Jake Luerkens and Connor Frischmeyer are co founders and partners at Auxo Partners, a finance advisory firm that helps startups make better decisions and grow strategically.
They have been in “the sidecar” as companies scaled from $2m to $50m, providing internal finance, FP&A, capital markets advisory and SPAC (special purpose acquisition company) support.
In this FP&A for startups episode:
- When should startups think about bringing in fractional FP&A services
- The rise and fall of SPACs (including a rap about SPACs)
- Why investors are focused on a clear path to solid business models
- How FP&A can help companies *not* blow their fundraising
- The most typical problems companies face in raising money
- Why Excel is the most flexible tool for finance
- Biggest Excel nightmares
- How to get started in FP&A
Follow Jake Luerkens and Connor Frishchmeyer on LinkedIn
Follow Paul Barnhurst on LinkedIn
Links from the episode
Spac Dream By Cassius Cuvée featuring Mags Lionne
Paul Barnhurst:
Hello everyone. Welcome to FP&A Today, I am your host, Paul Barnhurst, aka the FP&A Guy. And you are listening to FP&A Today. FP&A Today is brought to you by Datarails Financial Planning and analysis platform for Excel users. Every week we’ll welcome a leader from the world of financial planning and analysis, and discuss some of the biggest stories and challenges in the world of fp and a. We’ll provide you with actionable advice about financial planning and an analysis. This is going to be your go-to resource for everything fp and a. I’m thrilled to welcome with me two guests. Today we have Jake and Connor. Jake and Connor, welcome to the show.
Connor Frischmeyer:
It’s good to be here, Paul. Thanks for having us. Yeah, thanks
Paul Barnhurst:
Paul. Yeah, excited to have you. And lemme just give a little bit about their background and then I’ll give them an opportunity to share a little bit more about themselves. So Jake and Connor join us from Auxo Partners, an advisory finance firm. They provide CFO, FP&A, accounting, some capital markets and M&A advisory services. Jake is a former investment banker and private equity investor who comes to us from Colorado. And then Connor comes to us from Mexico City. He’s worked in investment banking before he even started his own company, previously, LIBO calculator, A tool designed to assist with financial modeling processes for investment banking transactions. So a little bit about them and where we’re gonna start is Connor, I had a question for you. I saw in your profile, I noticed you played in a garage band called the Single Dads. So how to start off with that? Ok. How did you come up with that name? What kind of music do you play? Tell me a little bit about that.
Connor Frischmeyer:
So the name idea behind the single dads was that we effectively played in a dad band. So we’re people, friends from San Francisco who all had our day jobs. And my, one of my bucket list items is to be in a dad band and embarrassed my kids at some point when I’m older. And so we started early and the single dads was a punk rock band who played like a bunch of Green Day. We actually did a little bit of clean and like some classic rock as well. But yeah, I, I had this house that I lived in, in San Francisco with about 12 other people, which anybody who’s from San Francisco knows the kind of like hacker house concept and it was right across the, from the old Grateful Dead House where they recorded a bunch of their albums and stuff. So Okay. We would practice in the garage, we’d pop the door open, we’d look out at the Grateful Dead House and basically just pretend that we were them although we were more of like tech and finance nerds than anything else.
Paul Barnhurst:
Oh, fun. I bet you had a good time with that. Do you still do any band stuff or is that
Connor Frischmeyer:
I do quite a lot of music stuff, unfortunately all of them have actually moved permanently to New York. I am, I spend a bunch of, bunch of time in New York City but I’m not out there full time. So the, the band has has fallen apart a little bit, but we’re working on getting it back together at some point.
Paul Barnhurst:
Oh, fun. I thought we’d start with that, cause I just thought it would be an interesting kind of little piece there. So thank you. So maybe now you could tell us a little bit about, you know, how you ended up where you’re at today and what you’re doing. What do you do on a day-to-day basis?
Connor Frischmeyer:
Yeah, totally. So both Jake and I started our career as an investment banking, as you said.We actually worked at the same investment bank and we both graduated from the same university as well. I spent some time in their leverage finance group. So I did a bunch of debt stuff. I was living in Chicago at the time, and the company came to me and said, we’re hoping to expand our technology coverage presence on the west coast. We had a group, it was mostly in New York. They wanted to expand more into San Francisco. And so I left Chicago and I went out there and shifted into, it was more like M&A and capital raising type stuff, investment banking transactions for tech companies, software, hardware, bunch of different stuff. And while I was out there I think I got a little bit of the entrepreneurial bug just from having started that office.
There was only, you know, three, four of us at the time. And I spent a bunch of time with really, really smart founders in Silicon Valley. And one of the things that I realized as I was doing that is they’re, they’re really, really smart and they’re really, really good at what they do, which is product development and marketing and strategy and all these different things. But one of the tools that they did not have was the one that I have, which is finance . And so that’s how the idea kind of came up to leave banking round up some of my friends and acquaintances and other people that we’ve worked with, and take that skillset that we built at larger companies in private equity and places like that, and then apply that to startups where it can really move the needle and, and kind of help them grow their business more effectively and, and more quickly.
Paul Barnhurst:
Got it. That, that makes sense to me and appreciate a little bit on that background. Jake, you know, kind of same, same question for you. Can you talk a little bit about your background and how you ended up, you know, where you’re at today?
Jake Luerkens:
Sure. Thing. You know, so as, as Connor mentioned, you know, also started out in investment banking. My role was pretty much sell side M&A focused from day one. Just spent a couple years working on a variety of industries and kind of business model types, sell set, m&a focused. After that kinda moved into private equity as, as oftentimes investment bankers do. Spent a couple years doing, you know, private equity investing. I think I got roughly 10 sort of deals under my belt there, which was a great learning experience. You know, kind of like Connor had had sort of the itch to get involved with startups. So moved down to Texas, joined a consumer product startup as their VP of corporate development, helped with some M&A stuff, some FP&A stuff, and then ultimately helped to take that company public in a SPAC merger in mid 2021.
And at that point, you know, I’d, I’d done all these things in finance. I had done m and a from a sell side perspective, from a buy side perspective. I had worked with a lot of portfolio companies operationally and on financial sort of support. I had startup experience, I had FP&A stuff. I had, you know, done, you know, corporate development. I had helped take a company public. So like I had this really wide set of kind of skills and, and thought that it’d be fun to branch off and, and kinda take those skills and, and help a variety of companies across kind, you know, the startup landscape and, and just kind, you know, bring those skills to that kind world.
