Analysing a scaleup CFO’s Journey — with Matt Hann
During our latest Future CFO session, we were lucky enough to interview Matt Hann CFO of Festicket, who has about 15 years’ worth of experience in investment and finance roles. Matt has worked with corporates, smaller startups and scaleups, so we took the opportunity to deep dive into his past experiences and the lessons he has learned throughout this unconventional journey.
We kicked off the session with a Quick-Fire Round…
Start up or scale up?
If you could only have two external advisors, who would you choose?
My auditor and my lawyer.
A team of five or team of 50?
What would be your ideal team size?
I’m pretty flexible I ran big teams of around 25 plus at Channel Four, then the team at Festicket was less than 10. There are advantages and disadvantages to both, I think.
Best tip coming into a new role to build a relationship with a CEO?
You have got to spend a lot of time together, you’ve got to know each other’s thought process inside out, you don’t necessarily need to like all the same stuff outside of work, but you need to almost be able to predict what each other is going to do in a certain situation. Train each other, on how you want to work and how you think.
Do you both evolve?
Biggest hiring mistake?
Ones where I’ve known, it’s not right, my guts told me there’s something missing, but I’ve gone ahead and made the hire because I’ve been under time pressure. I think waiting and being patient and making sure it is the right person for the right situation, is really important and if you don’t find that right person for the right situation, hiring someone to plug a gap, can end up costing you a lot more later on.
Best tip for managing a superstar? Autonomy.
How ready were you on a scale of one to 10 for your first CFO role?
In terms of motivation 10, 11? Yeah, maybe 11. In terms of having every box checked for the things that I’d have to do in that role, maybe a six or seven? When I got my first CFO job, there were plenty of things I hadn’t owned before like, an audit, international businesses tax strategy and tax structure, all the complexities around transfer pricing and all the other stuff that comes with that. So, I had to learn that at the same time as doing the things that I was hired to do, that I was more experienced in. So I think six or seven is probably, an honest assessment.
What was your strategy to learn those things you weren’t as practiced in?
I was pretty self-aware on what I need to improve on, so the important thing to me was to build a team that, on the one hand compensated for my weak areas and blind spots, but on the other hand, had the right skill set to learn the things that I felt I was good at, so we could really drive those things through the business. I made sure that I had a really good FC, to work with me on all of the areas that are my blindspot and I built a really good working relationship with them, so I knew the right time to challenge them and ask questions, but I also gave them autonomy to be able to make decisions and run things, that maybe I didn’t have as much experience in as they did.
In reflection, going into your first CFO role, is there any advice that you would tell younger Matt?
Read a book, called the first 90 days, which gives a really good framework to prepare yourself before you start a new job and also explains having a roadmap, so you can give yourself the best shot at success. I actually wrote myself up a plan before my first 90 days and listed different things that were relevant and when I started, I sat down with the founders and agreed on a 90 day plan with them as well. This meant we were all aligned on what success looked like, we were aligned on what was expected from each other and I think that really helps, it starts you off on the front foot.
Another bit of advice would be, do your research, I’d say really leverage your networks before you start new jobs and speak to people who’ve been there and done it. I spoke to about six or seven CFOs, who’d just been through a $20 million+ raise because that’s what we were trying to achieve at Festicket. I then had a good blueprint from lots of people I trusted, around what things might look like in 18 months, but also what problems typically occur. So, I felt like I was going in with a good plan, good preparation and insight around what to expect as the business changed in the first 18 months.
What are the key things you investigate before deciding whether to join a company?
Different situations, dictate a different level of decision process. For me, when I was trying to break through, into my first CFO role, I felt most of the calls I were getting from recruiters for other Heads of Finance roles, or maybe a divisional FD role and that wasn’t what I wanted to do, I wanted to be a CFO. So, it definitely depends on what you want and it depends on where you are, I needed to break through, so when I got the opportunity to join Festicket, I did my due diligence, but I knew that even if the business wasn’t hugely successful, the benefits were going to be there for me and I would learn lots, just in that first role.
Now, it’s different and I look at opportunities like I’m an investor, I have a five box theory I work through, to really assess and appraise whether this is a company that I’d like to go and spend the next period of my life working for, whether I think it’s a good investment of my time.
What do you think helped build your amazing career at Channel Four?
I was there for over 10 years, I was really fortunate to work with some great people and ultimately followed my interest, it didn’t feel like hard work at the time because I was naturally getting involved with stuff that I enjoyed.
