The State of Venture Funding in 2023 with OMERS Ventures

[00:00:00] Welcome to the Roll Forward, a podcast for the next wave of finance leaders, especially those looking to transform their roles by making smarter, faster, and more profitable business decisions using the power of technology and a forward looking approach to finance. Listen in to learn how to get out of the back office trenches and become a more strategic partner within your organization.

Introductions

Joe Michalowski: Hello and welcome to another episode of the Roll Forward Podcast. My name is Joe Michalowski. And this episode is brought to you by Mosaic, a strategic finance platform that transforms the way business gets done. And today I have a few guests for the first time, one familiar to many people, my duo, Joe at Mosaic.

Joe Garofalo, COO, co founder. If you’ve been listening for a long time, he hosted the first handful of episodes. He’s been on again. Uh, he will be on again soon. Spoiler alert. But our outside guests who I’m excited to speak to for the first time here are Marissa Moore and Eugene Lee from the Omer’s Ventures team, Eugene and Marissa.

Thanks so much for joining. Thanks for having us. Cool. Before we get going, do this for [00:01:00] everybody. But, uh, Marissa, I’ll start with you. Do you mind just giving everyone a quick background about yourself, the work you’re doing and we’ll get, get moving.

Marissa Moore: Yeah, sure. The short answer is I’ve been a numbers nerd my whole life.

In school, I skewed more towards math and science than I did really true finance. But right after graduating, I dove right into the deep end, took a job on Wall Street, worked on an equities trading floor of a bulge bracket investment bank. pretty quickly realized I wanted to do more analytical work than sales work.

So I ended up, you know, doing three years of the CFA program, made my way into equity research. And that was where I covered some of the largest machinery companies in the world. So Caterpillar, John Deere, Stanley, Black Decker. I learned a ton from these analysts I worked with. I really, really respected them.

And that’s when I fell in love with financial models. Importantly, like the good, good model hygiene, I learned really quickly what makes a bad model a bad model and what makes a good model a good model and have really stuck to my guns on that ever since. And yeah, from after that, I moved to private market research at CB Insights where I covered tech startups [00:02:00] for three years before coming to Omer’s Ventures.

And now I’ve been on the early stage investment team here for, for almost two years. And admittedly, I’ve earned a little bit of a reputation internally for my weird affinity of financial models, which Eugene can attest

Eugene Lee: to. True statement.

Joe Michalowski: I love that. This is the perfect place for you. Excited to have you.

So thank you so much for being here. Uh, Eugene, mind giving your stack round as well, and we’ll kind of dive into our

Eugene Lee: topic. Yeah, absolutely. So like Marissa, I’ve always been in and around numbers as well. And so I started my career off as a M& A banker building, you know, Excel model after Excel model before moving to Yahoo to start my call it corporate career.

I was on the biz ops team there at Yahoo. And the thesis back then was, Hey, let’s hire these bankers to help analyze key drivers, key metrics to help scale the business. You know, a lot of Excel work, a lot of models. And then after, after that, I went to back to business school and then started a long kind of career in, in startups and being part of two founding teams.

Anywhere from, [00:03:00] you know, those founding teams to growth at Pinterest, where I started the biz ops team and then really everything in between. And so most of those, most of those roles was leading those go to market teams, starting those biz ops teams. Like I said, and now I’ve been at Omer’s for close to four years.

It’ll be four years and it’s in September, which has been a wild ride. And now that being on boards, it’s a little bit of. Going back to early in my career where you’re helping these companies figure out scale through looking at numbers, looking at metrics, helping to set them the strategic direction, you know, product direction based on, you know, the, the numbers that we have in front of us.

So I’m getting to do kind of reverse of what, what, what, how my career started, except I’m not, I’m not building any models anymore. And there’s now there’s software to actually do this whole lot better than, than what I was doing, you know, almost 20 years ago.

Joe Michalowski: Love it. As the sole non numbers nerd here, I do words guys, I’m excited to learn from you all, but also bear with me as I try to keep up, but spoiler alert, you mentioned the software, uh, [00:04:00] Omer’s team, Eugene, Marissa, welcome to the Mosaic team led Mosaic series C.

So that is the impetus for being here aside from just being numbers nerds and getting to, to talk about those things as well. So really excited to dive into sort of that process and how we. We ended up working together and partnering you guys with the founding team. But before we get into that, it’s been, I remember a year ago, Joe and I sat down and we worked on a project, it was called like weathering the storm.

And so it was like, I think we published that like mid July. We’re about one year out from when all of that reporting started to happen about the market downturn and all of the analytics about, you know, what the market public markets were doing and how that might trickle down. And so before we get into sort of the fundraising process, things like that, I would love to hear from both of you about.

Just like the current state of venture funding now a year through and, and Marissa, I’ll start with you. How hard is it for founders to raise right now? What are things looking like above your perspective?

Current State of Venture Funding

Marissa Moore: Yeah, we’ve, we’ve talked about this a lot internally, as you can imagine. We’re, we’re [00:05:00] definitely a different, in a different world today than we were a year and a half ago.

And just to put it in perspective at a very high level, you know, at peak, there were lots of companies that could raise venture capital. There was just tons of supply. There’s also really low mortality rate because of this, you know, supply exceeded demand. And even the ones who are struggling or falling a little bit behind were able to raise follow on rounds that that the time between rounds is short, meaning there was less time for companies to really demonstrate performance.

And therefore they were, they were really valued on their future potential comps, excuse me, comps based valuation methods with comps at all times, all time highs meant upward spiraling valuations. The net net, you know, more companies surviving longer, valued based on their potential at higher valuations.