Paul Barnhurst:
Great. And it’s definitely an area that’s needed, you know, finance start, or not finance, but finance with startups is often lacking, right. They don’t have that, it’s not something founders think about. But you know, before I kind of go there, I do have a follow up question for you. You mentioned that, Jake, you mentioned you were part of a SPAC merger. So two things. One, could you just explain for our audience what a SPAC is, and then maybe a little bit about that experience. I worked for a company where kinda became public that we were looking at doing one and it fell apart at the last minute mm-hmm. <Affirmative>. So I have, you know, some definite experience with that, but just love for you to share a little bit about that to our audience.
Jake Luerkens:
Sure. so a SPAC is a, it’s often referred to as like a shell company. And so what happens is a group of investors, operators they get together, that go out in the public market and raise a ton of money which essentially gets held sort of in an, in an escrow accountfor a set period of time. I think it’s typically two years. And effectively at that point, they’ve raised the money, they have this big pile of cash sitting there, they need to go find a company to acquire. And then that company kind of merges together with the SPAC and becomes kinda a publicly traded company. So it’s this kind of different mechanism for companies being taken public. There was this huge SPAC wave a couple years back that, that my instance kind of fell into where SPACs were super hot. They were, they were happening all the time. But it’s, it’s effectively this kinda alternative route to taking a company public that’s more of, of sort of an m&a process process than it’s a traditional IPO process. As most companies go through, they kind of ultimately end up on the, on the public trading exchanges.
Paul Barnhurst:
Yeah. Obviously, like you mentioned, goals to go public, it’s a different way of doing it. And from what I’ve understood is there’s a lot of, there’s a lot of streamlining, at least historically I think they’ve made a few changes, but it was quite a bit easier than the typical roadshow and process to go public because the SPAC was already public. And so now it was a merger ransaction transaction versus your typical big IPO road show and all the things that go with that.
Jake Luerkens:
Exactly. I, I, I think it was much more streamlined. I think, you know, candidly, a lot of the SPACs that happened weren’t perhaps diligenced as much as traditional IPOs are. And for that reason, you, you’ve seen the SPAC market not, not do so hot overall
Paul Barnhurst:
Kinda market level. Yes. It’s dried up relatively speaking.
Jake Luerkens:
Exactly. So, you know, super crazy process. I mean, I think our, our S1 forget what all the filings were called, but, but, but the main sort of filing we had when we went public that was this long legal document was over 600 pages. So quite the, quite the crazy experience. I didn’t expect in kind of the role I was in to have as much sort of legal exposure as I did, but just by virtue of, of a SPAC coming up, that’s kind of how things went. But definitely a great learning experience. Glad I have the experience. And yeah, just, just again, just like another sort of perspective to layer into my tool belt that I can, I can now bring to other companies out there as we, as we help them with, with, with this thing we’re doing.
Paul Barnhurst:
Sure. Great. No, it sounds like a really good experience. I know seeing some of that, and I recently, about a year ago, I think it invested in a SPAC and they just bought a company. And so it’s been interesting to watch and see. So
Connor Frischmeyer:
I, the, the SPAC thing has become kind of like a, i I feel like it’s cooled off and in some ways it’s like a, a dirty word, but the reverse merger concept isn’t new. Like, people have done this forever. Oh yeah. So I think the SPAC thing isn’t going anywhere and it’s going to be a useful tool down the line. It’s just, it got a little too hot a little too quickly a couple years back.
Paul Barnhurst:
Yeah. No, I, you know, there’s also, you know, beyond the SPAC kind of that idea of the shell company where you find a company that had gone out on the market, but they’ve kind of, kind of died and you merge with them. Exactly. And it becomes something totally different. I applied one time to work for a, it was a biopharmaceutical company. They’d gone public through a gaming company. Right. It had nothing to do with their business. So Yeah. That, that idea isn’t necessarily going away. And I have to agree with you, some people think of SPAC as a dirty word, although if you want a good laugh, there was a, a rapper, and I can’t remember his name now, but he wrote a video about SPACs and how he was investing in him. It was on YouTube, and it’s,
Connor Frischmeyer:
Can can we look at that? It’s a pretty good
Paul Barnhurst:
Laugh. I’ll find it and put it in the show notes for
Connor Frischmeyer:
People. There you go. Totally
Paul Barnhurst:
Change of subjects, but all. So Jake, can you talk a little bit about, you know, why you guys formed your firm and what services you provide? So maybe just talk a little bit about, you know, the different things you guys offer and why you did it.
Jake Luerkens:
Yeah, sure. So again, you know, I, I think both Connor and I had really developed this really wide sort of skillset across, you know, finance and M&A and all these different things. And the other thing that we got exposure to in certain capacities was startups, right? And I think had this realization that oftentimes startups are, you know, they’re may be technical founders or they’re, they’re really good, you know, branding people or product people or whatever, but oftentimes they don’t, they, they maybe don’t quite have sort of a finance skillset or sort of finance perspectives that that, that we could, could, could kinda bring with our backgrounds, right? And so just had this realization that we could really add a ton of value and then also sort of acknowledge that, you know, getting financial practices sort of established early on in the company’s history is really, really important.
And at that early stage lifestyle lifecycle of the company, you know, those, you know, kind of errors you may make financially are sort of small and scale, but, but if the company’s successful and grows to be really big, if these, you know, financial practices that aren’t ideal sort of perpetuate over time, those can become really, really huge needle movers that people just have in their companies that don’t even know that they’re kind of doing incorrectly, right? And so being able to take our skillsets our perspectives from finance, all these things we’ve done, apply it to those startups, get them really operating sort of well from a financial perspective early on so that when they grow up and sort of scale up and, and, and are operating more efficiently and at a much larger scale, they really have those systems down and, and kind of, you know, super tight and and efficient.
