Buffeted by technological change and lightning-fast shifts in the business environment, the office of the CFO is undergoing one of its most fundamental transformations since it was invented more than a century ago.
No longer just confined to an operational role managing financial issues, the CFO’s office is fast becoming a hub for strategic thinking, requiring skills that range from investor relations and human resources to deep analytics and data visualization.
This opens up immense opportunities for companies selling software to CFO offices that are increasingly moving beyond Excel spreadsheets and toward more sophisticated planning and analysis tools.
These are some of the conclusions I heard from the stage at Jefferies’ recent Annual Office of the CFO Summit. I had the chance to moderate a panel of leading venture capital investors and former public company CFOs, as they discussed how and why the CFO office is changing and what this means for investors and companies helping to spur this transformation.
“The finance function today is often much more than an organization that measures financial performance,” said Ajay Vashee, the former CFO at Dropbox and a general partner at the venture capital fund IVP. “It is a business analytics hub with the responsibility for understanding what is working and what is not and taking action around that.”
Panel members pointed to a number of factors driving this transformation, including the speed of technological change and the rise of activist investors.
According to S&P Global, investor activism campaigns reached an all-time high with 850 campaigns launched in the first quarter of 2023. That followed a busy year that saw the highest level of activist activity on record – 762 campaigns in the first quarter of 2022.
“Activists are a factor for any public company,” said Jeff Epstein, a former CFO at Oracle and currently an operating partner at Bessemer Venture Partners. “The leadership team could decide what they want to do for the long term. But if they don’t get it right, they might not be around for the long term.”
New technologies are also needed to manage the growing range of responsibilities and the sophistication of the CFO office.
“I see small and medium-sized businesses, companies with 100 to 500 employees,” said Rajeev Dham, a partner at Sapphire Ventures, “and they are adopting great software that is applicable to them because they understand how critical this software is to run their businesses, versus just relying on Excel spreadsheets.”
Anything that can help simplify or centralize is appealing to CFOs. But according to Epstein, “the Holy Grail of products for an office of the CFO” are those that can, “actually enable revenue growth as opposed to just lowering costs.”
Panel members see a long-term and stable opportunity to drive transformation in CFO offices, which will likely continue investing in new technologies in up or down cycles. Companies still need to close their books at the end of each month, quarter and year, so CFO offices are less vulnerable to cutbacks on software purchases than say, the marketing department, whose spend will vary depending on business conditions.
But, when possible, CFOs want to acquire and implement product platforms that help with multiple functions.
“People realize that to truly scale a platform you need to do more than one thing with that platform,” said Roy Luo, a partner at the venture capital firm ICONIQ Growth. “A lot of folks have tried organically – and I think it is possible at scale – but for the past 10 to 20 years, it has been done a lot through M&A. That’s worked out well for a lot of folks.”
The panelists said that the biggest unmet needs and market opportunities include analysis and planning tools as well as billing software. They also advised vendors to be clear on whether they are selling to enterprise organizations or small businesses, because the sales process and the customer needs of the two are very different.
Most important, perhaps, is to have a product whose value add is apparent and does not require the explanation of a salesperson to be clear to potential customers.
“You want to have a product that the average salesperson can sell,” Epstein said. “Often it is the CEO who goes out and sells it. Often the CEO is a great salesperson. But the product has to be good as well.”
Evan Osheroff is a member of the Jefferies Global TMT Investment Banking team, based in San Francisco, with a primary focus on Enterprise Software. Evan has more than 15 years of experience advising Software companies. He spends most of his time on M&A strategy and helping companies position themselves for capital raises in the private and public markets.