Her CEO Journey™: The Business Finance Podcast for Mission-Driven Women Entrepreneurs

Weekly show where my featured guests and I explore the financial and business challenges women face on the entrepreneurial journey to success. You'll hear them talk about the money side of their businesses in ways you've always wanted to know about, but wouldn't dare ask. They openly share their disappointments, failures, successes, and everything in-between as they grew sales ranging from 6 to 9 figures. Knowing where your business stands financially helps you make critical decisions with confidence. It's simply the best way to be sure you grow a business that fuels the life you want to live.

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episode 132: Scaling Your Business and Attracting Investors: How IP-Backed Financing Can be Your Growth Strategy for Business - The Journey of Lesley Gouldie (Intellectual Properties Series) [transcript]


Financing is a requirement for the growth of your business. However, traditional financing may not be the best option for the nature of your business. Luckily, there are different options available to you. Your unique ideas, processes, and technology can be protected in the form of IP. You can then leverage this IP portfolio for debt financing. Through this process, you’re able to scale up and attract more investment opportunities.

Lesley Gouldie of Thornhill Medical joins us in this episode to discuss how her company leveraged IP-backed financing to ensure their growth. We learn why Thornhill Medical chose an alternate commercial lender over a traditional one for their financing strategy. We also find out the process of obtaining IP-backed financing and how we can use this to attract the right investors. Finally, we get some great advice on hiring a CFO or financial advisor and scaling strategically. 

Do you want to know how you can use IP for debt financing as a growth strategy for business? Then, tune in to this episode to learn more!

Here are three reasons why you should listen to the full episode:

  1. Find out the difference between debt financing versus equity financing.
  2. Learn how you can prepare for IP-backed financing as a growth strategy for your business.
  3. Determine critical steps in the financial planning process when scaling up.

Episode Highlights

  • [05:04] Lesley’s Journey
  • [06:35] Why IP Matters to Thornhill Medical
  • [08:39] The Basics of Patents
  • [09:49] Thornhill Medical’s IP Strategy
  • [10:44] Thornhill Medical’s Financing Strategy: Debt Financing with Quantius
  • [12:49] IP-Backed Financing as a Growth Strategy for Business
  • [14:08] Why They Didn’t Get Financing from a Regular Bank
  • [16:56] Debt Financing versus Series A Equity Financing as a Growth Strategy for Business 
  • [20:18] Making the Company More Attractive to Investors
  • [21:02] Preparations Needed for IP-Backed Financing
  • [23:51] Financial Planning Process During Company Hypergrowth
  • [26:47] The Importance of Having a Financial Background as a CEO
  • [27:32] Why Startups Should Consider Working with a CFO
  • [29:53] Lesley’s Final Advice on Scaling Strategically

Enjoyed This Podcast?

Write a review and share this with your friends.

Connect With Me

Ready to transform your purpose into an impactful business financial story, profit, and joy? Schedule a chat with me at any time.

Resources

  • Unlocking Financial Opportunities with IP: How to Patent an Idea - The Journey of Susan Blanchet
  • Growing Your Business with IP-Backed Financing - The Journey of Lally Rementilla
  • Download the Forecasting Guide so you can create a better and improved financial forecast for your business!
  • Thornhill Medical
  • Connect with Lesley: LinkedIn


