Recession-Proof - a podcast by Ramp

Speaker 1:
You are listening to FinOps Today, a podcast from Ramp, where the world's most innovative finance leaders share what's on their agenda. Here's your host, Ramp's own head of finance and capital markets, Alex Song.

Alex Song:
Hi there. Welcome to FinOps Today. On today's episode, we are joined by Joe Garafalo of Mosaic. Joe, how are you? Welcome to the podcast.

Joe Garafalo:
I'm doing great. Thanks for having me, Alex. Excited to be here.

Alex Song:
Absolutely. So Ramp and Mosaic, we've actually known each other for quite some time. We work with you guys quite intimately on the FP&A side, obviously, and we also have a shared dream, a shared mission, right, of modernizing financial operations. And we'll get into that much later on in the podcast. But for now, just want to congratulate you on your recent fundraise. Obviously very exciting developments coming into 2022. And it's just very good to have you here on the podcast.

Joe Garafalo:
Thanks. Excited to be here. And there aren't many companies that I like more than Ramp, so thanks again for having me.

Alex Song:
That's awesome. So Joe, maybe just to start, maybe you can tell us a little bit about Mosaic and what you guys do and give was the high-level overview. And then maybe we can delve into a little bit into your role, your experience, and how you got to this place.

Joe Garafalo:
Yeah. To start talking about Mosaic, I think it's important to go back to our Genesis story. So my two co-founders, Bijan and Brian, we met in 2012 over at Palantir. We were the first wave of a finance hires. And when we joined Palantir, they had just gotten their billion-dollar valuation and we thought we were joining this shiny company that had everything all figured out. And when we got there, it was quite the opposite, right? So we were a small team tasked with building all the models, understanding all the analytics about the company, and everything at this point was still on paper. So how are we going to grow this company into this hypergrowth phase with the infrastructure that we had?

Joe Garafalo:
So a lot of the work that we did was building the financial infrastructure for Palantir, understanding how all these different systems were going to be interconnected, and how we got information to different stakeholders across the business quickly and reliably. So spreadsheets were really the only thing that we had at the time to do that job effectively. And by effectively, it meant we were sleeping under our desks every night. We were catching lots of late Cal trains back to SF from Palo Alto. So we had to figure out a better way to do things. And the better way was through technology.

Joe Garafalo:
So all of us on the team learned SQL. We pumped all of the data from those different cloud-based tools into a central database and wrote a bunch of code to harmonize all the different data sets so that essentially what we had was a golden framework that you can use to ask any question about the business and get a reliable answer from. And when we had that thing built, the rest of the business noticed pretty quickly that we were now able to answer really hard questions in less than three weeks, which for us was lightning-quick. So we built a front end for that tool and different department heads were able to log in and see how the business was performing. And it really changed the way that we at Palantir were able to make decisions.

Joe Garafalo:
So fast forward 10 years later, we're building Mosaic, and Mosaic is essentially the productized version of that thing that we had built at Palantir so that finance people can connect their systems, understand their analytics, and use those analytics to plan what the future of the company looks like and get the right people to the right information at the right time.

Alex Song:
And who is an ideal customer for you guys? What's the right segment?

Joe Garafalo:
Yeah. So we are focused on B2B SaaS companies today. So anywhere from 25 to 500 employees is our sweet spot.

Alex Song:
Got it. And these folks are generally or exclusively based in the US for now?

Joe Garafalo:
No. we've got customers all around the globe. So UK, Australia, South America.

Alex Song:
Okay. We're going to delve into that in quite some detail in a little bit. But for now, tell us a little bit about your personal background. Obviously you spent some time at Palantir, but what about prior to that? Were you always in a finance function? And what does your journey look like from before to being a founder?

Joe Garafalo:
Yeah. it's a great question. I've always been a finance guy at heart. So I grew up on the East Coast in New York City, went to school at St. John's. Very strong finance and accounting programs there. Right after school, I joined the Big Four. I was over at KPMG for about two and a half years until I got a call from Palantir. The thing that really attracted me to Palantir was they were helping stop IED explosions in Afghanistan. My best friend at the time was a first lieutenant in the Marine Corps. I was like, "Wow. This can save my buddy's life. How could I not join this company?" So I got to join Palantir. Was there for more than five years. And then after Palantir, I went to hold a couple of other leadership positions in finance, vice president of finance over at Exxon, which is a blockchain company in New York. I think I'm actually representing them well today at my best.