That was what we wanted to do. And so that’s kind of like sort of how we thought about starting the business and, and while we focus on startups and kinda high growth businesses primarily. And then from a service line perspective, I’d say there’s two kind of sides to what we do. One is sort of helping with internal finance, so doing internal fp and a support, outsource, outsourced CFO support, help helping companies understand their cash flow and really kind of do, you know, operational optimizations to optimize their cash flow in the way they’re operating. So that’s kinda like the internal finance pillar of our business. And the other one is more sort of capital markets focused. So again, a lot of the business is oriented around startups. There’s capital raising support. We do, we can provide advice and perspective around M&A and, and transactions like that since we have kinda the backgrounds in banking and private equity and really just everything, capital markets focused, understanding debt, you know, when debt makes sense, when equity makes sense, all the different sort of mechanisms of tool out there, tools out there. So that’s kind of like the way we think about it. It’s, it’s kind of like broadly just finance support for startups. But in general we’re, we’re often either providing kind of internal finance FPNA support or we’re doing sort of, you know, capital raising and capital markets type advisory.
Paul Barnhurst:
Sure. And, and that makes sense. And often, you know, in small companies when they do have that first FP&A person, obviously they, off our C F O, they’re doing a lot of that fundraising and the FP&A, so I could totally see offering both those where they’re, you know, benefit. And so I know a lot of times funding needs are a big one. So Connor, I have this question for you. We’ve definitely, over the last few years, it feels to me like we’ve seen a huge growth in fractional services. It’s really kind of taken off and been a hot area within finance. Why do you think that is? Why do you think there’s, you know, such a need today versus maybe historically for financial advisory services?
Connor Frischmeyer:
Yeah, I mean there’s been a huge fractionalization I guess is the word that I’ll term for that over the last couple years. And I, I think the, there’s a couple reasons. Reasonone is there’s just more startups being formed than there ever were before. And I think some of that came out of covid and like the great resignation and all of these different things. But people realize like, Hey, I have this skillset, I can apply it to a whole bunch of companies and I can therefore do it in a more efficient way. So that’s part of it, that’s the services side of it. And then there’s also just more startups than there ever have been. And so there are just more companies at an earlier stage who need that expertise and perhaps don’t have access to it the way that some of these larger companies typically do.
If I think about finance specifically, and we, we work with a bunch of like fractional marketing executives and, and growth executives and things like that. And to a certain extent it’s it’s all part of the same problem. But within finance, VCs, investors, other potential acquirers down the line, cuz a big part of our business is trying to figure out how to get you to a place where you’re ready to be acquired or, you know, have some sort of exit liquidity event. The early stage investors are much, much, much more focused on solid business models on profitability or a clear path to that. Yep. And so there’s more of a need than perhaps there was five years ago to have that path and to have the people who are thinking about how to plan that and how do we position that and how do we convey that message to investors in the best way possible. And so that, you know, the, the simultaneous fractionalizing of all these services with, you know, people who then need the services is kind of lined up.
Paul Barnhurst:
I, I could agree with that. I like the idea where you said fractionalize fractionalizing. I hadn’t heard it said that way, but I like it. And one thing I think is very true is you mentioned, you know, that path to growth, profitable growth, you know, the last couple years you’ve seen a lot more startups, you’ve seen a much bigger focus on profitability versus just grow no matter what the cost is, right? Yeah. When money’s free, it’s much easier to fund growth when all of a sudden it’s a 7% interest rate, it’s like, oh, wait a second, do I really wanna spend this money?
Connor Frischmeyer:
Yeah, exactly. And so
Paul Barnhurst:
I think that also has been played a big part. So I agree with you. Those are all things people realizing with the great resignation, more startups, you know, change in capital and need for growth, all those different type of things have kind of come together almost like a perfect storm. And we’ve seen a huge growth in the industry.
Connor Frischmeyer:
Yeah. And actually I have kind of like almost a question for you, Paul. Sure. Or more of a thought that that’s been going through my mind, the world for really, really high level FP&A people or investment bankers or CFOs or whatever it is, finance type people is relatively small and there’s a lot of companies who could use that help. And in my opinion, I think the best finance people are able to really differentiate themselves from like the accounting side of the business. So what’s accounting accounting’s, making sure that, you know, all the books are in order and everything’s straight and all the numbers are correct. Finance is that, but it’s building off of that. And it’s saying like, how do we take those numbers and help them inform our strategies so that we make better decisions in the actual operations? Mm-Hmm. <affirmative>, like how do we serve customers better? How do we grow more efficiently and the best finance people? Again, I just don’t think there’s that many of them, and I think they can move the needle in a pretty material way.
Paul Barnhurst:
I, I would completely agree with you. I’ve seen examples. I do a course on business partnering, and one of the examples we share is Amazon. So I don’t know how many of you remember when Amazon first came out, it was like 2000, you know, so they’ve been out for a few years and they were, they tried a couple different strategies. They had one where, hey, if you spend more than $25, we’ll do do free shipping. But even before that, they did one where, hey, if you buy a second product, we’ll give you free shipping. And the most, it was either the number one or number two thing bought on all of that. Amazon was some obscure pamphlet that cost 27 cents, right? So Amazon was losing money on every single order, and somebody came up with the idea of Amazon Prime and FP&A a ran a lot of that analysis and very much pushed say it should be a subscription program, and really helped with define the way it came out.
You know, they didn’t create up the idea. They, you know, it’s not total credit to fp and a, but they played a huge role, right? And if I go into a room today at almost any conference that I had done it, and I ask how many people have Amazon Prime just about everybody’s hands go, goes up. I’m at the point now where it’s just ask how many don’t have it, right? Because, you know, the majority do. And so that’s an example of huge value that FP&A helped drive is to get ’em to think about changing the way they were, you know, thinking about free shipping. And so I, I completely agree with you. I think really good FP&A that one can partner with the business, two that can really understand the operations. It’s not enough to understand finance and numbers. You really gotta know how that business works and what drives value for ’em can make a huge difference.
When you get good FP&A, you want them in the room, you want them helping, making decisions versus the old idea of, all right, how do we do this without telling finance? Let’s just avoid finance until we have to talk to them, which is often still a mentality. And so I I, I agree with you, really good finance people, CFO, FP&A can be invaluable. And it’s not the accounting, the accounting is technical. Not that you don’t need good accountants and they can be wonderful at their job, but it’s just strategic and the business thinking and having a finance lens to ensure you’re best allocating that capital. That’s really what I think about when I think about FP&A.
