Good morning.
How will CFOs at tech startups with their fingers on the pulse of A.I. use the technology in their own companies’ finance function?
“It was good to see what was top of mind for the CFOs and how they were responding to some of the challenges in the businesses,” says Navneet Govil, executive managing partner and CFO of SoftBank Investment Advisers, SoftBank Group’s growth equity firm headquartered in London.
I talked with Govil about a survey of more than 100 CFOs at growth-stage tech companies from across their global portfolio shared first with CFO Daily. Softbank’s Vision Fund started in 2017 with $98.6 billion in total commitments, Govil says. “Over the last seven years, we’ve invested $140 billion in 473 companies globally,” he says. “We traditionally invest in private companies and the hope is they’ll either go public or they’ll get acquired and that’s how we will exit or monetize our investment.” Some companies in the fund’s portfolio include ByteDance, Cameo, and Sorare. To be sure, it has been a rough stretch for SoftBank Group’s Vision Fund segment (SVF1 and SVF2), which lost $32 billion in its fiscal year ending March 31, due to declines in its investments in firms like Chinese A.I. company SenseTime and Indonesian ride-hailing company GoTo, Fortune previously reported.
CFOs split on how quickly generative A.I. will impact finance operations
Almost all of the CFOs surveyed (95%) said that generative A.I. will improve productivity. And 69% said they plan to invest in the technology. By geography, 30% of CFOs surveyed in the U.S. said the technology will have a major impact on their companies in 2023, compared to 13% of CFOs in Asia and the Middle East, 12% in Europe, and 7% in Latin America.
By sector, CFOs at consumer companies believed the most (44%) that generative A.I. will have a major impact on their companies this year. CFOs at fintech companies (18%), enterprise companies (16%), and just 7% at health tech companies said the same.
But just 5% of CFOs said generative A.I. will impact finance operations in the next six months, 25% said the impact will happen over the next year, and another 43% over the next two years. Twenty-seven percent said they don’t expect it to have an impact on finance operations in the foreseeable future.
There are early adopters ready to jump on the tech, Govil says. Meanwhile, others are waiting to see where things settle, saying, “‘I don’t want to jump on something because the switching costs can be quite considerable,’” he explains.
He continues, “I think today, what we’re seeing is, with generative A.I., and A.I. in general, is: how can we leverage those tools?”
Govil notes that generative A.I. is just one component of artificial intelligence. “Many of our portfolio companies have actually adopted predictive analytics,” he says. “If you look at some of the companies we’ve invested in like DoorDash, Uber, or Rideshare, they use predictive analytics to look at the different trends.”
SoftBank Group Corp. and Symbotic Inc., an A.I.-powered automation technology for the supply chain, announced on July 24 their joint venture, GreenBox Systems LLC, to offer automated warehouses as a service. People can subscribe to a service rather than outright buying the large machines for warehouse automation, Govil says.
The survey also found that inflation, the financing environment, and market volatility are still top of mind for CFOs, but optimism is growing. The top way companies are adapting to higher interest rates is by increasing their use of money market funds (64%).
Issues fading in importance are supply chain issues (10%), and geopolitical concerns (11%). And just 21% cite hiring challenges, according to the survey. With the workforce reductions by large tech companies this year, more talent is available, Govil says.
Regarding banking, the collapse of Silicon Valley Bank in March 2023 prompted changes at many high-growth companies, with overall 67% saying they modified their approach to treasury management, with 83% of CFOs in the U.S. having done so. “A lot of CFOs and treasurers said it’s important to diversify your banking partners,” Govil says. “The survey shows that the average number of banking partners has gone from four to five.”
For CFOs, mitigating risk goes hand-in-hand with prioritize growth.
Sheryl Estrada
sheryl.estrada@fortune.com
Big deal
Over the next 12 months, 75% of mid-sized business owners (MSBO) expect their revenue to increase and 71% are planning to hire over the next 12 months, according to the inaugural Bank of America Mid-Sized Business Owner Report. The study is based on a survey of more than 300 MSBOs, with $5 million to $50 million in annual revenues, and focuses on their business and economic outlooks.
Ninety percent of MSBOs have adopted digital strategies to further optimize their businesses and operations over the past year. For example, new digital tools are helping them to save time (48%), increase customer satisfaction (43%), manage cash flow (43%), stay organized (41%) and reach new customers (37%), according to the report.
The survey found that 87% of MSBOs plan to further use automation and artificial intelligence to stand out from competitors (45%), assist with hiring (45%), and streamline payroll and bookkeeping (43%). However, 88% view cybersecurity as a threat to their business, and as a result, 65% said they’re further investing in digital security systems.
Going deeper
Wharton’s “Ripple Effect” podcast features faculty who dive into what inspired their studies and how their findings resonate with the world today. In the latest episode, Professor Peter Cappelli explains how viewing employees as financially valuable assets can lead to better management.
Leaderboard
Armelle Poulou was promoted to CFO at Kering, a global Luxury group that owns the brands Balenciaga, Bottega Veneta, Gucci, Alexander McQueen and Yves Saint Laurent. Poulou will begin the role on Sept. 1. Poulou joined the group in 2019 and is currently the director of corporate finance, treasury and insurance. She held a range of positions in France and worldwide, several financial functions at Procter&Gamble, Hewlett-Packard and EDF, before joining Kering.
Francis Lee was named EVP and CFO at Sleep Number Corporation (Nasdaq: SNBR), a wellness technology company, effective Aug. 14. Lee will assume the role from Chris Krusmark, EVP and chief human resources officer, who has held the position of Interim CFO since January 2023. Lee most recently served as CFO at Wyze Labs. Before Wyze, he spent 13 years with Nike as CFO of Nike Japan, VP of global marketing finance, VP of finance, and VP of enterprise strategic investments. At Gap, Inc., Lee worked in corporate strategy and business development.
Overheard
“Generation X represents the leading edge of the new retirement in America. As the first generation to mostly enter the workforce after the move away from defined benefit pensions in the private sector, most Gen Xers will not enjoy the secure retirement income that pensions have provided to so many in previous generations.”
—Tyler Bond, research director at the National Institute on Retirement Security (NIRS) and a co-author of a report on the retirement readiness of Gen X, told Yahoo Finance. The NIRS report defines Gen X as those born between 1965 and 1980, which is about 64 million Americans, or nearly 20% of the U.S. population.
