Interview with goPuff CFO

Tom Paine

Yesterday, I read two pieces in the Wall Street Journal: One on the decline of GE under Jeffrey Immelt, and the other on IBM’s less than successful foray into AI for Healthcare, Watson,.under Ginni Rometty.

IBM is reportedly considering seling Watson now. There are also signs that its cutting back on its aggresssive blockchain strategy. The article on GE’s decline discusses its bad bet on Predix, an attempt to develop an IoT-enabled digital operating system for industry.

Both Watson and Predix. were attempts to prop up or rejuvenate the two leading American giants of industry in the 20th century. Both strategies were accompanied by PR campaigns which oversimplified and oversold their capabilities and prospects. Both companies have returned to more realistic strategies under new management: GE under Larry Culp Jr and IBM under Arvind Krishna.

Despite showing future hope of a turnaround under Krishna, IBM’s market value is now barely over $100 billion, compared to Apple’s $2.2 trillion.. Once mighty Big Blue is a minnow compared to Amazon, Google, Apple, and Facebook. Even relative newcomers are passing it by.

Shrunken GE has almost exactly the same market cap now as IBM. It was over $500 billion in the early 2000s.

IBM reinvested substantially in the business (at least according to the numbers) but it didn’t pay off. Shrinking margins reduced the value of some of its businesses, and some R&D efforts produced neat technology, but with little commercial succeess.

GE may have underinvested, and it also badly overpaid for some acquisitions, while its finance business unraveled during the great recession. Its markets were mostly mature. Moving to Boston and hiring a bunch of techies didn’t work. The idea that one operating system could be a universal solutions for its different businesses didn’t pan out. IBM made a similar error with Watson.

Tom Paine

Being CFO at a company like goPuff must be challenging and somewhat daunting. Its a rather unique company at this point, so there’s no reliable model to build upon. You must create your own.

Each local supply depot (there are over 200 of them) is a different cost center. Its critical to understand how inventory is turning over. That’s a big difference between goPuff and most of the other delivery concepts, who feed off of other’s inventory.

Add to that the fact that things are moving so quickly that its got to be difficult to keep up with. And handling over $1 billion in a year and a half on top of that. While looking at cross-continent acquisitions.

Now goPuff has a new CFO who came on board in November according to LinkedIn. His name is Josh Burke, who began his management career at PwC, and then had stints at UnderAmour and BackCountry.com, where he was CFO. He received his MBA from the Darden School at the University of Virginia.

The previous CFO, Mark Gaudiosi, is a veteran of the Philly scene dating back to ZainyBrainy. He is still listed as CFO on LinkedIn. I’ve tried to reach goPuff for a comment on the CFO transition and haven’t yet received any response.

One thing Burke seems to lack is any high-level responsibility for an IPO process. Frequently companies headed for an IPO will hire CFOs who’ve already headed up such an effort.

Another interesting tidbit on goPuff’s financial management: Its an Oracle ERP and financials user. That choice may originate at the very top of Oracle’s and (goPuff investor) Softbank’s relationship. There are numerous connections between the two companies and their top leaders, Larry Ellison and Masayosh Son.

 February 12, 2021  Esther Surden

In a conversation with Aaron Price, president and CEO of TechUnited:NJ (New Brunswick), Tim Sullivan, CEO of the New Jersey Economic Development Authority (NJEDA), outlined the timing for the full implementation of the Innovation Evergreen Fund, which was signed into law recently.

The approved Innovation Evergreen Fund was the centerpiece of the “New Jersey Economic Recovery Act of 2020,” which overhauled the New Jersey’s system for encouraging companies to stay in New Jersey and grow jobs here.

“There are 15 programs in the new bill and we have to stand them all up,” Sullivan noted. “We can’t just stand them up at the same time; it won’t work.” That being said, “this is a super high priority program, but it is also a very complex program,” as it is brand new.

Auctions in Late Summer or Early Fall

 “We are optimistic that the tax credit auctions will start in the late summer or early fall if we get it all right, and then investments will flow from there,” said Sullivan. One of the keys to this working is that the auctions have to go well. If they don’t generate sufficient capital, that will be a problem, he added.

Price asked Sullivan if the NJEDA was concerned that the auctions might not go well. He replied that this was something new, and that the NJEDA would be marketing the opportunity to companies during the next several months and spelling out what obligations come with those tax credits.

The Fund is expected to create wealth as well as sustainable job and economic growth over the next 25 years. “We are rekindling our innovation and growing new companies into big companies,” Sullivan said. “This is a really important public–private partnership that uses tax credits in a really different way to support and fuel innovation.”

Over the past 10 years or so, New Jersey has fallen from 10th to 15th place in the rankings of venture capital deployed to its companies, he stated. Other states have grown quite a bit, “but we’ve actually shrunk in the amount of dollars that we’ve taken into venture capital.” Venture capital is not the only ingredient needed to grow an economy, but the lack of it causes a cyclical effect in which there are not enough companies being formed and sustained.

Breaking the Cycle

“We think one way to break that cycle, change the trajectory of that cycle, is with a significant investment vehicle to support more venture capital,” Sullivan said. He added that the secret sauce to startup success in New Jersey will be the commitment of corporations. The state’s proceeds from the tax credit auctions will provide half the cash for the Innovation Evergreen Fund.

