00:09:16 · Guillaume Moubeche, Martino Cadoni
[00:09:16] S1: And can you explain maybe, like, what's what's a treasury system and why... Like, how how things got improved on that side? [00:09:24] S0: Yeah. I mean, so a treasury system, usually, you... In a big company, you have multiple bank accounts. Right? These bank accounts needs to be managed. And usually, there is a a treasury system, which is like where you manage the... These bank accounts from. Right? Because GE was a combination of a lot of m and a acquisitions, over time, the amount of these management systems exponentially grew. Right? We... Drives friction, extra cost because you are paying multiple providers. So there was an opportunity to consolidate and improve processes, and that's what that's what we did. [00:10:03] S1: Okay. Nice. And I think at g, you did around like 20 exits and IPO readiness work. But also at HSBC, you were like a deputy CFO, and I think the business unit was around like 2,000,000,000. Where... How do you think, like, this this corporate jobs, like, kind of, like, help you transition to to start up? Like, what are the thing that you kept and also the thing that you had to unlearn to make that transition?
00:10:33 · Martino Cadoni
[00:10:33] S0: Yeah. I I think also what what you keep is the depth of analysis that you need to do because the devil is in the detail when it comes to value creation, optimizing the outcome of an M and A exit or an IPO. Really, you really need to go deep. And I think one of the things that is often underrated in tech is the balance sheet. Like, every time I go and work with tech companies, they are obsessed about the p and l, which is great. But you should be equally obsessed with the balance sheet because there is a lot of opportunities in a balance sheet, obviously, in... Depending on the business model more... Some more than others. But I think that balance sheet obsession is something that has benefited me quite a lot along my journey after public companies at Klarna, but also now at DeepL. So understanding the treasury side of things, how to optimize cash flows, I think that's something which I learned during those days. Also because, for example, at at HSBC, I was responsible for strategic finance, meaning deciding how much buyback we should pay. Right? How much dividend we should issue. Right? So managing the capital at the balance sheet of a company, which were back then, you know, was doing globally 50,000,000,000 in revenue and had a multitrillion balance sheet. Another thing I think a lender is institutional knowledge and also how to lead with central banks, with institutional investors, with other banks. I think that ability to build and manage those relationship is definitely helpful in my today's job. In term of what I had to unlearn, definitely, you know, when you move to a scale up, I think you need to understand the earlier when it's good enough because speed is as important as quality. So you don't wanna kill velocity because you wanna be too perfect. So you need to be... To get more comfortable in the good enough and just move on. Right? Because speed is critical in in private markets. So the one is definitely something to adjust. In general, be be a bit less polished. Right? Because, again, it's it's all about speed. It's all about execution. And sometimes it's better to be slightly imperfect, but be fast.
00:13:20 · Guillaume Moubeche, Martino Cadoni
[00:13:20] S1: And on the on the balance sheet obsession, can you, like, explain a few things that you managed to optimize? Or, like, if you had to go inside a company, like, what are the things that you look for, like, directly and where you you are, like, almost certain that they are, like, optimization that you can find? [00:13:36] S0: They are like... The the basic stuff is like accounts payable, for example. I mean, all the companies that go, usually, there are... Because what happens in most company, you get an invoice, You look at the invoice, and you go and you pay. Right? So so... And and... But that's wrong because you need to understand when is the invoice due and what's the best timing to pay that invoice. Right? So most companies, they pay a lot of invoice too too late as... And a lot of invoice too early. Well, actually, you wanna optimize and pay them a due date because if if you pay too early, you are missing out on interest that can be generated with the extra cash staying in the balance sheet for longer. If you pay too late, then you are, you know, doing something which might undermine your relationship with the supplier. So optimizing the timing of the payment is usually an easy win. [00:14:41] S1: Okay.
