#193: Revolutionizing Finance for Growth-Stage Companies
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Welcome back to The Richer Geek Podcast! In today's episode, we are joined by Eric Fiegoli, co-founder of Exbo Group. Since 2017, Exbo has supported over 50 growth-stage companies across industries like software, education, and healthcare. Eric shares his journey from being a senior product manager at Amazon to helping startups scale by offering financial, operational, and strategic expertise. Tune in to learn when to hire a CFO, the benefits of fractional CFOs, and how Exbo guides startups through fundraising and financial planning.
In this episode, we’re discussing…
Eric’s career shift from Amazon to co-founding Exbo Group
Financial Planning for Growth: Understand the importance of financial planning, budgeting, and forecasting for startups at various stages.
The Role of a Fractional CFO: Learn how a fractional CFO can provide valuable expertise and support to growing businesses.
Balancing Growth and Profitability: Discover key metrics to track and strategies to optimize for sustainable growth and profitability.
Navigating the Current Economic Landscape: Get insights into the current state of the VC market and potential trends for 2025.
Building a Strong Financial Foundation: Understand the importance of financial operations and how to avoid common pitfalls.
Resources from Eric
LinkedIn | Exbo Group | Email
Resources from Mike and Nichole
+ Read the transcript
Mike Stohler
Hey everybody. Welcome back to another episode of The Richer Geek Podcast. Today we have Eric Fiegoli. He's the co- founder of Exbo, you might remember that we had another Exbo person in Nicholas Spezio. I have to say it that way for some reason, very Italian.
But today we have Eric. He's the co-founder of Exbo Group. He co-founded in 2017 and since the firm's inception, he's helped provide finance, operations and strategy support to more than 50 growth stage companies. He focuses much of his time supporting clients fundraising efforts, which I know about, as well as new business development for Exbo Group. His areas of focus include software, education, tech and healthcare. For all of you techies out there, he's a former Amazon guy, so we'll talk a little bit about some of his background. Welcome, Eric, how are you doing?
Eric Fiegoli
I'm doing great. Thanks so much for having me, Michael.
Mike Stohler
Absolutely. So you know, it's a very interesting story, and I think a lot of our listeners are gonna relate. You come from the FinTech world also, and then started your own business, which I think just so many people do. You learn so much from a big box, multibillion dollars and you're like going, "Yeah, you know what? I can either do something better or start my own thing." So why don't you give us a little bit about your background and how you even got the concept to start Exbo Group?
Eric Fiegoli
Yeah, sure. So even before my time working at Amazon, I spent the first part of my career working at two investment banks. So I started my career really in core finance, working in debt capital markets and debt syndication, and then sales and trading. So I spent the earlier part of my career really understanding and learning about capital markets, understanding and learning about institutional investors, how capital gets allocated around the world, and a little bit about how the institutional rate markets work.
I spent a little over five years working at two banks, went back, got my MBA, and then decided to pivot. I wanted to try my hand, kind of, and get a broader experience in the tech world. And like you mentioned, I started at Amazon as senior product manager, and working at Amazon, I was working there, 2016 so the company was already very, very large, extremely successful. And at that point, they were really trying to make incremental tweaks to some of the products that customers and billions of customers were using. The product that I owned at Amazon was focused on package consolidation and helping customers receive additional options for getting their deliveries in fewer packages. And during my time there, I really learned about the product manager lifecycle at Amazon. It's a very heavy writing culture, so all the ideas that you're going to communicate have to be in written form with data to support them.
So I really learned how to substantiate, and really, basically, how to communicate, and how to convey the importance or the need for my product and why, I think there's a good vision for that, and I think that was really helpful for me, just overall, in thinking about and applying those skills more broadly. In business, definitely a challenging place to work. I've worked with a lot of talented people, and it's a company that really rewards people for bringing data and bringing and backing up what they intend to build. So that was very important to what we did there.
Mike Stohler
What were the AHA moments like, "You know what? I'm making good money, I'm in a big company, probably getting some profit sharing or some stocks, and now I want to quit and start my own thing." What was that? What was that kind of like?
