very, very focused on that. [The third factor is] you want to make sure that as you go through the funding process, you're meeting and beating your numbers.”
11:41 - How to analyze and present data
Use the data you have to prepare. Then, keep investors in an honest feedback loop where you consistently provide contextual updates.
“If you fail to prepare, you're preparing to fail. It's kind of like that old adage. We spent a lot of time on that. Then, the second piece of it is obviously thinking about the second and third-order diligence that's going to support that. For us, it’s beating up the metrics. It's analyzing the data. It's focusing on, ‘okay, so what are the cohorts doing? How do we present that data in a way that reflects our business?’ Not all of it is obviously the best news. You have to be prepared to present the business in a way that is consistent, and it gives investors real insight into how you operate the business. But, you have to do a lot of thinking about how best to present that data because investors don't have any context when they come in. Your job as a modern CFO and as a modern finance team is a much bigger understanding of strategy, so you set the context by which the numbers are being presented because out of context, I think they can be misinterpreted.”
16:18 - The magnetic power of founders
Curt was lucky to oversee countless IPOs while at JP Morgan. His favorite part? Working with the founders themselves.
“Through my career at JP Morgan, what really got me excited, and I realized this in my last couple of years, was working with founders. In particular, working with CEO/founders who had built their businesses from the ground up, had made the transitions through the various levels of financing and growth. We got to work with them going public and I was fortunate to work with Jeff Lawson at Twilio, and the team with Eric Yuan at Zoom. Obviously relevant names, and a full host of other names, which brings me to Andrew and Michelle [co-founders of Clearco]. As I reflect on it, I had done 100 IPOs and 250 billion of tech M&A and I was looking for that, ‘okay, if I really want to narrow it down, what I really want to do?’ I want to work with founders in incredibly constructive ways because I have a very strong personal belief that entrepreneurs and founders are the people changing this world for the better.”
23:22 - Building CFO/CEO trust
As a strategic partner, modern CFOs must lead company alignment. Having a united front is critical to success, but it doesn’t happen without asking the hard questions.
“The most important piece you have to figure out is trust. It sounds a bit cliche, but you've got to find the opportunity over those conversations - and we did - to ask each other hard questions about how...I asked, ‘well how are you guys doing?’ or, ‘why didn't you do it this way or do that way?’ You're getting a sense of how you're going to operate because if you're coming on as a strategic partner effectively, which I do think is really the role of the modern CFO, you're going to have to have a common operating system effectively because you're going to have to answer questions where all three of you are not in the room, but they're going to have to be based on a consistent framework. You're going to have to defend your decision-making post decision with your partners, just in the way you would if it was a law firm or financial firm. You better have a framework by which everyone can understand how you got there.”
24:40 - The best investments often appear a little crazy
It’s hard to break with tradition. That’s why so many people in the finance world told Clearco founders Andrew and Michelle they were downright crazy, but Curt learned that thinking differently can have its advantages.
“When Andrew and Michelle were forming the company, they probably had 100+ meetings with various finance individuals who said they were, ‘absolutely crazy’ or, ‘this will never work.’ or, ‘how in the world could you do this? This is the way it's been done for a hundred years.’ Of course, there are aspects of that I had, as sort of bias or sort of frameworks that I had growing up working at JP Morgan. I've had to learn to just understand it, let it play out, add constructive aspects to it and then just course-correct where we can, let things ride out because there could be something really interesting around the corner on some of those decisions we make that, you know, wouldn't be obvious in the same frameworks that some of the more traditional financing companies work in.”
25:40 - Put away your ego
The successful modern CFO is ego-free. The key is embracing a service mindset where the company wins and your wins are the same.
“You have to put the ego in the bottom drawer. You're an at-service leader. So, you're here to help people win. You're not here to push your career in a certain direction, or to look good because it doesn't fit with the mission of - and I would say this is probably for any modern CFO is - you're serving the board, you're serving the audit committee, you're serving the founders, you're serving all the employees, you're serving investors. You've got to be in that mindset so that when you get criticism, you get feedback, or otherwise, you have to just take it in. It's all for the better of the company. Push forward.”
29:44 - The untapped global potential
Curt says that with the right resources and support, there are hundreds of underrepresented individuals in the world who have the power to change it for the better.
“One thing that is underestimated globally is the power of the committed entrepreneur. The power of someone, an individual who is committed to change, who is committed to development, who's committed to their idea and what they're able to accomplish if they have the right resources to do that. I think that is underestimated globally. We have billions of people on this planet who in some way don't have the resources available that other billions do. We're not tapping into the greatest resource we have in this world, which is our human colleagues and capital, and other inhabitants on the planet. I think that is something that we often underestimate. It all seems very normal when we look back, but when you look back over history, it's really people who make a difference. Our responsibility, if we want the best out of this world and the best out of, from business to science to education, we need to empower these people and give them the resources.”
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