00:14:41 · Guillaume Moubeche, Martino Cadoni
[00:14:41] S1: Okay. [00:14:42] S0: Then another thing which is usually underrated is FX fees. Right? A lot of startups often, they invoice only in one currency or in a few currencies. They don't really look at FX until very late and high stage of maturities. So I think it's it's important, actually, there are easy wins there. Right? So... And then things like in the checkout, you can look at authorization rates, decline rates. And so, yeah, understanding anything about payments can save you a lot of times in general. [00:15:23] S1: And when it comes to, like, FX, how exactly do you, like, manage the arbitrage of the currency? So if we take, like, the example, for example, of euro dollar exchange rate, it has changed quite a lot, like, in the last year or so. So if you decide like to invoice, for example, in dollar, like, do you do you keep like your dollar in a bank account and and just like spending dollar whenever you can, and you you keep like same currency to avoid like change in FX? Or sometimes do you make arbitrage and say, okay, like the dollar is strong for now. I'm gonna change everything to euro because I'm a European company. And and when dollar is weak, maybe I'm buying more dollars from my euros. Like, how exactly do you make changes and arbitrage? [00:16:13] S0: So first of all, from an accounting point of view, unless you are a trading company, you should not be targeting to make money. Right? It's against the accounting principle. You should be trying to hedge and offset, but not to speculate on the effects. Right? [00:16:30] S1: I get it.
00:16:30 · Guillaume Moubeche, Martino Cadoni
[00:16:30] S1: I get it. [00:16:30] S0: And what's what's critical here is if you have a good cash forecast process, you need to understand for each of the currencies what are your upcoming payments to be made in the currency and how much revenue you expect in that currency. Because ideally, you wanna match the currency. You wanna match maturity. So if you know you need a lot of US dollars next month, you can do something to optimize that. Right? And then, obviously, there are FX hedging products that can help mitigate these FX risk. But often, step one, which is [00:17:12] S1: trying to forecast how much of the currency you have in and out is already a good amount of money saved. Okay. Okay. Really interesting. I want to go back to, like, the... A little bit of your, like, story at Klarna, because IPO was a bit below, like, the the last valuation, etcetera, and... Of the fundraise. So I want to understand, like, how do you approach a fundraise, and how do you approach an IPO, and how can you explain like the difference of valuation that can happen?
00:17:48 · Martino Cadoni
[00:17:48] S0: Yeah. I mean, so there are a lot of similarities between the two processes, but there are also differences. The similarities is it doesn't matter if it's an IPO or fundraising or m and a exit. I always say you need to work about this general concept of readiness. Right? So which means your house needs to be in order and and across all the different areas. Right? And from a finance point of view, obviously, the major things, particularly if it's an IPO, if it's an IPO in The US, is you have all these SOX framework, which is a a long list of compliance rules you need to comply with. Right? And for the rest, you need to have financial performance, which is obviously positive. So it's growing. But more importantly, I think to be ready to be public, you need to have a financial per... Performer, which is predictable with a high rate of confidence. Right? Because the last thing that retail investors or public investor want is a stock which is difficult to to predict. Right? So it's always good to go public when you have a performance that, you know, you are growing, but you are growing in a direction which is predictable. You can then do what's, you know, the classic beat and raise. You you are able to give strong guidance, and you are able to meet or beat the guidance. Because if you fail to do so, then you are in trouble as a as a public company. Right? And so... And then... And to do so, you need to have an equity story, which is very clean, very clear, so people fully understand what you are doing today and what you wanna do tomorrow in order to create value for for the shareholders. And this process is super critical also in fundraising. Right? Because it's obviously important your today performance and yesterday performance, but it's all about you being able to sell to the new investors what's your vision and how you're gonna go from where you are today to a place in three to five years where your valuation is at least three to five x higher because, particularly in late stage, that's the target for the investor. The investor usually have five to seven years holding period, and they wanna make that 30, 40% annual return that compounds. So you need to be able, you know, to do a three x or five x in late stage before you go public or before your next your next round. Right? The valuation per se is obviously a function of different things.