Connor Frischmeyer:
Exactly. We should have you write our marketing materials
Paul Barnhurst:
<Laugh>.
Jake Luerkens:
Yeah. All i I have a feeling this is gonna be a theme that, that comes up, you know, several times throughout this conversation as, as really important to us is kind of doing finance in such a way that, that that really is strategic. And, and that is also sort of, I mean it’s technical and, and it can be very detailed, but at the end of the day, it’s supposed to inform strategic decision making. And so that’s what we’re always working towards. It’s not working towards the most complex financial model we can build or something like that, right? So like, that’s how we think about business. That’s why you know, we think that our business makes so much sense is like, we have this technical skills, but I think we’re really good at being able to kind of think bigger picture and, and really provide kinda strategic guidance. So the fact we’re all aligned on this is great. And again, I I think it’s something that will probably come up time and time again throughout the conversation here today.
Paul Barnhurst:
And so, you know, next question, I’m gonna throw this over to you Jake, at what point do you think a company should consider bringing in fractional FP&A services? You know, is there a size, is there a growth that’s going on? How do you think about that and when do you think it’s important to keep that next step from, you know, maybe just having bookkeeping services to some advisory services to go beyond just recording the actuals.
Jake Luerkens:
Actual Yeah, I, I think it’s really sort of case by case dependent, but in general, I would say the, the, the time is when the kind of finance and, and the business starts to get complex enough to a, to a place where it’s hard to kind of keep track of everything and really distill things down and, and think, you know, be able to kind of get everything together and think big picture and, and kinda know where you’re heading financially. Right? And the other thing is a, a lot of companies don’t have any financial expertise and maybe they’re selling physical products and they have working capital and, and they’re growing and they’re profitable, but their cash is, you know, going down or, or flat. And they don’t understand why. Like, anytime the business is getting complex or hard to, hard to kinda, you know understand in a really simplistic way or when things are moving around and, you know, the founder or kind of the operating team doesn’t really understand what’s going on.
Like, that’s the time I think when it’s really important to bring in a financial leader or financial organization to really support, you know, kinda make sure people understand that. And again, just kind of distill things down to, to more of a strategic, you know, easy to understand kind of concept and, and kind of forward looking perspective. And so that’s, that’s when I think the time is right. But it, it very much varies kind of company to company and case by case and industry to industry. And so hard to say, I, I think the value of fractional is that it’s really great for kind of earlier stage businesses in many cases where maybe they don’t yet have the budget to hire a full-time very sophisticated finance person or things like that, right? And so that’s where we often come in. And, and again, I, I think, you know, getting the, the financial practices and systems kinda implemented what, you know, in, in companies inf where they, they really need to get these things established properly so that when they grow they, they kind of have them up and running in the right way. Like that’s how we think about sort of like how to think about fractional and, and, and sort of why it’s important at that stage of a company’s life cycle.
Paul Barnhurst:
Got it. And that makes sense and I appreciate that answer and I completely agree with you. It’s gonna vary by company, right? If you’re think about raising funds, you probably need some some finance support more than likely. You know, if you’re looking at hypergrowth, if it’s becoming so complex, you have a difficulty managing it. I think those are all great signs. There’s some small companies mom and pop that maybe, you know, you have somebody that has a finance background, you don’t need those services until you get quite, quite large and there’s others where you need it right away. I’ve heard of, you know, one person told me, and this kinda shocked me, he had a company that they hired their first full fp and a person, they were doing some budgeting. They really didn’t have fp and a until they hit nearly $300 million, right?
So I’ve heard all kinds of numbers now I wouldn’t recommend that by any means, but, you know, it does vary a lot depending on company and industry and all those things you mentioned. So I wanna shift just a little bit here and go back to something. So Connor, you know, as I was looking online, I know she wrote a blog about how raising capital for the wrong reasons, you know, can basically be a disaster. Wrong reasons, wrong time. It’s one of the biggest mistakes founders make. Can you talk a little bit about why that is? Maybe, you know, share example of something you’ve seen in that area?
Connor Frischmeyer:
Yeah, the thing about capital, it’s critical, right? And many times you do need to raise capital and you should, and you should be strategic about it and you should go out and do it and make it happen. There are a whole host of reasons that it can be a really bad idea or there are ways that you can raise capital in the wrong way. You can raise the wrong type, you can raise the wrong amount, you can, you know, there, there’s lots of landmines along the journey. The easy ones to think about are like, you raise debt and you raise too much and you can’t cover it down the line. And, and perhaps the FP&A group that you had, or maybe you didn’t have one, didn’t do a good job of looking at the debt covenants and how that’s gonna affect the business down the line.
Yep. Or you know, maybe you raise early and you end up giving up a bunch of equity and, and you give up control of the board and then you know, you as the founder get pushed out and the journey and the trajectory that you wanted to take doesn’t end up happening, at least for you and maybe for the company in general. There are a lot of soft things that can happen when you raise capital at the wrong time or for the wrong reason that I think are equally detrimental loss of focus. So particularly in the early days, I think there are some startups in particular who the goal is to raise capital and the goal is to have a big VC on the cap table. And the goal is to, you know, because now you’re like a real startup. Well, the problem is when you’re in the early days and when you’re a startup, the founders need to have focus and they need to be focused on building a valuable business on solidifying their business model, on finding their customers being very close to their customers.
And raising capital is hard and it’s time intensive and it takes a lot of your focus away from the business, which is ultimately the most important part. We talked about loss of control that can be detrimental. There’s also increased complexity. So the more money and the more people you put on the cap table the more complex your business is. And if you don’t have the puzzle pieces in place to take care of that things can kind of spiral out of control. And you see some startups get out over their shoes, right? And then you kind of end up stumbling a little bit. And then the, the final point I guess that I’ll make on, on the podcast is when you raise a bunch of money, and this has become very common in like software, like you’ll go out and there’s almost like set amounts at this point.
Like a series A is X amount of money and a series B is X amount of money. And if you don’t raise that much, your company must be bad cause people didn’t wanna give you money. You need to be thoughtful about what the uses of that capital are going to be. And then go raise, you know, give yourself a little margin, right? Say like, okay, I need this much money to get to the next phase. I’m gonna raise that plus 15 or 20% or whatever it’s. But some people go out and raise 20 million and they really only need 5 million. Now you’ve given up a bunch of equity, you’ve given up a bunch of control, and you have all this money that you don’t know what to do with. And it ends up getting spent in ways that are not productive or not as productive as they could be. And sometimes you see like business models that end up not being profitable because you’re just using all this extra cash to you know, to fund everything. When really you should be focused on like your unit economics and how do we create a sustainable long-term business. So a little bit long-winded, but there’s a lot of ways in which you can go astray on the capital raising front.
