Transcript: Sagi Rothman | Panorays | Vision, Strategy and Scale

Eyal David: [00:00] Hi everyone, it's Eyal. Today my guest is Sagi, CFO at Panorays, who shows how a CFO can think like a product manager. Build versus Buy decisions, data that drives strategy and growth, and great examples from the field. Let's get started! Hi Sagi, how's it going?

Sagi Rothman: [00:25] All good, thanks for having me, it's a real pleasure to be here. Absolutely, with us today is Sagi from Panorays.

Eyal David: [00:31] A CFO, the first CFO on the podcast. But you didn't come here by chance, we've also worked together, and I think you have a somewhat different perspective as a CFO, and I really wanted you to come. So go ahead, tell us for a second who you are and so on, take us a bit down memory lane,

Sagi Rothman: [00:49] so we get to know you a bit. So I'm Sagi, CFO of Panorays, I joined Panorays about three months ago. I've been working for something like fifteen years at the intersection of strategy and technology, business and finance. I really enjoy it, I've moved between large organizations and small organizations. I started in the Navy, did the naval officers' course, was deputy commander of a missile boat, did a few more staff roles and got discharged at a relatively older age. I went to study, I studied economics, statistics, operations research and business administration, so I'm a data and numbers person. I started working at Intel Capital, a venture capital fund, about fifteen years ago, at a time when there weren't too many VC funds in Israel. After that I moved to a finance role at Intel, I managed a small budget at Intel of half a billion dollars, from there I moved on to Amdocs, I really wanted to work in strategy and acquisitions, I joined Amdocs, Amdocs' strategy and M&A group, corporate development, I was there five years, my last role as a director, and then, after a fairly long period in big corporates, I wanted to try something small, and I wanted to join a place where you can build a big company, take it forward. I'm not an entrepreneur, the basic founding part is less interesting to me, what interests me is taking ideas in markets. I joined Verbit at what stage? I joined Verbit in 2020, I literally joined on the first day of COVID, the company was something like 70 people with revenue of about 4 million dollars, something like that. When I left Verbit a few months ago, with revenue of tens of millions of dollars, a global company with over 400 employees, over 3,000 customers, and we built the company from a fairly small company into a global leader in transcription. And after five years I came to a new place called Panorays, it's a CFO role, also CFO. So Panorays provides a SaaS platform that helps organizations assess and manage the information-security risks of their vendors, and of partners and third parties connected to their corporate network. This whole field of cyber and Third Party Risk Management has been identified by Gartner and Forrester as one of the most central areas in cyber, and there's almost no company that can say about itself: I'm closed, I run everything in-house, I don't connect to anyone and everything is safe. Things that were very trivial 20 years ago, and then all kinds of processes started to be created: how do you know that whoever you do business with is even secure? All kinds of processes were created that I assume many people listening here know, Excel sheets with 500 questions, a thousand questions, that come to check the state of your information security, which capabilities you use, which technologies, and it's a pretty cumbersome process. Everyone hates it, there's no one who loves it, not the people who run it and not the people who answer it, and Panorays came to solve this problem and essentially turn this process, which is a very, very static process, like an underwriting process that is very, very static, into a dynamic process in which, in real time, we run an assessment together with you as the customer on all your vendors and all the third parties, which don't necessarily have to be vendors, that work with you, in order to really identify for you where there's more risk, where there's less risk, and whether those third parties even comply with the policy and ways of working you're willing to accept. And every organization has different views, a car company is different from a bank. A bank has certain regulation, a car company has different regulation, and that's what we came to solve with technology. It's a combination of cyber and digital transformation. Amazing, so if I just for a second

Sagi's background

Eyal David: [05:01] look at it, both through the Verbit example and here, you basically know how to come into companies of a certain size, probably with a certain revenue run-rate, and basically look at it and take it forward. Yes, what I love to do is