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 2021-09-09  32m
 
 
00:00  Lesley Gouldie
I think what the
00:00
IP-backed financing enabled us
00:08
to do was to facilitate a growth
00:08
strategy and continue to develop
00:15
a pipeline and to develop the
00:15
business opportunities that
00:18
ultimately put us in a position
00:18
to make us more attractive to an
00:23
equity investor.
00:26  Christina Sjahli
As a founder
00:26
or as a CEO, there are many
00:29
things you have to take into
00:29
consideration, and one of them
00:33
is about securing financing.
00:33
Perhaps at some point in your
00:37
business cycle, you realized the
00:37
traditional way of financing may
00:42
not be the best financing
00:42
structure to support your
00:45
business growth. That's when you
00:45
need to think outside the box.
00:49
One of the reason why we create
00:49
this Intellectual Property
00:53
Podcast Series is to encourage
00:53
you to think outside the box. We
00:57
know there are different ways to
00:57
secure financing. Intellectual
01:01
property or IP-backed financing
01:01
is one of them.
01:40
Today's guest is Lesley Gouldie,
01:40
the CEO of Thornhill Medical
01:45
located in Toronto, Canada. Back
01:45
in 2017, Thornhill Medical
01:50
entered into a financing
01:50
agreement leveraging their IP
01:54
portfolios. Lesley shares, among
01:54
others, the reason why Thornhill
01:59
Medical gravitated toward an
01:59
alternate commercial lender
02:03
versus a traditional lender, the
02:03
due diligence process to obtain
02:07
the IP-backed financing, how to
02:07
leverage that financing to
02:12
promote growth and attract the
02:12
right investors, the different
02:16
strategies to finance
02:16
significant growth. If you are
02:20
not located in Canada, don't
02:20
jump to the conclusion that this
02:24
episode is not relevant to you.
02:24
IP-backed financing is not
02:28
specific to Canada. You may find
02:28
an alternative commercial lender
02:32
within your region. Take the
02:32
time to listen until the end
02:36
because this episode can give
02:36
you useful tips for businesses
02:41
globally.
02:42
You're listening to Her CEO
02:42
Journey, the business finance
02:45
podcast for mission-driven women
02:45
entrepreneurs. I'm your host,
02:49
Christina Sjahli. If you are new
02:49
here, a big warm welcome. If we
02:55
are not connected on LinkedIn,
02:55
please reach out and say hi,
02:58
because that's where I hang out
02:58
and share my business finance
03:02
tips. If you have been listening
03:02
to this podcast for a while, and
03:06
you are a regular listener, I
03:06
want you to know I appreciate
03:11
you. My podcast won't be around
03:11
without your support. This is a
03:15
free weekly show where my guests
03:15
and I want to inspires you to
03:20
balance between mission and
03:20
profit, to create an impact in
03:24
this world, and to achieve
03:24
financial equality through your
03:28
business for good.
03:29
When your business is growing
03:29
fast, you are not only focusing
03:33
your effort on securing
03:33
financing. You also need to
03:37
understand where your business
03:37
is going in the long run. As you
03:40
listen to this episode, any type
03:40
of lender would ask for a
03:44
forecast. If you are at a stage
03:44
where you realize you need to
03:49
build a robust financial
03:49
forecast but don't know where to
03:52
start, we have a solution to
03:52
your problem. Download the
03:56
Forecasting Guide we have
03:56
created for you and start
03:59
creating a better and improved
03:59
financial forecast. You can find
04:03
the link to this guide in the
04:03
show notes.
04:05
Let's say after using the
04:05
forecast you think, "Hm. This
04:09
guide helps, but I think it's
04:09
better if I focus my time on
04:13
doing what I really love, which
04:13
is building and growing my
04:16
business. I know business
04:16
finance is important, but I
04:20
don't love it." That's when we
04:20
are here to partner with you. We
04:24
understand building a proper and
04:24
robust financial forecast takes
04:29
time, accountability, curiosity,
04:29
and passion for your business.
04:34
Connect with us at
04:34
christinasjahli.com/lets-chat.
04:39
Now let's find out Lesley's CEO
04:39
journey. Lesley Gouldie, welcome
04:45
to Her CEO Journey. It's a
04:45
pleasure to have you here.
04:49  Lesley Gouldie
Thank you. I'm
04:49
delighted to be here.
04:51  Christina Sjahli
So before we
04:51
start talking about intellectual
04:55
property-backed financing, I
04:55
would love to hear your journey
04:58
from a chartered accountant in
04:58
South Africa to CEO of Thornhill
05:03
Medical.
05:04  Lesley Gouldie
Well, it has
05:04
been a long journey, both in
05:06
distance and in time. I
05:06
qualified as a CA in South
05:10
Africa, and I've transferred to
05:10
the office of