Paul Barnhurst:
I appreciate the answer, especially at the end when you mentioned over raising, you know, I’ve had some conversations with people and I was talking to one company that’s getting ready to raise a Series A and they reduce the amount they want to raise. They’re like, we’ve now shortened the timeframe to get to profitability. We feel like that’s best for our investors, best for this climate. And I thought that was a really smart decision as I talked to ’em Yeah. In this environment. And I think that’s somewhere where, you know, FP&A can really help, especially in a small company, those fractional services is really making sure they know how they’re gonna spend that money. Cause I’ve seen the other side where sometimes a company raises so much money that they gotta be growing at crazy rates to support their valuations and the money they’ve raised. And it just puts undue stress that you may not need. So it’s finding that right balance, as you mentioned, raising the right time, the right amount, keeping control. Because the more you raise, the more they’re gonna be involved. It’s bigger dollars and there’s more risk that they may take over the board. And before you know it, you no longer even working for the company.
Jake Luerkens:
From my perspective, I I think it’s a little unfortunate that, that the companies that get sort of celebrated in the news the least are those that are bootstrapped and, and and, and are able to, you know, generate cashflow organically from the start and, and never raise any money. And as a result of that, they never have a big headline come through TechCrunch that says, you know, so-and-so company raised, you know, x millions of dollars from, like, that is the holy grail, right? And to be fair, like there’s some companies going after such a big mission or such a big sort of vision that like they, they need to raise capital in those cases it makes sense and, and totally get it, but there’s many, many companies out there that are profitable and they have been profitable from the, from the start and they just generate cash every single month. And it doesn’t make any sense for them to raise you know, venture money in, in any respect, respect. And you don’t hear about those companies. But, but those are the best, most beautiful companies in the world. And so just, you know, quick shout out to all those bootstraped companies out there. I, I feel like, you know, we, we have a super high appreciation for that in, in our business.
Paul Barnhurst:
Hundred percent agree. And I don’t think they get enough credit. And you know, obviously I’m bootstrapped myself doing my own business and I get it, you know figuring out how to do it on your own. And there’s pros and cons both ways. And it’s understanding them, you know, if you’re able to do it bootstrap great, like you said, sometimes there’s a mission or you’re in a competitive enough market where you need that cash to fund the growth to get where you need to go. Nothing wrong with that. You can do that through debt, you can do that through equity, but there’s a real appreciation a hundred percent for those companies that completely figured out how to bootstrap anyone who’s ever read you know, shoe Dog and how those those early years. Phil Knight, Knight, you know, raised capital and did things great. I’d recommend to anyone who hasn’t read it, it’s a great story. It really makes you appreciate. Cause he was in those early days where it wasn’t like it is today. I mean, if you start, you started that business today, you could go out and get VC money no problem. He had to figure out ways to do it. He was growing too quick and constantly struggling with how do I fund it? I dunno if either of you have read that book, but it’s a great one. If you get a chance.
Connor Frischmeyer:
It’s one of those that just gets you hyped up, you know, like it does, it makes, it makes you wanna go out and, and work on your company basically. So yeah, highly
Jake Luerkens:
My favorite as well.
Paul Barnhurst:
Yeah. So I, you know, I’d recommend anyone out there listening if you hadn’t had a chance to read it. It’s a great book. I think it’s great for just thinking about a business and what it’s like to grow a business if you wanna be, you know, an early stage, even if you don’t, you can learn a lot, even if you’re working in a big company. I think there’s a lot of value for FP&A in that book. I really, you know, I thought it was fascinating. So we’ll go to, we’ll go to Jake and then we’ll go to Connor on this one. So, you know, Jake, what’s your favorite part about helping provide these services for small businesses? You know, why, why do you do it? What kind of gets you up in the morning and gets you excited working with these companies?
Jake Luerkens:
Yeah, I mean, I think for us, the, the really cool thing is, is we’re often kind of sitting in a sidecar beside, you know, founders and, and business operators for really high growth businesses that are super exciting. And, and so it, it gives Connor and I a chance to, to really kind of parachute into different types of companies and different types of business models and work on really cool, interesting, exciting problems and, and help these business leaders again, sort of, you know, conceptualize these finance things that maybe they’re not experts in. And really, you know, distill them down to actionable steps they can take in their business. Really add strategic value and again, you know, set the company up properly to kind of grow into something that’s really efficient and, and, and things. So for us just, just kind of getting to, to see a bunch of companies and work with, you know, with, with exciting entrepreneurs that in most cases have become close friends of ours is just the most, you know, cool, rewarding thing in the world for us.
Paul Barnhurst:
Great. Thanks. Thanks, Jake. How about you Connor?
Connor Frischmeyer:
Yeah, I, I would echo the same, I think the coolest thing about this type of business is that if you just focus on helping the client succeed, helping your, like Jake said, in many cases at this point, our friends succeed, you end up succeeding too. So you basically just jump on their team. You’re part of the mission, you’re part of the journey, you’re learning about this business as they’re learning about it, and you’re applying the FP&A skillset to help them make better decisions. And if things go really well for them, things go really well for you too. And so you just kind of get to be along to the ride. And that’s been really exciting. And we’ve seen, I mean there’s, you know, clients that we started with Jake probably like two years ago or something that have scaled from, I don’t know, maybe when we jumped on the ship it was like a couple million in revenue and now they’re like 50 million plus. And it’s like, okay, we got to be, we got to be part of that journey in addition to, you know, building our own company.
Paul Barnhurst:
Yeah, that has to be really fun. I’ve always loved the startup environment. My undergrad was entrepreneurship and, and just hearing those stories of how companies have scaled and grown, you know, it has to be great to be a part of that. So kind of speaking to that, and we’ll go with you, Jake here first, what advice would you offer if someone’s listening and they’re thinking of starting their own advisory services? You’ve gone through some of the pitfalls and challenges I’m sure of how you launch. What advice would you offer ’em? Any advice you’d give them?
