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CF0to1: Ajay Vashee, General Partner at IVP

Ajay tells his journey from Morgan Stanley to NEA to Dropbox and finally to one of the best jobs in Venture Capital in this month's CF0to1!

Ajay Vashee, General Partner at IVP, is July's CF0to1

What’s the best path to the top finance job at a unicorn? And how does a first-time CFO who guides a company to an $8.2 billion IPO get his start? For Ajay Vashee, General Partner at IVP, who spent 8 years at Dropbox, it started on Wall Street. “I actually had a really good experience in investment banking,” Ajay tells us of his time at Morgan Stanley with a smile. “Most people don’t.”

But for Ajay, who parlayed an internship at Morgan Stanley while a student at Columbia into an analyst role at the bank, the experience was illuminating. The training programs allowed him exposure to Excel, three-statement modeling, and IPOs — all of which would inform the rest of his career. “It was a great way to learn the nuts and bolts of finance,” he says. And another perk? His work on cleantech financing brought him to the West Coast and eventually led him to the world of software.

Ajay went from Morgan Stanley to NEA. He spent time studying Series A startups at a fascinating moment for tech: 2008-2012. There were some misses — “we invested in Fisker over Tesla, which was not a good decision in retrospect” — but also some big wins. “We were one of the earliest investors in Tableau,’” he remembers. “Eventually, Salesforce bought the company for $15.7 billion.”

At the stage of company that Ajay was investing in with NEA, the real strategy is to “bet on the team and the potential,” and one company stood out from the rest: Dropbox. They did their diligence on the firm and tried to invest, but Dropbox didn’t need money at the time. One of his colleagues, Sujay Jaswa, was so taken with Dropbox that when they offered him a job, he decided to leave NEA for the growing startup.

StratFin at Dropbox

For the next year, Sujay and Dropbox cofounders Drew Houston and Arash Ferdowsi recruited Ajay. They finally convinced him. “The pitch which resonated with me was, ‘If you’re convinced that you want to build a career as an investor, a lot of the best investors are folks who were operators themselves,” Ajay says. “‘They understand the businesses and companies they’re looking at better. They’re able to empathize with the founders and entrepreneurs that they fund. They are able to genuinely help the companies they invest in on their journey to an IPO and beyond. And you’re just going to have a better nose for the business.’”   

Ajay arrived and felt like he had “this unfair advantage” because of his time working as a VC. “Dropbox totally was in the early innings, but on that trajectory at the time,” Ajay says. “As a VC, you know how every company is doing and I knew that Dropbox just had something special going on.”

He’d been observing board meetings, so understood what would eventually differentiate Dropbox. “It is bi-directional because you walk in armed as an operator now with all this context on what great looks like across your portfolio: what does a great software company look like? What’s a great growth rate? What are SaaS metrics that matter? When can you tell someone’s going off the rails? How do you have difficult conversations with folks that you have to let go on the team? What do you look for in great talent?” he says.

He had joined a company with “a bare-bones finance organization”: a couple of people on the accounting team and one person working on payroll and accounts payables. He was the first financial planning and analysis (FP&A) hire. Right away, he got started on getting a company model up and running. “Just having a view of the business that was reflective of what was actually happening at Dropbox and working through our first planning process and building a budget and things like that,” he says. “Then there were some one-off projects: ‘Hey, we want help modeling what this new product could look like if we were to launch it’ or ‘We want to understand: if we add this feature, then are we going to improve monetization?’ That's how it worked initially.”

Eventually, Ajay was tasked with building an entire Strategic Finance team. The mandate at the time at Dropbox was “get the very best people in the world to join” to keep the company on a best-in-class growth trajectory. “It was about team building and hiring really smart, high-horsepower folks to join our finance team. We wanted to hire folks who were coming out of Goldman Sachs or top venture funds or awesome consulting programs and a lot of them didn’t want to join in like a traditional FP&A role. They wanted to do something that was a little bit more strategy-oriented; that could have more impact,” he says. “So, we created this team called Strategic Finance to facilitate bringing that talent in. That was the genesis of StratFin.”

Growing Along With the CFO Role

In 2016, Ajay was promoted from Dropbox’s Head of Corporate Development to Dropbox CFO. He’d spent time getting to know “the nuts and bolts of finance” in his first position as Head of Finance and then spent “a lot of time in a more strategic role on M&A” in his next role, which prepared him for the CFO position. But still, Ajay admits that he was an unconventional choice for the position. “Our CEO Drew didn’t feel like he had to go hire the person who’d done it three times if he felt like someone had that potential internally,” Ajay says. “Not all leaders and CEOs operate that way. But he really had a leaning towards that and he had an eye for talent.”