Joe Garafalo:
And then later at BarkBox. BarkBox has over a million active subscribers for dog toys and treats. And if anyone has a dog, shoot me a message and we can connect you with some codes. But at BarkBox, this is where the data problem of finance really hit me. It was like with a million active subscribers, if you don't have the right technology and you're not leveraging engineering resources, how are you going to come up with all the financial metrics? Because you're going to break your spreadsheets. This stuff does not scale. And that's when the light bulb for all us really went off as like, "We need a solution designed to solve some of these modern-day problems."

Alex Song:
Incredible. And is it safe to say that now, obviously at Mosaic... I mean, everyone works on finance, right? I mean, it's what you do. But are you also managing the internal finance function? Or how should we think about how your team, your company, what people are focused on?

Joe Garafalo:
Yeah. So I've transitioned from the pure play VP finance CFO to leading our sales and marketing team. So that's a whole nother conversation of, are finance people well suited for sales? I think actually we can be quite effective there. Internally at Mosaic, everyone at the company has access to the product. And what that does is allows people to see the numbers and also allows the relevant teams to make the right decisions based on the data. We have a great internal accounting team. Shout-out to Anne on our side, who keeps things in order. And because so many of us have finance backgrounds, we have our model published in the application and people can build different scenarios and versions from it. And then we usually align around three that we share with the board.

Alex Song:
That's fascinating. You know what? Let's actually double-click on that. As someone who's definitely worn the CFO hat and the VP of finance hat, I think you're probably our only guest so far who's actually made that transition and now leads that sales and marketing, that growth role. Would love to hear about the transition, how it's been, similarities and differences.

Joe Garafalo:
Yeah. So similarities, we're still selling to finance people and to CFOs. And the thing that is the most important when you're selling to this group is that you can speak their language, right? Nobody in finance wants to get on the line with an AE who doesn't really truly understand the pain of what goes into calculating ARR, how to produce the board slides, or what are the nuances of how to build model. So that skillset has suited me really well to be in a sales position. But the same things, the pain, understanding where the pain is, both the obvious pain and the latent pain, and the ROI, right? Finance people are so focused on numbers. So it's really easy to ask the question like, "If it didn't take you six hours to build your budget versus actuals and it took you 30 seconds, what would you do with the other five hours and 55 minutes?" Right? So there's been a lot of similarities, also some differences, right, like knowing when to push, knowing how to ask for the business. Those were all new skillsets that I think are easy to learn. So it's been fun.

Alex Song:
And how is your sales team structure? I'm just very, very curious. Is it a slew of As, AMs? You have customer success folks. What does that sales motion look like for you guys?

Joe Garafalo:
Yeah. So I think we can start with the marketing engine and the growth machine. The main goal for us and our north star on the Mosaic marketing team is to provide valuable content that improves the day jobs, the life of people in finance. So we do that through relevant content that's insightful, maybe templates that can be actually useful so that even if customers interact with Mosaic, they are getting value from us maybe even without buying our product. And that brings a lot of interest to the company. And that's where the sales team will then pick up those leads. And the sales team is comprised of an account executive function. And these are people that know how to do the Mosaic pitch. They handle the deal commercials. They shepherd folks through the process, but they're also paired with a solutions engineer. And the solutions engineers at Mosaic are all people from financial backgrounds.

Joe Garafalo:
So Marcus, who a lot of people have met, he's former banker from Guggenheim. Then he was leading Series C SaaS company. And now he's in sales. We have a former manager of FP&A at Fitbit who's leading the charge as well. So a lot of finance folks that are now in sales roles, which is cool.

Alex Song:
That's super interesting. Any interesting observations from talking to some of these stakeholders and selling any of them? Any objections? Where are people generally frustrated by? Where are they coming from? Are you swapping out a competitor? What does that interaction look like?

