CFOs' Strategies to Fight the Market Downturns | Pigment Webinars

Recession and market downturns are no stranger to the B2B tech world. The industry braved through periods of economic decline during the great recession of 2008, the Covid-19 pandemic, and more recently, the market downturn in 2022.

In fact, the 2022 downturn is the 10th worst recession since 1929.

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One common thread links each of these downturns, however: the bounce backs have been great periods of innovation and creativity. In fact, the top 20 brands with the most innovations bounced back at twice the rate of growth in the period after the 2008 recession.

What does it take to go beyond surviving to thriving through a recession? This article summarizes learnings from Pigment’s webinar, CFOs’ Strategies to Fight Recession, Inflation, and the Market Crash. You’ll read illuminating quotes from top CFOs of Discord, Figma, and Dropbox and gain insight into how Finance teams lead the organization towards better times.

Don't forget to check out our follow up to this article, with detailed answers to key audience questions.

Partners in navigating good and bad times: meet the CFOs

This webinar features a fireside chat between Eléonore Crespo, co-founder and co-CEO of Pigment, and three CFO guest speakers. Eléonore starts us off with a great quote to set the tone:

“As a CEO, the relationship with the CFO is critical.”

Indeed, Finance teams are quickly becoming business partners to guide the company through growth, scalability, and profitability. And the CFO is the visionary behind this transformation:

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Ajay Vashee: General Partner at IVP and ex-CFO at Dropbox

Ajay Vashee started his journey as an analyst and grew to be the CFO of Dropbox. He successfully led Dropbox to IPO, scaling the company from $45 million to $2 billion, with over 600 million users as of today.

Currently, as a General Partner at IVP, he has helped invest in incredible companies such as Figma, Superhuman, and TaxBit. IVP is a late-stage venture capital and growth equity firm focusing on fast-growing tech companies. The firm has invested in over 400 companies, out of which 131 have gone public.

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Tomasz Marcinkowski: CFO at Discord

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Tom Marcinkowski is the CFO at Discord, a voice, video and text communications service on a mission to create space for everyone to find belonging. Discord has over 150 million monthly active users with over 19 million active servers per week.

Tom’s expertise lies in growing and scaling internet companies, with a previous role as Head of Finance at Pinterest.

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Praveer Melwani: CFO at Figma

Praveer Melwani is the newly appointed CFO of Figma, the popular collaborative interface design tool. With his background in investment banking, he has held operations and strategic finance roles at companies including NerdWallet and Dropbox.

He previously spent five years as the head of Figma’s finance and business operations, where he championed finance best practices while helping startups and other companies launch their business and grow by using Figma.

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The current market landscape in a nutshell

Ajay has been on both sides of the coin,  as CFO at Dropbox and now as Partner at IVP, a leading venture firm in the valley. He shares his impressions of the current market downturn as someone living and breathing these turbulent times:

“We’re in a completely different market environment today than we were at this time last year.”

The combination of several disrupting factors, including the crisis in Ukraine affecting supply chain, fuel prices, and humanitarian causes, stagnant GDP growth, increasing interest rates and inflation, have led to a very volatile environment.

The companies with the highest valuation to revenue multiples are declining by 50% or more. However, Ajay warns us that the worst is unfortunately yet to come.

What to do while waiting for markets to bounce back

The cost of capital is rising, resulting in far fewer fundraising rounds. However, it is crucial to focus on durable growth regardless of a bull market or bear market. This is achieved by improving efficiency over time, while executing towards a vision for long-term growth.

Ajay shares his speculations on company valuations after markets recover. He suggests that many companies will see down-rounds and flat valuations. But this is not the main area of focus for a CFO:

“Market environments are not in the hands of the CFO. What you can control is your execution and progress towards your vision, category ownership, and market ownership.”

Ajay highlights that now more than ever, the Finance function has a wide array of tools available to manage scenario planning for turbulent times.

What keeps you up at night in the current economy?

Praveer shares that cash runway should be the number one cause of concern for CFOs. It’s crucial for leaders and teams to understand their key metrics, therefore, to ensure runway and be nimble and flexible.