Eric Fiegoli
Yeah.
Mike Stohler
Because that was a big, big decision.
Eric Fiegoli
Definitely a big decision, and I think maybe some of the listeners can feel the same way about this. But when we started Exbo Group, it was almost an accident. It was really a consulting engagement that me and my business partner and friend Kevin had taken on. And we're basically doing that on nights and weekends. I got a call from Kevin. He was also fresh out of business school. He was doing some consulting work for a venture capital firm based in New York. At the time, I was living in Seattle, and he asked me if I wanted to basically earn some extra money by consulting for startups that needed help just to raise capital. We both had experience and skill set in financial modeling and working at large companies.
We felt like we were well-prepared to do this. We started doing the work. We had some really good successes. Early on, a few of our clients went on to raise capital. And then they really, they asked us to stick around and continue to help them, because there really at a small company, very often there's either no one at the helm on the finance side, or someone's doing it as a side job. So they found it really helpful to have some people in their corner that could help them with planning, budgeting, forecasting, really, and explaining how the messaging around their finances and helping to craft a narrative.
For us, it really was not intended to be a company, but it was more of a consulting engagement that over time, got to the point where we had to make a decision around, do we want to leave our full time jobs and do this? And after about a year of doing it on the side, we both felt like we had had enough traction,toyed around a little bit with what our service mix was. Felt like we had some knowledge, and we had saved up some initial capital from the engagements where we felt like, "Okay, that's enough to see the business. Let's go ahead and start this thing."
We both left our full time jobs and gave it a whirl. I moved back to New York, and, yeah, we started the company in August, just the two of us in a small office that was back in 2018 and initially the work we were doing, we're working with some small companies. At that point, that was mid-2018 we started to get enough work where we needed to initially hire. So we started high and made our first hire, and hired some analysts. And then the company has, has really kind of grown slowly but steadily over time. And then really, in 2020 during the pandemic, we started to see a real tick up in need for our services, and started to see some acceleration. The contracts were getting bigger, and we started to get a sense that our clients were asking for more. So at that point, we also had hired a little bit, I think our team was maybe 8 or 10, and then we started to add on some other ancillary services to the mix.
So in addition to doing the core work, which was based around finding core finance and accounting work for our clients, strategic finance work, we also added a tax service which is very needed for small and growth stage companies. So a lot of that work centers around tax compliance, sales tax advisory conflict resolution with states, and also R&D tax credits research and studies that need to be submitted and for those companies to receive back credits for the R&D research that they've done. And then we also added a transaction advisory group, which really focuses on a slightly different area, but mostly doing financial, financial and tax due diligence for companies that are targets in the M&A space. Those companies were typically working with investment firms such as private equity firms or growth stage investors to evaluate and complete diligence on those companies to make sure that the investment that they're making is sound, that the financials are what they say they are.
Mike Stohler
At one point, we'll take this in two parts. You know, as far as the financial help to let us our listeners know that maybe just started, maybe they're three to five years in. At what point should they start looking at bringing a CFO in? What's the difference between a part-time CFO work, something that you do like with a fractional or bringing someone in full time. What are the advantages and disadvantages and the time period of, "Hey, I need something more than an Excel spreadsheet and a bookkeeper."
Eric Fiegoli
Yeah, that's a really good question. So first of all, when we first started the company, we worked with a lot of venture backed companies, companies that had taken on venture capital. They need to grow fast. They're taking on capital with the expectation that they're going to grow quickly. When you raise capital, or you raise an institutional round, you know you're sitting at the top of your stack, and you know the investors are now expecting to spend this money quickly and efficiently. At that point, a lot of the companies that we work with didn't have a really concise plan around how we spend this money. We need to go out and hire a bunch of people. We definitely might need to hire a sales team, marketing team. We need, may need to shore up some areas of our engineering group, customer success, all those different areas. We need to come up with a hiring plan.
