Join us on call with Jason Tan, CFO and Co-Founder of Rainforest, an ecommerce house of brands buying and growing brands for parenting and kids categories. Q1 this year the company marked its first profitable quarter and now with 16 brands in its portfolio, looks to expand their acquisitions beyond Amazon brands and build up their post-acquisition capabilities (they are hiring!). Jason goes down memory lane with learnings from his 20+ year career in finance from banking in CIMB to startup CFO (ex-OVO, Fave), deep dives into what being a CFO means in the context of Rainforest’s business, and shares advice on fundraising, making the jump into startups, and ensuring cash is king for your business.

Are you a finance professional looking to make a career shift into startups? We’re here to help you take those first steps. Check out Insignia Ventures Academy’s StartCFO program, an 8 week program for aspiring startup finance leaders to get a sense of what it will take to lead finance teams for innovative, fast-growing companies.

Timestamps and Highlights

(02:32) A 20+ Year Career from Banking to Fintech Founding CFO to CFO of an Ecommerce House of Brands;

“I do feel that if you join a startup, the learning curve is definitely steep. As I already mentioned, it’s riskier from a career security perspective. But if I were to rewind 20 years or so, I would still prefer my route where you build your foundation in a more established environment. And when you’re ready, I think you can take on more challenges, wear multiple hats, and be an advanced professional in a startup.”

(13:25) Buying and Building the Best Ecommerce Brands for Parents and Babies as a Profitable Business: The CFO Perspective;

“Acquisition is just a means to build up the portfolio. What’s equally, or even more important, is how do we build a brand post-acquisition to realize its potential. And in my role, I do have a wide and holistic view of everything from fundraising to the numbers, to the forecast, and to acquisitions as well. Obviously, they are all interlinked.”

(20:08) Building a Finance Team on the Foundations of Trust;

“As the organization grows bigger and more complex, the need to automate becomes even more important. One of the major projects we have undertaken since late last year was the integration of ERP into Rainforest. It’s a monster of a task, as you can imagine, but I’m glad to share that we are at the tail end of the process. This will form a stronger platform for us, better from a finance and supply chain perspective, for us to operate our brands more optimally.”

(23:07) Advice on Fundraising and Jumping into Startups as a Finance Professional;

“For the past couple of years, one of the top skills that people look for in a CFO is the ability to do fundraising. Recently, it has moved from fundraising to fundraising plus control.”

(26:07) #MinuteMasterclass: How to Make Sure Cash is King as An Entrepreneur;

“Cash is always king. There is no better measure of financial health of a company than cash, right? Open the bank statement. Compare between two time periods. Find the movements. That’s it.”

(27:48) #RapidFireRound;

About our guest

Jason Tan is CFO and Co-Founder of Rainforest, a house of brands based out of Singapore buying and building the ecommerce brands of the future. Prior to Rainforest he was CFO of Fave and OVO before that. Before getting into the tech sector, he had a more than a decade career at CIMB which saw him become Director of Group Strategy and Strategic investments at the bank. 

Transcript

A 20+ Year Career from Banking to Fintech Founding CFO to CFO of an Ecommerce House of Brands

Paulo J: For starters, I just wanted you to share with our listeners what that shift was like. As I mentioned earlier, you had a career in banking for more than a decade. What made you decide to take that jump into startups and become a founder yourself? And what was the biggest challenge for you in making that shift?

Jason T: Yeah, thanks, Paulo. I think you’re right. I spent the first 13 years of my career at CIMB, mostly doing M&A corporate transactions and fundraising. It provided me with a lot of fundamental skills to build a good foundation, network, and stability.

Moving from such a relatively stable environment into a startup is indeed a big move. The first startup that I joined was in Indonesia, and when I joined, I was practically employee number 10 or 11 as the founding CFO there.

So what actually drove that decision? I think a couple of things. The opportunity to grow both in skills and experience, perhaps greater autonomy, and also just to realize what else I could do for myself as an individual. Definitely, there were a lot of challenges. 