05:13
PricewaterhouseCoopers in
05:13
Toronto. And actually spent a
05:17
lot of my time there working
05:17
with companies in financial
05:20
difficulty. That was a
05:20
opportunity that I really got my
05:24
taste for operations, upgrading
05:24
in very challenging and critical
05:29
situations, as well as really
05:29
getting a taste for real time
05:33
decision-making.
05:34
I left PwC and then embarked
05:34
upon a series of senior
05:38
financial and operational
05:38
positions, including CFO of
05:41
Nelson Education, which is, or
05:41
was a division of Thomson
05:45
Reuters. I then decided I wanted
05:45
to become an entrepreneur, and
05:49
went, and in conjunction with my
05:49
business partner, secured
05:53
financing and procured a
05:53
platform called
05:56
studentawards.com, and I was the
05:56
CEO of that until we exited from
06:00
that. And then I embarked upon
06:00
the journey into medical
06:04
devices. I was the COO of
06:04
Meditech International, and then
06:08
ultimately joined Thornhill
06:08
Medical.
06:10  Christina Sjahli
The reason I
06:10
invited you to this Intellectual
06:14
Property Podcast Series is
06:14
because I know that at some
06:19
point, Thornhill Medical entered
06:19
into an agreement to get
06:23
financing. But to provide
06:23
context to my audience first
06:27
about intellectual property,
06:27
maybe you can share an overview
06:30
about Thornhill Medical and how
06:30
IP matters to your company.
06:35  Lesley Gouldie
Thornhill
06:35
Medical is the inventor and
06:38
developer and supplier of
06:38
groundbreaking medical devices
06:42
that are critical in delivering
06:42
emergency mobile and remote
06:47
healthcare support. We're
06:47
actually a spin-off of the
06:50
University Health Network.
06:50
Thornhill Medical actually
06:53
stands out in the medical
06:53
technology field by our superior
06:57
understanding of the utilization
06:57
of arterial blood gases, thus,
07:01
eliminating or substantially
07:01
reducing the bulk waste and cost
07:05
and logistical burden associated
07:05
with the devices and delivery of
07:09
care while optimizing our
07:09
patient outcomes. This control
07:13
of the arterial blood gases is
07:13
where a lot of our IP actually
07:19
resides. And that is our very
07:19
special and unique capability.
07:23
So our technology that has been
07:23
commercialized provides a lot of
07:27
unique and variable solutions,
07:27
including a device that's called
07:32
MOVES SLC that is a portable
07:32
integrated life support system
07:36
for casualty care during patient
07:36
transport in field hospitals and
07:40
in forward surgical suits. We
07:40
have ClearMate, which is a
07:44
pneumatic device providing
07:44
immediate and effective
07:47
treatment for carbon monoxide
07:47
poisoning at the scene of the
07:51
incident. And MADM, which is a
07:51
device that turns any ventilator
07:55
into an anesthetic workstation.
07:55
So we have three devices that
07:58
are commercialized an operating.
07:58
And then we have an
08:01
investigational tool called
08:01
RespirAct that is used around
08:05
the world for research
08:05
initiatives that measure
08:08
vascular reactivity.
08:10
IP has been the cornerstone of
08:10
our innovation, and certainly
08:15
has been the foundation for the
08:15
commercialization of the
08:18
products that are currently in
08:18
the market. And is very much I
08:22
guess, the backbone of our new
08:22
technology, the RespirAct,
08:25
which is currently still a
08:25
research product.
08:28  Christina Sjahli
In terms of
08:28
IP, a lot of them is probably
08:32
patents. So how long does it
08:32
take to get a patents? That can
08:37
be years.
08:38  Lesley Gouldie
That's correct.
08:38
It takes a long time, and a lot
08:43
of money, and a lot of patience.
08:45  Christina Sjahli
Before you can
08:45
produce and sell the product, do
08:49
you have to receive the patent
08:49
first?
08:52  Lesley Gouldie
No, you don't
08:52
have to. I think there's many
08:54
products that I'll say that do
08:54
not have patent protection, but
08:59
doesn't inhibit the
08:59
commercialization process. But
09:02
what it does do is it ultimately
09:02
protects you and your innovation
09:08
as you go forward and certainly
09:08
serves as a barrier to entry for
09:12
other companies that may want to
09:12
take a competitive stance around
09:16
what you're doing. Sometimes,
09:16
there's other sort of trade
09:20
secrets or methodologies that
09:20
provide sufficient protection
09:23
that you don't really need to go
09:23
down the patent protection
09:26
route. But, I guess the
09:26
methodology and the history of
09:31
our company, is we do patents on
09:31
a lot of our innovations. And
09:35
that does give us broad
09:35
protection as we go forward in
09:38
our commercialization processes.
09:40  Christina Sjahli