We need to make sure that we're going to spend this capital. But we also need to spend it efficiently and make sure that we're considering the trade-offs between growth and cost for those companies. Oftentimes, once they raise their first institutional capital round, that's a really good time for us to be brought in, because at that point they really need a consolidated plan, they need a budget, they need a forecast, they need some milestones, targets to shoot for, because at that point they need to think about, "Okay, maybe I have 24 months with the capital I just raised. I'm earning X amount of dollars on average per month." What are the milestones that I need to get to that my investors are looking at me to get to so that I can go raise more capital, or what are the milestones I need to get to flip this thing to start generating cash, one of the main things that we do is help these companies build an operating model that helps them think about, what are all the considerations that they need to have. What do we think about the different scenarios that they need to consider? What if I want to go out and hire salespeople tomorrow? What does that do to my cost? What are those salespeople need to target, from a quota attainment perspective, to cover their costs and ultimately become profitable, become more worthwhile? What if we want to extend our runway? What if we want to extend our runway another six months? How do we go and do that? What are the costs or growth considerations that we need to hit in order to extend our runway?
A lot of the work we do is around some of those core financial activities, budgeting, forecasting, building an operational model as a tool for decision making, around the business, maybe owner operated type businesses. I think, once you get to a point where you have a few million dollars in revenue, you're hiring consistently multiple people per year. I think at that point, if you are a founder that doesn't have financial acumen or that's not a core part of the things that you want to do, it can be really helpful to have a third party or, either in house or external that can help provide a perspective and sort of just help you understand. I think a lot of companies can't even answer some of those core questions, which are like, "Are we doing better than last year? And if we are or aren't, why? What is changing?" I can attest to this when you're dealing with clients, when you're building products and services, when you're dealing with your employees or really helping to grow the business. Thinking about your own company financials is probably #12 or #13 on the list of things that you're thinking about on a daily basis, and a lot of times, you're just thinking about staying afloat. So having someone else to take that burden off your shoulders, can be helpful, and it can be a way that you can have more insight into your business in a way that you never thought you could before. And it can help you make decisions faster, which is really important.
Mike Stohler
Yeah, it was eye opening for me when I eventually went to a fractional CFO. There comes a point at the growth cycle of a business where just a CPA is not going to do it.
Eric Fiegoli
Yeah.
Mike Stohler
All they do is they just put numbers into a spreadsheet and they say, "Hey, Oh, guess what? You owe $100,000 this year." And you're like, "Why? You couldn't have told me that six months ago, so we could have planned."
Eric Fiegoli
Yeah.
Mike Stohler
What you do is you actually talk with them. You probably have quarterly get-togethers. You're constantly in contact and telling these people it's like, "Look, we need to start planning this," and you become part of their team. Instead of just, "Boom, here's your tax return."
Eric Fiegoli
We're meeting with our clients at the very, very minimum once a month, but oftentimes we're meeting with our clients multiple times a month and sometimes weekly, because they have a lot going on. These are businesses that are in constant change. They need to make sure that they have a good understanding of their cash balance. They need to have a good understanding of you know, as their sales pipeline changes, how does that affect their growth path? We're also meeting with them on a monthly basis to review their financials from the previous month. So a lot of the work we do is to review their financials, to say, "Hey, how did we do last month? How did we do versus how we thought we were going to do?"
Building a budget allows us to actually put a stake in the ground and say, "Hey, how do we think we're going to do?"And then reviewing actuals against that, to say, "How did we think we're going to do, and how do we project better going forward, what changed?" And then doing flux analysis to actually understand, sort of, what's going on, and what's driving those changes. So we're doing that work, and we're also working with them to build out comprehensive forecasts, which is really important, which is to say, we know that businesses are breathing things, the forecast that you make at the beginning of the year every month, that's going to change based on conditions. So we're working with them to build out a comprehensive forecast that can change over time based on what's changing within the business.
Mike Stohler
And one of the big things that I see on some really, really good businesses, the great business models is that fine line between growth and profitability. All of a sudden, they just start franchising, they start building, they start going in all these cities, and all of a sudden, three years later, you start seeing them starting to shut down.
Eric Fiegoli
Yeah.
Mike Stohler
Because they possibly grew too fast. So what is that fine line? And what can you tell us about that side of the profitability of a business, about the trade off between growth and profitability.