Joe Garafalo:
Yeah. So some common threads are everybody's frustrated by spreadsheets, right? I think we all hold Excel and Google sheets very near and dear to our hearts. And you would think I'm crazy if I said, "Hey, we're going to completely replace spreadsheets." That is not what we're trying to do, but what we're trying to do is have software do the majority of the heavy lifting for you and let spreadsheets handle the edge cases. That way, you're spending 70%, 80% less time in those spreadsheets, and you're letting the software do the things that the spreadsheet isn't quite good at, right?

Joe Garafalo:
We've all been there before where we have 50 versions of the financial model and we don't know actually which one is the right one and if we made the changes in the right places and building those switches that toggle the high case versus the low case. So explaining that like, "Hey, we're not ripping spreadsheets away from you, but we're augmenting them," is a common objection that we get. And more and more, the software is actually adapting to have familiar spreadsheet-like qualities, like the ability to write custom formulas and the ability to tweak metrics. So getting people comfortable that they'll still be there as the crutch if you need them, but there's a better way.

Alex Song:
Maybe one last question on the sales and marketing front. Who is the persona that you are selling to?

Joe Garafalo:
Yeah. It depends on the size and stage of the company, right? At the earliest stage, you have really smart founders who just raised a bunch of money and closed their Series A. And now they have this new requirement of, "Hey, we have board members. We have board meetings. We have investors. We need to take finance more seriously." So we sell to CEOs and founders. Once they realize they need to hire a finance person, it's usually the director of finance or a VP of finance. And then as the companies get larger, right, there's generally a CFO or a director of FP&A and a VP of finance. So it's usually within that office of the CFO.

Alex Song:
That's a good segue for us at Mosaic. Given your focus on business intelligence, financial intelligence and analysis and whatnot, how is your finance team structured? Is there anything different or the same as other places that you've been at previously? Is there anything that maybe you just don't need to staff up, right, FP&A, because you've got everyone who's more or less an expert. Would love to hear how your finance team itself is structured.

Joe Garafalo:
Yeah. I think it's not too dissimilar than other organizations. But what I think is actually unique about us is because so many of us have that financial background, you actually see really strong relationships between our VP of sales and our operations and strategy team. And the models that we're building, because they're from Mosaic, are deeply connected to the actual data.

Joe Garafalo:
So an example, right, is you can sit down with your head of sales and you can show them, "Hey, here's how many new opportunities that are coming inbound from the marketing engine plus the outbound engine from the SDRs. We know our average win rates on these deals and we know our average selling price." So now you have these really well-informed conversations from VP of sales, operations, and strategy through the Mosaic application that make the planning process pretty easy. You combine that with a view of your pipeline and all of the rep quotas, and everybody knows where they stand and knows what they need to do to hit their targets.

Joe Garafalo:
So I would say the finance team here is more embedded than I've seen at other companies, which is actually really cool. And it's how finance provides that strategic lens. Nobody really cares if you show them how they did in their budget versus actuals last month, right? What you actually want to do is show them around those corners and what they need to be doing to hit their goals and where things are working or not working.

Alex Song:
Yeah. I think that definitely resonates with me. I mean, it certainly resonates to the folks here at Ramp, right? We're in a very, very similar spot in which obviously we're building tools for finance teams out there. And it definitely is inspiring. It's definitely empowering to have the rest of the organization, right, who are not involved in finance day-to-day, they still get it. They still know, right? It still resonates. And in much more so, I think, than probably other places, right? For companies like ours, it's much more one team, one dream, right? It feels good.

Joe Garafalo:
I love that. We have that motto as well internally. One team, one dream.

Alex Song:
That's great. I want to go back to an earlier comment you made. I actually didn't know that you served a number of international customers. And I want to double-click on that. Here at Ramp, at the moment, we're serving US businesses, US-domiciled entities with US bank accounts and whatnot. Any special considerations with respect to selling internationally, whether it's currency, legal, regulatory, or just different accounting conventions and whatnot? How does that impact how you approach the sales motion?

Joe Garafalo:
Yeah. it's a great question. So the first thing that we realized when we wanted to talk to these international companies were, hey, they need to consolidate their numbers. In many cases, they have a UK operation and a US operation, or an operation in Canada, an operation in the US. So building a feature that allowed us to connect multiple ERP systems and also handle what you just mentioned around FX and currency conversion is actually native in our application now. So you can plug in two QuickBooks instances or two Xero instances. And again, because we're API-focused, we have connections to a tool called Currencylayer that actually automates the FX calculations so that you're not sitting there in a spreadsheet, converting everything, pulling down the rates, and your consolidated financials are living in a spreadsheet as a system of record. Our application can handle that.