Jake Luerkens:
I would say don’t be afraid to start small, right? I, I think sometimes when, you know, people wanna branch off and do their own business, they try to think really big and, and think about, you know, well, it’s not be, you know, a multimillion dollar business right away. So like, you know, it, it’s not even worth doing type of thing. But like, what I think people, people often fail to realize is that everything starts somewhere. It starts small. It, it might just be one client and it might just be, you know, your your dad’s buddy who needs help and like, just stick your head in there and be like, Hey, I’m, I’m happy to do it even on the side, right? And, and test it out and, and start small and, and just take baby steps. And you may still have this grand vision for where you want something to go, but, but just take the smallest step possible today, see where you can get, and if it goes well take the next step and just go from there. So like that, that I think broadly is advice. Just start small baby steps and, and I, you know, Connor and I are, are a great example of how things can kinda snowball and grow over time.
Paul Barnhurst:
Anything you’d add to that Connor?
Connor Frischmeyer:
Yeah, two, probably two thoughts. One is you’re more capable than you think you are. I think especially for folks like us who come from finance backgrounds and a lot of fp and a folks will have been embedded in like an actual operating company for a longer period of time, whereas Jake and I came in from the investor angle, and so in our minds it’s like, no, people already know how to do finance. Like, are are we really capable of doing this? And then eventually you, you work with enough folks and you’re like, okay, no, they really, really needed this skillset and we were just so close to it that we had this assumption that, that people knew how it worked. And then the, the cool thing, and now I’m, I’m going back to the, the point before, like it’s all about client success.
And if you just keep reminding yourself the whole point of what you’re doing is to make sure that the client succeeds and that you get them the best advice that you possibly can, ultimately within a services business, that’s all you really have to do. And the rest of the stuff takes care of itself. You know, your growth takes care of itself. You’re finding new clients takes care of itself because your clients say, wow, they did a really great job. And look at how far we’ve come. I’m gonna tell somebody else about them. And so just having that relentless focus it it allows you to really like you, you don’t have to get lost in all of the other pieces of the business.
Paul Barnhurst:
I love that part of the, you said relentless focus on the customer, right? If you take care of the customer, they’ll take care of you by referrals, by using you again and again. And it benefits both of you. It’s one of those, you know, rare situations where it’s a win-win. I can be a symbiotic type relationship. And the one thing I’ll add to what both of you said, you know, anyone thinking of starting a service, I totally agree with the start small, but also figure out how you’re gonna market and sell yourself. Because we’re generally, anyone who’s thinking of starting in FP&A, you know, fractional service probably doesn’t have much marketing or sales experience. So that’s a skill you’re gonna have to develop. It’s something Jake and I and Connor, we were talking a little bit before we got started and how that’s been something we’ve had to learn. So that’s the one thing I would add there. So next I’m gonna throw a question that you guys didn’t get to see in advance, but it’s not a hard question. So, but I’m gonna throw one at you here and we’ll start with Connor on this one. So if you could meet one person in the world, dead or alive today, who, who would you wanna meet and why?
Connor Frischmeyer:
That’s actually a tough question. Not, not cause there aren’t people that I wanna meet, but because there are so many people that I wanna meet man, I think Mark Andreessen is amazing. I think his business sense is really interesting. I think he’s very balanced in the way that he evaluates things. And I think that he’s seen, I’m a tech nerd for sure, in addition to my finance stuff. I think he’s seen everything from the really early days of the internet and like how do we build browsers that people can actually use all the way to today, right? And now he runs one of the biggest venture capital firms in the world, so he’s seen like the entire journey from A to B. And now I think we’re at an inflection point where we’re moving from B to C, which is gonna be taking artificial intelligence and applying it all over the place, building it into like everyday companies and, and funding the tools that are gonna go out and do that. So yeah, it’d be cool to pick his brain and see where he thinks we’re going.
Paul Barnhurst:
That would de definitely be a fascinating conversation. He’d be a a great one. How about you, Jake? Who would you pick?
Jake Luerkens:
I’m gonna throw out Blake Mycoskie, TOMS Shoes Founder. He’s probably the entrepreneur in the world that I admire the most and I’ve listened to every interview and podcast he’s ever done and just, just really admire the way he’s gone about business. And he has such an insane level of creativity, but, but also I think is really good at it, sort of thinking differently. And he, he had this, you know, trip to, to this really crazy, you know, part of the world. And you know, instead of just being there and, and kind of helping out, you know, in that moment when he could, he, he, he thought much bigger and, and thought of this super novel concept of this, you know, sell one, give one thing that ha has since grown and, and, and kind of perpetuated across other companies. And I, I’m just a huge fan and admirer of what he’s done and kinda what he started. And so I, I think if I had to pick one, it’d probably be him.
Paul Barnhurst:
I love that.
Connor Frischmeyer:
Who’s yours, Paul?
Paul Barnhurst:
That’s turn table. That’s a great question. I, I’m debating where I’m gonna go, but there’s one person and I’ve messaged with him but never had been able to sit down and have a conversation with him. A guy by the name of Davis Smith, he started Cotopaxi, I dunno if you’ve heard of him. Mm-Hmm. <affirmative>, it’s one of the, it’s one of the first companies to ever start a corp, corp B and raise venture capital funding to start it.
Connor Frischmeyer:
Okay.
Paul Barnhurst:
And so I love the mission. His goal is to alleviate extreme prov poverty worldwide. They give a percentage of the revenue, they use refugees to help write notes to people. They’ve done that before to help pay ’em. So I, I love the way he, he puts, he’s trying to reinvent capitalism, a purpose beyond just profit, just revenue. And for me, I think with income inequality and some of the other challenges we need, we do need to rethink capitalism. So I love what he’s doing, you know, like Tom’s has done some things, he talks about that and you know, Warby Parker and there’s others that are corp B’s out there. So by no means is he the first or will he be the last? But I just love the outdoor brand. I’m a big outdoors guy, so I love the brand and then I love what he’s trying to do as far as the mission. So that, that would be one of, one of the people I would definitely have at the top of my list to go have lunch with.