Now, when you
09:40
joined Thornhill Medical, was
09:44
there already an IP strategy in
09:44
place at the time?
09:49  Lesley Gouldie
Oh, yes,
09:49
absolutely. The company was
09:51
founded in 2004. And I joined at
09:51
the end of 2015. There were
09:57
already a lot of patent
09:57
applications that were either in
10:02
process of being prosecuted or
10:02
had already been awarded. So
10:07
this is something that is very
10:07
well-entrenched into the DNA of
10:11
our company, both with our
10:11
founder who has always led the
10:15
charge on the patent
10:15
development, and I guess
10:19
prosecution, joined by various
10:19
scientists and engineers that
10:24
are on the team as well. So it's
10:24
very much a part of our process
10:27
and what we do.
10:29  Christina Sjahli
So back in
10:29
2017, Thornhill Medical enter
10:33
into a financing deal with
10:33
Quantius to launch new products,
10:37
right? And I know this type of
10:37
financing is very unique. Can
10:41
you share the uniqueness of this
10:41
financing deal?
10:45  Lesley Gouldie
Yes, I think
10:45
what was different about that
10:49
particular financing deal was
10:49
that Quantius was prepared to
10:54
give consideration to the depth
10:54
and breadth and value of our IP
11:00
portfolio in assessing the
11:00
amount of financing they would
11:05
make available and the security
11:05
that was available then to
11:09
facilitate that. So we went
11:09
through a very different due
11:13
diligence process from them. In
11:13
addition to the standard due
11:17
diligence that one would
11:17
normally go through when one is
11:21
engaging with the lender in
11:21
terms of them evaluating both
11:25
the assets available to secure
11:25
the debt and the cash flow
11:28
available to support the
11:28
repayments of the debt, Quantius
11:32
did a very in-depth evaluation
11:32
of our IP portfolio. They did a
11:36
lot of due diligence on it and
11:36
were able to come up with a
11:40
valuation on that IP to help
11:40
support a financing arrangement
11:46
for us to support the operations
11:46
going forward.
11:49  Christina Sjahli
So the deal
11:49
was basically instead of being
11:52
backed up by a building or land
11:52
or equipment, the deal was
11:58
backed up by your intellectual
11:58
properties.
12:01  Lesley Gouldie
That's correct.
12:02  Christina Sjahli
Before you
12:02
even approach the lender, in
12:06
this case, Quantius, did you
12:06
have your own valuation?
12:10  Lesley Gouldie
We hadn't done a
12:10
formal valuation by a third
12:13
party. Our valuation was very
12:13
much predicated on the
12:17
opportunity that the addressable
12:17
markets presented, and was
12:21
essentially embedded in our go
12:21
forward business plan or what we
12:24
thought we could obtain. So when
12:24
they did their valuation, they
12:29
obviously came at it from a very
12:29
different point of view.
12:32  Christina Sjahli
So how did you
12:32
even find out about this type of
12:36
financing? Did you approach like
12:36
a bank first at the time or did
12:40
you consider other financing
12:40
deal before you find out that IP
12:46
can be used for financing?
12:49  Lesley Gouldie
We were at an
12:49
inflection point. We needed
12:51
additional funding. So I was
12:51
looking for a package of
12:56
alternative financing, and I was
12:56
introduced to Quantius. And it
13:00
was the first time I'd ever
13:00
heard of IP financing. I don't
13:04
think, at that time, there was
13:04
anybody in the Toronto-based
13:08
market that was doing it. So I
13:08
was fortunate enough to be
13:12
introduced to them by a contact
13:12
of mine. And we met with them
13:17
and worked with them very
13:17
closely, to enable them to get a
13:21
really great understanding of
13:21
our product portfolio. They
13:25
spent a lot of time with us
13:25
understanding our business. They
13:29
spent a lot of time
13:29
understanding our projections
13:32
and our cash flows. They did a
13:32
very thorough job, not only in
13:35
assessing our IP portfolio, but
13:35
in assessing our business as
13:40
well.
13:41  Christina Sjahli
Based on my
13:41
reading and my research, back in
13:44
2017, Thornhill Medical have
13:44
customer in more than 30
13:49
countries. So the company was
13:49
really growing at the time. But
13:54
it's not as easy as someone
13:54
would think for you to get
13:58
financing from a regular bank.
13:58
Like you had to go through like
14:03
a unique type of financing to
14:03
refinance your business.
14:08  Lesley Gouldie
Yeah, I mean, we
14:08
have a very interesting business
14:11
to secure financing for. I think
14:11
the official technical term for
14:16
it is called lumpy cash flow. So
14:16
you can have very high levels of
14:21
revenue and cash, and then very
14:21
low, and very high, and very
14:24
low. And you can't always
14:24
