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The current environment is one of increased regulation and scrutiny, which has led to increased pressure on firms’ CFOs and COOs to manage their risks more effectively. This posed many interesting points of discussion and questions that were answered by seasoned experts, Christopher Parmo, Mirela Brox Montell, Bernd Eckel, Martin Kodar, Andrew Hampshire, Maximilian Fleitmann, and Christopher Conradi.
Keep reading to find out more on the current role of a CFO and COO in PE/VC firms, the
biggest business and financial risks for the PE/VC industries, the challenges that drive interest
in implementing a new technology, what do Limited Partners prioritize in the reports, and much more.
What impact could a CFO/COO have on the strategic development of the fund? What are the top strategic priorities for the CFO in the near future?
Since CFOs & COOs have a massive impact on the strategic development of the fund, we
started off by asking the CFO/COO of Verdane, Christopher Parmo, what kind of value a
CFO/COO brings to a private equity/venture capital fund.
„There is enormous value creation potential in the CFO / COO role. Both in terms of optimizing structures, incentive programs, cost and governance, internal efficiency and digitalisation, but also revenue-generating activities, business development into new fund structures and thinking strategically. The sky is no limit for an ambitious and driven COO / CFO!“ He concludes.
What are the top business and financial risks for the VC and PE industries in 2022 and how to mitigate them?
As the CFO/COO of a fund, there are a few key things that you could do to ensure that you are mitigating the business and financial risks you could face. Who better to ask than the Director of Finance and Regulatory at Hadean Ventures, Mirela Brox Montell, about the risks in 2022/2023 and how to mitigate them?
Mirela explains that there are three main risk categories: sustainability, cybersecurity, and talent retention.
Sustainability:
She starts off by saying that climate change risk is a world concern and requires global
mobilization and cooperation. As of today, Mirela suggests that everyone take action that can curb the worsening effects.
This goes hand in hand with the ESG factors, she explains.
This means no action on either ESG or environmental factors will be effective if taken alone. To combat climate change, Mirela believes the world needs strong governance, international
cooperation, strong and sound institutions, good working conditions, educated population – all resulting in crucial innovation and thus progress in finding solutions.
Cybersecurity risk (which Mirela also describes as an S-risk):
When you choose to manage your cybersecurity risk, make sure you act responsibly. In the
midst of rapid change, digitalization, and increasing levels of geopolitical conflict – it’s important to assess your risks regularly, put forth good policy, and create a strong corporate culture.
„Concrete incident response plans, testing, regular policy and SOP revisions, and training are all necessary steps in risk handling and mitigation“ she explains.
Talent Retention:
Mirela explains that a lack of flexibility can be the downfall of a company. Inflation, pandemics,
or other changes may necessitate change. Flexibility and rapid adjustments in response to
changing working culture are important for talent retention.
How do you become a truly trusted partner? How do you create synergy between the fund and portfolio company?
With Senior Operating Partner at Quadriga Capital, Bernd Eckel, on board, we had to ask how
to build stable strong relationships between a fund and the portfolio company, and here’s what he had to say.
Bernd elaborates that it is essential to set ambitious but realistic targets during the holding
period. “Based on transformation milestones, a roadmap with activities is necessary to define
the proper support for portfolio companies in order to maximize their skills and accelerate
transformation,” he explains.
Bernd believes that then, trust will be built between all parties, which will result in reasonable
expectations for stakeholders.
What do Limited Partners prioritize in the reports and communication received from the fund managers?
There are a few key things that modern investors want to see in reports and communication
from private equity managers. Luckily, CFO & Managing Partner at BaltCap, Martin Kodar reveals exactly what CFOs and COOs should prioritize when communicating with Limited Partners.
First, Martin stresses the importance of punctuality and transparency.
Reports need to be sent within the pre-agreed time and format, contain relevant information,
and be transparent.
„There is a well-known saying that good news can wait but bad news needs to be delivered
urgently to LPs. LPs need to get relevant news from GP before they read about it in public
sources“ he explains.
He also explains that ESG reporting and communications is an area where investors are
particularly interested in seeing compliance with increasingly complex regulatory requirements. However, they also want to receive it in a simple and understandable way from GPs, such as portfolio case studies.
What are the challenges that drive interest in implementing a new technology?
