The last decade has truly been the golden era for digital transformation. From using web services for chatting and communication to solving major hurdles, businesses have embraced technology, automation and digital tools in a major way throughout the past 10 years. With the pandemic in 2020, things came to a head. Forced to adopt digital tools in areas thus far unpenetrated by tech, B2B products have come to the fore. Many B2B marketplaces such as IndiaMART, Bizongo, Udaan, Moglix, Power2SME among others have emerged as the trend-setters in the new market.
And with growth and scale comes the responsibility of managing money wisely and spending it in the right areas to earn dividends. The B2B tech market is unique in that financial and even non-financial decisions often have a cascading impact on the final price of the product, which makes it trickier to sell to customers who already have a low propensity to pay. The likes of Moglix and other B2B startups also have to factor in the cost of compliance, supply chain and other uncontrollables.
Founded in 2015, Moglix is an ecommerce marketplace for industrial supplies, tools, machinery, equipment, safety and security supplies and electricals. With adoption growing at a fast clip over the past few months, the company realised it is essential to have someone handle the finances, budgets, compliance.
Rahul Goel, who has worked with startups such as Shopclues and MNCs such as Nokia, Motorola, joined Moglix on its growth trajectory in 2019 as the VP of finance. Under his stewardship, the Noida-based startup has grown tremendously in the past 12-18 months and has also attracted funding from the likes of Tiger Global and Sequoia Capital, two of the biggest investors in India.
When asked to point out the highlights of his tenure, Goel directs us to the scale that the company has seen. “The company has grown four to five times in terms of top line, we now work with 5 Lakh+ SMEs, 16,000 suppliers. We have 35 locations in India, Singapore, UK and Middle East and we have expanded our global sourcing portfolio to a very large extent”.
Agility In The Finance World: The Big Challenge For CFOs
“When we’re talking about the startup world, we can’t create a great company unless the founder’s vision and investor’s visions are aligned.”
For Goel, at whatever stage a startup hires a CFO, they need to be agile enough to adapt to the fast-pace tech world, which has multiple stakeholders and moving cogs. It’s imperative to know these various moving parts to see which will have the right impact. “CFO should be closely involved in the business modeling and business growth blueprint to ensure the finances are working to make sure that audacious goals are happening and we are able to achieve those goals. It becomes very difficult otherwise and finance will play a catch up game, particularly if you’re not watching it closely.”
Goel states that it is crucial for any company to hire a CFO right from the beginning in order to be successful. One needs to be more agile, fast and innovative in order to reach the business requirements and when it comes to tech startups, CFOs need to be dynamic. Stating his own example, he explains how important it is in a tech startup to focus on key performance indicators such as number of visitors, converts and of course, the revenue. This is indicative of financial performance in many ways too, he reckons, and while some metrics may not directly impact the bottom line, CFOs also need to know which ones are worthy of pursuing and which are simply vanity metrics.
Going Beyond The Finance Domain
A finance professional for over two decades, the Moglix CFO believes that two major factors that are often ignored by most financial heads at companies are growth and governance which play an important role in the journey. He stated that Indian companies have yet to understand the business model and efficiency of tech startups so that they can be evaluated correctly.
Given that tech startups ought to have cross-functional leaders, the biggest challenge for a CFO is balancing speed and agility of the finance operations with the other parts of the business from product to marketing. “In the early stage of that product, the resources might be limited but the speed at which the company wants to run might be very fast,” Goel added, highlighting the need for CFOs to learn about other domains to react in a quick manner.
Speaking about the journey of getting listed, which is considered the endgame for many startups, Goel said it’s crucial to have the right partner from both the investor and the bankers’ side. This means ensuring the company gets audited quarterly, reaching out to the right set of investors while focusing on the company’s position in the market and its various finance operations.
Leveraging Technology For Efficiency
Another key challenge revolves around hiring and bringing on leaders at different roles. Especially with tech startups, it is essential to have people who understand the business model, even if their core competency is somewhere else. Where traditional IT companies come with certain structures and setups already in place, startups require people who are flexible and do not shy away from putting in the extra efforts. The CFO is no exception.
Goel explained it is crucial for a good CFO to understand the core business model and the technology. It is a part of his job to keep a close eye on the growth trajectory of the startup, even at an early stage in the life cycle. Of course, one of the most crucial tasks for a CFO is fundraising. Goel told us a new-age CFO needs to assume responsibility for the complete fundraising cycle — from the timing of the fundraise to creating a healthy financial picture to meeting with advisors to identifying the right strategic partners and attracting the right set of investors.
Of course, these days CFOs are not expected to do all this by themselves. With automation and SaaS tools also solving a lot of finance operations inefficiency, often CFOs don’t have to manually ensure compliance or the right processes. Rather than fearing being replaced by software, Goel encourages the use of SaaS tools.
“These are the times for the finance team and CFO to look at more strategic value adding things rather than worrying about compliance. These tools actually help bring up the time from daily repetitive activities.”
Holding A Mirror To The Company
Communication is the key ingredient of any successful company and to maximise the success, it is crucial for a CFO to show the mirror to the company no matter what, the Moglix CFO believes. This means ethics must come first for a finance professional. “Whether it’s a traditional or a startup does not matter, your job is to tell the truth. Otherwise, if you start cooking up numbers, as CFO, you will fail in all aspects of your life.”
Weighing in his experience, Goel also spoke about the importance of the board for governance in case of contradictions and disputes between founders and investors and how a CFO should ideally deal with it.
“Investors, board, customers, suppliers, our team – all share guidance and inputs from their vantage points. The founder has to synthesize these inputs and take decisions in the best interest of the stakeholders, ecosystem and community. The objective of a CFO should be ideally to manage all stakeholders, which includes investors, CEO and the board,” Goel emphasised.