Joe Garafalo:
From there, really, the customer can control the presentation of their financials and make sure things look the right way for the right jurisdictions. And then really, the model is flexible. So they can model however they choose.

Alex Song:
Is international currently a pretty large segment or is still growing?

Joe Garafalo:
It's a significant segment for us, but most of the companies that we are working with do you have a US presence. So we're not actually out in the UK selling exclusively to UK companies. We're working with US companies that have UK arms or Canadian arms or Australian arms or vice versa.

Alex Song:
Understood. The international component is obviously something that's certainly worthy of discussion. And here at Ramp, I think we get that question all the time, right? "When are you going to issue cards abroad?" And et cetera, et cetera. It's definitely no trivial task. I think it's awesome that you guys have already been able to enable international support.

Joe Garafalo:
Yes. It's been really cool. And the consolidations feature that we have is pretty unique.

Alex Song:
Yeah. I want to switch gears a little bit. This is something that I ask almost every single podcast guest, which is hiring. We always want to think about when you're building a company... and I'm sure this viscerally as a founder... human capital is perhaps the most important thing that you can have, right, when starting out and building out a team, putting together a company, et cetera. Any dos or don'ts specific to maybe making the first few finance hires? And this could be maybe from your Palantir days or from any one of your other experiences even today. Who should be, let's say the first three hires that any entrepreneur needs to put on their finance team? What are you optimizing for? What are they doing functionally? What are their titles?

Joe Garafalo:
Yeah. that's a great question. And I think there's no generic, I think, answer for that. I think it depends on each company, right? I think a B2C company like BarkBox where there's a big inventory component and there's lots of low-dollar, high-volume transaction, you're going to need different skillsets than if you're an enterprise B2B SaaS company doing large contracts that are few and far between. So with that in mind, I think a controller is a really important first hire. I think you always want to have the books closed in three to five days. I think that's world class. And I think there's a world where a lot of companies can actually meet that goal. Even if you can't, seven days is also perfectly fine, but you want to be able to get into that rhythm and record transactions and also think about the hierarchy of how those transactions are recorded, how things are coded so that you can later do in really great in analysis, which is the next great hire that I think would be a director of FP&A.

Joe Garafalo:
I don't think it needs to be somebody that has the VP title off the bat. I think somebody who can come in and take the really good work that the controller's done and build operational models and start providing decision support to the different stakeholders across the business. I think that person should probably have a really good skillset around revenue modeling because in the early days, companies are typically flush with cash, and you burn is less of an important priority, but nailing the top line model and how the business goes out to generate revenue is super important.

Alex Song:
In terms of growth, the first couple of hires [inaudible 00:19:10] I mean, that definitely really resonates with me. In terms of scaling and growth, as a company gets larger and more sophisticated and complicated, would love to also hear from you what are ways in which a finance team can gain some operating leverage? And I think there's probably two components here and I'd love to hear your opinion on both. One is just maybe you just outsource some of it, right? Get contractors. Find folks or external who can perform some of these services, right? And we've certainly heard from some finance folks that definitely rely on more external resources too, is instead of human capital, maybe you just rely on software and automation and whatnot. So we'd love to hear along those two dimensions, what are some best practices that you've seen, things that you feel strongly about, the good and the bad and the ugly.

Joe Garafalo:
I think outsourced folks mainly on the bookkeeping side and outsource CFOs in the early days are super important. And most companies that we meet have those teams in place to do some of that legwork, but I still think the controller is really important to properly set up the chart of accounts and direct the bookkeepers and the outsource CFOs to do the right things for the long term. So I think that's an important call-out and distinction to make that without that controller, that person in seat, it's easy for the outsource firm to go off the rails and do what they do for every other customer and not take into consideration the uniqueness of a business maybe like Ramp's. So outside of the outsource firm, I think making hires that have seen the end state of where the company wants to go.