Chief Operating Officer and Chief Technology Officer at Gresham House, Andrew Hampshire
reveals what it is that drives them to implement a new tool or technology.
He explains that at Gresham House, when looking to implement a new technology, it’s all about how much value the outcome holds. They examine what problems they’d be trying to solve and then decide on which systems would best bring those benefits to reality.
He explains that if you can’t clearly identify a problem or value with the new system, it doesn’t get prioritized. “This is critical – there is never an objective for us to ‘implement a system’ – the objective will always be the value we are trying to create,” he concludes.
What is the current stage of digitalization in the Venture Industry: What tools are being used and what are we going to see in the future?
Angel investor and Founding Partner at Wizard Ventures & Owner of VC Stack, Maximilian Fleitmann gave us his insights.
He also explains that each fund is different and decides to focus on digitizing different areas of
their firms depending on the firm’s needs. “But most investors realize that a proper tooling setup helps them spend more time on the essential things – finding the best investment opportunities, making decisions, and then supporting their portfolio founders,” he explains.
He then goes on to explain that he currently sees two trends arising:
1. The bundling of software in the VC space to create comprehensive all-in-one solutions
2. Providers double down on specific use cases like Fund Subscription or ESG management.
“It will be interesting to see if GPs and investment professionals prefer these all-in-one solutions or still want to use a best-of-breed approach,” he concludes.
What are the cybersecurity threats that arise when integrating a new tool to your firm?
There are a number of cybersecurity threats that can arise when integrating a new tool into your firm. In order to protect your firm from this type of threat, it is important to have a comprehensive data security strategy in place. We just had to ask Chief Digital Officer at FSN capital, Christopher Conradi for his experience with cybersecurity threats.
Christopher believes that there should be a balance between convenience and security.
„Striking this balance is crucial – and where I see mistakes being made,“ he explains.
Christopher goes on to explain that maybe your team should not be running security. If done
incorrectly, it will just end up being a poor use of your time, and the end result will probably not be up to par.
„Rather, we outsource this to the pros. Meaning we rely on Microsoft for authentication, we rely on AON for auditing us, we rely on Google for patching our services.
By using public hyperscalers, and external auditors to check you are configuring things right, we feel we are getting the best protection on the planet, even though we have a small tech team, “ he concludes.
Stay ahead of the game with exclusive insights
You know how competitive this industry is. As addition, we are experiencing market downturn, inflation, geopolitical tensions, etc. How to differentiate to win? What are the best practices in these situations? What are the learnings from previous downturns?
The 0100 CFO & COO Forum is the place to be if you’re looking to gain exclusive market insights. You’ll meet the expert minds behind firms like 17 Capital, Adams Street Partners, Antin Infrastructure Partners, Antler, Astorg, Beringea, CapMan, EQT Partners, Kinnevik, Lakestar and many more!
Happening on the 24th of November 2022, in Hotel Riu Plaza, Berlin, Germany, the CFO & COO Forum will provide you with practical answers and real life examples to the questions that have been on our minds, like:
What are the biggest challenges for CFOs and COOs in the near future? How can finance and
operation roles also take part in value creation? What is the role of a CFO when it comes to deal sourcing, fundraising and exit strategy? Should you be focusing all your efforts in ESG investing and reporting? How can VCs foster a better relationship with their LPs?
At 0100 CFO & COO Forum, not only will you get a chance to meet all of the experts we
interviewed in this blog, but also over 120 senior finance, operations, ESG, and data experts.
Better than that is the content of the agenda! Here’s a glimpse of what will be discussed.
● The CFOs and COOs views on the PE and VC markets & The CFO’s role in the near
future.
● ESG revolution. The CFOs top standards and priorities for the future.
● LPs communication & reporting: how to provide LPs with relatable data and build a long-lasting relationship?
● The State of Digitalization of Private Equity
● Technology & automation in the VC fund: how to embrace new technologies to bring
efficiencies across the business?
● Strategic risk management in the fund. CFO’s role
● Relationship with portfolio companies: best practices & challenges
● We’ll even have an interactive workshop: What approaches should be taken in doing
Financial Due Diligence? Challenges and practical examples.
Sounds like something you don’t want to miss out on?
This is your chance to get first-hand insights. Register now and join us at the 0100 CFO & COO Forum in Berlin!
