Clari recently made the news with a $225 million Series F round, bringing the company’s valuation to $2.6 billion. While high valuations and healthy funding raises are only part of the Clari success story, I view this milestone as further testament to Clari’s leadership in the revenue operations category and early validation of my decision to join Clari’s board in 2021.
I currently sit on several boards. I have also worked as a Chief Financial Officer for the better part of the last 20 years. I am often asked how I make the decision to join a company as an executive or a board member. I am very analytical, and my training as a CFO has helped me to develop a framework I use when deciding which companies to join. I conduct more and related due diligence, but in general, this is what I look for, in priority order:
- Extraordinary culture and people
- Large and growing market opportunity
- Strong product-market fit
Let’s use my decision to join Clari’s board as an example.
1. Extraordinary culture and people
When I think about building “culture” in a company, I distinguish between Culture with a capital “C” and culture with a small “c.”
When I first moved to the Bay Area in 1997, it seemed that many business leaders thought a good culture meant kitchens stuffed with high-end snacks, ping-pong tables in the common areas, and raucous parties with overflowing kegs.
Early in my career, I worked at McKinsey and Hewlett-Packard. While I was there, both companies were very intentional about culture, values, and people practices. The HP Way was alive and well, and McKinsey’s values were so foundational that people of all levels referred to them regularly and walked the talk.
Leaders need to start with “Culture,” which includes setting an inspirational and authentic foundation by defining the company’s mission, vision, and values. Executives need to vigorously communicate these values, relentlessly weave them into as much of the company’s operations as possible, and consistently walk the talk. The latter is the most important for me. If leaders, especially the CEO, don’t embody the company’s values, then those values are just words on office posters; they’re not helping to build the true culture of the company.
Next, “culture” refers to important supporting processes, practices, and tools that fortify and enhance “Culture.” If I had to whittle culture down to three things, they would be:
- Strong leadership practices such as transparent and content-rich communications, finding the right balance of empowerment and accountability, and data-driven decision making.
- Strong human resources practices like finding, supporting, and developing top talent, goal setting, performance management, regular one-on-ones, and fair compensation practices.
- Invest in making the workplace fun and special.
From my vantage point, Clari has built a culture that attracts employees who are authentic, diligent, earnest, and, importantly, passionate about the business and our customers’ success. I’m consistently impressed with the team’s talent, communication, transparency, and alignment.
2. Large and growing market opportunity
Market size and growth rate determine a company’s long-term revenue and value potential. The more customers you can serve, the more your company can grow. This is simple in theory, yet in practice, it’s tough to get right.
Accurate market sizing is a complex endeavor that requires deep analysis across a range of data, information sources, and people. This analysis is critical for companies with ambitious growth goals. Without it, your venture becomes a lot riskier for all stakeholders.
In addition to common market size measures, like total addressable market, companies need to dive deeper into the composition of the markets they’re in, and potential adjacencies they might address in the future. Any company I join, I want to ensure they’re not just a feature, but that they provide the potential to become a large, growing, profitable, stand-alone company with a healthy portfolio of offerings.
Two related key metrics I focus on are:
- Market share. Market share is generally defined as the percentage of a particular market that your company owns. It’s a powerful metric for board members as it sizes the piece of the pie that you already have, and then this metric can be used to benchmark, set goals, and ultimately track progress over time.
- Market white space. This generally describes the gap between the share of the market your company has and all of the opportunities that aren’t yet addressable. The share of the market that isn’t yours today might be in your core market but either held by competitors or resulting from prospects not yet feeling a need for your products. White space opportunities might also exist in new markets/adjacencies you’ve not yet tried to serve. Companies use white space analysis to identify key gaps between current offerings and their desired growth, or offerings at some target date in the future, and then create a plan to close the distance.
As a former CFO, I understand the power of getting revenue operations right, whether it is basic sales force planning and sales team accountability, or predictable and accurate sales forecasts quarter after quarter.
Clari’s market opportunity is particularly exciting to me as it is large, growing, and important. Revenue is job number one for every business. Given Clari’s focus, if we do this right, every company can benefit from being a Clari customer.
3. Strong product-market fit
The best companies I have worked with are maniacal about product-market fit (PMF).
What does this mean?
For an enterprise software business, PMF means the company has a lather, rinse, repeat sales motion. The best way I have found to test this is to ask the following question: When the company hires the next incremental sales rep, is it consistently predictable how fast that rep will ramp her/his productivity and does that rep have the sales and marketing tools she/he needs to be successful in the process? If the answer is yes, the company most likely has found some semblance of PMF.
To ensure product-market fit, companies need to stay curious and connected to their markets. I look for companies that continually test their markets and related assumptions to ensure they’re going after the right segments, and then build great products that address the needs of even the most discerning customers in that market. You can build the best products in the world, but if nobody wants to buy them, your company is unlikely to succeed. This is why validating market demand is especially critical for early-stage start-ups.
Once again, I think Clari has gotten this right. Clari has capitalized on market momentum to deliver a targeted, differentiated platform that solves a long unanswered need from a growing market of revenue leaders who are eager to drive efficiency, transparency, and predictability in their sales and go-to-market efforts.
I chose to join Clari’s board of directors because the company and its executives emphatically ticked the boxes on these and supporting criteria for me. CEO Andy Byrne and his leadership team have built a wonderful culture filled with extraordinary people. They are addressing an important market that is large and growing. And their product platform robustly and reliably meets the needs of Clari’s happy customers as the company focuses on its mission to help every company achieve unmatched revenue growth and performance.
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