predict accurately when those
14:28
highs and lows are going to be.
14:28
Just given the nature of our
14:31
company is that, our primary
14:31
customers at that point in time
14:35
in 2017 were militaries around
14:35
the world. It's a long sales
14:39
cycle. There's always political
14:39
issues influencing
14:44
decision-making. You're dealing
14:44
with governments. You're dealing
14:47
with budgets. So it's very, very
14:47
unpredictable and
14:51
notwithstanding a high need and
14:51
a high demand, the overline sort
14:56
of macro environment in which
14:56
our business is operating, at
14:59
that time, just, it wasn't
14:59
predictable.
15:02
And as you know, when you're
15:02
dealing with debt providers,
15:06
they like to have a high level
15:06
of certainty and predictability
15:10
in terms of when you're going to
15:10
get the cash. And if we lend
15:13
this to you, when are you going
15:13
to pay us back? And will you
15:16
have the cash flow to not only
15:16
service the debt, but to pay
15:19
back the debt in the timeframe
15:19
that they were expecting? It's a
15:23
little bit of feast or famine,
15:23
which for traditional lenders,
15:27
and even mezzanine financiers,
15:27
they like to have steady,
15:32
predictable cash flows to
15:32
advance increasing levels of
15:37
financing, and we were the
15:37
complete antithesis of that. So
15:41
that's why we had to go the
15:41
alternate financing route to
15:45
come up with a partner who
15:45
understood more comprehensively
15:50
the underlying dynamics of our
15:50
business and the underlying
15:53
value that we had and were
15:53
confident enough to provide that
15:58
additional tranche of financing
15:58
to help facilitate the growth to
16:01
get us to that next level.
16:03
It is still the case with
16:03
IP-backed financing, to be
16:06
honest, when Quantius evaluated
16:06
our business, notwithstanding
16:11
the value that they attributed
16:11
to the IP, they still did a very
16:16
thorough job of understanding
16:16
what our projected cash flow was
16:21
going to be. Because they wanted
16:21
to make sure that we could
16:24
service the debt on an ongoing
16:24
basis and ultimately meet the
16:29
repayment terms. So they had to
16:29
get comfortable with our lumpy
16:34
cash flow, to make sure that it
16:34
met those requirements. So the
16:38
cash side of our business was
16:38
still a limiting factor in terms
16:42
of how much they were prepared
16:42
to advance us. But at least they
16:45
were prepared to advance us the
16:45
funding predicated on an
16:48
underlying security base of the
16:48
IP.
16:51  Christina Sjahli
Was this
16:51
financing is like more than five
16:54
years term?
16:56  Lesley Gouldie
I can't remember
16:56
because we actually, we got the
16:59
financing, probably within a
16:59
year of securing that debt, we
17:04
were able to get equity
17:04
financing, a series A. So when
17:09
we got to series A financing, we
17:09
were able to satisfy the debt
17:14
and pay it off ahead of time.
17:16  Christina Sjahli
So you bring
17:16
up a really great point over
17:19
here that I really want to dive
17:19
into. And I spoke to a lot of
17:24
female founders for my podcast,
17:24
and even outside my podcast. And
17:29
every time, not a lot of female
17:29
founders believe in getting debt
17:35
financing have the tendency,
17:35
either they're going to
17:38
bootstrap it, or they're going
17:38
to go with equity financing.
17:43
Now, I am curious, you mentioned
17:43
earlier, a year after you enter
17:49
into a debt financing, which I
17:49
assume is probably not a small
17:53
amount, it got to be in
17:53
millions, then you were able to
17:57
secure a series A. Can you share
17:57
a little bit in there, what
18:03
happened? What made your company
18:03
become more attractive to
18:08
investor?
18:09  Lesley Gouldie
I think what the
18:09
IP-backed financing enabled us
18:14
to do was to facilitate a growth
18:14
strategy and continue to develop
18:20
a pipeline and to develop the
18:20
business opportunities that
18:24
ultimately put us in a position
18:24
to make us more attractive to an
18:28
equity investor. So you need to
18:28
invest money to grow the
18:32
company, to expand your
18:32
footprint, to hire marketing and
18:36
sales professionals to grow the
18:36
business. So by securing the
18:39
additional financing, we were
18:39
able to execute on our growth
18:43
strategy. And by doing that, we
18:43
were able to attract a series A
18:48
investment, then secure the next
18:48
level of financing to help
18:53
facilitate the next stage of
18:53
growth.
18:55
I think every company is
18:55
different. In certain
18:59
circumstances, debt financing
18:59
can be preferable because you
19:02
don't dilute down your ownership
19:02
structure. But that other hand
19:07
you have to meet covenants and
19:07