Joe Garafalo:
So if they've seen it before, they know, "Here's all the gotchas along the way," and can actually set things up to later on scale. The last piece of ways to gain leverage, I think, are these digitally native first companies, they're going to grow up on Snowflake, right? And you can actually get to a world where you're doing things in this philosophy that we have at Mosaic, which is transaction to reporting framework, where if you record your transactions the right way, and you're pushing all of that data into your Snowflake database, you can actually automate a lot of the important analysis and reporting so that it runs for you. And that's another plug for Mosaic. We do just that. But having somebody that's technically-minded and oriented, that can think about the data architecture. What are the required fields? How does this stuff then push to a database and automate some of the analysis section there?

Alex Song:
Do you guys use any outside vendors from a software and SaaS perspective to help you guys along, whether it's, A, we don't have to just stay within the field of finance, right? It could be finance. It could be ERP. But it could also just be sales compensation or anything else. Have there been anything that really jumped off the page that's been a very good experience for you guys to work with?

Joe Garafalo:
Yeah. There's been so many great tools. I think we can start on the go-to-market side since that's where I'm most familiar. I think the tool to call out that's been life-changing for us on the go-to-market side has been like a Gong. The ability to just listen to calls and understand sentiment and figure out how conversations are actually trending, it's just been a game changer for us. It also helps distill information from customer calls to the product team to the engineering team. So super happy with that purchase. On the marketing side, HubSpot has been great for us. Couldn't live without it for all the marketing automation that it does. Plus the analytics and dashboarding are pretty spot-on. On the finance side, obviously tools like Ramp are incredibly helpful. I mean, we have our entire company coming to Cabo for our retreat on May 1st.

Joe Garafalo:
So having folks being able to spend, being able to put rails around things so that people feel empowered to make decisions but within the right guidelines has been awesome. Salesforce obviously has been crucial for us. I think finance people are typically married to the EERP system, but so much rich data lives within the CRM that I think finance people need to start becoming more and more familiar with it and not be as afraid of it as I think they have been in the past. But it is a scary thing if you're not super familiar with it.

Alex Song:
Yeah. It's fascinating. Definitely same here. We're happy customers of HubSpot, happy customers of Salesforce. Gong, same. We've used this since day one, just recording some of these calls, right? It's been tremendous for us.

Joe Garafalo:
It really is cool. And within Gong, I'll just call this out. You can actually use hashtags so that you can start to bring together all of the unique shout-outs for things that you want people to listen to in one clip, which has been just really cool for customer wow moments or product feedback.

Alex Song:
Yeah. Maybe we can to take a step back and look at the macro a little bit. We're recording this podcast right now, mid, late April. 2022 has been a little bit of a crazy year for all of us, right? We have stuff going on in Europe. We have crazy market volatility, right? Multiples compression. And there's definitely quite a bit of noise in the markets right around inflation and interest rates and whatnot. Would love to hear from you, what are you most focused on right now, whether the pros or the cons? And what are some things that you guys are planning for for the year ahead?

Joe Garafalo:
Yeah. It's a really great point. I think the environment has changed, right? Obviously there's lots of things that are causing the environments to change, whether it's the Fed raising interest rates, whether it's the CPI that keeps going up each month, whether it's the war in Europe, but it's definitely changed the macro environment that we're in. And I think that's scary. Absolutely. But what I'm passionate about is enabling finance and CFOs, the office of the CFO, to be a more strategic partner to the business. So in times like this, it's actually a chance for us to shine. And what are the things that finance people should be doing, should be directing their CEOs to think about? Now is the moment where we can become that strategic partner to the business and break that mold of like, "Hey, finance is the backwards-looking bean-counting organization, the guys in the back room with the green eyes or the gals in the room that are working really hard, but nobody knows what they're actually up to."

Joe Garafalo:
So with the environment that's shifting, one thing to call out, we have a really great investor. He leads a fund called Friends & Family Capital. His name's Colin Anderson, who was the CFO of Palantir. He publishes a report every week that talks about the best public company multiples. And over time, through 2022, you can see those multiples in the public markets start to compress. So if you look at that, that will eventually hit the private markets. And if you start taking note of the VC deals and the flow of VC deals, it's starting to slow down. It's definitely not as crazy as it was late last year.