Sagi Rothman: [05:13] connect vision to strategy, to work plans and business plans, and that's also what I ended up doing at Verbit. There was a very, very big vision from the CEO and founder at the time, Tom Livne, who brought me there: he wanted to build the biggest transcription company in the world. We had to take that vision and connect it to strategy: what does it mean to be the biggest transcription company in the world, which markets will we play in, why will we win at all, how will we even have enough money to execute it, what are our competitive advantages compared to many, many other players. We answered all of those questions, and then we had to build it, build a work plan: how do you execute it. We did certain developments that were organic, we bought six companies during that period, which is also a path, which is also a path, it's not very common here in Israel among startups, now you see it a bit more than before because companies started to be somewhat bigger than they were, say, ten years ago, but it's also a legitimate path. And I think ultimately, if we, this is a podcast for product managers and founders, I think people underestimate the whole topic of acquisitions, and always treat it at the extremes: either it's some nice experience, let's buy some group of five and see what we can do with it, or how we sell the company. But when you look at American companies, and not all of them are very, very large companies, you have to, before you go and do strategy as a product person, as a founder, I as CFO ask myself, is it right to buy, is it right to build, or is it right to partner, or is it right to combine these things. And I think a lot of Israeli companies very quickly, because we're a people who really like to do things very fast, rush to build and create some MVP and then some alpha, running, running, running, running, and many times someone has already done the work, they exist, you can work with them, you can buy the service, you can do lots and lots of things. What we discovered at Verbit and before that at Amdocs is that when you do this, it may take more time and you can't run straight to building, but your ability to move fast and take a shortcut in time is much, much faster. It comes with challenges, it comes with other risks that you don't have in organic development, but on the other hand someone has already invested 3, 4, 5, 15 years. At Verbit we bought a company that was 35 years old, someone had invested 35 years in the market, so they definitely know it better than we will know it, even if we now invest 5 years, and so I think you need to look at all the tools in the toolbox. One second before we continue,

Connecting vision, strategy and a work plan

Build vs Buy

Eyal David: [08:07] click the link to the Product Builder WhatsApp group in the episode description and join the community. There you can continue the discussion, ask questions and be the first to get updates on new Tachles episodes. We're waiting for you there, and now back to the episode. Tell me, and basically, like I said, in my eyes you're not standard. How do you map the CFO role? I think it's been evolving

Sagi Rothman: [08:31] in recent years. Like many trends, it started in the US, on NASDAQ, and started reaching Israel. In the US most CFOs on NASDAQ are no longer accountants, and I'm not an accountant myself, and I think ultimately you're a data person, you need to be a business and strategic partner to the company, to the CEO, to the technology organization, to the product organization, and in fact you must, unlike in the past, deeply understand technology trends and how they affect the business today and how they'll affect it in another two and three years. And while everyone is busy with Execution, as the partner you have to ask the hard questions about what will happen in another year and another two years, whether we're even investing our resources and energy in the right places, or whether we're here in something that's very nice for us to do but we're not sure it will really take us forward, because there are additional new trends we see coming but we're busy with other things. And I think the CFO has to look at that and has to be a significant counterpart to the business and understand these things from that place, specifically not from the details and not from the depth of things, but from above, from a broader view of processes. At the same time, that's inside the company, and when you go outside, if the salespeople sell the product, you need to be the salesperson for the company's stock, and know how to translate the technology, especially in tech companies, translate the technology and products into the language investors speak, in the language of strategy, the language of how sticky your product is, the language of ROI. And actually a lot, when you think about a product today, a lot of energy is invested inside, in sharpening the features very, very precisely, and making sure you're only doing what you need to, and moving forward in a very, very sharp way. The CFO needs to take that understanding and translate it into the language that investors, investors, shareholders, the board speak. So you're basically also doing storytelling for the product,

The CFO's role in an age of data and technology

Eyal David: [10:54] basically for a completely different audience, from its business side. Look, first of all, I'll give a bit of background. Basically, when I started working with Verbit, you were actually the champion of the move, you basically brought it in, and basically pushed the product initiative. So it's really interesting, what to do and what not to do, and also maybe how basically, like you said, Build versus Buy, doing it in-house or outside. I want to ask, how much time do you actually dedicate to future thinking, forward thinking? You described that it's something you do, what does it look like in your calendar? Because that's not classic CFO thinking, that's what I want to say.

