Biggest Challenges of Being a CFO at Compass Diversified
Ryan, Compass Diversified's CFO, identifies securing "equity capital" as the biggest challenge, a difficulty stemming from the company's status as a "small cap, somewhat unknown business" in a risk-averse market where institutional investors are hesitant to allocate funds to smaller companies due to factors such as potential recession and geopolitical instability. This necessitates Ryan dedicating significant time to convincing investors of Compass Diversified's potential.
Executive/Leadership, Overcoming Challenges, Industry Realities, Workplace Challenges, Raising Capital
Advizer Information
Name
Job Title
Company
Undergrad
Grad Programs
Majors
Industries
Job Functions
Traits
Ryan Faulkingham
CFO
Compass Diversified
Lehigh
Fordham MBA
Accounting
Finance (Banking, Fintech, Investing)
Finance
Video Highlights
1. The biggest challenge in Ryan's role as CFO is raising equity capital, which is harder for smaller, lesser-known companies due to perceived higher risk.
2. The availability of debt capital is less of an issue due to Compass Diversified's unique capital structure.
3. Current market conditions, such as the strong performance of a few large tech companies overshadowing others and investor concerns about recession, rising interest rates, elections, and geopolitical risks, make raising equity capital even more challenging for smaller companies like Compass Diversified
Transcript
What is your biggest challenge in your current role?
Our biggest challenge is getting capital, specifically equity capital, not debt capital. This is generally a function of being a unique, somewhat unknown, small-cap business.
It's harder to raise equity capital because there's theoretically more risk involved. Debt capital, on the other hand, is pretty plentiful for us due to our unique capital structure, making debt pretty easy to secure.
So, it really comes down to raising equity, and that's part of what I spend my time doing: trying to convince investors to invest in us. That's certainly the biggest challenge.
Sometimes it's market-driven. Right now, the stock market is going up, and the S&P 500 is hitting all-time highs, but it's really due to about eight companies. The S&P 500 is made up of 500 companies, but really, eight companies are driving its entire performance.
These are huge tech businesses like Nvidia, Tesla, and Meta. Yet, in theory, 492 other companies aren't performing well. This is because nobody is allocating money to smaller companies, as they see risk in the system.
We see risk with a potential recession, with interest rates, and with the upcoming election. We also see risk with geopolitical wars. Institutional investors don't want to put equity capital to work in small businesses because they treat them as riskier. That's our challenge.
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