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Cashflow issues — nobody wants them. Greg Capitolo has built a career around ensuring they never happen. His company, Attivo Partners, functions as a stand-in CFO, helping startups navigate every kind of financial and accounting challenge, from how to raise money to automating payroll. This week Louis and Greg dive into the world of startup financing and talk about what it takes to get a business off the ground.
“We work very hard to help our companies craft stories so that when they go out and fundraise, it’s successful.”
🎙 Highlights Include
- The unexpected benefits of waiting to hire a CFO
- Common pain points from COVID-19 and funding freezes and how to navigate them
- Greg’s advice for how to evaluate whether a financial services company is right for your business
This Week’s Guest
Founder @ Attivo Partners
Greg is one of the founders of Attivo, a full-service accounting and finance services company that supports emerging growth companies in and around the San Francisco Bay Area. Before founding Attivo, Greg spent almost a decade as an interim CFO and Financial Advisor.
The Startup Stack’s Host
CEO, Co-Founder of Rocketplace
Rocketplace is a curated marketplace of high quality professional service providers. A 3x founder, investor, and board member, Louis began his tech career as a partner at Andreessen Horowitz. When he’s not working or podcasting, Louis enjoys cooking for his family. His pizza, he’d like you to know, is incredible.
Full Episode Transcript
Greg Capitolo: Why did the accountant push the wages, pay and bonuses down the hill?
Louis Beryl: I don’t know.
Greg Capitolo: She wanted to see the pay “roll.”
Louis Beryl: I’m going to tell you mine. What did one accountant say to her friend, also an accountant, after her husband left her for another accountant?
Greg Capitolo: I do not know.
Louis Beryl: It’s accrual world out there!
Greg Capitolo: It’s accrual.
Louis Beryl: Welcome to “The Startup Stack”. I’m your host, Louis Beryl, the founder and CEO of Rocketplace. This week, we’re joined by Greg Capitolo, founder of Attivo Partners, a full service finance and accounting firm in San Francisco. Greg was extremely generous with his time and expertise. Let us pick his brain about everything frp, building a business and scaling and cash flow issues and how to think about fundraising in the age of COVID. There’s a lot to get to. Here’s Greg.
Louis Beryl: Listen, it’s great to chat today. I was wondering, just to start off, if you could give us an explanation for Attivo partner. You guys are a full service accounting and finance firm. And if you could give us some background on what a full service accounting and finance firm is and how you came to founding it.
Greg Capitolo: Sure. Attivo Partners, as you said, is a full service, the finance and accounting firm. And with that we are focused on all the infrastructure and processes around for finance and accounting. And that could mean from the basic accounting for transactions. So accounts payable, billing, payroll. There is complexity that develops through issuing financial statements. And then as well, on the finance side with our CFOs, we provide strategic financial advice around what might be structured or structured finance. It might be around developing financial plans and models, working with your management team and board to understand cash runway, how to allocate resources, how to think strategically about investing and accessing funds to grow your business. And so that that’s what we mean by full stack. And then in terms of founding Attivo Partners. I’ve worked with both Rebecca Lee and Portia Kirsten, my co-founders, prior to founding the firm. And as we were talking about the space that we’re in, we saw that there were certain things that we felt we could improve. And we said if we go find a new firm, we can implement these things. And then those items are, one, we always put the client first and so we’re really focused on what we’re delivering the support we’re providing, and set an expectation for our clients that that we want to meet. Two, we want to develop a collaborative and continuous learning environment. And so the team members that we hire we look for those attributes in them. Are they excited about learning? Because in our business going out working with multiple clients at a time you’re constantly meeting new challenges and you have to understand a new company, you have to understand the market, you have to understand their management team, and you have to understand how to do the accounting and financial reporting for that team.
Louis Beryl: It seems like a really attractive opportunity that I could join a firm like Attivo. I could have colleagues and be mentored, you know that by a group of people that has a tremendous amount of experience. While at the same time, one of the things that seems really exciting versus maybe just joining an individual company is I also get exposed to a wider array of business models. And so I’m wondering, is that how you see it play out? Like how have you seen the advantages in recruiting versus others? What has that been like?
Greg Capitolo: Right. And that’s a good point Louis to bring up, is that the training ground and the professional development that you get with a through a firm like Attivo where you have different people that you’re working with, different companies that you’re working with, and then different opportunities for learning, it comes at you extremely fast. And we say to our recruits and then our team members, we hire them, that if you think of this as a training ground, the next three years, you have an opportunity to accelerate yourself through the accounting ranks. Faster than you could in an individual company. And so, yeah, we compete with and with the individual companies based on that professional development. And we were competitive when it comes to other things around the environment the people work in and their salary and compensation. But we sell that continuous learning and collaboration. That’s really a strong value for us. And we see that is very important.