Now there are fewer companies that can raise venture capital as the bar in performance expectations has just gotten super high and funds have pulled back on net new deployments. Uh, there’s just no, you know, no ifs, ands, or buts about it. That’s, that’s what’s happening. The mortality rate is far higher.

Lots of companies are failing because that [00:06:00] now it’s reversed. There’s capital demand exceeds supplies. It’s a lot harder to raise those follow ons. And also because the time between rounds has increased as, as companies have been able to do some small kind of bridges and extension rounds, it’s a lot harder to raise those follow ons.

And there’s, you have to be, it’s all based on the demonstrated performance. So VCs have shifted to that basis for valuation. At the same time, the multiples have come down. So net net in today’s world, fewer companies raising and surviving value purely on their performance and at lower valuation. So totally different world than we were about a year and a half ago.

Joe Michalowski: Eugene, I want to kick it to you. Actually, quick note for everyone, since this is the first time we had three guests, I’m going to have to keep us moving because otherwise I could probably talk to the three of you for like three hours. So Eugene, as a follow up to that, do you think it, is it different for various stages or do you think it’s really just agnostic?

Is it just, everyone’s kind of dealing with the same

Eugene Lee: environment? Yeah, I would say [00:07:00] generally it’s probably, if I’m going to make a broad statement, it’s probably most likely to what Marissa had said earlier, I would say it’s definitely more, performance is definitely more noticed in the later stage companies because Frankly, there are numbers to actually go on, right?

There’s actually metrics to, to, to analyze. I’d say at the earlier stage, you know, those that are more in the beginning life cycle, you know, the precede seed, maybe a little bit of the series, a performance might not matter as much. There’s nothing to go on. You’re still going on team and vision, you know, and what they, what they think for the, for the future.

But I’ll, I’ll kind of throw a wrench into that in the sense of it really only takes one VC, one hot startup to kind of dispel this whole notion. Maybe it’s the, the hype of AI that everyone is reading about to kind of dispel that and maybe get founders thinking that this, what Marissa said isn’t happening.

But I would say the change is that that’s more the exception now versus, versus the rule. [00:08:00] And it was reversed, you know, in 21, 2021 and maybe 2020.

Joe Michalowski: Man, I, uh, just getting to watch it from this side just seems stressful, to be honest. And so Joe, I want to bring this to you because you just had to go through this from the founder’s side and curious what, what your thoughts are on what Marissa and Eugene are explaining and how things went for you raising the Series C in such a turbulent market.

Joe Garafalo: Yeah, I think anyone that’s gone through a capital raise before knows that it’s a really involved process. So you have to go into it eyes wide open. It doesn’t just fall into your lap. So there was a lot of conversations that we had and we’re fortunate to have a lot of great parties around the table.

General Catalyst, Trevor. He’s our partner. He’s on our board. He’s so helpful to us. John from Founders Fund, Colin from Friends and Family. So we had a lot of conversations going into the, the capital raise with them beforehand, just understanding what the environment was like, and there’s, there’s a lot at play, right?

We’re post pandemic inflation. We’ve got rising [00:09:00] interest rates. There’s a war in Europe. There’s tensions in China, there’s a looming election that’s around the corner, the banks were failing, there’s a commercial real estate bubble that’s happening. So there was a lot that was going to be stacked against us.

And we kind of knew going into this that like, you know, it was going to be more difficult for all the reasons that Marissa and Eugene mentioned. But also I think one thing that we didn’t quite know is that a lot of the VC funds deployed A lot of their dry powder in the boom times. So a lot of these funds, you know, they rely on LPs to raise more money, to continue the follow ons and to continue raising.

And I think, you know, and I don’t have any insight into this behind the scenes, but the, that, that also seems to have potentially dried up or slowed down. So when you have those huge funds that are completely deployed and only have a few. A few slugs left, it gets even more challenging to kind of stand out amongst the crowd.

And I think there probably are segments like the AI space that maybe are immune to some of the same hardships that, that other companies are now vanilla [00:10:00] SaaS companies, I guess, to call them we’re facing. But yeah, you definitely have to go into it eyes wide open and know that it is a hard time to get things done and the world has changed.

Joe Michalowski: Uh, vanilla SaaS companies, not something I thought I would hear us talk about today. Uh, love that, big fan. So I want to, Marissa, I want to kick it back to you. And like I said, I’m just going to kind of keep us rolling here. We have the question online here. So we, we know it’s hard to raise right now and it’s pretty clear, like even though, you know, we spent a few minutes talking about it, but it’s, it doesn’t take long for anyone to realize like, Hey, like this is going to be tough.

So I want to know Marissa first from you and then Eugene, I’ll ask you the same question, but. What, what does it take for a company to stand out right now? What are you looking for portfolio or in portfolio companies or potential investments that really, other than, you know, other than saying AI and, you know, actually knowing what you’re doing there, what are you looking for and what makes you stand out?

Marissa Moore: Yeah. I mean, I, for us, it’s outside of the macro environment or the industry, what it ultimately comes down to for us are [00:11:00] incredible teams with really strong founder product and go to market fit. Usually a unique insight or unfair advantage that allows them to build really best in class solutions, scale exponentially, and then become a category leader.

They also have to have a really, like, really solid grasp of the wine out question. I, I don’t feel that founders always lean into that. And a plan to execute against that and build defensible modes against others who are probably looking to ride the same tailwinds. So that’s really it across the board.

Of course, when you really drill down into it, there are some nuances that vary by industry, you know. For example, like a typical B2B SaaS go to market strategy doesn’t always apply to healthcare companies. So you have to think, or you have to evaluate their ability to scale in different ways. But in general, we think it’s, it’s really the same set of ingredients that make us a company stand out from the rest of the pack.