Additionally, Praveer aims to elevate the role of Finance under the guise of uncertainty, as a tool to motivate and drive his team through three reminders:

1. Great companies are enduring: fluctuations will always happen but companies with exceptional planning will prosper
2. Think long term: there’s a reason behind your vision
3. Be ready to execute: if you’re calculated and understand your expected outcomes, you can use the momentum to accelerate

Tom adds that not even a macroeconomist can predict what the future holds, and what’s important is to prepare for how long the downturn will potentially last. He also urges Finance teams to avoid being distracted from executing the vision and building the business:

“Even if you’re well poised to weather the storm, it can be very distracting for the org. Build a plan to manage distractions through better communication.”

The financial metrics that matter most

CFOs delve past merely tracking metrics to establish next steps based on metrics and data. Tom sharply observes:

“There’s a lot of detail that gets lost in the average of a metric.”

He advises Finance teams and leaders to always dig deeper and focus on how cohorts change over time. Praveer adds that it’s important to understand the metrics throughout your funnel:

“We try to reduce some of the noise in our metrics. We do this by slicing and dicing our data to find high value cohorts and users.”

Ajay takes a similar approach and recalls his successful path to profitability at Dropbox, Project Diamond. This project mapped a numerical ROI to each dollar of spend in an effort to accelerate the roadmap to profitability without sacrificing growth.

In a closing remark on handling downturns through metrics and data, Ajay suggests:

“Come out on the side with a deeper and more granular understanding of what you have, where you want to invest, and where you don't want to invest.”

The role of a CFO in market downturns

CFOs and Finance teams are becoming more important than ever, both before and after the current economic climate. Praveer compares the Finance function to a spiritual guide:

“I view the role of Finance as a truth seeker or spiritual guide for the organization.”

In his experience, the role of Finance hasn’t changed as much as people’s understanding of its importance. As Tom succinctly illustrates,

“All of a sudden, a lot more people want to know what EBITDA stands for.”

But both leaders stress the importance of context when representing the Finance team in the rest of the org. Build a consistent drumbeat of information to quickly diagnose root causes and present the leadership team with solutions.

The role of the CFO and Finance hasn’t necessarily changed during these turbulent times. Rather, we’re faced with a unique opportunity to underline the value added by Finance through scenario planning, performance management, and forecasting to help deliver confident decisions. This is why communication is of utmost importance.

Managing communication and transparency

Communication is always an interactive process that is improved over time based on stakeholder reactions to it. Ajay reminisces how his team would conduct pulse surveys to understand and fine-tune the messages delivered to stakeholders.

Praveer aligns with this principle by sharing that it’s best to over communicate and do what it takes to be viewed as competent. Regularly presenting your board with key health indicators is one of the ways to maintain transparency. In the matter of employee compensation transparency, it serves well to educate employees on the math behind the multiples, to build their confidence in understanding their compensation.

A CFO’s advice to other CFOs

Ajay, Tom, and Praveer collectively offer helpful advice for CFOs fighting the market downturns:

• Hire the right people
• Streamline your headcount planning
• Plan out your best-case, worst-case, and baseline scenarios
• Lose the fear of data and learn to be data literate
• Balance short-term and long-term investments

Advice on making mistakes as a new CFO

The dynamic crew closes with key advice for brand new CFOs, on learning lessons by making mistakes. Praveer, as a newly appointed CFO himself, reflects on his experience:

“Mistakes are inevitable. Be upfront about them but make sure you use them as learning opportunities to get to know the business really well.”

Both Praveer and Tom have leaned heavily on the power of community in lowering the learning curve of becoming a highly effective CFO. Tom suggests we keep an open mind to learn lessons from people around us.

He also stresses that CFOs shouldn’t underestimate their intuitions. Finance has a unique vantage point where it’s possible to see almost everything that happens at the company.

“Sometimes you see things that others are missing. Follow the instinct to pull the thread and go after it a bit more.”

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If you enjoyed reading highlights from our webinar, “CFOs’ Strategies to Fight the Market Downturns”, watch part 2 on demand: “Scenario Planning to Navigate Uncertainty”.