EY Entrepreneur of Year Award winners: Inspiring, innovating and paying it forward

There is an interesting dichotomy that has existed in Silicon Valley for decades. Entrepreneurs have to closely guard their IP, the tremendous asset on which their business is run, while at the same time they have a compelling need to evangelize their business and share their vision.

Throughout the Valley and Northern California, there is a concentrated effort to share in each other’s knowledge and wisdom, from mentors to colleagues and back around again. Pass on what we’ve learned so we can all improve and innovate, the thinking goes.

At the 29th annual EY Entrepreneur of the Year® 2015 Northern California Awards gala on June 11, paying it forward was a key theme. The 9 out of 25 finalists chosen as regional winners shared what they’ve learned, and the spectators (approximately 480 people, including a few of us from RoseRyan) were there at the Fairmont Hotel in San Francisco to soak it all in.

 

 

Stan and his wife, Marjo, and VP Maureen Ryan

Stan, his wife, Marjo, and VP Maureen Ryan

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Director Chris Vane and CEO Kathy Ryan

 

A good mix of industries, including five technology areas, were represented with the final nine award recipients, who will go on to compete at the national level. There was also an award for the best Young Entrepreneur (Doesha Monay Wright, from San Jose), as part of the program’s efforts to recognize and support the development of entrepreneurship with young people. Here were the winners for Northern California:

  • Cloud Services: Keith J. Krach, chairman and CEO, DocuSign
  • Emerging: Dheeraj Pandey, president and CEO, Nutanix
  • Health and Life Sciences: Jean-Jacques Bienaimé, chairman and CEO, BioMarin Pharmaceutical
  • Networking: Jayshree Ullal, president and CEO, and Andy Bechtolsheim, founder, chief development officer and chairman, Arista Networks
  • Retail and Consumer Products: John Foraker, CEO, Annie’s
  • Services: Kenneth Lin, CEO and founder, Credit Karma
  • Software: Marcus Ryu, chief executive, president and co-founder, Guidewire Software
  • Technology: Paul Nahi, president and CEO, Enphase Energy

In their acceptance speeches, these winners touched upon their goals for changing lives, building sustainable value and giving back to the community. Also, they commented on the art of building great teams, listening to the customer and keeping “innovation” as a core value. It’s a big part of the EY award as the judges—who always do an excellent job—give community involvement and company culture as much weight as financial performance.

Another theme was that entrepreneurs work so hard because they know that what they do makes a difference. This was a universal theme regardless of industry or focus. We’ve all seen it firsthand in the effects this small group has on this region. Consider how much the 25 finalists have achieved in total:

  • 13,290 jobs created
  • $3.8 billion in sales revenue
  • 4 unicorns (startups exceeding $1B in valuation)

Any of those areas could be the subject of a lengthy blog, but what interests me most were the discussion around knowledge sharing, one of the core values in the Valley and Northern California as a whole.

Keith Krach of DocuSign had some fascinating comments during his acceptance speech. Because of my longtime involvement with the EY program (15 years and counting!), I had the pleasure of interviewing Keith many years ago, when he was the CEO of Ariba and a EY finalist that year as well. Keith is a very dynamic individual who radiates a high level of enthusiasm and energy no matter whether he’s in a one-on-one meeting or presenting in front of a large audience. His energy is simply contagious.

He thanked many people, with a special emphasis on his wife, his long-term administrative assistant and the entire DocuSign team. And he gave a special thanks to Cisco CEO John Chambers, who acted as a mentor to Keith on a monthly basis for two years. The only thing that John asked from Keith was to do the same for someone else. Keith remarked that this “paying forward” philosophy is what makes Silicon Valley a unique and special place.

At the gala, where inspiration was boomeranging off the walls and lessons learned were shared freely, that theory certainly rang true.

Stan Fels is a director at RoseRyan, who joined the finance and accounting firm in 2006. In addition to helping the finance dream team keep their skills sharp and stay true to RoseRyan’s proven processes, he matches gurus to clients in the high tech and life sciences sectors. 

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Women at the top in accounting: RoseRyan ranks high on national equity leadership list

We’ve always thought that both men and women are fully capable of having positions of power and authority. Let the talent, skills and merit of any individual shine so they can rise to the top.

At this time in our firm’s history, we have three extremely talented executives at the helm here, all women: Kathy Ryan, founder and CEO, and vice presidents Pat Voll and Maureen Ryan. And it is being noticed.

Each year the Accounting & Financial Women’s Alliance (AFWA) and American Women’s Society of CPAs (AWSCPA) recognize firms with high proportions of women partners and principals in the accounting profession. Just 14 firms made their Accounting MOVE Project Equity Leadership list this year—that’s the number of participating firms that have at least 50 employees and a minimum of 32% female partners and principals. This year we rank at the top of the list, since our executive team is composed of all women at this time.

