The Finance Tech Stack: Opportunities for Innovation (Part II)

By: Medha Agarwal and Urvashi Barooah

We believe there is an opportunity to optimize every layer of the CFO tech stack in response to the pain points we covered in our initial post. As we alluded to there, some of this optimization is already underway: The space has seen a lot of innovation in the past few years, mostly driven by finance practitioners and operators who are frustrated by the status quo.

Below we have created a map of both established and emerging companies looking to innovate various aspects of the tech stack. Note that some of the companies highlighted play in multiple lanes, but we have categorized them according to their core products.

Based on our conversations with CFOs, we have broken down the finance tech stack to align with how finance teams tend to think about the workflows and systems:

  • ERP/Accounting: The ERP/general ledger is the backbone of the CFO’s tech stack, connecting financial information across business processes and accounting sub ledgers.

Despite feeling like there is a better way to do things (and often being inundated with outreach from companies developing solutions), most of the CFOs we spoke to were wary of experimenting with new tools without good references from peers. The unfortunate reality is that finance teams tend to have very little time to implement new tools because they are always chasing a deadline — whether it is the next close cycle or assisting leadership on key business decisions. Understandably, they tend to be risk averse and reluctant to spend on anything that is a “nice to have.” So as we alluded to in our previous post, finding the right wedge is key for startups hoping to break into this space. Below are some examples of areas where we think the need is pressing enough to break through the noise.

  1. Better financial planning & analysis: The majority of planning and analysis takes place in Excel and Google Sheets today. Even companies using advanced tools like Anaplan or Adaptive Insights will default to Excel for certain parts of the process. While Excel is beloved by finance teams for its flexibility, it has significant shortcomings around collaboration, real-time updates, and versioning. We see an opportunity for companies to build automated workflows on top of Excel or create end-to-end solutions that obviate (or drastically reduce) the need for Excel altogether. We also believe data analytics using advanced tools like SQL and Python will become an increasingly core skillset for FP&A teams. The worlds of FP&A, BI, and data science are colliding — especially in consumer businesses. We are bullish on software that anticipates this shift and helps non-data oriented FP&A folks make the transition more easily.

The above is a small sample of areas where we see opportunity to reimagine the CFO tech stack. For more thoughts on what we believe are requirements for success, check out our previous post where we share learnings from our conversations with CFOs. If you are working on a company to solve an issue faced by the CFO’s office and our perspective resonates with you, we’d love to hear from you!

Originally published at https://medium.com on October 13, 2020.

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Medha Agarwal

Currently @RedpointVC. Former founder, ops, and consultant. Proud @HarvardHBS @Harvard @Radlwtcrew @Bainalerts alum. Recovering New Yorker, currently loving SF