Louis Beryl: Yeah, it also seems like a really strong value proposition for your clients. If I’m if I’m emerging growth company, as you describe them and we’re thinking about building out our finance function, it would almost be impossible in the early days for me to have the full breadth and level of expertise initially that your firm can kind of deliver on day one. You know, maybe you could talk a little bit more about that when you meet clients, what do they typically look like? What are their capabilities on the finance side? Maybe like what are the biggest things that they’re typically missing those early days like?
Greg Capitolo: Well, lots of times it’s very early. We’re where we are exclusively focused on venture backed emerging growth companies. And so when we meet our clients for the first time, they have three founders or two co-founders and two employees and no revenues. And they’re realizing that, hey, we’ve just closed some money, some institutional funding. We need to figure out where we’re going to spend it and how long we’ll have those resources. So they come to us and they’ll come to us and say we need our accounting system set up. So something might be something as simple as QuickBooks or Zero that will help them set up. We’ll set up something that sets things that set around that related to vendor vendor payments, related to payroll, related to the benefits for their employees. And we have a checklist that we go through to help guide us and them through that process. First and foremost, we want to focus on making sure that their people are paid timely and appropriately. Then we focus on paying the vendors. Then we focus on what it looks like, what do we want your financial statements to look like, and what’s good for managing the business. Then we’ll develop more complexity around that, around financial plans, financial modeling. We’ll get into it again, as these companies move along and complexity builds, we’ll get into pricing and how to go to market with the sales team.
Louis Beryl: I imagine you must have some companies that are just growing incredibly fast and that you’ve worked with companies growing incredibly fast. What would you say some of the tips are or strategies that you employ when you have some of these really, really fast growing companies.
Greg Capitolo: In terms of strategies? I think I will build that down to processes. Like what, what are those processes that make you more efficient? So specifics around that are…as you take a look at, a lot of complexity comes around the billing systems. And so when we think about strategies, just a very simple strategy is there are certain pieces of information that we need as accountants to, and financial advisers to do the reporting. And so as you’re putting in your billing system, as you’re thinking about collections and you’re tracking units of sales, whether it’s software or or or units of goods, you involve us in that process as you think strategically about how to build that, build that platform.
Louis Beryl: Yeah, totally. I mean, maybe another way I would say it is, OK, we’re growing really quickly. We have all these sales or bookings, et cetera. You know, I’m reporting to my investors increasingly high millions of dollars annual ARR, but I’ve got a cash flow problem. Right. So my working capital is all off. I’ve got cash…I’m actually running out of money. You must have situations like this where it’s like everything’s going gangbusters and we’re running out of money and we don’t even know where it is.
Greg Capitolo: Absolutely. And from that perspective, that’s where the strategic financial advice comes in. So there’s two things that we look at there. One, there especially when you’re thinking about SaaS companies, there’re metrics that you can look at that you’re going out to do fundraising, as you’re going out to look for debt structures to support that growth. Getting that reporting right, being able to talk about those metrics in a manner that shows that I’m growing today and cash flow will become positive in the future are very important to those investors and those debt providers. And so we worked very hard to help our companies craft stories so that as they go out and do fundraising, it’s successful. And so that’s when you go back to that question that you had about strategically how you think about things. That’s strategically what we want to do is begin to craft that story to say how we are going to get from, let’s say, one million of revenues to 10 million in revenues? And that story’s going to show us going through product milestones. It’s going to show us building our sales team, but it’s also going to inform us on the resources we need to make that happen and so we can go…
Louis Beryl: And I think that’s really the key. I mean, if I think about my own experience building Earnest. It wasn’t necessarily…like the easy question for us very often was where we predicted growth around revenues. The much more difficult question was, given these scenarios around revenues, how much cash do we need? What is the actual cash flow look like and the cash flow cycle? And when are we going to have points in the business when we’re low on cash as we are growing very quickly? Because that is the question that’s really informing how much money should be raised and what is the ROI on this invested capital. And so I imagine you must just deal with that all the time. Right. Because, you know, investors are always asking and it’s one thing about how quickly you’re growing, but it’s another question of why is this amount the right amount of money for the fund? It’s a complicated question.
