Welcome back to Office of the Venture CFO, our monthly series where we talk to the people actually running finance at top venture firms. Last edition, we sat down with Healy Jones on how a mark actually gets made at Neo. This time, Mike Witkowski is back for a second run.
Mike is CFO at Eniac Ventures, and he sat down with us earlier this year to walk through how he engineered liquidity via a strip sale for LPs at a prior firm (a must-read for all fund managers). He has now run finance across three venture firms of very different sizes and cultures, which is why we wanted him back for three topics the series hasn’t touched at all: how to pick and manage service providers, his approach to investment committee meetings, and what the CFO needs to contribute to an AGM.
The following content is for informational purposes only and should not be construed as personal legal, tax, investment, or financial advice. The transcript below has been edited for length and clarity.
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Your Service Providers Are an Extension of the Fund
Venture5: You’ve now run finance at three venture firms. The CFO usually owns the service provider relationships day to day, the bank, the fund admin, the tax and legal teams, and often the job of finding and vetting new ones. Beyond asking peers who they use, what are your best practices?
Mike Witkowski: The biggest thing I always think about is that these guys are an extension of the team. Not my team, an extension of the fund. You have to pick people you’re comfortable representing you outside of the firm, to your LPs, to your founders, to your other vendors. Essentially, they’re part of the firm.
“The biggest thing I always think about is that these guys are an extension of the team. Not my team, an extension of the fund.”
There are three other things I pay attention to. First is who is actually doing the work. When you start chatting, when you’re getting the letter of intent or the proposal, you’re talking with partners, with people who are really high up. Those are not the guys you’re going to be working with. You’re going to be working with frontline employees who will be doing the work, responding to LP requests, and working with your investment portfolios. You need to be sure you’re comfortable with those people, because ultimately those people are make-or-break when it comes to service providers.
Second, work everything backwards. Put your deliverables and the outcome on the calendar and work backwards from there. That way you can keep track of everything that’s supposed to happen, and you have a real-time feedback loop on whether you’re on time or not.
Third, and this is important because a lot of people are not comfortable doing it, give feedback in real time. Fast, polite, but in real time. You don’t want to be unhappy and churn your providers because you’re afraid to give feedback. Providers will actually appreciate it if it’s done right, if it’s done politely, and if it’s constructive and not just complaining. Those are the three things that, to me, make the relationship successful.
“You don’t want to be unhappy and churn your providers because you’re afraid to give feedback.”
Venture5: Does the extension of the team idea go as far as having providers sitting in Slack with you?
Mike Witkowski: It’s mostly email, sometimes Slack, but that’s the depth of the relationship typically. Just to give you an example, we had a Zoom with our GPs and a legal team, and the legal team did not show up on camera while our GPs did. Small thing, but that builds trust. Why are you not here? Be present. Even that type of small feedback is valuable to service providers.
How you respond to LP requests is another one. Is it ignoring it, or is it acknowledging it? You have to acknowledge it. You cannot let it sit for a day or two. At the very least, a good service provider will acknowledge it. That’s the level of relationship and the level of interaction I’m looking at.
Venture5: When they’re interacting with your LPs directly, are they copying you on everything?
Mike Witkowski: Yes. I cannot allow myself to not be involved in what’s happening with LPs. At the very least, I have to have a vague idea. This LP wanted this; it’s been handled. That being said, I don’t need to know the minutiae, but I would like to understand what the sticking points are.
When (Not) to Rely on Your Fund Admin
Venture5: If we drill down into the specific categories, banks, fund admin, tax, legal, are there any where there’s nuance beyond the general principles you just laid out?
Mike Witkowski: Fund admin is probably the area where I spend a lot of my time, if not the most. The biggest trick of the trade there is that if you’re not sure of something, don’t rely on fund admin. Look to your auditors, because ultimately that’s the test of whether what you’re doing is right or not.
“If you’re not sure of something, don’t rely on fund admin. Look to your auditors, because ultimately that’s the test of whether what you’re doing is right or not.”
Just to give an example, say a fund ends up slightly over-distributed on the GP side. You don’t want to wait until the end of the fund to bring that over-distribution back to zero. You’d like to do it proactively. The question is: how do you distribute so that you bring over distributed and potential clawback amount down and at the same time maintain compliance with the LPA? That’s not a fund admin question. That’s an auditor question and a legal question. What does the LPA allow us to do, number one? And number two, does the auditor agree with that?
Venture5: And legal.
Mike Witkowski: Legal can get really expensive if you don’t manage it well. Don’t ask them open-ended questions. If you go to your legal team, ask a very specific question that you want an answer to, and only if you’re not certain about the context in which you’re asking, ask for a little more.
The question is not “how can we distribute X from fund Y.” The question is: “Can we use distributions, or can we withhold distributions, to offset unpaid capital calls?” – an example of a question I would ask. There’s a difference between “how” we distribute and “can we do this” with the distribution.
How to Bring Something to the Partners
Venture5: Let’s shift to the Monday meeting, when the investment committee is together talking about specific opportunities. How do you personally prep for those discussions, and what do you bring in to inform the decision-making?
Mike Witkowski: It really depends on the firm. I’ve had the privilege of working at firms that were large and corporate-like, and at firms that were fairly informal and small. How you prepare depends on that.
For the larger firm with a more formalized reporting structure, you have to preview what you’re going to be discussing during the meeting. The meeting is too formal, too big, too busy to start discussing something from scratch. In a smaller firm, there’s a more collegiate atmosphere and easier information flow, and that allows certain topics to be brought immediately into a meeting.
