A CFO’s Take on the Hard Work Needed to Clear the ‘IPO-Readiness Bar’

For finance chiefs who are helping prepare their organizations for whatever comes next, it’s good to set the bar high.

The highest target in terms of processes, controls, systems and the ability to report quickly and forecast accurately is the “IPO-readiness bar,” so that’s a good thing to aim for, ExtraHop Chief Financial Officer (CFO) Matt Parson told PYMNTS.

“It’s good discipline for any business to have, irrespective of whether you’re going to go public or not,” Parson said. “A lot of the things that you would do are things that are just good discipline and practice for the business anyway.”

Bringing Public-Market Discipline

ExtraHop is a cloud-native network intelligence firm providing a cyber defense platform called Reveal(x) 360.

Parson joined the firm in August, bringing a background that includes being CFO at payment solutions provider Paymentus and holding several roles at infrastructure software company Red Hat.

At ExtraHop, he is tasked with overseeing its financial operations “with an eye toward bringing public-market discipline to ExtraHop,” the company said in a press release announcing his appointment.

Interviewed for the PYMNTS series “A Day in the Life of a Digital-First CFO,” Parson noted that ExtraHop was acquired last year by Bain Capital Private Equity and Crosspoint Capital Partners.

“I think they’re focused on the next phase of growth for the company and scaling, so, as with any growth company — and I’ve done it a few times now — a big part of the focus is on making sure we’ve got the right foundation in place, organizationally, from which to grow and scale,” Parson said.

Optimizing the Foundation

The right foundation includes automation and good processes, controls and systems, Parson said, adding that ExtraHop’s are equal to or beyond what one would expect for a company of its size and scale.

Aiming to meet the IPO-readiness bar also includes continuing to grow the business, remaining at the forefront of network security and taking care of customers.

Another key for CFOs of any company, at any time, is tightening down processes around spending and ensuring the company’s getting a return on investment.

“Everything’s a trade-off decision, at the end of the day,” Parson said, adding that whether a company is considering hiring new engineers or using existing engineering time to develop a new feature, it should determine whether that feature would help retain or gain clients — and do so better than something else the engineers could be spending time on.

Focusing on Mission and Customers

As companies cope with coming out of the pandemic, experiencing inflation and other challenges, it’s also important for them to keep their focus on their mission and the problems they solve for their customers.

Parson said that he reminds the team and the organization that they can’t control inflation or the economy, but they can control delivering great service and value to their customers.

“For ExtraHop in particular, being in the security space, it’s a very relevant and timely thing that we’re doing — leading the way for companies in network security — and it’s applicable to every company out there,” Parson said.

Another key task in a fast-growing technology organization is change management. Because things change so fast, both the organization and people must be ready to accept change. Making sure that’s the case can be a challenge when people aren’t in the office and connecting around the watercooler.

“You have to be much more purposeful about change management and making sure you’re connecting with people and that they’re feeling good, confident and understanding of the change,” Parson said.

Aiming for ‘Maximum Optionality’

Parson, Bain, Crosspoint and the rest of the executive team are aligned on the concept of “maximum optionality.” They are not predetermining an outcome, but since an initial public offering (IPO) is the highest bar as far as a company’s readiness, that’s the bar they’re aiming for.

“There’s lot of ways to ultimately have a great outcome for Bain, our customers and our employees,” Parson said. “We’re going to absolutely work toward meeting that IPO-readiness bar and then if that ultimately happens, that’s great, and if it’s another avenue that comes, then we’ll be ready for that too.”

That readiness includes having a frictionless growth model in which finance, accounting, IT, HR, legal — the entire back office — work in a frictionless way to ultimately support sales, marketing, R&D and the company’s customers.

“The IPO-readiness checklist, if you will, very much lines up with creating a world-class, foundational back-office function that’s going to help us grow and scale in a frictionless way,” Parson said.

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