Greg Capitolo: It is. And that’s why we spend a lot of time working with our companies’ buildings, typically given the size that they are, we want to see that cash last anywhere from eighteen…or as you complete a fundraising, it’s typical that we want to see that cash last anywhere between 18 and 36 months. So we spend a lot of time with our clients, building two to three year models to say what is the right amount of cash and how do we think about valuations at different points in time as we’re using that cash and as we’re going out and thinking about what is the right amount of cash to use. We want to be very sensitive to that management team so that so that when we go out and set valuations and ask for a certain amount of cash, that the dilution is appropriate and meaning that we’re not over diluting the team so that when there is a successful outcome, they get they get the monetary wars that they that they were looking for.
Louis Beryl: I asked you earlier about your founding of Attivo, but I want to ask you some questions. Have you known, you advise a lot of entrepreneurs that’s what you do all day. But you yourself are an entrepreneur.
Greg Capitolo: Right.
Louis Beryl: You know, as you were building Attivo, what are some of the biggest challenges that you’ve had building the company?
Greg Capitolo: The biggest challenge for us to date has been finding great people. And I think in the market that we were in pre, let’s say, COVID, we had very low unemployment. As a team given our geographic location in Silicon Valley, Northern California, we’re competing against a number of startups that are very enticing to people because as we’ve seen, there’s many successes and there’s financial rewards. And there’s…it’s exciting to to be in a company that’s growing quickly. And so attracting that talent that we wanted to put in front of our clients has been very difficult. And those two key things with a…an excitement about continuous learning and the willingness to spend the same time sharing your knowledge with others is really, really hard to find. And I think much…everybody wants those types of values in those types of skills in their team members. And so that that’s been the most difficult part of building the firm is building our team members. And then we have I wouldn’t call this difficult, but it’s structuring it we’re…we…as we’re building the business and we’re up to 30 team members now, how do we build a, like our clients, how do we build a go to market strategy that continues to keep our pipeline full? So as we were very early, we could rely on individual referrals. So people that I knew or people that Rebecca knew or people the Portia knew. Now we have to be much broader in terms of our business development. And building that machine that builds the pipeline has been very…it hasn’t been difficult, but it’s actually been quite exciting to do. And we brought in a head of biz development to help us do that. And she has been fantastic in reaching out and structuring programs to reach others.
Louis Beryl: Yeah, I think that’s so interesting. I mean, you know, in terms of the business development side, it’s actually a very common pain point. It’s one of the reasons we founded a Rocketplace and a very common pain point that we hear very often. As you know, Rocketplace only has very high quality firms on the platform. And when you think about very high quality firms that as you’re describing Attivo, when it’s small, you know, maybe when you were about five people, you’re able…the amount of work you’re able to do approximates the amount of work you’re able to bring in through your personal network. And so that works and you feel very busy. And then as you grow the firm, now you’re 20 people and you’re starting 20 plus people and starting to get better leverage and you have a couple of offices. It’s like, well, we can. We can not only take on more business and we might actually have some clients rolling off because they’ve kind of transitioned away and graduated, quote unquote, from us. But, you know, we kind of have a bigger enterprise that we need to bring business in and continue to grow. And then we recruit more people, et cetera. And it’s really those businesses that, you know, we’re constantly getting pinged on Rocketplace about their love right in our sweet spot because they are looking for more channels. You know, it’s not just it can’t just be word of mouth anymore. Right. And they’re thinking about what are those other channels that we can get our name out there.
Greg Capitolo: And that, you know, from that standpoint, that’s exactly the type of place that we’re seeking to place in our name. So it is, you know, what type of events are we hosting? Who are we partnering with and how easy are we to find different places? And so Rocketplace as you’re saying is a great platform for that. Will be a great platform for that for us. And we’re excited to be a part of that. But in addition, you know, we’ve still got a lot of the services business and this is very interesting, relies on that personal touch. Meaning that, you know, whether we’re being introduced through a platform like Rocketplace or whether we’re being introduced through a referral, how we come together in conversation and develop trust and credibility through those initial conversations becomes very important. So there’s still that connection that needs to be made. And bringing those both together is very, very important.
Louis Beryl: Yeah. And I think that’s a great transition. You know, as an entrepreneur myself, you know, OK, we’re starting to grow quickly. We want to bring some outside help, a finance and accounting firm like Attivo in. What are the questions that I should be asking when I meet a firm like yours in order to understand this is a good fit, this is what I’m looking for. How should I be evaluating firms like yours?
Greg Capitolo: I think first and foremost is experience. And so who are the clients that we’re working with? Are they similar to your business in terms of how you’re building your business?
Louis Beryl: Like similar in terms of industry, similar in terms of size, industry and size?