So, Ajay took the reigns of the finance side of a company with 500 million users in 2016. Right away, he looked for mentors and found them on Dropbox’s board. “We had a couple of former CFOs on the board who felt like they could play a really active mentorship role with me when I was there. The former CFO of Priceline and Booking and then the former CFO of Nike were both on our board,” Ajay says. “They were like, ‘Hey, we’re willing to take Ajay on as a mentee and mentor him through stepping into the CFO role through Dropbox’s IPO and beyond.” 

He leaned on those mentors, and his unique experience — starting in investing and then building and growing with the finance team at Dropbox — to master the role. And, critically, Ajay continued to hire the best people for the role and lean on them to get to the best result. “So, I had a CEO who was willing to make that bet. I had a couple of former CFOs on the board who had a lot of credibility. And then I built a team around me that had much more experience than me working at a public company in a finance function and who'd been through the IPO process in the world of accounting FP&A, tax treasury, those kinds of functions,” he says. “So, it was the three different elements there that allowed me to do what I did.” 

The Dropbox IPO

“I became CFO, a year later, we were on file with the SEC to go public, and then three months after that we were public,” Ajay says. “So, like 15 months after I became CFO, we were a public company.”

It’s a staggering feat to imagine going from zero CFO experience to a public offering at $8.2 billion. But Ajay nailed it. He’d spent years watching the finance side of Dropbox from every angle and helped walk everyone else through the intricacies. “We ran mock earnings calls and we had a really buttoned-up accounting-close process. We had world-class auditors we were working with,” he says. “We were operating like a public company almost right away.”

He’d seen the differences on the finance side of a growth-stage private company and of a public company. “The level of rigor with which you’re examining the business, the way you’re running your planning process, the way you’re holding every team accountable to what they deliver for the company, the way you’re narrowing down your forecast accuracy and running your budget versus actual, the way you’re talking about the business and measuring it and writing about it, all that changes,” he says. “It really was night and day.”

But Ajay and his team actually loved the process — I know, it sounds strange! But the guy who’d started as an analyst was invigorated by the process of drilling deep into his own company. “For us, our IPO was actually a very energizing and illuminating process. It forced everyone to come together and think really hard about who we are as a company, what we want to be in the future, and to communicate that in a way that the world could understand,” he says.  “For investors who knew nothing about the business until we walked into a meeting as part of a roadshow, can we communicate in 30 minutes exactly what we do in a way that would be very compelling and get them to invest? They'd have to understand. The press would have to understand. Anyone reading our S-1 would have to understand. So, it forces you to go through that exercise, which is like strategically very beneficial to the company if you get it right.”

Clearly, they got it right. Dropbox’s stock rose more than 40% the day it first traded as a public company in 2018. 

Strategic Financing is Key for Companies

In 2021, Ajay left Dropbox to become a general partner at IVP. But he leans on the lessons he learned at Dropbox when considering investments. He tells us a story about Dropbox which helps illuminate the power of strategic finance for a growing company. 

Dropbox initially scaled on AWS, but there was a moment when they realized they should invest in building their own cloud-based infrastructure. Finance was brought in right away to tackle issues like investment timelines and depreciation schedules for infrastructure. “Our team was really intertwined with everything we did as a business,” he says. “They were intimately involved in: What should we build next? What should we buy next? How is that going to inflect our trajectory?” There was intensive modeling done in unison by the finance and infrastructure teams, and eventually, the decision was made to take on the massive effort. “It was a four-year project. We spent hundreds of millions of dollars to build out our own data center footprint across the country and then migrate exabytes of data from AWS to Dropbox,” Ajay says. “That project allowed us to grow from a 42% gross margin to an 80% gross margin. And speaking of what allows you to go public: moves like that opened up the IPO option for the company. Because the 40% gross margin SaaS business is not super exciting for a public market investor. But an 80% business is very exciting.”

Today, he tells the CFOs and Heads of Finance that he mentors to be pushing for 30-40% of your dollars to be spent on future growth — whether that’s people or other investments that can pay off down the road. “The thing that is a red flag for me is when I hear a finance leader, the go-to-market team, or the sales team, and part of their planning process is asking, ‘What’s the plan for next year?’” he says. “We have a major issue if that’s the way your finance organization is operating versus them saying, ‘Here’s the plan for next year.’ The ones that say, ‘Here’s the plan, and here’s how we’re going to make it happen,’ are the ones who will realize the full potential of a company. If your finance team is not doing that, then you are not realizing your potential.”