have very robust reporting and
19:12
be very conscious of the fact
19:12
that you can't be off your
19:15
margin requirements. Equity
19:15
gives you a lot more flexibility
19:20
in many respects, depending upon
19:20
the nature of how that is
19:23
structured. But also you then
19:23
have to be prepared to give up a
19:26
percentage of your ownership for
19:26
that flexibility.
19:29
So it's a trade-off depending
19:29
upon where you are on the growth
19:33
curve and your comfort level
19:33
with debt and frankly, how much
19:38
money you need. So I think
19:38
there's a number of variables
19:42
that come into play if you want
19:42
to choose debt financing versus
19:46
equity. Some businesses, just
19:46
depending where they are on the
19:51
growth curve, you will just not
19:51
get their financing because
19:54
either you don't have enough
19:54
assets to provide the security
19:58
or you haven't generated enough
19:58
IP to warrant IP-backed
20:02
financing. So, essentially,
20:02
equity is the only solution if
20:06
you can't bootstrap it yourself.
20:08  Christina Sjahli
Without the
20:08
bridge financing, though, that
20:10
you receive from this IP-backed
20:10
financing, do you think you're
20:14
gonna get an attractive offer
20:14
from an equity investor?
20:18  Lesley Gouldie
It's hard to say
20:18
now in hindsight. What the
20:22
funding enabled us to do, and at
20:22
the same time, we were able to
20:25
refinance our traditional line
20:25
of credit, we went to another
20:30
bank, we got a more robust
20:30
offering, which also gave us
20:34
more access to cash. That, in
20:34
conjunction, with the IP-backed
20:39
financing from Quantius, enabled
20:39
us to facilitate and execute on
20:45
a growth strategy that made us a
20:45
lot more interesting.
20:48  Christina Sjahli
In terms of
20:48
people that are interested in
20:53
doing IP-backed financing, what
20:53
do you think they should have in
20:58
place before they even approach
20:58
a lender in the space?
21:02  Lesley Gouldie
So there's a
21:02
couple of things. I mean, if
21:05
you're going to have IP-backed
21:05
financing, you want to make sure
21:08
you have good, I would call it
21:08
patent hygiene. Make sure all of
21:12
the documentation is in order.
21:12
Make sure you've got good IP
21:15
lawyers that have filed
21:15
everything that needs to be
21:18
filed and paid all the
21:18
maintenance fees and done
21:22
everything that needs to be done
21:22
to maintain a robust and healthy
21:25
patent portfolio.
21:27
Then on the other side of it,
21:27
you still need to have in place
21:32
the business plan. You need to
21:32
have projections. You need to
21:34
have a cash flow. All of those
21:34
things a traditional or
21:38
conventional lender would
21:38
require. So just because you
21:41
have IP, it doesn't mitigate the
21:41
requirements for having all of
21:45
the standard requirements that
21:45
you would have to have in place
21:48
when you went and approached a
21:48
schedule a bank or some other
21:52
mezzanine debt provider. So it's
21:52
an extra layer of work that you
21:57
need to have in place that
21:57
you're going to have the IP,
21:59
because you just, you want to
21:59
have everything, all the I's
22:03
dotted and T's crossed on the
22:03
patent side before you approach
22:07
that sector of the market.
22:09  Christina Sjahli
Do you think
22:09
they need to do any valuation at
22:11
all? Should they hire a third
22:11
party?
22:13  Lesley Gouldie
I mean, we
22:13
thought we had very valuable IP,
22:17
just because of the novel
22:17
technology we have and we are
22:22
very unique. Frankly, I don't
22:22
think I would have invested in
22:27
evaluations that time. We
22:27
thought there was high value,
22:31
and I knew that we were going to
22:31
ultimately be limited or
22:35
constrained by the cash flow of
22:35
our business. Regardless, even
22:40
if the valuation had come back
22:40
at 10 times smaller than the
22:44
funding that was ultimately
22:44
provided, we wouldn't have been
22:47
able to finance the carrying
22:47
costs of that. So I always knew
22:51
that the limiting factor was
22:51
going to be our core business,
22:56
our pipeline, etcetera,
22:56
etcetera. So I think you just
22:59
have to be realistic. I'm not
22:59
sure it's worth having a
23:02
valuation, to be honest. But I
23:02
think it depends on the nature
23:05
of the business, how novel your
23:05
technology is, and how confident
23:09
you are of the market
23:09
opportunity, whether that's what
23:12
dictates the need for
23:12
third-party valuation or not.
23:15  Christina Sjahli
So earlier in
23:15
this interview, you said about
23:19
the lumpy cash flow. I know that
23:19
Thornhill Medical experienced
23:23
tremendous growth. Thornhill
23:23
Medical received ventilation
23:27
order from the Federal
23:27