I think one of the main things is this mindset shift. As part of a bank, I always say that you are part of this mothership that has plenty of resources and buffers. Moving on to a startup, what you realize is that a lot of decisions that you make, a lot of actions that you take, impact the organization a lot more as compared to say, a bank or a larger organization.

Paulo J: We have quite a number of finance professionals listening in. Would you also recommend that kind of trajectory, based not just on yourself, but also what you’ve seen with your peers and other startups? Would you recommend that trajectory of going through that kind of stable environment, person backing before jumping into startups? Or if they really see themselves working in a startup, should they just jump right in?

Jason T: I think yes and no. See, now I’m also interviewing a lot of fresh grads, and I applaud them for taking their decision because that’s definitely a different risk-reward paradigm.

I do feel that if you join a startup, the learning curve is definitely steep. As I already mentioned, it’s riskier from a career security perspective. But if I were to rewind 20 years or so, I would still prefer my route where you build your foundation in a more established environment.

And when you’re ready, I think you can take on more challenges, wear multiple hats, and be an advanced professional in a startup.

Paulo J: What is one thing that you took away from your banking days that you were really able to apply as you became a finance leader in startups?

Jason T: Yeah, I think it’s interesting, right? So if you are part of a bank, a lot of the time, you’ll be taught to evaluate proposals and investments by a certain set of criteria and rules. And I think I brought that across, but at the same time, you realize that you can’t copy and paste everything that you learned because the pace is definitely faster in a startup.

We do not have the luxury to perhaps do the same level of evaluation, the same level of approvals as compared to a bank. But what we will then do is to decide on something, monitor, and iterate if we need to. And I think that’s one of the foundations that I mentioned earlier. We just need to tweak it for the requirements of the startup.

Paulo J: And I think that assessing opportunities is really the bread and butter of Rainforest’s business model, actually. We’ll talk a little bit more about that later on. But first, I wanted to pass forward from your shift into tech startups to when you were, as we learned from JJ in that podcast two years ago, introduced to him by us. So I wanted to get your perspective on that story. What was that like, and what made you decide to join Rainforest?

Jason T: Oh, that’s an interesting one. I love this question, actually. So I know of Insignia, obviously, although they did not invest in any of the previous startups that I was a part of. Definitely, we met through events and so on. So one day, I got an approach to ask if I was interested in joining something exciting.

I do believe that was the top line sold to me. Then, I’ll say, “Why not?” That’s pretty much a no-regret call. And that’s when I was put together in a call with JJ, some sort of blind date for founders to the call. And that was just the beginning of a series of calls.

And eventually, I was also introduced to our tech co-founder, Ola. And I think after speaking for about two or three months, we decided to put something on paper, sign it off. And that was then the birth of Rainforest. Running a startup is really tough, right?

And to have the right team, to have the right set of alignments in values, it’s very important, especially among your co-founding team. And I am very grateful that I found that in my co-founders of JJ and Ola. And I’m just glad that our journey has been great so far.

I think it’s been about two and a half years now. Maybe I would also like to share a fun fact here where when I started Rainforest, I was still in Jakarta, where I actually spent 12 years, and I did not manage to meet any of them physically for 12 months of our operations. And it’s pretty crazy to think that we did three rounds of fundraising during that time as well without me meeting my co-founders physically.

Paulo J: That’s pretty interesting. And certainly, I would say an experience that we’ve heard a lot on the show as well, like a lot of co-founders, especially companies that started in 2020, never actually met for 12 months, or even up to two years before restrictions started to ease.

And then they were finally able to meet in person. So yeah, kudos to actually pulling that off and raising that amount of money without having to really meet in person.

I did want to ask how, because Rainforest is a company very much focused on the e-commerce sector, but your two prior companies were very much in the FinTech space.