Maureen Ryan, Pat Voll and Kathy Ryan
What’s really nice about the MOVE Project, now in its sixth year, is the ongoing effort to encourage the advancement of women in the accounting profession. Unlike us, many accounting firms still have a small percentage of women in executive positions (just 19%, according to the MOVE Project, even though women represent 51% of public accounting firm employees). Too bad, as there is a lot of great talent out there that may get overlooked.

Like others in our industry and talent-strapped Silicon Valley, we are always competing for the very best employees we can get, regardless of gender, and trying to make sure the ones we have love our firm so much that they stick around. While they’re here, we give them the tools they need to expand their talents and advance their careers.

Ever since she started the firm in 1993, Kathy Ryan has set out to gather an incredibly capable and diverse team of talented finance aces to provide outstanding work every time. And thus the “dream team” was born—senior consultants, both men and women, who are steeped in both public accounting and corporate finance experience, who fit in easily with various settings, and who help clients at any stage of the game.

Whether it is to help companies interpret the latest accounting rules, whip their corporate governance into shape or to guide them through transitions and transactions, the best consultant for the role is based on experience and skills, not on gender. We love to supply our clients with the right talent at the right time.

What drives our diverse team? Passion and enthusiasm for the job, for sure. But there’s also a united set of values behind it all. Our four key values are to be trustworthy, to excel at everything, to be good advocates for our clients and employees, and to be a great member of the team. We think these are pretty good values to live by. By embracing these values honestly and deeply, we are carving the best path forward to help all our men and women advance and find their spot in the sun.

Read more about the MOVE project and the background of RoseRyan’s founding in our press release.

Does our firm sound like a good fit for you? We’re looking for a few good salaried consultants, who will get the independence of consulting combined with a trusty paycheck, benefits package and professional support. See our open positions here.

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Putting the E in “revenue”: A big challenge of the new rev rec standard

Accounting professionals who have been involved with revenue for many years can recite the four criteria for revenue recognition as quickly as they can their children’s names—it just becomes second nature. For people less familiar with the process, I have used a mnemonic—it’s like learning your ABC’s but without the AB—you can sort the criteria into Collection, Delivery, Evidence, and Fixed Price (C, D, E, F). Gimmicky, but it works.

Well, we’re all going to need new hints for taking on the new revenue recognition standard when it goes into effect. The adoption date may be a ways off with FASB’s recently announced one-year delay, but finance teams still need to get their heads around the changes. Implementation challenges are ahead, and contingent revenue related to bonuses and penalties will be particularly challenging for some organizations.

The new big “E”: Estimates
While many of the same concepts will still exist, the framework of the standard moves to a five-step process rather than relying on criteria. So while collectability, delivery, evidence of the arrangement, and even some aspects of fixed or determinable pricing still come into play, that last aspect is where I see the biggest challenges.

If I had to create a new term for what we currently view as the “fixed or determinable” part of rev rec, I would call it “fixed or estimable” for the new standard. It requires, in almost all circumstances, entities to estimate the amount of contract consideration that they believe they are entitled to (assuming that recording such revenue would not likely result in a significant reversal of revenue in the future). So, there will be more judgment involved and this will require a change in practice.

Much has been written about how the new standard will require organizations to not only make many more estimates but have systems to support those estimates, provide more disclosures in their filings, and have controls to ensure that the system that supports the estimates is controlled—this isn’t about someone just throwing a dart at a board! This is why now is the time—while we all have it—to take a close look at your systems and processes and decide whether they’ll need to be modified to make room for the flexibility that’s needed when you’re dealing with estimates.

You say tomatO, I say tomAto: A bonus and penalty can be the same thing!
How is this different than current practice? Consider this pretty straightforward example of how a contract with a bonus (or penalty) provision would be treated today versus the new standard. Keep in mind this deal (from an economic perspective) can be structured using either a bonus or a penalty.

Assume Customer A purchased a single hardware element that qualified for separate accounting (i.e., it is not a multi-element arrangement). The vendor structures the deal at a fixed price of $10K for Customer A with the understanding if the product meets certain performance parameters after 60 days (i.e., uptime), the vendor gets a bonus of $2K. Then consider a deal that same vendor makes for Customer B: It charges the organization $12K with the understanding it would have to give back $2K if those same parameters are not met.