The corporations won’t be getting those credits unconditionally. They will have to commit to supporting the entrepreneurial ecosystem in a real way. “We’re still working on how this will work. But if you’re a big pharma company, it could mean partnering with small biotech firms. If you are a big corporation, it could mean committing some of your IT spend to return to startups.  It could mean working with secondary education talent in New Jersey.”

The auctions should generate $250 million over five years, and the state will pair that money with funds from private venture capital companies run by experienced investors. “The state will be a coinvestor with these companies in the startups the VCs have brought to the state.” However, these startups must be based in New Jersey, stay in New Jersey and commit to growing most of their new jobs in New Jersey.

The Startup’s Perspective

From the startup’s perspective, “if you are a young technology company and you have the chance to work with either a big financial services company or a fintech player,” or if you are a biotech startup and you have a chance to work with a big pharma or biotech company, “what better place than New Jersey to do it?” Sullivan asked.

Price clarified the startup perspective, saying “If I’m an early-stage company, looking to raise capital, if I decide to make my headquarters and or job growth — and I know you are still figuring some of these things out— focused in New Jersey, [I could] raise capital from an approved venture capitalist” on the NJEDA’s list. That VC will be able to write a bigger check because it’s getting matched funding from the state.

He gave the example of a startup getting a $1 million commitment from a VC who has been approved by the state. Then the state will add $1 million to the round, so the startup has “more firepower to build instantly. And as an entrepreneur, my fundraising process, which many of us know is a very time-consuming process, becomes much more efficient.” Price added that it’s better to go after the approved VCs, because you’ll have more firepower with fewer partners.

Sullivan noted that when companies exit or monetize, “whether through the public markets or the sale … the proceeds of the state’s equity ownership flow back to the Fund and support more investments over time.” He said that if the portfolio over-performs, some of that money will go back into the state government’s “general fund to pay for roads and cops and teachers and other programs” or whatever is decided on at the time.

Price explained that the VCs, who make money through carried interest on their fund’s return and a fee for managing a fund’s capital, will earn money on the state’s contribution, as well. That will incentivize them to leverage this pool of capital. Sullivan added that the state needs the expertise of the professional venture capital firms because his colleagues at the NJEDA are not investors, and don’t know how to evaluate the potential of “the next dating app” or “the next cure for cancer.”

The NJEDA will be opening up a commenting period to help it decide what the program will look like exactly. One open question raised by the audience was the role of strategic investors. It’s likely that investment funds run by corporations will qualify, but direct strategic investments will not, according to Tim Rollender, a technology sector lead at the NJEDA, who was also participating in the phone conversation.

A full-length video of the event can be found here.

This article first appeared in NjTechWeekly.com. It is reposted here with permission of its founder and publisher, Esther Surden.

Tom Paine

TrialScope, a provider of clinical trial software & operations, has been acquired by the UK firm Informa. Based in Jersey City, TrialScope has been nominated for “the best investment deal” as part of PACT’s 2021 Enterprise awards.

Its a bit odd to have a North Jersey firm that only has a few of its 47 employees in Pennsylvania (per LinkedIn) be up for a Philadelphia-based award, though Princeton-based Edison Partners, a PACT member, was the principle investor (Edison says it got 3x its investment back from the sale). NewSpring and Conshohocken-based Dublin Capital Partners were the other investors.

In addition to providing the software and operational expertise for managing clinical trials, TrialScope had also expanded into areas such as patient recruitment for trials.  TrialScope Connect (acquired in 2019) recently supported the patient recruiting efforts for Moderna’s recent COVID vaccine.

Good clinical trial operations are very attractive assets right now. Although Edison’s 3x return is not remarkable on an investment dating back to 2014.

TrialScope was originally created from a spinoff out of Deloitte.

Tom Paine

San Francisco-based Lob, a cloud printing and mailing service, with backing from First Round Capital among others, is coming to Philly, and eight other cities as well.

As a CFO, I once oversaw a lead managemeet service provided to b2b markers. The business was a mess. It involved coordinating mail campaigns with clients, but you didn’t know when they were starting campaigns so it was hard to staff for fulfillment on the back end. Then there were accounts that needed one-off responses at any time. How to scale that business without better technology was a mystery to me. But that involved investments that we couldn’t do at the time, or technology that wasn’t yet available.

So what Lob does makes sense to me. Through a series of APIs,the fulfillment process is automated You can print different collaterals on demand. It preps your mailings, adding address verification. And it manages the data in the cloud to help ensure that you don’t lose track of customers or prospects in the process.

Prior to this year, Lob had three financing rounds: a $2.4 million seed in 2013, a $7 million Series A in 2014 (when First Round first participated), and a $20 million Series B in 2017. Co-Founder Leore Avidar told one interviewer last year that he was planning on raising a $100 million round sometime in early 2021.

I think thy’ve already raised that round, though I don’t know the amount. (I couldn’t find a Form D for its 2017 round, and probably this one hasn’t been announced yet.)

Lob has evidentially decided to go local, as indicated by its Careers page.

I see some 17 positions posted in Pennsylvania and eight other states: IL,MI,NY,TX, CO,WA, UT,OR.

I don’t know if Lob is planning to fill all of these position, but if it where it would add up to more than 150 people, as compared to 257 employees currently appearing on its LinkedIn page.

I asked Lob why it had chosen to build these local staffs. The response: “We’re hiring all across the US and have open remote locations across the US to help serve our customers in those locations and to accommodate resources in different timezones.”

The idea that print and snail mail usage is shrinking ignores the fact that its still an enormous market, and in fact a service such as Lob may increase demand since it makes those things easier to do.