Sagi Rothman: [11:32] So I spend a lot of time outside, I talk to customers, to partners, to technology people, and in my business mindset I'm very, very paranoid, so when something doesn't add up for me, I immediately think something is going on. And I split my time roughly half and half, half the time inside, ultimately, on internal business processes, to make sure the company is heading to the right places. I'm someone who comes from statistics, I come from data, it's very important to me that we measure the right things, and that we really look, not under the streetlight, but really at the things that worry us. At the same time, I keep asking myself, going forward, what are the steps, those operational steps we measure and do, are they really taking us in the business and strategic direction we want to go. And you give the example, the Verbit example: at some point we understood at Verbit, Verbit, that we had to provide a solution for a certain segment that we weren't serving. Verbit as a company served very, very large organizations, and we realized we constantly had inbound requests, both large organizations and small ones, knocking on our door, wanting to do business with us, and we didn't have a very simple and fast ability to work with them, it was a bit more cumbersome, with sales first, go talk to someone, and they wanted to transcribe two hours of recording. And up to that point in time, someone picked up the gauntlet, how did it roll over to you, actually? I saw it, I picked up the gauntlet, like happens in many organizations, the gauntlet gets picked up in several places at the same time, and I never wait for... anywhere to call me. When I identify that there's a challenge, I'll go and fix it, that's what I've done everywhere in my life, if the floor needs cleaning, I'll clean the floor. That's connected to the Navy, right? I'm connecting it. It's also connected to who I am, I'm very informal about titles, and it never bothered me, when I was in the Navy, to talk to someone more senior, or when I was at Intel and someone very senior came and I had a question, or at Amdocs needing to talk to the CEO, if there was something that didn't seem right to me, or that seemed more correct to me, and also today. And ultimately, the moment I see something where I can contribute, and pick it up, and push it forward, and it sits within our strategy, meaning, I won't go and touch something I think has no purpose, just for the sake of it, but rather I think it touches our strategy, I think it's not being handled well enough in the company, then either I'll start working with whoever leads it and understand how I push it to the right places, or I'll go and pick it up myself. And in the example you gave, really, we picked it up, and I picked it up, and we built a team around it, that's a product team, a dev team, a marketing team, that would be able to talk to smaller organizations and do transactions. And a strategy we really believed in, that ultimately the world is going more and more digital, especially in use cases that are becoming more and more, that people want less to talk to a salesperson and do big transactions, rather, there's a whole layer of the world where people do small deals, like on Amazon, they don't want to talk to anyone, they expect it to work, send us the invoice and that's it, and finish there. And I think we wanted, at Verbit, where we had very, very good capabilities in the enterprise world, we knew how to sell very well to very, very large customers, and we wanted to change that point, and that's the provision. There's simply a cake here, let's eat from it too, and... there's a cake here, we have capabilities that are very, very good for this cake, but they require certain changes in go-to-market, and in general it's not my area, as CFO, to now start handling go-to-market, but I identified there was a challenge there, for us, as a company. It sat in a place that didn't have someone who could take it on, and... and then I approached it, like many things I approach, I always come at it from strategy, and there was something like a month of strategy work, we examined the market, I spoke at that time with something like 20 people who had done projects or who have businesses in the content world. So that's my way, I come in, I do some kind of blitz, and raise my own level, and the level of the team working with me on the topic, and then after a month suddenly you start having intuition, you've heard a lot of things, you start understanding what really fits you, and then you can move to okay, how will I do the execution, and what are our goals, and what are the KPIs. But I always believe, and sometimes people say I'm a bit tough about it, first define what you want to achieve, what success is, how we'll know we even got there and succeeded. And I think today a lot of times people run, because technology has become easier, and everything is more available and more accessible, they run to build, they run to ship certain solutions, and they skip important stages, which aren't technical stages at all, which are stages of how will we know we got there, how will we know we're... Let's dive in here for a moment, what does a process like that look like? Give us a few tips. So I, I invest a lot of time in this part of defining the goals. I look at our past, at our future, at industry trends, average deal size, how many leads came in, I bring all the data that... however I can get it, public, private, from others, almost every piece of information that... So if we talked