Connor Frischmeyer:
Amazing. you know what, I, I have a kind of ancillary idea that I’ve thought about for a long time and I’m, I’m gonna use your audience to see if anybody can help me make it happen. <Laugh>. And the idea is basically there are two ways in which, let’s call it like impact investing happens as I see it within the venture universe today. There is impact investors who raise funds, go out, invest with a certain purpose, and then, you know, give the capital back to their LPs. . And there are venture philanthropists who go out to developing economies and do it’s venture, but it’s really more of like a grant and the company grows and then, you know, hopefully the economy takes off and all both of those things are really great. I have this idea where you kind of merge them and you have LPs from the LP side, it’s more of a venture philanthropy model where like the money is permanently deployed at this fund.
But then from the investing side, the idea is that the companies that you invest in actually do generate a return that then goes back to that fund. But rather than giving the money back to your LPs, it’s redeployed in additional investments. And so then you can just kind of like grow that impact over time and recycle the money over and over and over again and try to grow, you know, certain microeconomies within the US or around the world. I think it’s a cool idea. I’d love to <laugh>. So someday if Auxa works out really, really well and we grow super big and I have time to focus on something else, that is probably the direction I’ll go. So
Paul Barnhurst:
Cool. Well if anybody has idea, we get to that point, reach out, let’s talk. And anyone has ideas you can reach Connor on that. I think those type of things are great. I’m a big fan of finding different ways to give back and help, you know, show that capitalism can be more than just the almighty dollar as much as we all need to earn a living. And there’s nothing wrong with liking money, you know, there’s a lot of good that we can all do,
Connor Frischmeyer:
So, yeah, totally.
Paul Barnhurst:
All right. So next question here we’re gonna ask, and this is a standard one, we kind of, we ask everybody, and we’ll start with you here, Jake, tell us something unique, something I’m not gonna find online about yourself, something most people wouldn’t know.
Jake Luerkens:
Yeah. Something I’ll throw out about Connor and I together is just that, you know, we were very, very close friends for probably almost a decade before starting our business together. And so, you know, you, you hear a lot of stories around kind of co-founders and a lot of people advise really strongly against it and some people have had success with it and things like that. But, you know, I, I think something really unique about us is just that, you know, our, our very first, you know, class at college, it, it was our business rhetoric class at the University of Iowa. We were in that class together and formed a friendship, you know, again, like over a decade ago now at this point. And, you know, stayed very close friends for, for a long, long, long time and, and had these kinda independent careers doing different things and then kind of came together such, you know, so many years later to, to kinda work together.
And so I think just something unique about us together is just that, like, we had that insanely close friendship for such a long time as just friends and, and just like guys that hung out together and stuff. And now we sort of still have that, but we’re also business partners, which I, I think is a little bit unique about us and, but you know, but but also allows us to have sort of really sort of candid, transparent conversations with each other that I think are really important in, in business partnerships. And so that I think from a business dynamic perspective is, is kinda unique about us.
Paul Barnhurst:
Thanks, I appreciate that one. Jake Connor, how about you?
Connor Frischmeyer:
So something else about Jake actually is that he, he, he goes to battle for me professionally and personally. So he’s been training for a marathon for quite a long time. And there is a race in Seattle called Ski to Sea. I’m sure you haven’t heard of this, but it’s the largest relay multi-sport relay race in the United States. And it goes from skiing from the mountains outside Seattle to the sea and the final stop of the sea kayak. Sure. Well there’s one leg of this race. I got to do the skiing portion much much more laid back. But there’s a certain leg of this race, which is the downhill run, and Jake’s been training for a marathon. So naturally he’s gonna do the downhill run. Well he ran an entire eight mile run downhill, totally beat up his body because anybody who’s a runner knows that unless you have really good form downhill running is seriously hard on your joints. <Laugh>,
Paul Barnhurst:
Even if you have good form, it’s hard
Connor Frischmeyer:
On your joints. Fair enough.
Paul Barnhurst:
I’ve run a few marathons, so Yeah, I know.
Connor Frischmeyer:
So this is an entire down a mountain eight mile run that he, that he took down for us a couple weeks back. So again, he’s a, he’s a, a committed soldier.
Jake Luerkens:
Eight miles, 2200 feet of elevation loss was no joke. I didn’t really know like what the proper downhill running form would be. And I kind of just went in there and winged it and I don’t think I did right because for four or five days after the fact I was limping around like an old man. But did what we can and I mean So, so both Connor and I are extremely competitive and, and we love adventure sports, we love hiking, and you can catch us like running up mountains often, right? And so like, we’re gonna push the pace for sure, always. And, and, and this was, was no exception, but definitely paid the price for the, you know, four or five days kind of after the run
Paul Barnhurst:
You want to let your body carry itself downhill. You push the pace downhill. Yeah. It’s gonna trash your body.
Jake Luerkens:
We fully push the face and fully trash the body. So
Connor Frischmeyer:
You needed
Paul Barnhurst:
To talk to call. We should talk some time offline about that. I’ve done a half iron man, I’ve done a few marathons. I’ve hiked Whitney, I, and I’ve trashed my body more than once, so I can relate. So, so next question we’re gonna ask here, and this is a favorite of mine. It’s one you know, our sponsor is Datarails. They’re big fans of Excel. They’re a platform that’s built around Excel for doing your planning and budgeting. So we’ll start with Connor on this one. What’s your favorite Excel function feature? Favorite thing about Excel that you like?
Connor Frischmeyer:
Oh man, I think my favorite, you know, what you brought up earlier that that I had co-founded this other company, which is true. I did it with Jake and another friend of mine, Marco, who is a software engineer from sf. And the goal of the company was to automate financial modeling for investment banks. And I promise this relates back to Excel. We started building the product and it was really good. It’s a great software product. But what we found is Excel is so adaptable and you can create so many things within it. Whatever crazy idea one of our clients dreams up for, you know, some product line or some marketing channel or whatever it is, there is a way that you can finagle Excel to do a really good job of evaluating that problem. And I don’t know that I can think of another software tool that is quite as adaptable, and that’s the best part about it.