Government of Canada. In a high
23:31
growth situation like this, plus
23:31
the type of feast and famine
23:36
cycle, financial planning
23:36
process is important. Can you
23:42
share what are the financial
23:42
planning process that you have
23:47
to ensure that revenue growth
23:47
can still increase profit and
23:50
cash?
23:51  Lesley Gouldie
When we secured
23:51
the order from the Canadian
23:54
government, our business grew
23:54
more than 10 times over the
23:59
previous period and we had to
23:59
have the capability to finance
24:03
the growth. The government
24:03
actually procured the MOVES
24:06
SLC device, which not only is a
24:06
ventilator, but it has the
24:09
oxygen generation capabilities
24:09
and patients monitoring intact.
24:13
So that's the integrated life
24:13
support system that's part of
24:17
our commercial portfolio.
24:18
So in order to finance that
24:18
exponential growth, we had to
24:24
secure a manufacturing partner
24:24
to support us, to not only
24:28
support us through the supply
24:28
chain constraints that were in
24:31
place; there was a huge global
24:31
supply chain challenge at that
24:35
point in time, with everybody
24:35
changing the same limited
24:39
components to manufacture
24:39
ventilators. But we were able to
24:43
negotiate a very favorable
24:43
agreement to support the
24:46
financing of the scale up
24:46
because there's nothing worse
24:50
than securing a large order and
24:50
then you can't finance that
24:53
because you don't have all of
24:53
the constructs in place to do
24:56
that. So we were able to solve
24:56
that through negotiating a very
25:00
favorable agreement.
25:01
And I think my advice on a go
25:01
forward basis to any company
25:07
undergoing hypergrowth is really
25:07
to have a line of sight on the
25:13
horizon and really understand
25:13
how quickly you think the growth
25:16
is going to happen, and have the
25:16
financial planning tools in
25:20
place to predict that, and
25:20
really understand your cash
25:24
flow. Because if you don't, you
25:24
could potentially get caught
25:28
flat-footed with a large order
25:28
and insufficient components to
25:32
manufacture those orders.
25:34
Really just having a very, very
25:34
acute understanding of cash flow
25:39
and the needs and literally
25:39
looking at those numbers every
25:42
single day was how we managed to
25:42
scale and finance that, and I
25:47
think any other company going
25:47
through hypergrowth, would need
25:50
to have solid financial support
25:50
in place to facilitate close
25:56
attention to the the cash flow
25:56
cycle with respect to supply
26:00
chain and then collection from
26:00
receivables. Because you can run
26:04
into problems very quickly, if
26:04
you don't understand that.
26:07
When we were at the height of
26:07
securing the order and executing
26:13
an order, we would be running
26:13
cash flow numbers daily or
26:18
sometimes a couple of times a
26:18
day, depending on how
26:20
circumstances are changing. So
26:20
we have a very detailed
26:23
integrated cash flow that we've
26:23
been using to manage the cash
26:27
because that's always been a
26:27
cornerstone of the business:
26:31
really understanding on a daily
26:31
basis what our cash situation
26:34
is, so that we can make really
26:34
good decisions.
26:37  Christina Sjahli
I know you're
26:37
a chartered accountant from
26:39
South Africa, and then you work
26:39
for PwC. How important is your
26:44
financial background to your
26:44
work as a CEO?
26:47  Lesley Gouldie
My role of a
26:47
CEO, a lot of times is raising
26:50
money, refinancing the company,
26:50
managing the financial
26:56
expectations of all of the
26:56
stakeholders and shareholders.
26:59
So having that financial
26:59
background, I think it just
27:04
makes that piece of the job that
27:04
much easier and a lot more
27:08
stress-free, because I'm very
27:08
confident in that aspect of my
27:13
role to just facilitate
27:13
excellent execution of the
27:17
financial responsibilities of
27:17
the CEO, having had so much
27:20
in-depth financial training and
27:20
experience.
27:23  Christina Sjahli
Now, in your
27:23
opinion, a startup, when should
27:26
they consider having a financial
27:26
partner like a CFO, even on a
27:31
part-time basis?
27:32  Lesley Gouldie
I think every
27:32
founder should have a financial
27:35
partner right from the
27:35
beginning. It doesn't have to be
27:39
extensive. But I think there's a
27:39
lot of decisions that have to be
27:43
made on structure and choices.
27:43
And I think if you do not get
27:48
good financial advice at
27:48
important inflection points, you
27:52
can really box yourself into a
27:52
corner and be locked into
27:56
choices that maybe in hindsight,
27:56
you didn't want to make. So
28:00
having a good partner, financial
28:00