Eric Fiegoli
There's definitely a trade-off between those two. I think oftentimes they're in conflict, something we talk about a lot with our clients, something we talk about a lot internally, when you're in growth mode, that's very, very different than building a business for profitability. When you're building a business to scale. When you're building a business for growth, you know, you're really, really reinvesting heavily in that business every month, every quarter, every year, because you want to make sure that you're piling as much as you can into that business. And that's whether to make your customers have a better experience. Build more products and services, invest in your people for retention purposes, but you need to make sure that you're investing in that business for growth.
When you're building a business for profitability, you're really, really thinking about things on the margins around cost. You're thinking about optimizing. You're thinking about providing service, but you're thinking about providing service in a way that you're not going to be constricting the bottom line. So we definitely talk with our clients to understand their goals and what they want to do to build to build their business. There's definitely always a tradeoff the way to think about that. We think about a lot of metrics. Some of the metrics that we think about are efficiency metrics. So one thing that we think about is capital efficiency and also unit economics the business. So to give you an example, there's a metric called LTV:CAC, or CAC payback period, and that, what those numbers are telling you is, how efficient are you in your sales in your sales cycle and sales process, all the money that you're spending, cost of customer acquisition, all the money that you're spending, from a sales perspective, to acquire your customers, versus the what the lifetime value of those customers as a ratio. And if you're not spending enough money, or if you're spending too much money, that ratio is going to not look correct. You want to keep that ratio in a good place, where you're spending kind of the right amount of money that their customer is paying you more over their lifetime than it's costing you to acquire, that's for sure, probably to the order of three to 5x if it's too much, it means you might not be spending enough on your customers and they could leave you so there's another side of that too. Or things like CAC payback period, which is from the initial contract.
How long does it take your customers to pay you back for the cost to acquire them? If you have a contract that is paying you $12,000 a year, but it costs you $18,000 to acquire that customer over time. That's going to be a cap payback period of almost 18 months. That's a long time to recoup your costs and acquire that customer. The other area that we really like to dig into is gross margin, really important. And I think that's a thing that can erode very quickly, which is as your contribution, if you're not contributing to your overhead or to your fixed cost, if that's changing, that's the sign of a business that's going to start to erode very quickly in terms of profitability. So that's an area that we really like to dig in with our clients pretty deeply. And then for a lot of the businesses that we work with that are in software, what we really like to look at is dollar is customer metrics, customer retention metrics, net dollar retention. We want to make sure that customers are sticking around with our clients over time. So the areas that we like to look into are net dollar retention. Want to make sure that over time, that customers are spending more money with you, not less and less means that they could be leaving your platform, or their contracts could be getting smaller. So those are just some of the areas that we think about as we start to evaluate the sort of overall growth and profitability of the businesses that we try and help.
Mike Stohler
And it seems like you know, if they grow too fast or they're not really maintaining those types of metrics, that the quality of the service can also go down, right?
Eric Fiegoli
Yeah, you see that in customer retention metrics, like if you see the businesses are growing quickly, you might see that top line revenue grow quickly, but the next year after that growth, that top line is going to snap back, because all those customers that you just gained are going to roll off your platform, and you're not going to be able to retain them for long term. So you see that that's all seen in the customer metrics. If you start to grow quickly but don't provide good service, your customer retention is going to go way, way down.
Mike Stohler
On the VC side of it. Do you handle some of that part, or is that more of Kevin's?
Eric Fiegoli
Well, when you say VC side, do you mean interacting with them?
Mike Stohler
Yeah, interacting with the VCs. And what are you seeing in today's economy with the buyers and sellers? Is there a lot of kind of holding back on the capital right now?