So what was that transition like from an industry perspective? Was there anything from your prior experiences that you were able to bring into navigating the e-commerce space?

Jason T: Yeah, I think you mentioned this a bit earlier, Paulo. I think buy and build has always been there in the playbook.

So when I learned about this opportunity to apply this strategy on good e-commerce brands, I pretty much jumped at it. Obviously, you are right. I think my previous experiences were probably more tilted towards fintech. But evaluating good brands to buy, it’s very similar to assets that I’ve done in my previous life.

So that’s where I see the similarity. And I’ve also talked about having the right people, complementary skills. So those ingredients were there, and so it didn’t really take me a lot to sign up for this.

Paulo J: And now I wanted to ask a question I’ve been asking all of our guests for season five. It’s the three numbers question, as I call it. So how would you describe the impact that you bring to Rainforest in three numbers? And I think this will be an opportunity for our listeners to really get a grasp of what being a finance leader, particularly in this kind of company, looks like.

Jason T: Yeah. I think in the span of about two and a half years, we have acquired 16 e-commerce brands, focusing on parenting and kids categories. We have recently recorded our first-ever profitable quarter. So that’s one of the great achievements for Rainforest.

And I think so far, we have been focusing a lot on the Amazon-based assets. So one of the things that we are shifting our strategy or expanding our strategy to be exact is to look at non-Amazon brands as well and bigger assets for acquisition.

In terms of numbers, I think looking back two and a half years, growing from the three of us to now close to a hundred and a strong team across more than 15 countries, I think that’s another number that I would also like to share because Rainforest is all about its people as well. And to me, building a remote-first and such an international team is, to me, one of the achievements of Rainforest. So that’s probably another one of the numbers that I would like to share.

“I do feel that if you join a startup, the learning curve is definitely steep. As I already mentioned, it’s riskier from a career security perspective. But if I were to rewind 20 years or so, I would still prefer my route where you build your foundation in a more established environment. And when you’re ready, I think you can take on more challenges, wear multiple hats, and be an advanced professional in a startup.”

Buying and Building the Best Ecommerce Brands for Parents and Babies as a Profitable Business: The CFO Perspective

Paulo J: Yeah. No interesting practices that you mentioned. I really like what you talked about the OKR platform being open to everybody in the organization and also that insight about new joiners really wanting also that in-person experience as well. Although there is that convenience with being remote. I now wanted to shift gears and talk a little bit about the business that Rainforest is doing.

And we’ve mentioned it several times so far that you really find, acquire, and then support e-commerce brands and businesses as you build this house of brands. And I would say that the role of the CFO in this particular type of business is a little bit more pronounced than other types of businesses.

So maybe you could elaborate a little bit more on that, like how the business model of Rainforest impacts particularly your role as CFO.

Jason T: Yeah. As part of my role at Rainforest, I lead acquisitions as well. And I think it’s important to also highlight that acquisition is just a means to building up the portfolio.

What’s equally, or even more important, is how do we build a brand post-acquisition to realize its potential. And in my role, I do have a wide and holistic view of everything from fundraising to the numbers, to the forecast, and to acquisitions as well.

Obviously, they are all interlinked. And I think having this holistic view is important for me. It’s important for Rainforest just because of the interconnectivity amongst all these functions.

Paulo J: I really like what you mentioned about also having to pay attention to the health of the cash flow of the brands post-acquisition as well.

Because obviously the acquisition is just the beginning for your business. And it doesn’t really make sense if you just buy, but then they don’t succeed afterwards. Have you noticed anything in terms of how you’ve had to grow these brands post-acquisition in terms of how much cash you’ve had to allocate and how much versus what you expected initially? Has there been any difference in terms of expectations versus reality on that?

Jason T: Oh, definitely. So I think if you open up the portfolio, there will always be overperformers, the ones that meet expectations, and similarly, there’ll be underperformers as well. There are many factors to that.