Discovery work: market research, customers and defining success

Eyal David: [17:40] one second, if we talked about forward planning, that probably falls under new initiatives and forward planning. How do you arrange your calendar? Or how much time do you dedicate from your calendar to it? What does it look like? Or does

Sagi Rothman: [17:52] the opportunity come and then you... I'm constantly walking around the company, and I said I'm paranoid, so I'm constantly walking around with a feeling of what am I missing here. So I don't wait, the opportunity doesn't come. Opportunities don't come. And there's some study that was done on luck. I don't really believe in luck that happens to specific people of one kind and not to other people, rather luck happens to those who look for it. And I live by that view, I walk around the company all the time looking for opportunities. Some of the opportunities are being handled, and then you need to measure them and ask yourself whether they're handled properly and moving in the right direction, and sharpen them where needed. And some of the things, also many things, both at Verbit and at Panorays, are moving in good directions and with the right strategy accompanied by good execution. And some of the things are less so, and then I usually ask myself, is this an initiative that will serve our strategy? To what extent? And if the answer is yes and it's strategic for us, but it's not handled well enough, that's usually the place where I'll open the door and stick my nose in and try to understand

Eyal David: [19:10] what we're doing here. If now, I'm really trying to formalize it, so you're observing all the time, you probably also have some fixed time, you might not admit it, but you have such time, and then you basically bring people in, say okay, this sounds like an interesting opportunity, not being handled, now you basically set out

Sagi Rothman: [19:28] on a research journey, what does that look like? I'll touch on one more point before that, you asked about time. I meet people at all levels inside the organization all the time. When I was at Verbit, my wife didn't love it so much, I spent a lot of time in the US, near our customers, near our employees who worked with the customers. I traveled, we had a site in Canada, I traveled to Canada and I traveled to Denver and Pittsburgh and England to our various sites, because I really believe the wisdom isn't at headquarters, the wisdom is as close as possible to the customers, to the people who really understand what customers want right now. You can hear it through someone translating it for you, through someone, and you get it four levels very distilled, or you can sit and listen to the one person a very, very big customer called 10 minutes ago and asked for something. Now, that person may not fully understand, he's not a product person, he's actually a support person, he doesn't fully understand the distillation of these things, or he's a support manager and he does understand it, and then you ask him, tell me, how many times did people call you about this topic in the last month, and he tells you 15 times. That's one of the places where I start to understand there's something and I start digging, and I'll ask to talk to his peer, to someone sitting next to him, and after I get back to Israel I'll call him two weeks later, and then I start. Many times we tried, we tried to create a culture like that at Verbit, where people would raise ideas and come to me and to management in general with all kinds of things. Now sometimes some of the things aren't relevant and they really are an edge case and they're not very, very interesting, but when you talk down the line and not only with someone parallel to you or who works with you directly, then you discover, and you hear people speaking a different language, really a completely different language and a different jargon, in different fields of work, and you have to translate it for yourself. Some conversations won't have any follow-up, and you get feedback for the company and it doesn't go anywhere, and some conversations were pure gold, you heard things from customers in certain areas that I wouldn't have managed to hear, you won't get them from anywhere else. So you can start working, and you can go to product and start asking, coordinate with product, bring in product to see if they're even looking at the area. Sometimes they'll tell you yes, yes, we checked, it's less interesting, and then you say fine, bring me the data that supports that, so it already starts moving work inside the company. And some of the places really, there's nothing to do, you can't be absolutely precise all the time, and in some you're spot on, and you manage to move forward, and in this process people experience the progress together with you. I don't bring the data myself, and I'm not a product manager and I'm not a technology person, but you build the most relevant team for it and start meeting and thinking and listening, and send them to talk to the same people who were relevant, and good things come out when you build teams that are not, not homogeneous, not from the same territory, not from the same

Eyal David: [22:58] culture. Let's continue with the story's role, so basically we talked about very deep research, and when are you satisfied with your research, when do you feel you've researched enough?