Joe Michalowski: Yeah, it makes sense. Thank you for touching on the healthcare thing, because I know that that’s, uh, one of your expertise. So good to know that it’s kind of the same general bucket, but Eugene, curious if you feel the same way, is it something where there’s something [00:12:00] specific you’re looking for, something that makes it stand out, or do you kind of agree with Marissa there?

Eugene Lee: Yeah. I mean, I think I generally agree with, with Marissa. I think there’s a little bit of nuance around early stage versus late stage companies in terms of what, what makes them stand out. I’d say at the earlier, earlier stages, now that it kind of blends, you know, and to a degree, but I think the vision and the team matter a little bit more.

I mean, if you think as, as early stage VCs, we’re in the business of not just investing in. What is today and what is now we’re in the business of what does this thing look like in the next five years, seven years, even 10 and 10 years, this is that journey that would that we’re on with, with, with these teams and the vision now might be something completely different, you know, in that, in that, in that time period.

So can the team and the founding team actually navigate those challenges, some expected, some unexpected, like we’ve seen, you know, what the market and the banking crisis of, of this [00:13:00] year. It’s something that we definitely want to look for in companies and help those companies. You know, that that’s basically what makes them stand out.

I’d say at the later stages, going to our earlier part of the conversation, it is about performance. It is about traction. It is about mad momentum. And that matters a little bit more given that there is that it are those numbers. And then I guess in the evolution of a company, something that we also think about from, from the longterm is.

What is the next phase of, of, of the company? What’s the next phase of mosaic? You know, is there a second product? Is this a platform? Are there huge partnership opportunities that can open, you know, blow open the door in terms of distribution and, and thinking through at that massive scale that we hope, you know, hope these companies can get to.

And so how’s the founder and how’s the team and how’s that all kind of shaped into kind of the delivery of, of, of the pitch and, and, and in that conversation? I love that. I,

Joe Michalowski: uh, so. I didn’t say it up top, but I kind of, I wanted to get us through this. I feel like we’ve set the stage well. And so [00:14:00] that’s kind of why I’ve been moving us through this a little bit.

Cause the next question is what, I kind of want to step out of the way and let you guys, the three of you have a conversation here because you know, we know difficult to raise, we know kind of what your perspectives are, Eugene and Marissa on looking at companies, but Joe. Raising a series C from Omer’s I’m curious, like how your experience aligned with their comments on what they’re looking for.

And I would love to listen to the three of you kind of discuss a deeper overview of what the process looked like, the metrics you were all diving into and how difficult it was to really get this deal done. Obviously, you know, I’d like to paint the picture where like everything was perfect. Few days, like mosaic just looks like such an amazing investment.

They couldn’t resist, but. I know it wasn’t that easy. So Joe, I’d love to turn it to you and kind of

Eugene Lee: let you guys talk.

The Mosaic Series C with OMERS

Joe Garafalo: Yeah. I think to piggyback off of the, the way we started the conversation, right. I think historically in, in 2020, 2021, talking to investors, they are, we’re [00:15:00] just eternally optimistic. And I think this go around, I don’t want to say that there was, there was more negativity, but I think.

Investors, we’re seeing a lot across their portfolio, right? They’re seeing other portfolio companies maybe struggle with pipeline generation, or they’re seeing a slowdown in the sales team, lend rates, or maybe ACVs took a dip. So they’re coming in with, with that, that context that like, Hey, you know, our companies or some of our other companies are struggling, or slowdowns in X, Y, Z places, or things may look a little soft.

Is that what you guys are seeing? And fortunately for us, you know, like we, we haven’t seen that pipeline slow down. You’ve actually seen our ACVs grow, but there still was like that bit of, of skepticalness. And I think, um, in accounting, they call it like professional skepticism, which I think Marissa and Eugene, you guys displayed pretty, pretty greatly.

I think in the backdrop too, you probably are, you also have, you know, the, the big failure of, of FTX and I’m a big crypto guy. So that, that one broke my heart, but it felt like there was almost [00:16:00] zero, zero diligence done. For, for that massive scale deal. So maybe, and again, this is my own interpretation, but maybe there was an over rotation of like back to basics on some of the due diligence that got done.

So this is all water under the bridge and Eugene and Marissa, you guys are part of the team now. So I’m happy to joke about it, but the diligence process, like we, we went through it with you guys for about 90 days, right? We had a great 2022. We finished the year strong, we tripled and. Then it was, it was January, right?

And suddenly Q4 didn’t matter anymore. Like we, we, we went off a huge Q4 to, to start conversations. But now I was like, okay, let’s, let’s see how Q1 goes. So we wanted to play that quarter out and make sure that none of the things that were in the back of minds to investors or what they were seeing across their portfolio was, was going to happen to us.

So we went deep. I mean, like we, we covered pretty much every metric. I think there’s all the table stakes stuff, right? Like CAC, ARR, LTB, growth. Um, but I think this time around, like growth was, was obviously still important, but was the growth efficient, [00:17:00] right? You needed, you needed the burn multiple to be paired with that growth for it to be scalable and for it to make sense in today’s world, given the cost of capital.

And I think that the headline growth number these days just probably isn’t good enough to get a deal done in this environment. Um, I think more than ever, like there was a big focus on retention and rightfully so I think, I think that’s always the case, but I think it. It definitely felt a little bit more exaggerated in this environment.

So yeah, I think the shift from growth at all costs to growth at You know, a clip that actually makes sense and can scale, but we went deep, right? We had multiple sessions. I think with Marissa and Eugene, we, we did specific go to market deep dive sessions where, you know, we got into the nitty gritty, we got into the marketing funnel, we got into how leads were generated from different channels, how those leads turned into MQLs and SQLs, what we could expect from inbound and outbound pipeline generation.