partner doesn't have to be a
28:03
formal CFO. It could be an
28:03
advisor or somebody on the board
28:07
in the initial stages. But I
28:07
think having, if the founder of
28:11
the business doesn't have
28:11
personal financial experience, I
28:15
think it's imperative that they
28:15
have an advisor or a part-time
28:18
CFO working with them right from
28:18
the beginning, right throughout
28:23
their journey.
28:24  Christina Sjahli
You mentioned
28:24
choices. Can you elaborate a
28:27
little bit? What do you mean by
28:27
choices here?
28:30  Lesley Gouldie
Well, it could
28:30
be anything. It could be as
28:32
simple as like, if you enter
28:32
into a lease agreement. What are
28:35
the terms and conditions? Maybe
28:35
if you don't have a good
28:38
financial adviser, you sign up
28:38
for something and made
28:42
commitments that ultimately you
28:42
can't comply with. Or it could
28:46
be, whether it's equity or
28:46
whether it's debt. Or what kind
28:50
of arrangements do you put in
28:50
place for your employees? Or
28:54
what kind of contracts do you
28:54
negotiate with potential
28:57
customers or partners? So I
28:57
always would recommend to a
29:01
founder, regardless of whether
29:01
it's startup or the
29:04
commercialization or further
29:04
along, just to have a financial
29:08
partner just to double check
29:08
what you're doing, to bounce
29:11
your ideas, and just to make
29:11
sure that you're not doing
29:15
something that ultimately will
29:15
cause your business to be
29:20
devalued by making a decision
29:20
that could potentially have been
29:24
avoided.
29:25  Christina Sjahli
So last
29:25
question for you. Because
29:28
Thornhill Medical is scaling so
29:28
fast, and you are at the top of
29:33
the leadership team, you
29:33
mentioned earlier financial
29:37
knowledge or financial acumen is
29:37
one of the thing that can help
29:42
founder to scale strategically.
29:42
What would be your other advice
29:47
in addition to financial acumen
29:47
that you can share with my
29:51
audience?
29:52  Lesley Gouldie
If you're going
29:52
to scale fast, you obviously
29:55
want to be surrounded by a
29:55
really good team. And having
30:00
people that you can rely upon to
30:00
make good decisions quickly.
30:04
Because when you are scaling
30:04
fast, you have to execute
30:09
quickly. You have to execute
30:09
well. And you don't always have
30:13
a lot of time to do it. I'm just
30:13
speaking from my experience over
30:19
the last year. What I would say
30:19
a lot of perhaps conventional
30:23
analysis and decision making, we
30:23
don't necessarily always have
30:27
the time to do that. So
30:27
surrounding yourself by a team
30:30
you can trust, whose judgements
30:30
you can trust, and has
30:32
experience to make risk-based
30:32
decisions, I think, is
30:35
absolutely fundamental. If
30:35
you've got those good people,
30:39
and you've got a financial team
30:39
as well that's taking care of
30:43
the financing of the scale up in
30:43
the background, then you will be
30:47
able to do an excellent job.
30:49
So, for example, when we scaled
30:49
over the last year, I literally
30:55
doubled the size of my team
30:55
overnight, in two weeks. I went
31:01
through my Rolodex, and I needed
31:01
people in every single
31:04  functional area
engineering,
31:04
production, manufacturing, HR,
31:09
finance, sales and marketing,
31:09
and hired what I call the surge
31:13
team, I brought on close to 30
31:13
people. But these were all
31:17
people I worked with previously,
31:17
people whose judgment I trusted
31:21
and who I could trust to work
31:21
independently in a very unusual
31:26
set of circumstances. And then,
31:26
once things settled down, I was
31:30
able to pay that surge team back
31:30
and replace those individuals
31:35
with full-time people. So the
31:35
people, I cannot stress how
31:38
important the people are.
31:40  Christina Sjahli
So you brought
31:40
in 30 new people on a full-time
31:45
basis?
31:45  Lesley Gouldie
Yeah, they were
31:45
working full-time. They were
31:48
full-time consultants.
31:49  Christina Sjahli
Okay.
31:50  Lesley Gouldie
They were
31:50
full-time that came in to
31:52
support us as consultants for as
31:52
long as we needed them.
31:56  Christina Sjahli
Lesley, thank
31:56
you so much for being here.
31:59
And that's bring us to the end
31:59
of another show. Thank you so
32:02
much for listening to another
32:02
episode of Her CEO Journey, the
32:07
business finance podcast for
32:07
women entrepreneurs. If you want
32:11
to create a proactive financial
32:11
plan and process for your
32:15
business so you are ready to
32:15
weather the financial storm over
32:19
the next few months, let's chat
32:19
and see what's possible for you.
32:23
Book in a time to speak with me
32:23
at
32:25
christinasjahli.com/lets-chat.