It could be anything from supply chain, pricing, competitors. So many things that can actually impact the actual versus forecast. But what is actually more important for us is to create the team, create the foundation, create the tools, and for us to take action to build this brand towards its fullest potential.

One example that we probably would look at is product development. So if a brand is already successful, we, the team, will actually look at new opportunities to either improve the existing products. It could be as simple as introducing new colors, new sizes, or even adjacent products to leverage the strength of the brand and ultimately grow the brand and profitability.

Paulo J: And then speaking of the big picture, I wanted to also ask your views on the current landscape for building this kind of house of brands.

I know JJ also did an interview with Tech in Asia recently that was published in one of their articles about how there’s this shift moving from just focusing on acquisitions, which you mentioned, to really building up those foundations to help these brands grow. 

I wanted to ask particularly since you need acquisitions, how have the expectations evolved in terms of what entrepreneurs are looking at with what they can exit with? Are they a lot more eager these days or are they a little bit more hesitant? Like how have things changed?

Jason T: Yeah. When we started Rainforest, we saw the introduction of many similar players. There were a lot of funds being raised. Relatively, fundraising was easier, deadlines were available. I think the media even dubbed this frenzy as the modern-day gold rush. I think fast forward two years, two and a half years later, I think the situation has — obviously there’s a life cycle to the industry as well. We are seeing a couple of trends.

I think number one, it’s very clear. It impacts many other industries and verticals as well. I think the availability of funds has tightened. I think that’s one. You spoke about valuation expectations. I think that has also dropped. People are more willing to sell, people are more willing to talk today.

And certainly, you’re actually seeing more and more. In fact, there was an announcement this morning as well on what you’ll see is mergers of aggregators. So previously, aggregators raised money to buy brands. Today, aggregators are merging with aggregators to realize the fuller potential of cost synergies.

For us, we have been very disciplined in our growth. We have been focusing a lot on optimizing our cost, optimizing our performance. And as I mentioned, I mean that we are actually in a good position right now to make the next strategic moves to propel us to the next phase of growth.

Paulo J: Definitely a good time to be profitable if there’s ever been one. I wanted to move to another aspect of the business, which I think you’ve been really passionate about from hearing our conversation so far, which is building the team and organization. You mentioned some strategic moves, considering moving out of Amazon brands and also looking at more opportunities, especially in this market, to acquire more brands within the sector. How do you see this impacting the way the team or organization is evolving?

Jason T: Yeah, we have always been keen to automate as much as possible, especially in the finance function. As the organization grows bigger and more complex, the need to automate becomes even more important. One of the major projects we have undertaken since late last year was the integration of ERP into Rainforest. It’s a monster of a task, as you can imagine, but I’m glad to share that we are at the tail end of the process. This will form a stronger platform for us, better from a finance and supply chain perspective, for us to operate our brands more optimally.

I also believe that building a team starts with hiring. Even today, I interview each and every one of the new joiners of Rainforest. It’s not so great for the interviewees because they have to go through an additional layer of interviews, but I think it’s very important. It doesn’t guarantee a hundred percent success, Paulo, but I feel that it’s good to at least share our vision, to share our values, and for me to gauge the alignment of the new joiners with our values that we hold tightly here at Rainforest.

Paulo J: Thematically speaking, is there a particular kind of question that you ask in these interviews to really suss out that kind of alignment for new joiners?

Jason T: No, I think one of the core values we have is trying to suss out how deep the sense of ownership is. I typically ask one or two examples that the interviewee can share with me that demonstrate their sense of ownership. It could be anything from high school, from their house, from their career, and so on. This allows me to gauge this person’s sense of ownership.

“Acquisition is just a means to build up the portfolio. What’s equally, or even more important, is how do we build a brand post-acquisition to realize its potential. And in my role, I do have a wide and holistic view of everything from fundraising to the numbers, to the forecast, and to acquisitions as well. Obviously, they are all interlinked.”