And that was just, you know, that, that was that next level of depth in the diligence process that we hadn’t seen in the, the A or the B. And then even down to [00:18:00] like product stuff, like we got into user sessions, user accounts, how we expect customers to grow over time. And it was a really, really good exercise for not only to get Marissa and Eugene comfortable, but for also for us to get comfortable on like, Hey, they’re asking all these really hard questions.

A lot we had off the shelf, thanks to the product that we have, but it allows us to not only like. Do the work and understand what’s going on to answer the questions, but then we can share that information with the rest of the teams. It’s like, how do we now equip the customer success team with the user data to make sure that, Hey, by month three, this is what we expect to happen.

This is what a prototypical customer that’s successful looks like. How do we, how do we go scale that across the entire customer base? So ultimately a lot of the same with more emphasis on new things. And then just deeper.

Eugene Lee: Yeah. I’d

Joe Michalowski: love the follow ups because selfishly, I’m just like, I want to hear how all of this works, but yeah, please.

Eugene Lee: Yeah. Let me just respond to kind of, or react to kind of what, what Joe said here. I mean, I [00:19:00] would say that the process was, it was pretty smooth, right? I mean, I think, yes, it was a little bit longer than the historical kind of processes, processes that you’ve seen in yesteryear.

But I think part of that was for us too, was. You know, we really wanted to build a relationship and with, with the, with the team. And just as much as we’re, we’re, you know, drilling you guys on questions. I mean, you’re, you guys are peppering us with questions and hopefully ultimately we landed. And I think we’re there of like, you guys know how we think and we know how you guys think about, you know, solving these problems.

And I think for us, that’s just a really important thing about doing deals. It’s like. We want to get alignment around like what, just not what the historic performance is, but how do you think about the future? Because that’s what we’re putting, you know, our funding dollars. Our dollars too. I think what was, you know, when you’re going through like, you know, the, the detailed of some of the metrics and you mentioned, you know, the software enabled you to do that.

I just remember during that process where it was, uh, you, [00:20:00] Mosaic was, you guys were so buttoned up from that process that it was almost like. Wait, wait a second, like, you know, it was like, you know, you know, but I think that’s the power of mosaic, right? That’s the power of the software is because in other processes that we’ve been and even when I was a, you know, practitioner in the space, it was so manual.

It was like it was pulling teeth and like for you guys to have everything locked and loaded on that amount, I think just spoke volumes to like where you guys were as a team and then like. You’re you’re I told Marissa, like you’re mosaicing mosaic, right? Like it’s like, it is the perfect like diligence for us to see it in action as we kind of go through the process, which made us get more conviction of like, okay, we’re, we’re onto something here, you know?

So

Joe Michalowski: I love this. I. I want to go a level deeper because I work in marketing. I, like I said, I’m not the numbers guy here. I am the words guy. I host the podcast and write the blog posts and things like that. I heard Joe mentioned deep go to [00:21:00] market conversations and selfishly. I would love to look at that as an example of how you guys all went through the diligence process.

You said it was smooth, but Marissa, maybe I’ll start with you. Cause you said financial modeling nerd. I’m throwing a curve ball here, but you know, if you’re looking at kind of the funnel metrics or things like, what are you. If you’re looking at a diligence process, what are you diving deep into? What are you trying to uncover?

What are you looking for in trends? I, I would love to hear you guys talk about that go to market analysis to see if, you know, Mosaic was worth the investment, which we know the outcome. So it’s, you know, a positive conversation. So it’s great.

Marissa Moore: Yeah. Pulling a little bit of an audible here. It’s been a while, so I don’t remember all the details, but like in general, it’s, it’s what Joe said.

It’s understanding the channels, ones that have been from the get go. How they’ve trended in terms of conversion, how efficient they are, how the sales team is doing against quota. And then what channel, what new channels are emerging and what are the early signs that like they’re worth throwing more money [00:22:00] onto and investing in?

I mean, that’s, that’s really the high level in terms of the data that we were shared. It was really like down to, it was the most granular inbound and outbound, you know, funnel conversion metrics I think I’ve ever seen to Eugene’s point. And the whole time we were saying like, We just want to see Mosaic and Mosaic, and they just gave us access to Mosaic and Mosaic.

But we really were, we were getting it. It just was, you know, true excel, but now we have access to Mosaic and Mosaic, and it’s the most incredible thing ever. So, yeah, from a go to market standpoint, it was, it was really that at a high level. I’m gonna have to really go back into my memory to remember the specifics, but Eugene.

Yeah, I

Eugene Lee: can chime in. Like, I think not to go too into the nitty gritty details, but like, I think part of the process is understanding how you got to where you, where you are, right? And so like, there’s a little bit of, when you do diligence, there’s a little bit of a notion of like, yeah, there is growth, right?

And so, but is all growth is not created equal. [00:23:00] And so for our as as impressive as where mosaic was when we were doing diligence, it was about like, is that is that growth going to be sustainable from the efficiency perspective that Joe Joe mentioned? But like, you can theoretically artificially inflate the growth by, you know, Maybe you’re not getting the right ICP.

You’re just signing up customers and what we would care about on the back end, like we wouldn’t want from a year from now, all those customers that you just kind of fluffed up the numbers to churn out. And so it was just trying to get to that next layer of like understanding, you know, in this case, who your customers are, why did they buy?

You know, do we have a good point of view on whether they’re going to stay on for for the future and just really understanding that kind of whole process of how this whole, you know, operation kind of kind of works.