Current U.S. GAAP treats both these contracts the same—it is a classic “substance over form” example and the reality is that both customers negotiated the same deal. But there’s that $2K unknown; since it does not meet the fixed or determinable criterion, the vendor cannot count the $2K contingent amount as revenue until that 60-day contingency passes (at which point both the vendor and the customer will know if the uptime spec was met). It’s the same scenario even if the vendor can show that 100% of the time it has achieved the specs it’s promising.

Now, fast-forward to the new standard—this contingent revenue will have to be estimated and recorded up-front. The result is binary—either the vendor records the $2K payment or not. This time, if the vendor has a strong history of meeting its performance specs, it would book the $2K. Or it could estimate a weighted-average probability amount if the amount it expects to receive falls within a range of possible outcomes. This would be more appropriate if the contract bonus depended on a percentage of spec achieved (i.e., a different example).

The bottom line
In almost all companies, a purchase order is a big factor for determining the ceiling for revenue recognition. Using our super-simple example above (if only all rev rec determinations were that easy!), the vendor may receive a PO of $10K from Customer A but $12K from Customer B. But let’s say Customer A ends up following up with a second PO for $2K when the performance bonus was earned—just as the vendor predicted. Under the new rule, the vendor would have already recorded $12K for that contract even though the PO said something else—this discrepancy could create challenges for many companies from a systems perspective.

Also important to understand is that the first step of the new standard—determining the contract—contains the old collectability criterion in it. Put another way, you can’t have a contract if you don’t have a contractual right to payment with a credit-worthy customer. In our example, the contract value is “potentially” $12K regardless of the amount and timing of POs received.

Ultimately, companies need to have a process in place and should look at how their ERP system may handle situations like this. Manual, off-line, Excel-based tracking may seem like a reasonable solution, but in my experience, it introduces too many risks for errors and inefficiencies.

In addition to the accounting considerations, the new standard could let sales organizations give customers more contracting options. Often, the finance or accounting organization has had to “hold back” certain deal structures to ensure revenue rules were met. Given the focus on the big “E”—estimates—in the new standard, many organizations will find that they can create contracts with more value for their customers and alter contractual language, win more business and, in turn, increase profits—although that is just my estimate!

Looking for more insight on the new revenue recognition standard? RoseRyan and FinancialForce.com teamed up for a new report that gives companies a starting point for planning for the changes, explaining who should be involved, what areas of the company should be impacted and how to move forward. Click here to download the report: Quick guide to revenue recognition.

John Cook is a member of the RoseRyan dream team. He is a CPA with over 25 years of experience working in finance and accounting organizations in Silicon Valley with a focus on operational finance and technical accounting.

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Hot deals, talent wars and ‘winning’ entrepreneurs: Just another day in Menlo Park

Optimism in the air—that was the first thing you would have noticed at an EY Entrepreneur of the Year® reception at the Rosewood Sand Hill last week.

As I walked through the hotel’s reception area, I couldn’t miss the well parked Lamborghinis highlighted by a metallic blue one that simply screamed “IPO success.” Just to the side of the reception area, the Rosewood bar was packed with wall-to-wall patrons relishing in the latest business deals.

The real show was going on in the Rosewood’s lower conference room, where a wonderful reception was held for the 24 finalists of the EY Entrepreneur of the Year Awards, who were honored for making the grade. Truthfully they were all winners at this event, which RoseRyan proudly sponsored again this year. However, the final 8 winners will not be announced until June 11 at the lavish event at The Fairmont in San Francisco. (Check out the 24 finalists for Northern California here: www.ey.com/us/eoy/norcal.)

Conversations in Menlo Park that night with the entrepreneurs and their teams ranged from valuations of funding rounds to the mentality of “take the money now” when it is available from growth-starved investors. These entrepreneurs’ most immediate worry? The talent war. They seem most concerned with the ability to hire top-notch employees with just a small pool of candidates in front of them.

Looking further out, they are optimistic about the future, but they also expressed a sense of trepidation of what is going to happen when interest rates rise and the cost of commercial and residential real estate continues to be expensive. There is a general feeling that the current influx of late-stage funding rounds may decline once any indication of a slowdown in the general economy occurs.

But any down talk was quashed by the overriding sense of optimism. It was wonderful to see a diverse group of companies among the finalists. Although cloud software and mobile technology seem to gather all of the headlines these days, these finalists represent a broad range of categories: finance, beverage, food, biotech, consumer brands, cleantech and healthcare. Of course, application developers, wireless and cloud companies are well represented too.

Overall, the EY finalists are a fine showing for Northern California as they demonstrate the versatility and entrepreneurial spirit that are alive and well here.

Chris Vane is a director at RoseRyan, where he leads the development of the finance and accounting firm’s cleantech and high tech practices. He can be reached at [email protected] or call him at 510.456.3056 x169.

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