Ever dream about which tech firms you’d invest in if you had a million dollars? Well, someone already has your fantasy job, and that someone is Navneet Govil.
Navneet is the Managing Partner and CFO at SoftBank Vision Fund. His organization – a subsidiary of Japanese tech conglomerate SoftBank – invests in future-thinking tech companies like Jellysmack, Kitopi, and Lenskart. Currently, Vision Fund is looking to invest in organizations innovating in spaces like artificial intelligence (AI).
Working with so many organizations on a regular basis puts Navneet in a unique position. In this episode of Spend Culture Stories, Navneet explains what he looks for in portfolio companies, how to execute on an exit strategy, how to IPO, and how the role of a CFO has changed since COVID-19.
Listen to the episode
Introducing Navneet Govil of SoftBank Vision Fund
💵 What he does: Managing Partner and CFO of SoftBank Vision Fund, an organization that invests in emerging technologies.
💡 Key quote: “I feel that I have a responsibility for laying the groundwork for the success of the funds for decades to come. I can set the foundation upon which others can come and continue to add value.”
Navneet tells us that SoftBank Vision Fund is currently looking at investing in organizations innovating in AI. But, according to him, it’s not just the tech that matters.
“The second thing we’re looking for is ambitious founders who are passionate about delighting their customers,” he says.
Potential portfolio companies also need to prove that they’re thinking longer term. “There has to be a path to profitability, where they’re building a sustainable business,” Navneet says.
The emphasis on AI came directly from SoftBank CEO Masayoshi Son. But even he couldn’t have predicted the COVID-19 pandemic and the impact it would have on the demand for AI-powered digital products.
“His vision about the AI revolution meant that we were investing in companies that were benefiting from some of these tailwinds that came as a result of the pandemic,” Navneet says.
For example, the fund has invested in ByteDance, owner of TikTok, and in food delivery service DoorDash, which saw revenue more than triple to US$1.9 billion in 2020. DoorDash has since completed a successful IPO in December 2020.
Top takeaways from our conversation
CFOs must resist the urge to be naysayers ⛔
When and where the buck is spent stops with you, and you alone. As a consequence, there’s a strong temptation to hold onto the purse strings a little too tightly. “CFOs have a natural tendency to focus on maintaining a cost discipline: controlling costs, not getting too far ahead until they see the revenues materialize,” Navneet says.
However, this often leads to friction with the wider organization. As Navneet points out, “Finance (or the CFO) often saying ‘No’ is not always the right answer. We need to be enabling our business partners — the CEO, founders, sales teams, and the R&D teams.”
Instead of shutting them down immediately, ask questions. For example: “What are you trying to achieve? What’s the problem that you’re trying to solve?” Navneet says. “Then, find out what’s the best way to enable that in a way that creates value for the company.”
Actively seek advice when deciding whether to IPO or choose a different exit strategy 🙋
When you can see the metaphorical exit sign coming up ahead, be sure to research which route to take. Some of the best sources of information? Seek people who have already taken a particular path and can advise on the hurdles to expect.
Navneet says organizations in the SoftBank portfolio that are trying to decide whether to go public, stay private, or seek to be acquired are introduced to others in the network who’ve already gone through it. After all, learning how to IPO from those who have been through it is the best approach. “A lot of it is giving our portfolio companies the opportunity to learn from the experiences of other portfolio companies,” he says.
This applies outside of SoftBank, too. When planning an exit strategy, draw on your network and ask around for advice before jumping in.
Send the right message to potential investors by beating your targets 📈
If your company goes public, your new priority will be showcasing your organization’s potential for growth so that people will want to invest. “As a public company, there’s a lot of focus on the short-term performance of the company; CFOs have to report results on a quarterly basis,” Navneet says.
Deliver by overdelivering. “When I used to work at public companies, I had this concept of ‘beat and raise.’ Every quarter, you have to beat the performance that you set for the quarter, and then raise the target for next quarter’s performance,” Navneet says. “Establish that track record over at least four to five quarters.”
This is all well and good, but how do you do it successfully? “This comes down to having visibility into the company’s performance beyond a certain quarter,” Navneet says. “Understanding the cost structure and having that visibility on the revenue backlog is important, because that allows you to plan for the future.”
Top highlights from the podcast
The benefit of a different perspective 💡
[2:11] “Historically, the backgrounds of CFOs at funds have tended to be accounting-driven. This is the first time I’m working at a fund or a financial institution. Prior to this, my background was working in finance at pharmaceutical, high tech, and solar companies.
I was used to being a business enabler, essentially supporting sales teams and R&D teams. With that mindset, coming into a fund, what I did was focus on our key stakeholders. My focus consisted of:
- How do we help?
- What can we do to add value to our limited partners?
- What can we do to add value to our investing teams?
- And how can we help our portfolio companies leverage the SoftBank ecosystem?”
Strategic finance centers on stakeholders 💡
[5:19] “Strategic finance means adding value to our key stakeholders. First and foremost, as a business partner to our CEO: what can I do to help him make insightful decisions?
Second is helping our investing teams make good decisions; some of that is doing portfolio and sector analytics for them. The third thing is supporting our portfolio company CFOs, primarily by helping them leverage the SoftBank ecosystem.
And then for the limited partners of the fund, we give them insights into our portfolio company performance, and demonstrate to them how we are adding value to our portfolio companies, as well as our monetization strategy for our investments.”
But first, unit economics 💡
[19:35] “At the Vision Fund, we refer to ‘nail it and scale it.’ First, get the unit economics right for a business, and then scale it. Sometimes people think, ‘I’m not profitable today because I’m not selling enough. I don’t have enough units. But once we dramatically increase the number of units by orders of magnitude, there’ll be economies of scale and we will become profitable.’
The key thing is to recognize that you need to get the unit economics right first. If the unit economics work, then you scale it.”
How to IPO: your pre-IPO preparations 💡
[21:27] “There are a couple of different things to do to learn how to IPO. The first is the accounting and the controls aspect: closing books on time, making sure Sarbanes-Oxley (SOX) controls are in order. Ensure there are no deficiencies, weaknesses, things of that nature.
The other thing is building a business that is going to be attractive to institutional and public investors. You may not be profitable today, but you need to have a path to profitability. And another thing is building a sustainable business model, then thinking about where you see the company five or 10 years from now, and being able to lay the groundwork for that.”
It’s easier to assert financial controls when your team is respected 💡
[31:41] “At the SoftBank Vision Fund, I had the opportunity to build the finance team from scratch. We initially only had a handful of people, and today we have a finance team of about 50. We’ve hired amazing talent.
In a portfolio company, if you have a finance team that’s very strong, the folks in sales and R&D and marketing are going to be impressed. When you talk about cost controls and cost discipline, they will take it seriously and they’ll accept it. That message is well received when you have a strong team that’s adding value to the rest of the firm.”
Our favorite quotes
[18:03] “Sometimes in finance there’s a tendency to say, ‘No, we’re being too aggressive here, we can’t do this.’ But what we really need to do is partner with the business side in finding a solution.”
[20:26] “For CFOs, the key is to focus on controlling the table stakes — doing basic accounting and finance — but then enabling our business partners by helping them think about how they can scale.”
[32:18] “Smart people are going to automate routine tasks, and they’re going to want to focus their energies on value-added work. And if you have smart people, they will represent you well with your stakeholders.”
[34:24] “At the SoftBank Vision Fund, I’ve been very fortunate to have been part of the journey building the infrastructure, setting up the processes, hiring people in finance. I feel I have a responsibility for the career development of the 50 or so people we have in finance, to ensure that they do well.”
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