Finance Department Upgrade: CFO Rebeca Sanchez Sarmiento

CFO Rebeca Sanchez Sarmiento left her New York stock research roots for Los Angeles nearly a decade ago. Since then, she has held various corporate strategy and finance roles for private equity firms, landing her first CFO position at ATTOM Data Solutions in January 2018.

Sanchez Sarmiento arrives on a year as the first chief financial officer of the R&D scientific software company Dotmatics. Dotmatics is a portfolio company of Insight Partners, which has invested over $100 million, with the last funding round taking place in the first half of 2021. Through a series of M&A deals, Dotmatics combines applications from critical R&D to a unified end-to-end solution. integrated data platform to enable collaboration, workflow automation and analysis in biology, chemistry, formulations and new processing methods. It’s technology “built by scientists, for scientists,” said Sanchez Sarmiento.

The University of Chicago MBA is tasked with bringing accounting, financial reporting, and governance up to standard required for a publicly traded company. It is also hiring an FP&A team to add to the approximately 35 members of finance and accounting spread across the US, UK and New Zealand – a 24/7 organization working almost entirely at home,” Sarmiento said.

In late June, I spoke to Sanchez Sarmiento about the company’s financial goals, building the finance department, and its role in M&A due diligence.

This interview has been edited for brevity and clarity.

VINCENT RIAN: What are the goals of the Dotmatics finance department?

Rebeca Sanchez Sarmiento: Creating this end-to-end vertical platform introduced a whole new set of challenges. This allowed us to start thinking about the next iterations of the organization from a financial perspective. I don’t think public company opportunities were necessarily in the near future. The changes to the business model and the economy have allowed us to start thinking about it.

I have been focused on transforming my own team over the past six to nine months. I invested in the team, introduced more technical and domain expertise in finance and accounting, and did a lot of work around systems integration. And ensure we have the proper governance, processes and procedures [for being a public company].

Can you give us some specific examples of this transformation?

Sanchez Sarmiento: We have experienced significant growth through acquisitions since 2017, but 5 of the 10 acquisitions took place in the last year. When I started last September, we had six accounting systems. We ultimately integrate all of these systems and create the framework for our future reporting needs. We transfer all of this to a single NetSuite application.

Then the goal is to layer additional tools and technologies within this set of solutions that will accelerate our [monthly close] and present [improved] workflow within a globally distributed team. In addition, [it will] improve segregation of duties and checks and balances between management team and support staff.

We’ve been through the process of reconfiguring how we want data to flow and what data should look like. We have also reviewed our accounting policies to ensure standardization and harmonization in all acquired business units. There was a lot of configuration, creating requirements and designing the future state.

The rest is about evolving the organization to ensure that we don’t just meet today’s needs, but eventually pursue M&A ambitions. We want to create processes and structure to integrate new acquisitions more seamlessly.

What characteristics do you look for in candidates for an FP&A job?

Sanchez Sarmiento: Intellectual curiosity is quite material for me. Persistence, because you have to start very big and keep peeling the layers of the onion to get to the root cause. And more and more technological capabilities are needed – perhaps even having some programming experience to mine data and datasets and manipulate them quickly and efficiently. The fourth is definitely communication skills. They must be able to collaborate, work across the organization, ask clear and concise questions, then turn around and translate the results into [layman’s terms].

What are the company’s financial goals for the next year?

Sanchez Sarmiento: Our goal is to continue to do what we do successfully, which is growing at around 30% per year on a pro forma organic basis, and to continue to ensure that we are committed to generating cash flow. …We are currently operating at over 120% net retention [the percentage of recurring revenue retained from existing customers over a specific period]. That means we deliver to our customers, build loyalty, cross-sell and grow [their business with us.]

We continue to be a “rule of 70” SaaS company, which means 30% growth and the balance of that [40%] comes from the generation of free cash flow.

My team and I are very focused on determining what we believe to be the future prospects of these acquisitions to ensure long-term value creation and targeted return on investment, as well as stress testing the hypotheses.

We are very fortunate to have completed two initial rounds of funding early on and to be able to fund our growth internally. Particularly in this [economic] context of rising interest rates and rising capital costs, this is very important. We constantly ensure that we are operating efficiently, so that we can invest in R&D and scale effectively, and with the balance invest in future mergers and acquisitions.

What role do you play or will you play in M&A operations?

Sanchez Sarmiento: We have a dedicated team that prospect M&A prospects. Today, we review over 1,200 R&D software applications and try to hit at least 30 or so per month to keep that pipeline warm. And our CEO, Thomas Swalla, is primarily focused on M&A and helping to generate that insight. [toward a deal]. I see my role as a bit of a check and balance. I am here in part to ensure that we use our available capital effectively and efficiently.

I will often debate and insist on the assessments that we apply to these acquisitions. And certainly my team and I are very focused on deriving what we think are the future prospects of these acquisitions to ensure long-term value creation and targeted return on investment, as well as testing resistance of assumptions.

The other aspect of mergers and acquisitions is integration. We are very focused on data integration as opposed to technology integration, which is a key differentiator that allows us greater success in mergers and acquisitions. When they merge, most software vendors have to rethink the technology itself. We create a data layer that connects the scientist’s workflow process. This is where our value creation comes from, ensuring that the data factory supports all these applications and is very connected to scientific research. This allows us to act quickly and create a better end-user experience.

Our M&A playbook [is not about] cost synergies. Instead, we acquire intellectual capacities and the technology that supports them. Thus, we cherish the R&D we acquire and try to find every possible way to continue investing in it.

Disclaimer: Oracle NetSuite is a sponsor of CFO but had no influence on the content of this interview.