Greg Capitolo: Yes. And I think then at the same time, similar in terms of aspirations. And meaning what are you trying to grow as quickly as possible? And and so if you’re going from zero to 10 and in less than two years, how many clients have we worked with at Attivo that have gone from zero to 10 in less than two years? And can we talk about that experience, the guidance that we provided, systems and team that we put in place, how we transitioned in a new team as we transition out? So we typically, if our firms are if our clients are successful, they’ll begin to hire their full-time team as they grow and will transition out as a part time team will fill in around where where they’re where there’s holes and gaps in in the finance and accounting team. But then eventually we see that will come in on an interim project basis and on a basic basis and fill in holes where they’re needed.
Louis Beryl: Well, and I think that’s probably on entrepreneurs minds as well. So I think very often they could be thinking, should I work with an accounting and finance firm like Attivo or should I just hire a full-time CFO? And how would you advise between those decisions?
Greg Capitolo: I think early on, when you think about hiring a firm like Attivo, you’ve got the full gamut, CFO, accounting manager and accountant that can help provide work for you.
Louis Beryl: And a lot of times that the typical team, when you start a new engagement, you put a typically a CFO, accounting manager and accountant on a project?
Greg Capitolo: That that’s a typical start. Yes. So, yes. You’re getting three for less than the price of one. And the other thing too with, we’re thinking of especially at that CFO level, what we find is that if the longer you can wait to bring in that lead finance person on full-time, better on a full time basis, the better opportunities you’ll have in terms of recruiting an individual. You’ll have the opportunity to recruit somebody with more experience. And so if you bring in somebody when you’re, let’s say, at two million of revenue as a lead finance person versus bringing in a lead person…lead finance person when you’re 15 million in revenues. The experience and background of that particular individual are going to be very different. And so you can continue to work with a team like Attivo until you’re 15 or 20 million. Then bring in a finance lead that can take you from 20 million to 60 million in revenues and not have to worry about having a change in that because you’ve brought in somebody where you’re two million of revenues. And that experience going from two to 60 is very different from going from 20 to 60.
Louis Beryl: I want to ask you about other trends that maybe you’re seeing with the fast growing emerging growth startups. We talked a little bit about COVID some of the other trends that are happening right now. There’s certainly a lot of talk around diversity. I bet that’s a common topic of discussion with management teams. I’m wondering if you have thoughts around that or also maybe things like IPOs, companies staying private longer than they have in the past. I’d love to understand a little bit about what you’re seeing on the finance side over the last couple of years and right now.
Greg Capitolo: With, you know, in thinking first about diversity and and thinking about that in terms of our clients. I’ll go back to what I alluded to when you talked about when’s the right time to bring on a CFO. That brings you to a firm like Attivo that is structured around fractional work. It allows our clients to take the time to make sure that they hire the right person. And many times with the clients that we’re working with, one position where you can create diversity on a management team is that lead finance position. And so that by using Attivo, you’re provided the opportunity to take the time to find somebody that has a diverse background that might be different than the existing management team.
Louis Beryl: Yeah, I mean, I think I think that’s really smart. I mean, you know, what I’m hearing is, you know, if you’re a, you know, a leader, CEO of an emerging growth company and diversity is important to you. And as you’re thinking about building a diverse set of leaders in your organization, one of the value propositions that Attivo can bring is we’re there to support you as you think about building that team. Right. You don’t have to worry about that, you know, I just have to hire this person and get a seat. You know, we’ve we’ve we’ve kind of got your back the whole way through. And quite frankly, you know, we probably can help you screen source qualify a wider array of high quality candidates. So we can be, we can help you be more successful in that initiative.
Greg Capitolo: The client can have the patients take the time to do the evaluation and look at a much broader array of people for those particular positions. And again, I’ll go back to say that a lot of times that VP finance or CFO provide great opportunities to build diversity in the management team. In terms of the other trends about thinking about staying private longer or delaying an IPO. So our focus is primarily on companies that have, say, less than 20 to 30 million of revenue. So we don’t spend as much time growing into that IPO stage as a full-time CFO, full-time VP finance would in supporting those companies. But I do think that companies are staying private longer for two reasons. One, is that the regulatory environment to go public is, you know, it costs money, takes resources to do that. And two, I think there’s a lot of capital that is looking for returns in the private markets before companies go public to see if they can get those outsourced returns. And so you see some of these fund much larger funds putting significant amounts of money into companies before they go public. So there’s not a reason for those companies to go public until a later stage because the capital is available to them.
