795: The Canary in the Coal Mine | Anisha Sood, CFO, First Choice Health

Back in 2001, as the dotcom bubble imploded and the U.S. economy took a downward spiral, Anisha Sood, a recently hired consultant for Accenture, felt fortunate.

“There were rounds of layoffs happening and Accenture was trying to manage it well, but I got lucky because I was in healthcare,” explains Sood, who reports that other practice areas such as technology and media were not so fortunate.

Seven years later, just as Sood had finished logging her first 48 hours as an investment banker with Credit Suisse, Lehman Brothers collapsed—but once more, Sood felt fortunate.

“Here again, I could credit healthcare as being the stabilizing factor, although there were no deals happening, no IPOs or M&A, for about 12 months after I started,” recalls Sood, who in the years that followed would lead a variety of health sector transactions for the bank before moving back to hometown Seattle to begin a multichapter career as a venture investor in healthcare.  

“When I left Seattle in the ’90s, it was kind of a small town known for its alternative rock, and now I returned to find this bustling world of startups and spinoffs and large players that had made a reinvestment in healthcare and seeded this entrepreneurial biocommunity,” observes Sood, whose venture investing career chapter—unlike those that preceded it—appears to have opened unaccompanied by the peril of economic collapse.

There were other differences as well, for it was during Sood’s venture investing days that she first began to acquire the escalating desire to build things that over time fueled her ambitions to become a CFO.

Along the way, Sood says, she came to realize that most often it was finance that was first to expose whether or not a company was going to be successful. As she likes to put it: “Finance is the canary in the coal mine.”

According to Sood, the welfare of the bond between venture investors, boards, and entrepreneurial founders often depends on a single deliverable that is usually framed by more or less the same query: “Can you provide us with a unit economic model that shows us how profitable or sustainable your clients will be over time as you start to grow?”

It was just such a deliverable that later tripped up the management team of one of Sood’s portfolio companies.

“We realized over time that the company was not tracking toward its numbers—the incremental margin, the incremental sustainability, just wasn’t materializing, and it became clear that there was a flaw in the strategy and underlying business model for the company,” remembers Sood, who adds that the company was ultimately sold for far less than what had previously been projected by venture investors.

For Sood, the experience reveals why finance must always be the canary—and sound off with tough questions that are sometimes difficult to ask.

Says Sood: “How much do we need to pay attention to these numbers? When must we start to call it? If we let things play out, it may lead to an exit that no one wants to see.” –Jack Sweeney