What sparked your interest in finance?
My interest in finance was sparked by the profound importance that financial aspects play in almost every area of life. Finance is the backbone of every organization and influences both individual decisions and global economic trends. The idea of how money is moved, invested and managed fascinated me from an early age.
The way companies organize and manage their finances can make the difference between success and failure. Financial strategies are the engine that drives innovation, enables growth, and ensures financial stability. From personal finance to global financial architecture, the interplay of numbers, markets and human behavior is extremely complex and interesting.
Finance also provides a platform to discuss economic theories, policy influences, regulatory actions, and ethical considerations. This broad range of topics has inspired me to dive deeper into the world of finance and develop a comprehensive understanding of its impact.
What sparked your interest in startups, specifically how startups fund their operations?
My interest in startups was driven by the incredible momentum and innovation that these companies bring to the economy. Startups embody the spirit of entrepreneurship and the ability to turn breakthrough ideas into reality with limited resources. The idea of how a single innovative idea can change the world has fascinated me from the beginning.
What is particularly exciting is how startups finance and scale their activities. The way they raise capital to make their visions a reality is often a textbook example of creativity and risk-taking. From pitching to investors to crowdfunding to working with venture capitalists, the variety of funding methods in the startup world is impressive.
The challenges of juggling limited funds, optimizing cash burn rates while pursuing a sustainable growth strategy are fascinating to watch. Startups must make strategic decisions about when and how to invest in order to have the best possible chance of success. This requires a deep understanding of financial management and a wise balance between short-term goals and long-term vision.
Overall, the startup world is a kaleidoscope of creativity, innovation and business agility. It offers insights not only into the financial mechanics, but also into the human passion and ingenuity behind every successful startup.
Has the startup’s view of cash burn rate and working capital changed in recent years?
Absolutely. There has been a massive change in the last few years. Up to 1-2 years ago, the focus was on growing fast and gaining market share. Profit was not important.
That was the Amazon strategy: grow, grow, and then figure out how to be profitable. That strategy often led to having too high a cash burn rate, where startups spent more money than they took in.
The primary thought was: we’re going to make this next round and we’re going to allow ourselves to spend this much money. Revenue and market share used to be important. Financial decisions were made to increase the top line. It was very important to put a lot of money into customer acquisition and retention, i.e. sales and marketing. This strategy was very expensive, but the thought was: we spend as much money as possible to raise as much money as possible from VCs.
A prominent example was Klarna, which raised a billion. The preference was to invest money in growth. Then the wind changed. Gorillas is also an example.
Today it is different. There is more focus on sustainable stability and profitability. Startups have become more cautious. It has become more important to reduce cash burn. It has become apparent that too much reliance on external funding can be problematic.
Startups are paying more attention to their working capital. You have to be efficient with available capital. One avoids tying up too much capital with the goal of becoming resilient.
What impact did macroeconomic factors such as interest rate policy generally have on financing decisions?
Macroeconomic factors and interest rate policy have a significant impact on financing decisions of startups. Low interest rates can lead investors to invest more in riskier assets like startups in order to achieve higher returns. This can favor the funding environment for startups.
And also for companies that rely on foreign capital?
For companies that rely on foreign capital, currency fluctuations play an important role. Fluctuating exchange rates can affect return on investment and increase risk for foreign investors. Startups need to develop strategies to minimize currency risks and provide investors with confidence in their financial stability.
How are activities of Data Teams often accounted for?
They are accounted for in various cost categories.
The largest costs come from personnel costs. Personnel costs are recorded as operating expenses (OPEX). In addition to these costs, there are costs for licenses for cloud-based software providers, which can be treated as capital expenditures (CAPEX) for the required infrastructure.
Can ad hoc work in lieu of project-based work lead to an overcharge of operational expenses and an understatement of capital expenditures? Does this impact funding decisions in data versus other areas?
I personally believe yes.
Ad hoc work can lead to an imbalance in spending between operational costs (opex) and capital expenditures (CAPEX). If companies do more ad hoc projects, expenses could quickly increase in operating costs because they tend to be short-term, recurring tasks. This could lead to higher ongoing operating costs.
The uneven distribution of expenses can affect financing decisions. Investors may have concerns about too many resources going into Opex, as this could affect the company’s profitability and long-term financial stability.
What determines how data teams are accounted for as compared to other stakeholders?
The strength of the Data Team’s impact on top line growth is critical.
Stakeholders like Sales and Marketing have very direct relationships with revenue generation and customer retention. These costs tend to be viewed as capital expenditures (CAPEX) that lead to revenue growth.
In contrast, teams like Data and Engineering teams, while essential, are a cost center in companies. They are operational costs (OPEX). They fall under operational costs because they contribute to the business without generating immediate revenue.
How can data teams be booked as profit centers?
If it has a very direct impact on revenue generation.
If the impact on revenue is too subtle, then you are inclined to see Data Teams as a cost center.
Can the way a department is booked have an impact on what investment it does or does not receive?
Yes. If a department is only booked as a cost center, then you are inclined to put less resources there than a department that generates revenue.
Are you seeing any specific trends regarding investment in data teams and data skills?
More and more companies are recognizing the strategic value of data in their business model. There is an increasing willingness to invest in data teams and data initiatives with the goal of making better decisions and gaining competitive advantage with improved data usage.
But it’s still seen as a cost.
The trend is to go in the other direction. The trend is not necessarily fast.
Do you think there will be a new normal for funding for data teams and data skills in startups? If, yes, what will this look like?
Yes, against the backdrop of startups finding it harder to get funding, there will be a focus on what and where to invest.
Companies are increasingly recognizing that data can be an important factor in decision making. There is increasing investment in data.
We are moving in a direction where a component is booked as a running cost and investments in infrastructure are booked as CAPEX. Why? We are in a phase where sustainable investments are becoming more important.
What should you look for as a data leader?
The link between the availability of data and the ability to make decisions needs to become clearer. It is of great importance to make the link between revenue growth and cost reduction clearer.
Let’s be clear: without the data team, we wouldn’t have been able to make the decisions we needed to make.
What are some of your secrets to success?
The learning curve has always been a thing that has been very important to me.
The learning curve has always been one thing that has been very important to me. I made decisions that led me to the steepest learning curve. When I realized my learning curve wasn’t as steep, I made the decision to restore it.
Who is Timur Bokari?
In his current role, Timur supports the growth of a FinTech in the Recurring Revenue Financing space by developing new customer segments and refining strategy based on existing data. In his previous positions, Timur has gained extensive experience in acquisition, financing, and structuring acquisitions, as well as developing business cases for various platforms. In addition to his full-time job, Timur is passionate about his work and is always ready to take on new challenges and advance his career.