I wouldn’t say there was anything in particular, that built that career, but I would recommend following things that you’re interested in because you have to have that in-built motivation and work really hard. I turned up at Channel Four every day wanting to prove myself and the competitiveness inside of me, made me want to try new things. I was particularly interested in new growth and venture activities, and I learned a lot working on the new emerging technologies and new emerging business lines because I gained more autonomy and almost became the domain expert for something that became very important. I found myself growing with those specific business units as they became much bigger. Finally, you need to be a team player and want to be collaborative and help people achieve things as a group, because in any organization all those things are absolutely vital.
Talk us through your last role at Channel Four, what were you responsible for and what was your core role?
I kind of had a split role at the end of Channel Four, on one hand I was managing a commercial finance team that covered about £1.2 billion a year in income, and about £300 million a year in terms of cost base and technology investment. My role was as a divisional CFO for commercial finance, so I reported to the CFO, but I really partnered up with the chief commercial officer, chief strategy officer and chief legal officer to work on anything from basic FP&A to decision-making, my time split was probably 20% on FP&A type activities and 80% on working with them on decision-making, contracts, investments, business plans. On the other hand, I spent time trying to help Channel Four grow its investment activity. I worked with two funds, one I co-founded and one, I ended up running for the last 12 months at Channel Four and in those funds, there was probably about 25 investments to companies between the stages of series A through to probably series C/D, and the total value of Channel Four investments in those companies, is around £50 million.
Was it at that stage, you think that you knew that you wanted to work in one of those portfolio businesses?
Yeah, that experience really gave me some good insights, I sat on the board of three different companies as well, ranging between 5 million turnover and up to about 35 million turnover and that gave me an insight into smaller business management. The fund management meant I got to look at really interesting business plans all the time and meet founders and founding teams as they were pitching investments to us. I worked on Channel Four’s investment in Pinterest, Reedley and Eve mattresses, who have all gone through an IPO, since Channel Four invested and that gave me the bug to get involved in that kind of environment.
I was also really fortunate whilst at Channel Four to be sponsored for an emerging CFO program at Stanford university in California, this allowed me to spend a lot of time with people on my course that were working with scale-ups in the US and I joined them to visit those companies. So, I built up this natural interest in start-ups and scale ups, through an unusual route.
How were your first few months at Festicket, was it what you expected?
No, I’d say it was way harder. I had to write on a piece of paper “make decisions and get on with it” and have that sitting on my desk because I found that when I first started, everyone was coming to me with loads of questions, which is very different to being at a corporate. At a corporate, we would typically write a paper, present that paper to a senior committee, debate that paper, go away and iterate that paper, debate it again, and then maybe make a decision. Whereas at Festicket, people were coming to me and saying, Matt, can I do this? Can I spend this £100k? And you almost have to do the opposite and say, right, hang on a minute I’m not going to have that same information, it’s a different pace, I’m going to have to come up with a different process for making decisions around, what’s important, what’s most vital for the company and think about how I spend my time. So, it was a big culture shock in terms of that first three to six months and one again, you can prepare for mentally and create roadmaps for an ideal situation, however, in the startup and scale-up world, you’re often not in an ideal situation. It was fun, don’t get me wrong but it was very different. Luckily, I got to know the senior leadership team pretty quickly and bonded with them outside of work as well, so we formed a nice friendship group and they were a great support network in those first few months.
In 2019, maybe 2018 as well, you were in the top 10 of the fastest growing businesses in the UK. How do you prioritize the scale-up from your perspective in the CFO role?
You need to have your finger on the pulse to know what the leavers are to drive growth and if things are not working, you need to re divert investment quickly to get them working. I think, for me, that was the biggest thing, I really got to understand the business model very quickly and I could predict our trajectory and therefore we could have more strategic debates about how we overcome future challenges by spotting and understanding those things early.
We made some huge changes to the business model, when I first joined, we were a marketplace and we were selling packages for music festivals and a few tickets and I’d say that probably 85% of the orders were coming off Festicket audience, and it was all about Festicket, as a brand. If you fast forward to today, we’ve totally re-engineered the business to be more of a B2B SaaS platform and now it’s the complete opposite, about 85% of our revenues come from SaaS tools that we give to event organizers that we generate revenues on. That whole process has been part of the scale-up journey, making those decisions, making those investment choices as we’ve gone through the last three years. So, it’s all about understanding that relationship between investment and return, as the CFO.
How was the VC involvement through that period of a scale-up?