Building a Finance Team on the Foundations of Trust

Paulo J: I wanted to zoom into the finance function specifically, and maybe this would be particularly useful for early stage CEOs out there or even finance leaders out there who are thinking about how to build out their startup’s finance function. What has your approach been to doing that at Rainforest?

Jason T: I think every startup is different. At every level, we need to look at what the priority is. Today, for example, you would want to start with a control function. I think a control function is very important no matter how big or small the organization is. Then you probably need to move on to the future, the forecasting, and the monitoring. 

If it grows bigger than that, then there is also the tax and treasury function that one should put in a lot more effort on. There are multiple layers to that. If you consider fundraising as part of the finance function as well, that’s one of the non-negotiables from the beginning. So I think you can speak of the finance function into all those different categories.

Paulo J: I really appreciate what you mentioned about the control function being really foundational regardless of the stage. A lot more companies are realizing that now. People who specialize in that kind of role are very much in demand all the more these days.

I wanted to also ask about performance management. I think this is a pretty challenging question for a lot of leaders regardless of what kind of organization they’re in. Is it something that’s always evolving? What has been your own learning from this experience of doing performance management, especially for an organization that is remote and operates across different countries?

Jason T: Yeah, I think number one is to be open and to be clear. We have an OKR platform that is public, and everyone can log in and look at the OKRs. It’s the weekly or biweekly check-in that is in there. 

For the finance team, when we first started, we talked about more basic stuff, like let’s close the account by T plus 14 days. Once you get into that cadence, that shouldn’t inform part of your OKRs anymore. Then you go on to perhaps tax filings, value creative stuff, cost savings, treasury functions. These are all some of the OKRs that you can place on the finance team, obviously with alignment to the overall OKR of the company.

“As the organization grows bigger and more complex, the need to automate becomes even more important. One of the major projects we have undertaken since late last year was the integration of ERP into Rainforest. It’s a monster of a task, as you can imagine, but I’m glad to share that we are at the tail end of the process. This will form a stronger platform for us, better from a finance and supply chain perspective, for us to operate our brands more optimally.”

Advice on Fundraising and Jumping into Startups as a Finance Professional

Paulo J: Thanks for breaking that down and emphasizing the fact that prioritization is important for startups, specifically choosing which metrics to focus on at any point in time.

I wanted to talk about one specific function of the finance team in most cases, fundraising. This is more of an advice question for entrepreneurs in this market: how do you discern between the different types of instruments to raise, especially now that there’s more demand for tighter capital, as you mentioned earlier?

So how do you discern between raising equity, debt, a mix of both, and perhaps other instruments? I know we’ve heard a lot about venture debt and other things that you can creatively fundraise with.

Jason T: Every instrument carries different characteristics, pros, and cons for the company. They may not always be readily available to everyone. So if you are lucky enough to be able to decide, then diversification of funding sources is great. For example, at Rainforest, given the nature of our business, we have been able to use some debt.

Using debt is great if you use it in a more disciplined manner as it can allow you to grow and minimize your dilution. But we need to make sure that our cash flows can cover the future payments, right?

That’s one example. I think there are also a lot in between, anything from equity to debt. And if you look at the current market situation, a lot of discussions are probably tilted towards more of both, even at an early stage. It’s moving more towards a convertible note or a SAFE note.

To me, this is just a reflection of the current market environment and trying to match between the demand and supply of funds. So if you are one of those that can choose, my advice is to use it in a disciplined manner. Ensure your cash flows will cover the future payments.

Paulo J: This next question ties in with what you were talking about at the beginning of this conversation, your leap into the startup world from banking.

What’s your top advice for finance professionals looking to jump into startups and become a finance leader?

Jason T: Before I drop my one-liner, it’s interesting that if you speak to people in the industry, for the past couple of years, one of the top skills that people look for in a CFO is the ability to do fundraising. Recently, it has moved from fundraising to fundraising plus control. I’ve even met people who are looking for strong controls. So I think this is the shift, and then this goes to my one-liner.