Louis Beryl: Yeah, I mean, it’s amazing the dichotomy in the world right now. Because we do have a tremendous amount of private capital out there. I was just talking to a friend who’s an investor telling me about a large private company that’s raising their series N right now. You know, it’s in the companies worth tens of billions of dollars and they could you know, I’m certain they could go public if they wanted to, but they’re still keeping it private. While at the same time, you know, we have a tremendous amount of entrepreneurs, a lot of young entrepreneurs who listen to this podcast that are actually struggling financially. And so because the world is changing rapidly right now, maybe they can’t raise money. I was wondering what advice do you have for those entrepreneurs out there, the entrepreneurs that are, you know, wish they had thirty six months of runway?
Greg Capitolo: That’s an interesting question. But from our perspective, as we went into the, they’ll say, the COVID downturn, we spent a lot of time with our entrepreneurs redoing and remodeling the financial plan. And saying how can we extend the runway longer? What are those investments that we have to delay? What are those changes we need to make to the existing resources, if required to extend the runway through, let’s say, as long as long as reasonably possible. And so that’s so that’s so that’s the first thing. The second thing is that it is a changed world. And I think that as we’ve spoken with a number of VCs, they’re looking at their existing portfolio and making sure that those companies that they believe will be successful are funded well. And so there’s not as much new investment going on, we believe, as there has been in the past. So I think that’s hard for entrepreneurs today. Who, if you had been thinking about your business in late 2019, the world has changed for those for those for those entrepreneurs in terms of available capital.
Louis Beryl: Yeah, definitely. I mean, it’s definitely one of those moments where you have to imagine the advice is, you know, do everything you can to preserve what runway gets your burn as low as possible. Certainly one of the things that I’ve had I’ve been advising any other CEOs that I talked to. Which is like, the importance of getting as to break even or as close to break even right now really, really makes a huge difference as we as we look to make sure we get through this pandemic and get kind of get to the other side of it. And there’s uncertainty with how whether it’s the pandemic itself or the economic effects of that, how long that’s going to last and how will that change the venture capital cycle? I mean, I wonder, are there silver linings you see with what’s been going on?
Greg Capitolo: I haven’t, to be honest, I haven’t seen silver linings yet. But I think there is a mentality to add what entrepreneurs should be thinking about is, I think, set expectations for funding a bit lower and manage resources more carefully. And and I think that especially at the throughout the stages of growth, but especially at the early stages, if you are close to bootstrapped, it does create a certain discipline and mentality in a business that as you start to scale you, you’re probably not going to get ahead of yourself in terms of your spending. And a lot of times when we’re talking to our entrepreneurs, it’s like, OK, we have a revenue plan that’s easy to put down on paper. But if we begin to allocate resources and spend those resources ahead of that revenue plan, it’s hard to bring that spending back. And so I think this economic downturn right now has…will be forcing people to make sure that their spending follows their revenues instead of their spending, leading their revenues. And I think that’s a very important discipline for entrepreneurs to have as they scale their business.
Louis Beryl: As a final question, I wanted to bring this back to you as an entrepreneur. With everything that you’ve learned over your career and running Attivo, if you could give yourself any pieces of advice, the young, the young, Greg, what would be some of the advice you might give to yourself before embarking on this journey?
Greg Capitolo: Maybe there’s two two pieces of advice. One is, always listen. And listen first and use that listening to learn and develop and then don’t be afraid to put to put professional development ahead of financial compensation or title or other things, things like that because in the long run, that professional development will help you advance in your career, if that’s what you, if that’s what you desire.
Louis Beryl: Have there been examples you’d be willing to share about times that you wish you had listened better?
Greg Capitolo: I worked at one point in time with the rapidly scaling company that had a managed team that was very experienced in scaling businesses. And as we were scaling this business, they advised me on patience around certain things in terms of building up the infrastructure for the business. And I pushed very, very hard to accelerate that and and didn’t understand how they were explaining, explaining to me what their patients meant. And as a result of that, we clashed in this process for expanding this, expanding this business. And I could have learned a lot from both these leaders if I had just sat back and said, hey, you guys, you guys have done this before. I love the experience that you’re sharing. And let let’s grow this let’s grow this together.
Louis Beryl: Well, Greg, I really appreciate the time today. I think this is just very interesting hearing more about your firm and getting all of your advice on building out the finance and accounting functions at these companies. So thank you so much for joining us today on “The Startup Stack”.
Greg Capitolo: Thank you, Louis. Thank you for having me. And I enjoyed my time.
Louis Beryl: For more on our conversation today, visit www.rocketplace.com/podcast. We upload a new episode every week. So if you haven’t yet, make sure to subscribe to “The Startup Stack” in Apple Podcasts, Spotify or wherever you listen to them. Thanks again for joining us. See you next week.
Announcer: The Startup Stack. Written and edited by Hannah Levy, produced by Leah Jackson.