Marissa Moore: I’ll add to that too, just back to Joe’s point on, you know, maybe there was a little bit more emphasis this go around on retention.

I think that’s more a product of the market [00:24:00] than it, like, and the customer base than it is about Mosaic or any other company that sells into venture backed companies. It was more like we wanted to make sure that the customer base was healthy, you know, like we have full belief. We’d gotten to a point where we’re like, this is the best product out there.

Like people, it’s very sticky. People are going to get a tremendous amount of value out of this. But it was more a matter of what happens if they don’t raise their next, the customer doesn’t raise their next fund or the fundraise, or, you know, they go out of business, so they get bought. Like what happens then?

Because that’s what is happening in the broader market. So I would say it was a little bit more, there’s more focus on that than there really was about, you know, the, the testament of, you know, the value that Mosaic’s product brings.

Joe Garafalo: Yeah. And I think one thing that is, is always fun to do is like, it’s great to look at the numbers, but I think what’s more fun is just telling the story behind the numbers.

Right. So when we look at our sales team and you’re like. How, how the heck are these guys blowing out quota one 30, one 40, one 50%. And then you talk about the way that [00:25:00] you hire and the team that you’ve built. And I think that all that context that would just get lost. If you look at the numbers and the win rates and the quota attainment percentage, but the behind the scenes of like how the team on boards, how the sales team ramps, what their profile is, what attributes we look for in candidates.

I think that that’s probably the most fun part of the diligence process.

Eugene Lee: Yeah, and I’m sorry. I just want to respond. Like there was one point I think going down that process when you’re talking about, you know, the sales team. And I think you highlighted that a lot of a lot of the sales team and a lot of the backgrounds of people at Mosaic have come from the world of finance.

And so have been in those roles and I, I remember thinking like, that is genius. Like you got to talk the same language, right? Like you need, you need to understand who your buyer is and you have people in place. They may be new, new to being a, from a selling perspective and a selling role, but like that just makes a whole lot of sense and why they’re, they are, you’re scaling the way that they are and why they’re, you know, exceeding expectations from a, from a [00:26:00] quota perspective.

It all, it all kind of. Came together at that

Joe Michalowski: point. I say this all the time. I’ve said it on the podcast. I am wildly spoiled at this company as a content person, because the only thing that makes my job easier is having subject matter experts to actually tell me what it is I should be talking about. And there are so many across this company, whether it’s sales team, the C at the entire CS team, you know, our founders, our product led or our product experts, it’s just.

An embarrassment of Richard’s on the subject matter expertise front. So I’m glad you mentioned that. Cause I, I can’t speak highly enough of some of the, the backgrounds that are at this company and whether that means like they’re the greatest like sales rep or CSM, to your point, like maybe they didn’t have experience in that role, but because they can speak that language with.

The people we care about, like it, it just makes a huge difference. So I’m glad to touch on that. It’s really, it’s exciting to me. So I’m glad that it matters to other people too.

I appreciate you all bearing with me as I definitely did [00:27:00] not have these questions outlined ahead of time, but I was excited to sort of spend a little bit of extra time on the metrics and the views of things, Joe, the only followup I have for you. Is if there’s anything you remember that are like unique views of metrics, either whether it’s with the Omer steam or any other like investor conversations, but ways that you had to present metrics this time around, that maybe you were able to give like a higher level in the past.

Any examples where like, uh, A deeper dive or a unique view in Mosaic was a helpful for the pitch.

Joe Garafalo: I think to Marissa’s point earlier, right? Like focusing on the customer base was, was important. So being able to not only look at your ARR by customer, but by segments, by region, by customer size, and just assessing like if there is risk in the portfolio, like where is that risk?

And as we continue to move up market, we probably see less, less of that risk, but being able to communicate that clearly was important. I’m all for continuing to help SMB customers. There’s [00:28:00] obviously just more inherent risk in that segment, given when, when times are, are more difficult, they tend to struggle more than, you know, the more established enterprise companies or the upper mid market.

So I think deeper looks at, you know, customer counts by segment, by region. Geography is also important, but again, I don’t think these are any different than a normal diligence process, but probably had a bit more focus, whereas maybe it was a check the box and like, did this company provided in 2021? The answer is yes, but now we actually sat down, had a conversation and the real thought behind it.

Joe Michalowski: I will give you all a break and we will get off of the deep dive into the metrics train. Thank you again for bearing with me. I wanted to move into talking a little bit about the, the space that Mosaic operates in and kind of what was attractive to you all from that perspective. And Eugene, I’ll start with you because you, you operate in this environment at Pinterest.

And so anecdotally to me, I feel like the CFO tech space, this FP& A software spaces [00:29:00] withstanding some of the headwinds of the market, like no one’s immune to it, except again, except maybe, maybe AI a little bit. But, uh, you know, we’re withstanding a little bit and I’m, I’m curious, Eugene, if you think that’s true and if so, like why, why now for CFO tech investments?

Why do you think now’s the right time?

Investing in the CFO Tech Space

Eugene Lee: Yeah. I mean, I think to back, to back up a little bit, I mean, we’ve always been bullish on the space, not in just, you know, these, these kind of, these kinds of times we actually wrote an article, I think it was in 21 around our, our belief in kind of what we had called the office of the CFO.

And again, like, like you said, Joe, this, this kind of stems from my operating background in, in, in the space. And so I think there’s been a shift in how teams and companies think about the role of the CFO and how CEOs think of, of the CFO. I think CFOs are now being viewed more as a strategic partnership between the CEO and the CFO.