Sagi Rothman: [23:10] I say this all the time to my kids and I don't know if it's the right saying, already back in my Navy days I really believed in 80-20, meaning invest 20% of the time, understand that you're at 80%. How do you understand you're at 80%? You start seeing the same numbers come back to you again and again, more or less in the same orders of magnitude, the same trends, the same things start converging into the same areas, and then usually further deepening, unless you're badly wrong and not in the right direction at all, usually further deepening won't give you significantly more precision, and it's better to leave the data topic and start moving toward what are we doing here and what are we trying to solve, and less let's bring another data point and another data point. I think today, in the age, in the age of AI, access to data, at least from what I've seen in the last two years, is an order of magnitude greater. I started as an analyst at Intel Capital 15 years ago and everything was hard, you had to read a lot and you had to summarize and think, and things were much more complex. And today you can feed in huge amounts of data, and no matter which tool you work with, it'll summarize, and I work with it very, very closely, and so whoever still does research in an analog way, I'll call it, I think they're behind, technologically, they're late and they're wasting a lot of energy for nothing. How do you know you've reached eighty percent? Because I see the same conclusions coming back to me again and again, the same numbers start appearing again and again, the same trends appear again and again, you've reached a certain market size. Now sometimes when you do work on, say, market size, you can do it top-down, you can do it bottom-up, there are all kinds of different methodologies, it's fairly important, it's relatively, and something smaller can also be 100 million dollars and you're coming with a new product line, it matters much less whether it's 10 percent or 13 percent. I do get very concerned when I get warning signs about markets that are declining, and in places where there are risks. Many times there are risks and opportunities, there are new technologies that come in and disrupt markets, and then you ask the question of how you put them beside you so they help you, and not how you panic and now what do you do with them. In my experience, usually after about a month you get to both the numbers and a top-down strategic understanding, you have certain theses and you've laid down those theses and arrived at a certain set of assumptions about the world, and that's how you see the world. And usually also when you start, as I said earlier, I don't do this in a silo, and when you start talking to people, then even if you don't get the most precise numerical answer there is, they'll tell you if you're wrong, because the people who care will stop you and tell you, listen, you're off, you're looking at the wrong problem. Now, if you don't approach them very, very gray, or very clear about what you want, you won't get that answer, but when you put it to them in black and white, they'll tell you, no, you're not looking at it right, it's not black and not white, it's gray. When you put nothing in front of them, they won't talk to you about these things at all. And usually, after I reach theses, I start talking inside the company with 15-20 people I respect, and start checking whether I'm even in the right direction, or whether I need to go back to the drawing board and... So allow me to tell you, you're doing product work? That's also true, and I think good PMs approach all these challenges from the start, and if you really know how to answer in a simple way, not in a complicated way, it's hard to do simple things, but if you know how to crack it, and large companies do this very well: when a large company sets out to crack a new product, the PM doesn't go and start bringing requirements documents, rather the deep and real work is done, and they ask all these questions, how will we sell it, and which markets are we even going to talk to, and how will we sell it, maybe it's not even worth building, it's someone else. Will we partner, will we buy it, how will we support this thing. We had examples, I have an example from Verbit where we developed a product, it was a fairly core product for us, a certain transcription technology, I'm talking about five years ago. And along the way, again, I sit with the product people and the technology people all the time, and we understand, me and the team, they understand that we won't manage to make money from this product, there's no way to make money from it, at least under our assumptions, in terms of unit economics, in the simplest way, how much it will cost us to produce the unit we sell, versus what price we can charge for it, especially in the markets we tried to crack. And all the requirements were already in place and development had started working, there was already an MVP, and we tried it, and it already worked in the lab, and everyone was happy, and I ask a very simple question, like, explain to me how we, how will we make money from this, how will we monetize this, it doesn't help much to sell something for a dollar that costs you two dollars. Silence. And silence, and we sent them back to the drawing board, and they came back with a dollar fifty, and I said, that's fine, but it's still, we're still losing money here, and we sent it back again, and eventually we reached the conclusion that we were solving the right problem for the wrong market, and in the market where we tried to solve the problem, they wouldn't agree to pay the same prices that another market was willing to pay. Now, what does that mean? It means we designed great technology, but on the sales side, the go-to-market side, we didn't ask ourselves where it would solve. And now, when we sharpened the market, we fit the development to the market, to that market, and moved to marketing this product. This product is still, today, five years later, the infrastructure for many of Verbit's capabilities today, but it was built very, very precisely for the market where it truly has a chance to make a change and make an impact. It did delay us, but I think the alternative was, we'd ship a product, we'd realize we can't make money on it, and then we'd shut it down fairly quickly and fairly sadly. And instead we stayed with very, very good technology, in a different market, that works for us, is profitable for us, and we managed to bring it to market, admittedly a bit late, because it required us to go back to the drawing board and think about it. But the moment we finished that work and understood it, a lot of noise from the other markets dropped away too, we said why do we need to waste energy, we'll solve the other markets in a different way, and this specific market, which is the legal market, we'll solve this way, and then we could move forward at a much, much faster pace than if we'd now tried to solve all the problems of the whole world in one go.

