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Silicon Valley Seeks CFOs to Hop on IPO Train

John Holland, Managing Director of Boyden San Francisco comments in a WSJ.com article on the demand for experienced financial executives in the Silicon Valley

By: Emily Chasan - WSJ.com

August 18, 2011 -- The IPO boom in Silicon Valley  is creating another mini-boom in demand for experienced financial executives. While demand for new chief financial officers has been somewhat slow at Fortune 500 companies and private-equity backed firms this year,  executive recruiters say the market is on fire in Silicon Valley.

Start-ups might have gotten by with only a controller or part-time CFO over the past few years, but now dozens of companies with strong venture-capital backing and revenues in the $200 million to $300 million range are seeking full-time finance chiefs to prepare a company to go public, said Jenna Fisher, an executive recruiter at Russell Reynolds Associates in San Francisco.

Fisher, who has conducted several executive searches recently for tech companies thinking about going public in the next year or two, told CFO Journal that “a fresh cadre of new CFO roles are being created.”

IPOs are historically the exception to the rule in Silicon Valley, with companies much more likely to be acquired by a larger firm than to go out on their own. But venture capital firms say they’re now looking for CFOs with some public market experience who are prepared for either situation.  Another recent trend is CFOs guiding a company through an IPO or sale, and then starting all over again with a new company.

For example, local review website Yelp, which has said it intends to go public, hired Rob Krolik as its new CFO last month. Earlier in his CFO career, Krolik helped take Shopping.com public and led it through an eventual sale to eBay.  Online retailer Gilt Groupe, which is also considering an IPO in the next few years, hired Andrew Page as CFO last year. Page previously led the sale of online tickets seller StubHub to eBay.

“Usually we like to have them in a position to be able to go public, even if it will eventually be sold to another company,” said John Jaggers, managing general partner at venture capital firm Sevin Rosen Funds in Dallas. “You are generally looking for a CFO who has taken a company public once or twice and is willing to work for equity more than cash.”

The firms need CFOs with some experience handling “wild swings” in cash flow, internal controls in the post-Sarbanes-Oxley era, and a CFO capable of going on a road show and explaining the company’s financials to investors, Jaggers said.

“They want to see successful exits on a CFO’s resume,” said John Holland, managing director at executive search firm Boyden in San Francisco. “Did the company they worked for scale? Did they go from revenues of zero to $50 million or from zero to $100 million?”

Holland said he often recruits CFOs for venture-capital funded firms out of the finance departments of publicly traded companies, especially where they have overseen big increases in revenue. He also looks for CFOs that have been to the top business schools and have had some experience at a “Big Four” accounting firm, he said.