The Modern CFO How Summit’s Matt Wensing is challenging Excel spreadsheets and reinventing financial models
As a serial entrepreneur, Matt Wensing is no stranger to managing the day-to-day operations and growing pains of new businesses. However, he was surprised that his dependency on the same, stale spreadsheets hadn’t waned by his third venture.
In 2019, Matt launched Summit to accelerate financial intelligence by replacing idiosyncratic, disparate spreadsheets with a collaborative modeling platform. His goal is simple: to create a forecasting platform that anyone, from CFOs to start-up founders, can leverage successfully. On this episode of The Modern CFO, Matt and guest host Stuart Balcombe discuss where Excel falls short and how Summit’s plug-and-play features are a leap forward in building companies within our globally connected world.
Show Links
- Check out Summit
- Follow Summit on LinkedIn or Twitter
- Connect with Matt Wensing on Twitter
- Connect with Stuart Balcombe on Twitter
Key Takeaways
1:12 - The question that started Summitt
Matt was confident in his financial know-how, until he was hit with a question Excel couldn’t easily answer.
“The simple question was: if your sales cycles extend from what they are today, which is approximately 30-60 days lets say to 90-120 days, what's that going to do to your business? What's that gonna do to your capital needs, to your hiring plan, etc? And I remember thinking, that's really smart. He's seeing a trend, which sales cycles are extending, and he's buying into it, which is what I want them to do as a founder. But he's then saying, ‘If that’s true, then what?’ I remember going back to my Excel-based model and realizing that in order to answer that question accurately, it wasn't going to be simple. I couldn't just delay receivables. I couldn't just change the pipeline. So many things about the business needed to change to capture that distended sales cycle. It occurred to me as I was going through that wow, this is an extremely painful, but extremely smart question. And it's kind of crazy that in order to answer this, I'm going to have to spend hours and hours back in Excel."
6:33 - Messaging that hits home
Summit’s mantra is: speak quietly and carry a big message that pushes your users right where it (currently) hurts.
“You are in a relationship with a tool that both simultaneously delights you and simultaneously frustrates and disappoints you. And in some cases betrays you when you want it to support you and have your back. There's this love-hate dynamic. And because of that, the H1 there says, ‘Tell your forecasting spreadsheet you're never getting back together.’ It's really directly appealing to the fact that it's not all love all the time. And you had your moments, maybe not today, but in the recent past, where you've thought about burning it down and starting again.”
11:35 - Summit’s customer-led approach
To compete with Excel’s customizable model, Summit had to become a language - not a product.
“I ended up realizing spreadsheets are a programming environment, not a database. And I think that the approach that you choose to take, when you're attempting to replace a spreadsheet, has to take a position on that. Am I going to replace this programming environment - this language, if you will - with a SaaS tool, which is effectively a product? And I am the only one who can improve that product, my team improves that product and launches features? Or am I going to take a platform language approach and say, ‘I'm actually going to build a better programming environment that enables you to do everything that you can do today, but better?’...For Summit, I've chosen an approach of building a better language, a better programming environment for financial modeling, as opposed to just a product. Because I don't think you can build you can't beat a language with a product. You can only be the better language.”
14:38 - The global market vs. Excel
Everyone’s got their own dialect of Excel - and that’s killing collaboration in a global workforce.
“The more valuable a spreadsheet is to an individual, the less valuable it is to the group. So much individualism, idiosyncratic statements, dialects, ways of doing things, structures that are unique to my mental models, all get infused into the sheet. And that puts the ‘anything-goes’ approach to development at odds with the internet itself, in terms of collaboration and protocols that inter-operate with one another. You've literally created a lot of impedance around this very valuable asset. And it's this cruel irony that the more I invest into it, the worse it gets for you. That is fundamentally at odds with a world where you and I have an easier time than ever working together, even though we're separated by thousands of miles, the fact that this paradigm is not supportive of that or conducive to that.”
16:07 - The challenge of new economic activity
As businesses rely more on subscription-based services, Excel spreadsheets don’t provide an easy way to model this new economic activity.
“The other thing is the subscription economy, which I believe has put a lot of pressure on a need for standardization of certain representations within financial models. So cohorts, retention, subscriptions, plans, tiers and pricing and all of these - so much economic activity now is centered around subscription revenue. You can create subscription revenue in Excel, but the fact is that it's so hard to properly model cohort-based retention and retention analysis in a spreadsheet. Call it a difficulty level of 50 - and there's pressure for it to become a 5, because there's a thousand times more subscription revenue activity going on in the world than there was 30 years ago.”
18:12 - VC’s growing interest in financial health
Today, presenting a financially sound business is more critical than unicorn growth when it comes to landing VC investments.
“There's a long list now of funds and firms that are actually looking for a financially sound investment. They're not just looking for unicorns. Of course, they want unicorns.That's great. But they're actually very happy with what they call the long SaaS ramp of growth. And they're looking for this at very early stages, to make loans, to make investments with maybe even revenue based returns. So the IRR is great, but they need to look at your business at a much earlier stage than ever before. And they’ll make a decision not just based on the founders and the hotness of the markets or the market potential, but they want to make a decision based on the things we just talked about, which is how sound and strong your business is financially. And that means that founders and early-stage operators are being asked to produce models that are much more rigorous much earlier in their life cycle than they did 10, 20 years ago to get that $300,000 loan for a business doing $300,000 a year in revenue.”
24: 21 - When growth hits the wall
Companies may get away with poor financial practices for a while - but most will reach a growth plateau. This reality demands re-evaluating the antiquated tools we rely upon.
“Everybody hits this asymptote at some point in their growth. That asymptote is a painful relat...