Managing a thin balance sheet: Lessons learned from a $2 billion acquisition

Thoropass (formerly Laika) sat down with SaaStr to discuss how to play offense as a start-up with a limited balance sheet. President and COO of Thoropass, Eva Pittas, and CFO, Dicken Chaplin, lent their insight and experience to discuss managing a thin balance sheet, including lessons learned by Chaplin at his previous company that was acquired for $2 billion. 

We broke down their discussion below.

Why hire a CFO?

Recently coming off a Series C, effectively and safely managing cash flow was a top priority. Thoropass strives to drive operational excellence with a future plan to cash-flow break even, and it was the ideal time to hire a CFO. 

Additionally, Thoropass wanted to develop a 3-year plan that accounted for multiple financial scenarios. It was the opportune time for a strategic lens only a CFO could bring. Hiring the right management is key to identifying potential growth and pitfalls—and Dicken Chaplin was the perfect person for the job. We could not be more excited to have him here! 

The path to success is a winding road

For high-growth startups, the path to success is not always linear; everyone would love it if it were, but unfortunately, that is not the case. Instead of a smooth upward trajectory, you should expect a line that resembles a series of consecutive S-curves. These S-curves highlight areas of growth and contraction that occur in the business. 

To determine the path to success, you have to know what to anticipate next, and what to anticipate next, and so on. Then use that information to chart your course. Hiring a strong team to read your path will help lead you to success.

Looking back to move forward

Understanding where you are on your path to success and the S-curve in which you are can help you anticipate opportunities and risks. 

Chaplin describes the ‘Radar Function’ concept as a way to identify leading indicators to anticipate business challenges today and in the future. Some industry standards to consider looking back on to determine your future are:

• MQLs
• ARR; and,
• Customer retention.

 By looking back on those factors, you can proactively create a strategy for growth. 

Fail fast to scale fast

Making bold bets and quickly understanding if those bets are working is imperative to scale fast. Failures lead to success as they allow you to comprehend what went wrong. You need to fail to scale.

Some keys to success include:

• Build a detailed operating model: List out the assumptions in your model. The important thing is measuring against those assumptions to better understand your leading indicators and bold bets.
• Define what success looks like: Track what looks like success to you every month, quarter, and year. Constantly measure against that plan and pivot when need be.
• Be decisive: Make a decision and stick with it. Experiments are good but can lead to bleeding your balance sheet if you’re not quick to shut those experiments down.

Suggested Reading

SaaStr Annual: Fail Fast to Scale Fast

Live and die by the forecast

Build a forecast early on. It may sound simple, but it’s often overlooked. You’ll need to build a forecast on the sales side and build a statistical forecast. To accurately forecast, remember to continuously refine your methodology to predict your outcome.

If you set the expectation of a forecast every few weeks, it can be built out 2-3 quarters in advance and result in a good growth trajectory. 

Final Thoughts

If you take anything away from this talk as it pertains to managing a tight balance sheet, let it be these four points:

1. Build a robust operating model
2. Hire a strong team to anticipate your path of growth and success
3. Make bold bets but measure along the way
4. Live and die by your forecast

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