Eric Fiegoli
Yeah, we work very closely with a lot of the investors you know that are on our boards of our clients. A lot of times we're appearing as the CFO for our clients. So we're on those board calls directly. We've spent a lot of time with our clients for and crafting those slides, which is important just to help convey the right message, make sure that we're showing information properly, make sure that we're building a story and a narrative around what's going on and helping them think about, you know, the forward looking parts of the business. So we're interacting pretty heavily with those investors, and then what are we seeing? So, obviously 2021-2022 is sort of the high watermark for the industry. And since then, interest rates have gone up. You've seen capital constrict pretty heavily. VCs have been definitely a lot more selective in terms of their investment, but also have tighter walls in terms of follow on capital for investments that they've made previously. So we've definitely seen some of the weaker companies go out of business, and that's just from the fact that they've they've kind of run out of money and aren't able to raise, fall on capital.
Whereas, earlier in 2020 or 2021 it was people were lining up to give companies capital, even if they had bad metrics. Even if they didn't have great market fit or traction, it was just a different world. Now, seeing the VCs be a lot more hesitant, a lot more discerning just in terms of new investments. A lot are backing multi time founders because they have proven track records of success. A lot are backing businesses that are already showing track customer traction, that are a little farther along so they want to make sure that they already have revenue or that they have a really good path to profitability. There's definitely just more of an emphasis on capital conservation, just go out and spend as much money as you can and grow as quickly as you can at all cost. This is not really the ticket right now. It's really more about thoughtful growth, structured growth and organized growth around sort of milestones, used to have this mantra that was like, triple twice and double thrice. So that was kind of the top line target that companies would go for. And you're just not seeing that anymore. And I think VCs would much rather see companies grow a little bit slower, but grow in a more efficient manner and build a business that has a path of profitability and is sustainable. I think they're looking for a lot less boom and bust than they were the previous cycle.
Mike Stohler
What are you seeing? I know you don't have a crystal ball, but the Feds are thinking about rate cuts. Some of the economists out there saying, "It's a dime a dozen." Five of them are gloom and doom, five of them are optimistic. Are you seeing anything within your world, any changes that might come in 2025 or is it going to be just still kind of holding back and being a lot more cautious.
Eric Fiegoli
Well, I work in a very thin slice of the economy. I do see a lot of different businesses. I'm working with people that are very hopeful and very optimistic. So we are still seeing businesses raise capital. Good businesses raise capital on the private equity side of the business. We are seeing more and more deals get done. And that could be a function of buyers and sellers just becoming more realistic. Sellers being more realistic in terms of the levels that they want to achieve for their sale, them coming back down to earth. So we're seeing more transactions happen, that's for sure, which is a good thing. I think it helps the capital markets kind of flow. It gets things going. There's capital that's sitting on the sideline that's getting into motion. So that's a really, really good thing that we've seen in terms of, where I think rates are going. I used to work at rates.
I think the Fed is a very slow moving organization. They're a very slow moving machine. I tend to think they're going to be very cautious in terms of cutting rates. Yeah, we're never going to see an environment with rates where they were from, sort of like the 2009 to 2021 capital cycle. I don't think we're ever going to go back down there, but I think it's going to be slow through 2024 and 2025 they're still going to be relatively elevated compared to prior years.
Mike Stohler
Yeah. And we're seeing a lot of deals. You have to have a higher LTV because the DSCR, the debt service coverage ratios just aren't there. And there's that stagnation between, I think, what you're seeing with the realization that the sellers just cannot get the price that they had four years ago, what it was worth, the valuation, and the seller saying, I can't buy it that because the debt now doesn't cover the price, you know, it's upside down. And so there's this kind of a butting the heads now of what they can do and what you can accomplish. And I'm seeing that in the hotel business, the sellers want, "Oh, you know, my hotel's worth this." I'm like going, "It is, well, but at an 8% interest rate, no one can afford to buy it."
Eric Fiegoli
No one can cover that debt service, right? And you can't put as much leverage on the business as you normally would if the debt service would essentially break the business. So I totally agree. And we're seeing less leverage being put on deals, which means you're going to be seeing less ROI on that deal, because you have to put more equity capital in, but that's just what's happening in the market to get these, to get these deals done. You have a lot of, I don't know how much you you get into this, Michael, but on the private equity side, you have a lot of investors that have made investments for fun vintages in, kind of the 2018, 2019, 2020, vintages are now reaching the end of their capital cycle. They need to exit those businesses to realize the gain for their investors, ultimately to show positive returns for their fund and to raise another fund. So you're really starting to see what I think is going to be, some heavy moves to the exit, and deals have to get done, because they have to move these assets, even if it's at a lower price, because they need to get them off the books to show some sort of return for their investors who are now leading and saying, Hey, we've been in this fund for the last six or seven years. This fund is only supposed to last X amount of years. We need to start seeing some returns and some capital distribution.
