Navigating Cash Conversion Cycles and Competitive Dynamics in Hardware Businesses

The chapter explores the importance of cash conversion cycles for hardware businesses, particularly focusing on working capital consumption during periods of growth. It discusses the benefits and challenges of negative working capital cycles, using examples from SaaS companies and big players like Amazon and Walmart. Furthermore, it delves into Fitbit's competitive landscape against rivals like Nike and the Apple Watch, emphasizing the need for innovation and adaptation in a rapidly evolving market.

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In this episode, CJ is joined by Bill Zerella, the CFO of the publicly traded auto marketplace ACV Auctions and former CFO of Fitbit, Inc. to discuss hypergrowth and taking companies from the private to public markets at scale. Bill sheds light on his days at Fitbit and the friction he faced in managing a business in hypergrowth mode, as well as its impacts on company culture and managing employees. He explains the CFO’s role in understanding tech debt and his approach to forecasting R&D spend. He also talks about Fitbit’s unprecedented growth, the company’s cash conversion cycle, and how it achieved negative working capital, before he tells the story of what it was like going up against the Apple Watch. Overall, he shares what he learned from his varied career in data-driven businesses. Tune in to hear about navigating hypergrowth and other insights from a CFO with an impressive career in later-stage tech firms.

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@cjgustafson222 (CJ)

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TIMESTAMPS:

(00:00) Preview and Intro

(02:10) Sponsor - Leapfin | Mercury

(04:14) Managing a Business in Hypergrowth Mode

(07:15) Hypergrowth and Company Culture

(09:54) Managing Employees and Over-hiring

(14:05) Board Dynamics and Investment in Hypergrowth

(14:59) Understanding Tech Debt as a CFO

(17:59) Sponsor - Netsuite | Maxio