I think you’ve seen, you know, two fundamental shifts in the past couple of years [00:30:00] where there has been a focus on the CFO and that was through, you know, the beginning times of COVID when everything shut down, how do we evaluate or reevaluate the business? And then in the recent, like March timeframe of the banking crisis, when there was potentially not funds available for, for, for, for companies, like, how do you react, you need to be.

You know, kind of on the, on the spot to, to be able to put together a, a, a plan that’s, that’s, that’s timely. And so the CFO now needs to have that visibility, you know, readily available and, and, and do it quickly. And then I think the market, like we’ve said, is kind of accelerated. You know, the reliance on CFOs, like Joe had mentioned, you know, pipelines, decreasing ACVs, you know, decreasing, you know, CFOs are actually in these conversations now from, from a sales perspective of like approving stuff or approving, you know, things that you’re going, you’re going to go by.

And so. They’re being more critical into the [00:31:00] day to day life of, of operating, operating the business. And I think historically there’s been investment into engineering and product teams to help, obviously help build the product sales teams to go grow the revenue. And I think now you’re seeing this shift where, you know, you need to figure out how to scale the business in, in the right way.

And so you need to enable the CFO and their teams to think about not just growth, top line growth. But how do expenses and revenue actually move together to help scale the company? And so I think there’s starting to be this more of a shift, you know, it’s not just the CFOs now that are being hired are coming from, you know, the traditional accounting world, right?

They’re coming from these more strategic lenses because they’re becoming partners to the, the, the CEO. And again, in scaling the business. Merce, I’d love any

Joe Michalowski: follow up thoughts, and again, touching on just the industry at large, like what stands out, I [00:32:00] know you have that healthcare expertise, but I know this is a space that’s important to you too, and yeah, I would love to hear your thoughts.

Marissa Moore: Yeah, I think, you know, just double down on what Eugene said at the beginning, that this is an exciting space, irrespective of the economic environment, like, What’s, what’s really clear to me, Eugene has spent more time exploring the space. What was really clear to me when I first started to dig in was that there’s absolutely universal need for it.

There’s yet to be a ubiquitous operating system for FP& A teams. And based on our conversations with, with these finance leaders, the market’s ready for one. It’s these often loads, but necessary, you know, legacy operating systems. The finance leaders have to, you know, find themselves replacing spreadsheets with these solutions.

It takes six to 24 months to implement. And then you’ve got all this like either internal or external talent to manage, maintain, and build those things. And they just consistently rank with negative NPS and they don’t really have the like automation, collaboration tools and necessary [00:33:00] integrations that businesses today, like have come to.

Frankly expect. So net net, you know, the category is yet to really see a dominant winner, but it’s ready for one both from a business and a technology standpoint. And those are again, irrespective of the macro environment or really the, the industry we’re looking at. Those are the ingredients of like what make a really great venture investment.

So yeah, just, just to double down on that, this is. The, the space itself, and we think is really interesting, but, and obviously we think Mosaic is poised to be that winner. Let’s

Joe Michalowski: all hope so. That’s, we all need it. It’s going to happen. We’re making it happen. Joe, I’ll let you round this out. I want to know, obviously, strategic finance, that’s your, that’s your baby, you started with it in 2019 and it’s what we’re all trying to sort of.

Move this industry and, you know, the business world at large toward curious what your perspective is on its value in the

Joe Garafalo: current environment. Yeah, I think, I think Marissa and Eugene nailed it. And I don’t know if I’ve told either of you this story, so it feels like now is a good time. But the reason we called our [00:34:00] podcast, the Roll Forward, number one was we wanted to take the role of the CFO and move it into the future, and that’s what we think strategic finance is.

And what Eugene said is, is really, really true, which is. CFOs need to be in tune with Salesforce or what’s going on in the pipeline. And they can’t be afraid of that data. And for a long time, it felt like CFOs are really in tune with the three statement financials and probably the ERP and the accounting system.

But no, everybody here knows if you, if you wait to make decisions based on the three statement financials, you’re probably going to lose because everything there is a lagging indicator. So in times like this, it’s really important for finance folks to be in tune with what’s happening. Today in the business, and if there looks like there’s going to be a soft quarter, you probably need to have that conversation with your CEO and give them a heads up that, Hey, things might be getting soft and it might be time to dial down burn or, Hey, you know what?

Now we’re seeing weakness in the market from other competitors. Now’s actually the time to dial it up and take that risk. [00:35:00] But you can’t do that if you don’t have a platform like Marissa was alluding to where, you know, it takes forever, 24 months to set up and then you need to. A whole suite of headcount that have to become profits or whatever to, to manage the software and rolling a model forward is, is really important.

I think, you know, it was like quarterly was good. I think now monthly is probably really good. So again, the reason we called it the roll forward was cause that’s what we do in finance. We roll those models forward as much and as often as we can. So I think now more than ever, it’s important to just stay strategic with your finance.

And finance doesn’t have to just mean gap accounting, financial statements. It means the metrics that move the business. And if it has a dollar sign that says heeded to it, we should be on top of it.

Joe Michalowski: I love that. I knew, uh, full credit to Joe for, for naming the podcast. Joe is, I might do some of the tactical marketing stuff, but Joe is very good at branding for somebody with an entirely a finance background.

So we were very fortunate to have, uh, [00:36:00] Chochi on that. Cause I was excited about the podcast name. He’s a renaissance man. Yeah, he is. So, I’ll have to hear it. All right, let’s we’re, we’re coming, we’re not coming down to time yet, but we are getting closer. So I want to move us down into the last couple of questions and I’ll leave Joe out of this one because he might be a little tired of like thinking about fundraising and might be ready to get back into actually the business.

But I know Marissa and Eugene, you have to always think about fundraising. That is a, as your life. And so we talked about the current state of venture funding. We talked about what you all are looking for, but I want to spend at least like a minute talking about what you think things might look like going forward.

