I just had a very interesting discussion with one of our CEOs. In essence it involved a heated debate on what to do with substantial accumulated funds of one of our portfolio businesses. Invest, save or distribute to shareholders – for me it was clear that a start-up needs to heavily invest if it sees an opportunity. Screw security, savings or distribution of returns! This often means taking on a substantial amount of risk and not focusing on those things that would be dear to a prudent eCFO. The CEO was totally surprised to hear that from me and said “that goes against everything you told us before. You made us focus on liquidity, told us we needed 3 month working capital in the bank and were not allowed to spend any money on stuff you considered not absolutely essential.”
This clearly showed me the danger of over emphasizing certain points.
Just because I firmly believe that liquidity is the one and only important measure for a start-up does not mean that once the business is generating cash it should not be re-invested. It also does not mean that I would suggest that savings and reserves should always be the right way to go. Each measure ALWAYS needs to be adopted to the environment it is applied to! Risks need to be taken once it has been sufficiently analyzed and understood – start-ups depend on the risk taking ability of its management.
For me this is an important lesson that as an eCFO you have to continuously further the education and situational awareness of your team and the people you work with. Never assume that people will understand that each measure is only applied for a certain period of a business lifecycle. It also means that I need to improve my communication in regards to a healthy balance between risky and risk adverse behavior.