Having said that, you do not want to surprise your partners, your GPs, when you bring something in. We have our meeting next week. This morning I sent a quick note to my GPs telling them how I view our current fund deployment and what the tradeoffs and offsets are between going one way or another, so that we can have an informed discussion during our management team meeting. You want to have a topic previewed before you bring it to their attention. But at the same time, you don’t want to run a theater of going to each individual GP, talking with them, and then doing it again at the meeting. It’s balancing what’s required against what’s most efficient.
“You don’t want to run a theater of going to each individual GP, talking with them, and then doing it again at the meeting. So it’s balancing it between what’s required and what’s most efficient.”
Venture5: For that pre-meeting communication, is it a detailed email, a doc, a long Slack message? What works?
Mike Witkowski: It depends on the purpose. If it’s just an FYI, we have this issue here, this is what’s going to happen if we do this versus if we do that, Slack is perfect. You outline scenario one and scenario two: this is what it’s going to look like. No decision is immediate, but keep these two scenarios in mind as we continue to deploy the fund because we’ll be calibrating in real time over the next few months.
When a decision needs to be made, that’s either a detailed email or a document that’s shared and requires their input. Hopefully that goes out a good few days before the meeting so GPs have a chance to read it, absorb it, and digest the proper context to make those decisions.
Venture5: Deployment pacing is one recent example. What are the other themes that come up that you have to prep for?
Mike Witkowski: There are two, and they’re typically fairly difficult for a CFO to handle well, because there are a lot of pieces and people to manage. Those two are reserve management and fund performance. They require GP input, they require their knowledge and their sharing of information, and they aren’t the easiest topics to address. But they have to be done, and they have to be done periodically. So getting into a cadence, number one.
Number two, getting into a habit of sharing materials that GPs are comfortable with. If you share a spreadsheet with 20 different worksheets or what have you, nobody’s going to look at it. Make it simple, make it easy, use drop-downs if possible, yes or no if you can. It should be easy for them to give you input or decide.
Venture5: When we spoke with Dan Rochkind at Lerer Hippeau, he made a similar point coming out of his journalism background. What’s the headline, and here are the three key points. A busy GP is not going to read a 10-page document or a 20-sheet spreadsheet.
Mike Witkowski: Exactly. You will lose them before you even get into the room.
Venture5: And that makes the CFO less effective, because you’re not able to frame things in a way that gets you decisions so you can move on to the next thing.
Mike Witkowski: Precisely. And there’s one other thing that CFOs may or may not think about. At an investment meeting, you’re not required to answer the first-order questions, whether this investment makes sense or not, but you’re expected to answer the second-order questions. Which fund does the investment go to? Is it QSBS or not? Does it blow the concentration limit, yes or no? Things like that.
“You’re not required to answer the first-order questions, whether this investment makes sense or not, but you’re expected to answer the second-order questions.”
Venture5: And a lot of that ties back to the LPA, which in some cases runs 70 or 80 pages that you’re filtering in real time.
Mike Witkowski: Correct. And that’s why having a good relationship with your service providers is essential. You can use them to help you quickly navigate where to go and which questions to ask..
The CFO’s Job at the AGM
Venture5: I’ve been to some AGMs. You show up, there’s a nice meal, a good show, some slides. But there’s a lot that goes into making an AGM productive for the firm and for LP relations. Where does the fund CFO fit into that process?
Mike Witkowski: My view is that as CFO, I do not run the AGM. What I do is make sure that the partners run the AGM efficiently. They’ve built their LP relationships over the years. My job is to make sure the information they give to the LPs is true and accurate, and that everything ties to fund performance or whatever it’s supposed to tie to. The worst impression to make on your LPs is if something doesn’t jive and you have mistakes in your presentation.
Second, when you think about an AGM, you’re telling a story, so you’ve got to start with what story you want to tell. Same goes with fundraising. If you’re fresh at the firm, you probably don’t have that understanding quite yet, or you may miss certain nuances. But for someone who has been with the firm more than a few years and through more than one or two AGMs, you can easily manage that process with the GPs.
Venture5: What’s the timing? Setting aside the logistics of where you host it, how far ahead do you start getting organized on the presentations, the data, the story?
Mike Witkowski: A quarter before is a good time to start having these conversations and putting it on the GPs’ calendars that they have to start thinking about narrative. Then call it two months out, you start building an outline of the deck and an outline of the narrative you want to present.
As soon as you possibly can, invite your speakers, and that’s way before that quarter timeline. You want to hit them as early as possible and secure them as early as possible, because LPs know your numbers from your financials. What they want to hear is how your portfolio is doing, what’s so special about the founders you invested in, what’s special about the sector you’re investing in. That’s really what makes for a good AGM. Not the deck and the numbers. Those have to be flawless, but that’s not what makes an AGM successful.
“AGMs are not about numbers. AGMs are about the story.”
Venture5: How do you prep efficiently for it? You’re deep in the numbers all year. Are you repackaging analysis you’ve already done, or is there a lot of ad hoc work that comes up?
Mike Witkowski: It’s a mix. You’re never going to have everything done by the book. There will always be some ad hoc stuff that comes out of the woodwork that you have to be prepared to answer. But the biggest thing you have to focus on is consistency of the message across the GPs. However you slice and dice the info, however the presentation goes, consistency of the message is key. You don’t want to have one GP saying one thing, another one saying another thing, and the numbers telling a different story. That piece is probably the most important one to keep in mind as you build your narrative.
“You don’t want to have one GP saying one thing, another one saying another thing, and the numbers telling a different story.”
ABOUT MIKE WITKOWSKI
Mike Witkowski is CFO at Eniac Ventures, an early-stage firm backing founders from day one. Before Eniac, he served as CFO at Primary Venture Partners, where he led the firm’s financial operations and structured one of the more innovative secondary liquidity transactions in recent venture history. Mike brings a practitioner’s lens to fund finance, focused on tax efficiency, operational structure, and building finance functions that scale with the firm.