Joe Garafalo:
So with all that in mind, what does that mean for finance folks? Right? It means the VCs are probably still going to look for growth, but more efficient growth. And unit economics are going to matter more. Things like burn multiples, which are... Just talking to a customer about this the other day. Your net new ARR divided by your gross burn. What is that multiple? Is it within range? So yeah. More things for finance people to look at now that it's under a microscope.

Alex Song:
What is some of the chatter that you've been hearing from CFOs and finance teams out there? From the perspective of 2022 and the effects that you've described, are people actually seeing maybe a modest or a significant reduction in spend? What are some of the tangible impacts or chatter about some of these impacts that you've heard?

Joe Garafalo:
Yeah. I think the chatter is just... The funding environment is just slightly different and I think it's probably fine for seed and Series A. I think those will probably be relatively unchanged. Maybe valuations go down a bit. But for those later stage, those growth stage deals, the companies just need to show a bit more maturity in their finance function, that they're thinking about the upsell motion, that they're thinking about how to expand ACDs, how to cross-sell and upsell, that the unit economics make sense, the CAC and the payback periods make sense. So just a renewed focus on businesses that are going to be here for the long-term. But definitely have heard that the next 12 to 18 months, things are still in that uncertain territory.

Alex Song:
Yeah. That's very interesting. It's almost this weird countercyclical effect, right, where companies like Mosaic is you could almost think of them as recession-proof, right, because exactly when things quiet down a little bit, exactly when people are a little bit perturbed, a little bit unsettled by the macro environment, that's exactly when they need to be, right, very circumspect about their financials, their performance, how they're doing, measuring KPIs and whatnot. I can definitely see this is one of those things, again, almost countercyclical in nature.

Joe Garafalo:
Yeah. I think you're spot-on. And the cost of the tool, right? It shouldn't be prohibitive. We're not going to say, "Hey, this is going to be your biggest expense at the company." So it's a small price to pay for that peace of mind to be able to see into all the financial quarters of your business, and to not only understand what happened in the past, but be able to anticipate what will happen in the future, so that when times like this do come around, you're able to pivot and make adjustments and see around those corners, which is really, again, where I think finance can add a ton of value.

Alex Song:
Is your revenue model today just it's exclusively software and SaaS, or is there additional components, services, or something like that?

Joe Garafalo:
Yeah. So today we're all software licenses. We have two products. We have an analytics product and a planning product. Each of those are unlimited seats. Our view is we want as many people in the application getting as close to the numbers as possible, and we don't want to be prohibitive about who can access and who can't access. So two simple platform fees for each product, and we can always discount if people buy both products together.

Alex Song:
You're obviously surrounded by a lot of very smart people, a lot of former investors, bankers, finance folks. Any thoughts in the future about potentially providing more of a services component or advisory component where you can maybe almost be a little bit more normative or prescriptive with some of the stuff that you're seeing?

Joe Garafalo:
Yeah. Absolutely. I think one thing that we see really often is people, they want help, right? They want help cleaning up their CRM data because they didn't pay enough attention to it. And now they can't actually get the right insights that they need. So actually, customers have been pushing us to do some of those cleanup services or those advisory services. I don't think it's ever going to be a large part of our business, but if it helps our customers get to where they need to go faster, we think about it.

Alex Song:
Yeah. Joe, it's been great to have you on the podcast. Our two firms have known each other for quite some time. I know that my FP&A team certainly feels that you guys are extremely, extremely valuable partner. How do our listeners find you?

Joe Garafalo:
Yeah. Our listeners can find me on LinkedIn, Joe Garafalo. You can also find us at info@mosaic.tech or our website, mosaic.tech.

Alex Song:
Very cool. Well, thank you so much once again. Thanks so much for taking the time and offering some of your observations, opinions, and insights about growing FinOps and automation and just getting operating leverage in the business. Has been absolutely tremendous having you on the podcast.

Joe Garafalo:
Yeah. This is a ton of fun. Thanks for having me, Alexa. Happy to join you anytime.

Alex Song:
Thank you.

Speaker 1:
Thanks for listening to this episode. If you enjoyed it, please rate and review us on Apple Podcast, Spotify, or wherever you listen to your favorite shows. It really helps to spread the word. Until next time, this is FinOps Today from Ramp.