When to stop researching, and how to know it's enough

When a product doesn't make money: back to strategy

Eyal David: [31:06] Tell me, do you know other CFOs who think and operate in a similar way? Is there anyone who honked at us?

Sagi Rothman: [31:13] Yes, I think that... and I recommend this to every founder, I also recommend it to product people I meet with and to other CFOs: listen to investor calls of American CFOs. Many times we, as a nation, we're very unstructured, very fast-running and dismissive of hierarchy. There's something in the way the Americans, the CFOs of large American public tech companies, approach this world very, very professionally, it's very, very precise, it's a real show. Give, give, what example do you see that you have? I'll give the example of Salesforce, I'll give the example of ServiceNow, I'll give the example of Meta. Ultimately, when these companies, again, large companies, it's no surprise they do it precisely, but when they come to report quarterly results or analyst days, which I really recommend listening to, it's a day of usually three or four hours of presentations, not only financial ones, but for analysts, for people, exactly those investors who look at the company and need to decide, among thousands of companies out there, whether to invest money in this company or not. And you see good companies that come and communicate, and the story is completely coherent, the financial story speaks to the product story, speaks to the Go To Market story, with the partners, there are discussions with the partners, and the partners tell how very, very good this product is. Another example of a company that's still well known today, Snowflake, Snowflake's financial story, very interesting, and good CFOs manage to connect these dots. They explain why the product is a good product, but for that you don't need a CFO, you can talk to customers, but they also explain how this product will make these investors lots and lots of money. So let's start with Snowflake's story, it seems good to me. Snowflake, a company that does a data platform, very, very well known in Israel, it usually has several other alternatives that are equally good, and Snowflake's finance side knows, and their investor presentations and the way the CFO tells the story, he takes capabilities in the product. For example, there's a capability in Snowflake's product called Land and Expand: you land, close a deal fairly quickly, and then you grow with your customers, your customer grows and becomes richer and bigger, you grow together with them, if it doesn't go well for them, then it doesn't go well for you either. Now obviously every product person wants their product to be used as much as possible, so Snowflake is very precise in its business model and its product: to land you as a customer, starting to work on Snowflake takes very little effort, and so the Land deals, Snowflake's landing deals, are not very big, and their whole purpose is to get you to start using the system. You don't need to commit for a long time, you don't need to sign a 50-year contract now, you don't need to do anything, you just need to start working in the system, and after that you start doing Expansion. And Snowflake has a certain financial trick that was translated from their product. They don't pressure you at all on the commitment level, meaning, they have nothing against it if you as a customer are willing to commit to, say, 100 thousand dollars a year. But let's assume a year has passed and you only consumed 80 thousand dollars, you didn't reach the usage they forecast, that you forecast. Snowflake has no problem with that, as long as you renew for the next year, and at renewal you don't go below the original commitment of one hundred thousand dollars. And then they take the 20 thousand dollars you had left, add the hundred thousand dollars, and now suddenly you have a commitment of 120 thousand dollars. You already paid the first hundred thousand dollars, right? Now you pay another 100 thousand dollars, but your commitment is for 120 thousand dollars, and then the third-year renewal comes. You're already at 120 thousand dollars. Classic. And then you constantly have to do Expansion, it's very hard for you to go down, they can make that very, very hard. Now, ultimately, what did the CFO do here, okay? He took a certain capability in the product and translated it both into business communication and into communicating that technological capability to the market. And ultimately this creates a certain metric called Net Dollar Retention, NDR, which measures how much your customers really value you and how much you grow together with them. And this business model, which sounds very, very simple, right? There's nothing very complex about it, it's a one-page contract, and much, much simpler than many other things. But it's very, very simple, and it creates a certain business dynamic in which, again, you have to deliver a good product, customers need to love your product, they need to use it all the time, that's clear. But you enter a dynamic where investors, investors really appreciate an NDR above one hundred and ten percent. You really serve the story, that's what will make you. Right, and then you enter this model where really you constantly have to grow usage, right? They have no problem with you consuming less than you committed, as long as you keep putting in, the money has already gone to them, you no longer have it, the money has already gone to them, and you're inside it, and now the exit costs are very, very high, stickiness is pretty high, and take your time, it'll take you two, three, five years, they're in the game forever, they have no problem with it. And after that they also go and communicate to investors how many future bookings they have that haven't yet been realized, not yet realized, it's a figure that exists, it's not secret, they communicate it, it's not an accounting figure, it's not in the accounts in a classic way, easy to crack, they report it to the world. And what happens is that this number keeps growing, because you keep bringing in new customers, they don't need the full hundred percent of the subscription, the subscription doesn't end at the end of the year, the company recognizes revenue by usage, not by the invoices they issued, but by how much data you actually consumed from the platform. And the story does a very, very good job there, translating these product capabilities, which are very, very good capabilities, this isn't a small company, a lot, a lot of thought went into these capabilities, it doesn't fit every company, and they're riding a very good wave, and executing at a very, very high level, they're able to really translate it into numbers and data that the market