Paul Barnhurst:
That is a great answer and, and I totally agree. I I’ve put this on LinkedIn before and I’ll, I’m sure I’ll do it again, but I have this graphic where there I put like 12 different things like, you know, modeling, sales, commissions, whatever, procurement and I, I put on every single one of them the second best software Excel, you know, and like, it’s an entire page of all these different use cases. You can almost always find something for a specific case that maybe you could do a little easier, that’s better, often gonna cost you a lot more, and it’s just not near as flexible. Like you said, the agility of spreadsheets in general, and especially Excel, is just incredible. You can do all kinds of different things in it. So I, I’m with you. That’s, that’s a great one. How about you, Jake?
Jake Luerkens:
I think Connor’s answer is the right one. And, and I think it’s the reason why Excel has stood the test of time and, and why, you know, there’s constantly, constantly more and more sort of, you know, products and, and software and, and tools that come out that they try to kind of replace or, you know, be better than Excel in some way. And, and, and yet Excel is still the absolute, you know, 8,000 pound gorilla in the room. And it’s because of that functionality and kinda adaptability and, and the fact that it’s so kinda malleable and, and functional on like a more, you know, sort of like granular level for, for all the Excel people out there. And, and, and frankly like probably the Excel, like the, the really hardcore Excel people are gonna roll their eyes at this one. But I love SUMIF.
SUMIF is such a nice feature and, you know I I feel like it’s not a super complex feature, but I think it’s one that’s very, very functional and, and allows a, a really seamless way to take something that that can be kinda complex, a lot of rows of data and distill it down to something that’s fairly simplistic and so love. And some if, again, with the goal generally as being, taking something that is kind of hard to look at and sort of like synthesize really quickly and make it digestible for a person out there that’s maybe not a finance person or, or, or isn’t used to looking at these really kinda long, long-winded kinda complicated Excel sheets.
Paul Barnhurst:
You’re, you’re not the first person that’s given SUMIFs. I think it is a very versatile function. There’s a lot you can do with it. So I’m with you on that. So now we’re coming up toward the end. We just have a couple more questions here, just a few minutes, but I wanna ask Juan, this is the first time we’ve asked this question kinda a little bit new in our standard section, and we’ll give Jake, we’ll give you the opportunity. I wanna know about your worst Excel horror story.
Jake Luerkens:
This is one that, that I have a feeling a lot of, I, if there’s any other kind of former investment banker, analyst type people out there listening, they, they can probably relate. So in investment banking you kind of join as an analyst, you’re fresh outta college, you don’t really know what you’re doing, but you want pretend like you know what you’re doing. And so on a certain day you, you get the opportunity to, to own the financial model for a given project and you probably don’t feel ready, but of course you’re gonna take the opportunity and, and and, and fake it until you make it and pretend like you know what you’re doing. Well, I had my first great opportunity to do this with a really important, fairly sizable deal at Lincoln, the investment bank you for. I got the model you know, popped it open.
I was doing a bunch of work in there and then I think I deleted out a column on one of the tabsand the entire thing roughed out and I didn’t know what was going on, but I had made all this other progress too, right? And of course I was a newbie. I I didn’t know that I was supposed to be saving versions along the way, so I roughed it out. And then to make matters worse, I then saved the roughed out version without having any sort of interim version saved in the middle. And so brewing the whole model, didn’t know how to fix it. I had to go drill back to my, you know, associate the person directly above me at the time. And, you know, we had to go back from square one and, and basically in that particular case, I had to hand it back to him. He had to do the work stream and I had to, you know, go back and, and work on other things with my tail between my legs. So that, that was not a fun experience, but like a worthwhile kind of learning opportunity nonetheless. And that, that, that was my first real learning that like saving up versions every time you’re doing something in an Excel model is extremely important. So that was really ingrained me from that point. And, and, and I’ve never lost sight of that since.
Paul Barnhurst:
Yeah, I think we’ve all had that moment where you’ve had to go back and redo a bunch of work, not necessarily, maybe we didn’t have to go back to our boss, but losing something. I can, I can see why that was a nightmare there. Next question is for you here, Connor. You know, if, if we have someone listening that’s, you know, thinking about starting a career in FP&A, if someone’s starting out, what advice would you offer them?
Connor Frischmeyer:
Start with the fundamentals. Like learn the accounting, make sure that it’s all rock solid. Understand the financial model and why you’re building it and how to build it and where it’s likely to get messed up like Jake did and how you can fix it if it does happen. And then once you know all of that stuff, kind of forget about it and go back to thinking about the actual business, right? It’s like build a skillset that you need and then just zoom back out and say like, okay, the goal now is not to build a financial model. The goal is to make better decisions for this company. How do I use all the tools that I’ve learned over the past 6, 12, 24, whatever, however long it is, and apply those to that goal and then not getting lost in the numbers along the way.
Paul Barnhurst:
I love that answer about, you know, get the fundamentals down, accounting, building the model, but really then step back and learn the business because that’s really what we are in many ways we’re advisors. It’s not, it’s not about how good of a model you can build what Excel formulas, you know, it’s about how can you help advise the business. So I that that is a great answer. I really appreciate that. And so last question we have here as we’re running outta time is if someone wants to get ahold of you guys, what’s the best way to do that? And we’ll let Jake, Jake go first. What’s the best way if somebody wants to get a hold of you?
Jake Luerkens:
Yeah, they can check out our website. It’s https://www.auxopartners.co/.You can email me. I’m Jake@auxopartners.co and Connor@auxopartners.co. I would say like in general we’re very open to talking to anybody anytime, even if it’s just casual to provide perspective or advice or just to get to know someone. So feel free to reach out and happy to chat at any time.
Paul Barnhurst:
Thanks. Appreciate that Jake Connor? Yeah, anything you’d add?
Connor Frischmeyer:
Echo the same. Definitely check out our website. We have some blogs on there that I think are pretty interesting. We’re gonna be hosting some free tools and resources and templates and stuff that you can use in Excel to kind of get your finance function going on your own. And then you can find me on LinkedIn and every day I share some sort of helpful post or thought around finance and metrics to evaluate if you’re a software or consumer company or cannabis, whatever it is. So yeah, we’re, like Jake said, we’re always happy to talk and we love teaching people and we love learning from people and anytime a conversation’s open, listens to it.
Paul Barnhurst:
Well, well thank you Connor. Thank you Jake. Really appreciate you being on the show. Had fun chatting with both of you. So thanks for joining us and I’m excited, you know, for our audience to get to listen to this episode. So thanks again for being on the show.
Connor Frischmeyer:
It was great being here, Paul.