Disclaimer, no financial. So this is not a, any sort of thing like that, but yeah, Marissa, I’ll start with you curious what you think the things are going to look like in the second half of 2023 into 2024 and what advice you might have for companies that have to raise moving forward. Yeah,

Future Outlook on Venture Funding

Marissa Moore: I mean, I think it will, I think we’re still going to be in this, this present state for a [00:37:00] little bit longer.

I haven’t seen enough signals to say that we’re really on the cusp of that inflecting in a material way. I think. For us, like as investors, I think we’re going to see a bit more deal volume at the A, the B in the second half of the year. Cause a lot of those companies, like I said earlier, we’re, we’re doing extension rounds or doing inside rounds to kind of bridge till they had really hit the metrics that they felt justified, you know, that next round of funding.

So I do kind of feel like there’s pockets of that that are going to, you know, a big. A big group of them coming out to raise at the same time, but I think generally like expectations and valuations and all of that the way that we diligence the timeline that it takes to fundraise is probably going to still be the same for the second half of the year in terms of advice.

One, there’s a few things I would say, one is give yourself plenty of time to raise. Maybe even test the market early. Start having informal intro calls a month or two before kicking off a formal process. And this goes a little bit to my second point, like [00:38:00] start getting a feel for the investors that you thought are priority for you.

Like, do you actually get along with them? To Eugene’s point earlier, like for us, we’re very relationship driven. And it’s really important to really build that rapport and make sure that you know that you’re going to be able to have tough conversations down the road. Like this is a marriage that you’re getting into multiple, multiple years of, of deep conversations, happy conversations, tough conversations.

You need to know that you can like really trust these people. So that goes to my second point is really before you start, create a pipeline of target investors and force rank them based on how well they map what you’re looking for. And then also like. How well your round matches what they look for in terms of size of the check, the stage, the active theses they might have, like, as an investor community, I don’t think we always do the best job of signaling to the market with exactly where we are on those things, except for like these one on one conversations, but again, goes to my point earlier, start having informal conversations before you actually kick off the raise, and then prioritize your time accordingly, like only you.

Only give all your all to the funds that you [00:39:00] really think are really good maps, but obviously keep your options open. And then when it comes to the pitch itself, like clarity and consistency of vision is key. Remember that in that first pitch, you’re not trying to seal the whole deal. You want to tell a compelling story and pique the investor’s interest just enough to move to the next stage of the process, which, you know, to Joe’s point earlier, like might be a deeper dive into a particular aspect of the business, whether it’s product demo or go to market or whatever.

But that’s it. Stay focused on that. Take it step by step. Don’t try to boil the ocean in the first meeting because that tends to obfuscate clarity and that’s You want to be super clear. You want to make it as easy as possible for the investor on the other side to really understand what it is you’re building and I’ll pass it off to Eugene.

Eugene Lee: Yeah. I mean, that was fantastic. I mean,

Joe Garafalo: that was some of the best advice

Joe Michalowski: I’ve ever just cut it there. We’re just, yeah.

Eugene Lee: Yeah, I don’t know if I could add too, too much there. I think the only, the only thing that I could add on is it’s a process, right? And [00:40:00] I think during that process, I think everyone, all these investors know that it’s been a tough market.

You can’t get around that. And so at some point I think you have to admit that it’s been a tough journey and, but I think more importantly, it’s. What did you learn from that? What did you change? How did you adapt? And again, to Marissa’s point, it doesn’t have to be in the first conversation because you’re trying to get to the second conversation.

But I think there is a story that you can create around, Hey, yeah, market sucks. Like, we, and then we did this, and then we figured something else out, and then we, you know, we This is the iteration and the challenge of, of a startup in good times and in bad times is that constant fine tuning of what you’re learning.

And I think, you know, investors, you kind of want to know how you, how you change and how you adapt it along, along, along the way. All right, guys,

Joe Michalowski: I have one last question. I’m going to keep it to just Eugene and Marissa because Spoiler alert for anyone listening, I’m taking Joe on the podcast again in a week.

So I’ll make Joe answer this [00:41:00] question in a separate episode just for the sake of time, but you know, Eugene just finished up. So Marissa, I’ll ask you first. We ask everyone that comes on, usually it’s about finance specifically, but I’m going to broaden it because, you know, not like a CFO. So what’s one thing, you know, now that you wish you knew at the start of just your career or even in your financial modeling, nerd, hobbying.

Marissa Moore: Yeah. My hobbying. Yeah. Wow. I sound so cool right now. So yeah, no, but actually it kind of has to do with, with finance or, you know, the hard technical skills, you know, I’ve been in the job for two years now. Before joining OMERS, I really thought I had a good idea of what my pre VC work would. would carry over into, like, what would be most important, what would be most relevant, what would make me stand out?

And specifically, I assumed, you know, that my, my work as in equity research would be more important than maybe sales. I thought my hard skills, the financial analysis, modeling, all of that would be much more important than the soft ones, like, you know, adaptability, communication, time management, all that stuff.

But honestly, every day I catch myself drawing upon what I thought [00:42:00] were completely irrelevant experiences to get my job done. Spoiler alert. So much of VC is actually sales. And the soft skills, you know, come out just as often, if not more often than the hard ones. And if I’m really honest, like it’s probably the soft skills that end up creating more value.

It’s really about relationships. It’s how you connect with, sympathize with, care for, and support other people and their businesses that make you stand out as an investor. It’s not your modeling skills. And so, you know, for really the last 10 years across personal, professional, and academic experiences, like.