We’ve got great relationships with our investors, the business is owned about 70% by venture capitalists and individuals of high net worth. I think investors are quite predictable in what they want and as a stakeholder, that’s a good thing, I know that investors want to make a financial return and I know roughly the time period they want it and what’s good for them in terms of how big of a return they made. So as a stakeholder, I know whether they’re going to be happy or not happy depending on the results of the business and where we are and I think I am good at understanding them. Having run a fund before definitely helps because I’ve been in a position where I’m managing a portfolio of investments and I understand the VC environment is very different to other types of investments. Their involvement also evolves with the company, when we raised our Series D, restructured the board with a new chairman and brought in two new lead investors, along with all of that came a lot more scrutiny around our investment decisions. The bet became bigger and it was not longer just about headline growth, we had to start delivering the underlying model and showing the path to profitability, this can create tough choices where we had to turn some growth away because it wasn’t profitable and replaced it with profitable, scalable streams, hence our move to B2B.
Is there anything you would have done sooner or differently, to make the scale up more successful?
No, because I think with the time period that we had it helped us make certain decisions with more conviction and then when we were able to make bets on the strategy that we wanted to do. In terms of like finance systems as a CFO, we would have preferred to improve our data flows and systems much earlier, there’s no doubt about that. We went through a period where we were growing at about 40% a year and the finance systems were fine and then we bought two companies and we were then growing at nearly 200% a year, and it broke us as a team. We couldn’t have foreseen the impact that would have had, but if I could go back with that knowledge now, I definitely would have addressed some of those small structural scale type problems earlier with Festicket.
23rd of March, 2020, things obviously changed significantly, was the business expecting it and did you have a plan?
I think as finance leaders, we’re always working on scenarios and quite often we’re the person in the room that Is saying, well this could happen, we should have a plan for this and most other leaders in the room are like that won’t happen, just don’t worry about it! We always recognized that we’re a business going through extreme growth with a lot of volatility, so we always took an agile budget, we had a base budget and then we had, an optimistic case and a more pessimistic case, and we have different gates to release investment as we went through the year. So, on a quarterly basis, we’d put more money in, more gas into the engine if things were looking like they’re on the right trajectory and working, or if they weren’t, we’d come back to a decision for them with our board, to talk about the corrective measures and whether it was right still to invest or pause and fix and then invest. So, our natural approach of having that agile mindset with clear gates around investment decisions helped us, but we never had anything that was even remotely close to the scenario that we faced ourselves. We were flying as a company we’d delivered over 200% growth across the first 10 weeks of the year and then after that day you mentioned, we found our revenue drop off by 95%. It was way more extreme and way more significant than any of the kind of traditional budgeting scenarios, planning could have accounted for.
What were the emotions and feelings in those first three months?
To be honest, I didn’t really have much time for emotions and feelings, it was such an intense period that I had to react and come up with a plan, not just for finance, but for the company to survive. We took a very structured approach with our board; we initiated the project boomerang and what we did was establish some macro scenarios inspired by other people’s predictions and then applied it to our industry, so we could plan cash burn and how to preserve the business.
Did you find the CEO, CFO relationship harder during this period?
I think we’ve managed it really well with our investors and boards between myself and the CEO, but it was definitely harder because you’re having to have tough conversations about how many heads to let go, how many people to put on furlough and when the rebound is going to happen. A natural gap appears in the thought processes between the CEO, probably being more of an optimist and the CFO, being a bit more of a pessimist. You’ve got so much cash and if one person thinks that something’s going to improve on a certain day and someone else thinks it’s going to improve on a different day, you must work through that together because you need to go into that board meeting and speak to your board, totally aligned. Of course, there’s a lot of stuff that goes on behind closed doors, where you’re debating, you’re analysing but you must work through any differences of opinion before you’re going to investors and your board.
You were talking through having to renegotiate your new investment with VCs and obviously the valuation, how did you approach that?
For those people who don’t know, we closed around during the pandemic and I guess it’s something I’m quite proud of as a CFO of a live entertainment business, when live events couldn’t happen, to raise VC money at that point. But, in terms of how we went about it our relationships being strong was important, our VCs trusted us as a management team and they knew that if we had a strong plan to minimize the damage during the downturn, they believed in us as a management team to return investment on the upturn. So, I think the backing came from that trust and respect that we had and that trajectory the business had before the pandemic kicked off. When we were negotiating, it was tough of course, there’s lots at stake and those negotiations are never easy. But we were all starting from a point of debating how long this would last and when the rebound would come and when would that growth trajectory pick back up? Not if it would. And I think when you have that trust with your investors, that they believe in the business and believe in the management team there, I think you’re starting from the same belief point and that helps massively when you’re trying to negotiate a VC investment in tricky times.
You can watch the full interview recording here
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