Mike Stohler
Yeah, and that's it, the preferred returns, the capital distributions, ever since COVID, they've no longer people that said, "Hey, we're going to give monthly distributions, quarterly distributions." And all of a sudden it's like, "Wow." And a lot of the real estate based ones now they're the loans are coming up, and there's going to be an interest rate. They had a five year locked in rate, and now it's going to switch to a new interest rate, and now the debt service is going to go up three points or more for the same asset. So it's an interesting time for venture capitalists and founders and potential buyers.
So Eric, is there anything else before I let you go that you'd like to tell our audience that I didn't get to?
Eric Fiegoli
Whoa, that's a good question. For founders who are thinking about building businesses. One thing that I'll say that we've seen is businesses that have grown but not paid attention on the finance side really get themselves a little bit twisted or offside when they need to start making good financial decisions down the road. I think it's easy to ignore these things for 6 or 12 months, but ultimately they're going to come back and bite you in the butt, because not paying attention to finance to Ops, making sure that you have the right systems in place to scale, to invoice your customers, to grow, those things become really important if they don't seem important for day one, I would just say to anyone, please pay attention to you know your financial operations, whether that's having someone in house that you can build and help you, I think for early stage businesses, that can be really expensive if you're going to hire someone full time. So that's why fractional often, often makes sense. It can be more cost effective from our perspective, we can bring a full team to your company or organization.
We can bring in experts from accounting, finance, tax, and it becomes more advantageous and we have more experts. But either way, if you're going to bring in someone fractional or if you're going to bring in someone full time, I see it not as a cost center. I see it as an investment in your growth, and it's going to allow you to make decisions faster and help you grow your business faster. So that's what I would say, and I think that's what I would caution and I would say that's something that founders need to pay attention to, because we've certainly seen a lot of companies that have it and they get themselves in hot water pretty quickly.
Mike Stohler
Yeah, I absolutely agree, Eric. One of the best things I ever did was bring in a fractional CFO, and it's just it was mind-blowing, not only for the business, but for also the taxes as it trickles down to myself as the founder. And that was fantastic. Yeah, it's amazing. Well, before we leave, where can people find you if they want to get a hold of you?
Eric Fiegoli
Yeah, if they want to find me, they can go on our website, www.exbogroup.com, that's E, X, B, O, group.com, and you can go to the Contact button. That'll go right to my email address. We're on LinkedIn, and if you follow us on LinkedIn, we send out some white papers and some marketing material around various finance topics that you may find helpful. We're happy to talk to anyone that has a business where they think they might need help. Always, always happy to take that call. Yeah, we would ask if anyone wants to chat with us, please reach out. But thank you so much for having me. I really appreciate it.
Mike Stohler
Absolutely. And everybody. Today's episode is brought to you by reiwords.com. Do you know what your Domain Rating (DR) rating on your website is? Do you want to grow your website, organic traffic, blogging? Reach out to reiwords.com.
Thank you so much, Eric, for coming on and have a nice evening.
Eric Fiegoli
Thanks for having me.
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ABOUT ERIC FIEGOLI
Eric Fiegoli is the co-founder of Exbo Group, a firm specializing in providing financial, operational, and strategic support to growth-stage companies. With over 50 clients under his belt, Eric focuses on fundraising and business development. His expertise lies in software, education technology, and healthcare.
Before Exbo, Eric held product management roles at Amazon and investment banking positions at TD Securities and Deutsche Bank. He holds a BS in Finance from Lehigh University and an MBA from Dartmouth's Tuck School of Business. In his spare time, Eric enjoys outdoor activities and spending time with his family.