What to learn from CFOs of American tech companies

Why users matter more than the bottom line

Eyal David: [38:15] and analysts know how to value. Tell me, what other data actually serves you? For example usage, is that a figure that interests the CFO?

Sagi Rothman: [38:24] Yes, I... You're back to managing risks? Yes, not only risks, I... The financial numbers, that's very basic, revenue, expenses and so on, everyone tracks that, it's very, very basic, that doesn't mean it's easy, and it requires looking at the right areas and making sure you're really measuring the right things. I also invest a lot of effort in operational types of data, like product usage, like NPS, which is a customer success metric, product usage. At Verbit we had a unit of measurement of how many minutes we transcribed per day and how many hours we transcribed per day, and we'd measure it for every customer every day.

Eyal David: [39:18] You went for that basically, because you described that you define what success is, and you measure it,

Sagi Rothman: [39:24] So that's basically the inverse metric of the thing, do you also parse the anomalies? No, no, that was fully part of our definition of success, because we said, the money comes after customers use the product, if we manage to get them to use our products more, they'll pay us more, and we'll succeed, we'll check the box on financial success. And I think today we're in an era where you have companies that measure everything, but they do nothing with 90% of the information, and everything is stored in some log, in some data, and nobody does anything with it, because it's complicated, because it requires a bit more effort and more... It's not sexy, it's much more fun to build things. It's tidying and cleaning, and many times this data doesn't come out of the systems clean, it's not in a financial system that organizes it for you, it's not in a clean state, it comes from some operational system, some log, and to really do something with it, you have to organize it. I'll give an example from us at Verbit: we bought six companies, as I said, some of the companies measured minutes, how many minutes of transcription they did, some of the companies measured hours, and some measured pages, transcript pages. It's not very trivial to connect these three things, as simple as it sounds, minutes and hours, it's not very, very trivial, some systems round up and down, and so we had to make a certain investment in organizing the data. But why do I really believe in this? Because I think a lot of unknowns hide inside this data that isn't financial. On financial data, say ARR, on recurring revenue, everyone looks at it, net dollar retention that we talked about earlier, everyone looks at it, you can measure it every day, very, very simple. But the moment your customer hasn't logged into your platform for a month, even if they paid you. They won't renew. They probably won't renew, something bad is probably happening here, and then the question is what you do with it as a company. And it sounds intuitive, but it's not that clear, you need to build a system that's able to track platform usage. Now what is usage? He logged in, yes, wants to connect via API, wants to connect directly, one user, ten users, spent five minutes in the system, is that okay, or spent fifty minutes? Suddenly that requires some thought, it needs something more, it also needs someone at the end who says, I want to know this specific thing. Right, right, and I always ask what operational metrics we want, because I say, if you run the operation, the business, correctly, you'll get good financial results. Many times people rush to the financial results, we sold a deal for a hundred thousand dollars, fine, excellent, but if we never finished onboarding, didn't bring the customer onto the system properly, they won't renew next year, so what's it worth? That whole sales process isn't worth it. And so it may be that a lot of people in the company, and the smaller the company is, everyone knows this, and things are simple, but the bigger you grow, and at Verbit we're over 3,000 customers, it already becomes information that isn't so clear, and