I’ve just learned how to challenge myself, try new things, wear a lot of hats and adapt and evolve to change the circumstances and, and, and in retrospect, I think that ability to adapt and relate to and connect to so many different types of people, um, might be the single most valuable skill I’ve brought into this role.

And it’s something that like, I definitely did not expect when I joined.

Joe Michalowski: Eugene, same question to you.

Eugene Lee: Yeah. I mean, mine’s a little bit on the same lines of Marissa. I mean, I [00:43:00] think early in my career and like mini kind of hard charging, you know, type a personalities, you know, I was very early on. I was chasing, you know, let’s call it status title prestige, right?

I mean, I went into investment banking thinking like, Hey, that’s what you do when you come out of college. And, you know, just doing investment banking wasn’t good enough. I had to do what was Yeah. Thought of as the hardest, one of the harder, you know, kind of functions within banking, which was M and a, and so I think I wanted to be at that time.

I wanted to be the guy, you know, not just a guy on, on the team. And I think in some cases I achieved, but in some cases, in a lot of cases I failed at that. I was chasing the wrong, wrong thing. So if I look over like the last two decades, of, of my career, instead of chasing that kind of title and, you know, prestige, it all comes down to, to people.

I would have optimized [00:44:00] an earlier part of my career for, for the team, the people that I can actually learn from and not that title on, you know, the job, the job, job description, because I think at the end of the day, If you do great work and you have a team that helps you, you know, figure out how to do that great work and you can learn from them, everything at the end of the day will take care of itself.

And so, it’s about surrounding yourself with, you know, those special people that you can create those bonds, those relationships along the way. And I was fortunate enough to do, be early in my career at Yahoo during some of the early days at Yahoo, where we’ve all stayed in touch, you know, I’ve actually, I think I’ve told some people this, that You know, basically after every job post Yahoo, I have found my next opportunity through an old Yahoo contact.

And so it’s those types of relationships that you think through, you know, the Pinterest days were just as good. And so I think who you work with is, is, is everything and can kind of change the trajectory of your career. It’s not necessarily the, [00:45:00] the, the company or, you know, the title that, that will, that will do that.

Marissa Moore: Basically what he’s saying is that the Elmer’s Ventures team is absolutely awesome. Exactly.

Eugene Lee: Exactly. We

Joe Michalowski: all know that’s true. It’s absolutely true. You guys hung out with me for basically an hour just to teach me about investments and raising funds. So much appreciated. I would fully agree. I also love that question.

I say this every time people listen enough podcast episodes are probably really sick of me saying this, but I really like that question because it always applies beyond anytime I ask someone specifically in finance. It’s never like, man, I wish I knew that one Excel function earlier in my career. It’s always something that applies broadly just to me outside of finance.

And so I thought it was, uh, nice to hear perspectives from you both as well. So appreciate it. Um, but that, like I said, is the last question we asked. So. I’ll turn the floor over to you. Usually we have people on that are like selling product. It’s kind of the floor is yours to promote. Where can people, you know, follow you, learn more [00:46:00] about the Omer seam, any other investments that you guys have, whatever.

I’m curious. What would you guys like to pitch as the floor is yours?

Eugene Lee: I’ll let you go,

Marissa Moore: Marissa. I actually have something very exciting that I’ve been working on for several months that I just publicly socials today. It’s called the green room. It’s a safe space. Private zoom environment for founders to get ready for the main stage, practice their pitch in front of real VC investors that have been hand selected to provide feedback on that particular stage, business model, topic area.

So I’ve got the first few ones scheduled for July. They are focused on health tech, but we will be expanding and broadening out to different industries and different stages. And the goal is really just to give back to the founder community and help them. As I know, as we’ve talked a lot about this.

Session is fundraising is damn hard. And sometimes you don’t always have access to the people who are on the other side of the table to give that harsh or the harsh feedback, the honest feedback, the, the true [00:47:00] feedback, whatever it is, it’s what you need to really get your pitch in tip top shape before you go out to fundraise.

So that’s the goal. Congrats. So apply on the gr wow on the green room. Yeah, I’ll, it’s on on my socials. Check it out on ER’s Ventures, socials as well. And would love to have any founders. Yeah.

Joe Michalowski: It’ll be linked in the notes. I, I’m going to be honest, was not expecting such a perfect thing. It’s hot off the press.

Yeah. It’s hot off the press right now. What timing. This is incredible. Okay. Uh, Eugene, anything from you or do you want to leave it at, at Marissa’s? Yeah. Well, no,

Eugene Lee: I mean, if, if look, if you’re looking to raise more early stage technology investors, we invest in series A, B, C. Like, I think, you know, we’re on this podcast, but I think our founders mean in the team, founding teams and the teams that we back are the most important thing to us.

And so I think hopefully it shows through kind of the relationships that we’ve built with the Mosaic team. And I think we rest on kind of the founders and their, and their feedback on what they say about us as a team. And hopefully that carries through. And as we look at, you know, potential new investments.[00:48:00]

Get in touch if you’re, if you’re raising love it.

Joe Michalowski: Well, Marissa, Eugene, Joe, as always, thank you for joining, for bearing with me again, as I threw curve balls at you that you didn’t expect, it was great. I thought it went really well and just, that was great. Having you all on the roll for it. Hope we can do it again sometime.

Thanks for

Eugene Lee: having us. Likewise. Nice meeting you. Thank you for checking out this episode of The Roll Forward. This show is powered by Mosaic, a strategic finance platform that transforms the way business gets done. If you enjoyed what you learned in this episode, make sure to follow The Roll Forward wherever you listen to your favorite podcasts, or visit mosaic.

tech slash podcast to get immediate access to all of the latest episodes.