I think the role of a finance leader is ever-evolving yet critical. So if you join a startup, be ready to be agile, adaptable, and embrace the multiple hats you’ll wear.

“For the past couple of years, one of the top skills that people look for in a CFO is the ability to do fundraising. Recently, it has moved from fundraising to fundraising plus control.”

#MinuteMasterclass: How to Make Sure Cash is King as An Entrepreneur

Paulo J: Definitely those go beyond finance. And in certain cases, if you join as early as Jason has, into some of these companies, like employee number 10 or, even the founding founding member.

And on the note of controls I wanted to go into our minute masterclass corner. Which is a new corner for the season of the show. If you were to give a class to fellow entrepreneurs, founders, finance leaders, specifically on measuring financial health or even, managing that, it goes to controls, right? What would be the key takeaway for the class? 

Jason T: I’ve always mentioned this, cash is always king. There is no better measure of financial health of a company than cash, right? Open the bank statement. Compare between two time periods. Find the movements. That’s it. I think the other benefit of tracking cash or using cash as the main metric is that as I’ve already mentioned, it is very easy to track and it’s very easy to reconcile. So yes, I think focus on cash and that is actually the truest form of your financial health.

Paulo J: I had a follow up question there and have you seen any, like pitfalls in terms of how people interpret, because you say it’s very easy to measure, and then how do they interpret that cashflow into sort of just strategic decisions, right? Because normally, people would maybe sometimes overestimate how much you’re able to do or underestimate. Like what’s the fine line there?

Jason T: Yeah, I think that increasingly you realize that even if, let’s say, as I said, because the previous question was on fundraising. If you go to a– a bank for example, right? That the line that the bankers will be most interested in would be your cash flow.

And to track your cash flow they have tons of metrics out there. One example will be your cash conversion cycle, your cash cover, DSCR and so on and so forth. So there are many of these ratios out there that can indicate I would say the truer sense of the financial health.

“Cash is always king. There is no better measure of financial health of a company than cash, right? Open the bank statement. Compare between two time periods. Find the movements. That’s it.”

#RapidFireRound

What superpower would you want to have?

Jason T: I have a hundred teammates in 15 countries, teleportation power.

What digital technology or innovation excites you the most today?

Jason T: AI, the virtual brain that can help and serve you.

If you were invited to produce a Netflix or any OTT series, what would be the title of the show?

Jason T: I would invite professional athletes from different sports, and they would need to learn another sport that they haven’t played before.

Looking back now, what is a skill you believe you should have learned back in your time as a student?

Jason T: I should have listened more.

If you could automate one aspect of your role just by wishing for it, what would it be?

Jason T: Reconciliation. My team spends so much time and effort reconciling every line. If I had a magic button, then I could help them automate it.

If you could pick anyone, alive or dead, to be your 24/7 executive coach, who would it be? And why?

Jason T: Roger Federer. He’s the greatest of all time. He didn’t start playing tennis until his teenage years, and he was able to build his career to be the greatest of all time. He’s also an investor who invested in a brand called On, which is worth millions today.

Paulo J: What other sport would you want Roger Federer to learn if you were part of the show?

Jason T: Football would be interesting.

What is your favorite go-to destination in Southeast Asia? Apart from Singapore, or what trip are you most looking forward to taking in the region?

Jason T: I recently visited Chiang Mai in Thailand for fun, and I fell in love with the place. So that’s one of the places that I would like to go back to again.

What’s your favorite activity to de-stress?

Jason T: Running.

And finally, is there anything that you’ve read or taken up recently that you’d like to recommend to our listeners?

Jason T: “Range” by David Epstein. One of the interesting points is differentiating generalists from specialists. Through multiple research, it was found that a generalist with a wide range of skill sets is more likely to succeed as compared to specialists.