sometimes the customer can't do onboarding now, because something is happening to them, because they're in some process. And then only if you put the right operational metrics in place and track them... we, I wake up every morning to dashboards that are sent to me, from six thirty in the morning until nine, every half hour, I get a different dashboard, some financial, some operational, and then you can start the day, and you can ask questions, and you look at yesterday, and you also start accumulating very, very good intuition about the business, and you don't meet it only once a month or once a quarter, rather you meet it every day, and things don't change very, very significantly. And then suddenly you discover that a big customer of yours, who accesses your platform every day and spends a certain amount of time, you see it, you've been looking at it for a few months. Suddenly you don't see them there, since you can monitor it. So either you have a data problem, go fix it, or you have a customer problem. Usually it's not a data problem, it's a problem, something is happening. I have a nice example of this: we bought some company in Canada and... we started learning after the acquisition, there's a stage called Post-merger integration, you learn how to work together, and it's a good company with very, very good customers, and we started connecting their data to the data we had, again, with the same goal of being able to track these things. And we wake up one morning, and a very big customer of theirs, their biggest customer, we see there's no usage on the platform. Okay, I say maybe the data is incomplete, go check the data and get back to me later in the day. There's no problem with the data. We call them, I call the person who worked with me there, and I ask, tell me, how can it be that there's some problem here, and then it turned out that customer was some very large parliament that, by coincidence, again, Israelis can relate to this, was dissolved at that time, and we stopped doing transcription work for it, it simply stopped using it, because there were no more committee discussions, we did the committees and there were no committee discussions. Now, that's a false alarm, but when you know how customers behave, you can just as well find that 100,000-dollar customer where you know you should expect a certain usage of the system within a month, within two months, and if it doesn't happen, then there's a problem here. And now, I don't think it's the sole, only role of the CFO, you need to push the product team and the customer success and onboarding team to these places, but only if you look at everything horizontally can you really get there. If you look only at the numbers, only at the bottom line or the top line, you won't get there, you'll have a pretty big gap in understanding.

Eyal David: [45:42] Sagi, it was really fun. Tell me, if people want to get in touch with you, what's the best way to do it? LinkedIn.

Sagi Rothman: [45:48] LinkedIn? LinkedIn, yes. I try to be available. In between things, but the thing is, like, write to me on LinkedIn fairly clearly, like, "hi, what's up" is less my thing, I'm sorry, but I'm less likely to reply. If someone needs help, advice, I invest a lot of time helping companies, mainly on strategy topics and on mergers, acquisitions, integration, happy to help. We didn't even talk about that much. Yes, I've done it a lot, I think there's a lot there,

Eyal David: [46:25] and we'll see more and more of these in Israel. Let's say, we made it. Sagi, thank you very much, it was fun. It was fun. Thank you very much. Bye bye. Hey everyone, thanks for listening. If you found this podcast valuable, you can subscribe and follow us, of course, for more episodes, on Spotify, Apple Podcasts or any other app, and of course if you didn't find us on some app, we'd be happy if you wrote to us. We'd really appreciate five stars on every platform and for you to follow us, so more listeners can discover us and find the podcast. You can also find previous episodes on any app or on the YouTube channel. We have links in the description. Until, until next time. Come on, be efficient, and bye bye.