From Deepfakes to Burn Rates: The Hidden Dangers That Break Startups (And How to Outsmart Them) | Ep 218 with Sanjay Chadha Co-Founder of SAV Associates

0:00Hey, everyone. Welcome back to Founder Story. Today, we have Sanjay Chata, the co-founder of SAV associates. And Sanjay, you have an incredible background. We're going to go into all these things because a thousand plus clients around the world, a global organization in itself, and you're helping a lot of people. So we're going to go into all that. But first, you are bringing over 25 years of extensive experience in corporate finance, cybersecurity, and risk management, which those are big things nowadays. Cybersecurity with AI, risk management, I imagine every company or organization needs to understand these things.

0:43But Sanjay, how did you get started? And what was your spark that made you say, I want to be an entrepreneur and this is the company? Thank you for having me here, Daniel. I really appreciate your time today because I think it's a great forum. A lot of people should get inspiration from my perspective and how I started this journey. So I think a playstone does not gain mass. So I was at a position in my corporate life where I was not moving. I was feeling, I was in a position where I was not learning anything. I had a very defined job, which was box 10. I couldn't, you know, I didn't have the wiggle room to basically either brush up on my skills, learning new things that were happening around me and, you know, felt suffocated.

1:35So I think that's where the spark came from. And I think I'm very grateful that it came because, you know, looking back about 20 years ago when I was doing my MBA, you know, when I spoke with my peers and friends and colleagues, we always had this question in mind. Is the corporate ladder the way to go or to start being an entrepreneur right after MBA is the way to go, right? Now, if you go to San Francisco and you speak to anybody from Stanford or any of the colleges there, the vibe is completely different. Yes, full scale, 100 % entrepreneur, right? But about 20 years ago, I think Corporate Ladder was the place to be.

2:15And I was lucky enough to join and work at a couple of big four firms, audit firms, and then get into Fortune 500. but I think my spark came from the fact that I was not learning anything. I was not delivering value. I mean, like I delivered value, but then I was boxed in to go beyond a particular, particular, you know, place where I was. Yeah. I think we, we hear that a lot, right? You kind of max out your capabilities at the organization. You also realize that why are you making so much money for someone else when you could probably make more of that for yourself? and then you want to do more.

2:55And corporations don't typically have that type of culture at some point. Do you find, though, that because you had that corporate job, a lot of the things that you learned, you were able to take away and move into business? So I think I would say my consulting life gave me a lot of takeaways, not so much the corporate life. Now, you know, you talked about money and definitely there's always this fear factor that, you know, you have, you're getting a paycheck and then you have to, you know, feed yourself and meet all your needs and desires. But don't forget that, you know, you have a very defined job.

3:40And what I was doing is I was mitigating risk, solving complex problems, delivering value, big buzzwords, but within the boundaries. You know, even though I was, I thought that I was taking decisions, but I had to take those decisions, keeping in mind a lot of other people that were around me or the people that were getting impacted. Right. So I think the primary focus for me for getting into the entrepreneur journey was not money, but my life at Big Force. And then about 10 years before coming to Canada, when I became permanent president, I lived in about seven countries. I lived in Africa, Madagascar, I lived in Vietnam, I lived in Dubai, Bahrain, different countries.

4:26And I moved those countries with a higher profile and job every two years. So I would go set up a joint venture, go set up a factory. I will interact with government officials. So that agility early on in my life and then consulting firm where I was dealing with multiple clients, delivering value, was something that I can relate to and was a great push for me to start, you know, join hands with another partner and start this for about 10 years ago. So to answer your question in one sentence, it was not the industry, but the consulting gig that I did at Big Four. And prior to that, working with good, strong, I think, leaders that were very entrepreneurial by themselves.

5:20And having an organization that you could be really a global organization now, you know, with having the internet and different ways you can connect with people on Zoom or whatever that you don't have to physically meet in person now. I'm a big proponent of, you know, really having an organization where you can take clients from all over. What were the things that you learned since you had lived in different countries, you have done things in different countries that you could then take back to your company to make sure that your company also meets global needs? So I think, you know, COVID taught us a lot, right?

5:58I think in the late early 2000s, there was a big push for, you know, working remotely, internet. There was a time when, you know, the larger organizations had stopped travel and they were talking a lot on, you know, Zooms and Zoom-like platforms in the past. But I think COVID really educated us very, very well. Now, in our industry, we have both experienced people in the firm. And then we have to, just by the nature of it, because there's a lot of burnout, we bring in a lot of people who are just out of college or university or have very limited experience. So I think we have tried a lot working as a firm in a hybrid model or remotely.

6:51But I think we try as much as possible to work as a team in the office. Having said that, what these technologies have done for us is that now we have literally stopped going to client sites. So if I look back about five or seven years ago, if we had to perform an audit, we would physically go to client location and we would, you know, touch, feel the organization before we conclude, yes, it's a going operation and, you know, everything is working perfectly. Now, we have matured to a stage where we are assessing all the risks and obtaining all the evidences to support that, yes, it's meeting our objectives purely by talking to people on technologies like today that we're talking to each other.

7:41Now, that has also helped us to have our teams in different geographic locations. So as if it is possible, we try to deliver work from North America. So we have offices in Canada and in the U.S. But we do now have office in India as well, where we have a few people that deliver not a large part of consulting services for our clients, but they do. So what has happened is that because we don't have to send our troops to the ground at a client location, we have been able to expand ourselves beyond the geographic location that we are located. So we have clients all over Canada. Literally every province we have our clients.

8:30And we have a lot of clients in the U.S. as well. We have some clients in Europe as well. So, yes, we have been able to serve many clients in different geographic locations just purely because of the technologies that we have these days. We could probably say that finances, money, these are the lifeblood of pretty much every company, no matter what stage they're at. I know a bunch of people that went out of business because they either didn't have the right CPA, they weren't really paying attention to their finances. What advice do you give or what are you looking at when it comes to the complexities around a company's profitability, finances, anything in this realm that people can take away that they, you know, something that they need to be looking at or understanding?

9:22So, you know, I definitely get back to you in a minute on that. But I think the growing gold, so, you know, as we all know, accountants are, or the CFOs are basically the protector of the gold or the most precious, you know, gold of an organization. Today, it's data. So we have kind of diversified. 30 % of our practice, 30-40 % of practice is traditional accounting firm, but about 60 % of our practice is cybersecurity and protection of data and privacy. But to answer your question about the accounting and finance, so I feel what is important, there are a couple of things which are very, very important, right?

10:06So keeping a tab on your numbers is very, very important. So I find in my business, we come with amazing entrepreneurs who have a great idea, but they are not successful because either they have hired people who are, you know, are not delivering the same amount of value that an expert would and they cost very high, or they have not been able to focus on understanding the client needs stakeholder expectations. expectations, and they are very focused on what they believe is. They want to move the world the way they look at the world, right? So what it does is they overspend, and without really comparing the inflows and the outflows, you can definitely do it for a very short period of time, and these days you have a lot of venture funds and startup supporting agencies.

11:08but in long run you have to understand your math very very well right so uh you might be the best cook in the kitchen but you know you need to know how much that menu costs and how much should it be sold for and then there is a sweet spot you can't make it super expensive that nobody comes to your restaurant, right? So I think a lot of entrepreneurs don't see the value that monitoring their finances brings to them because ultimately that's what makes them successful. And most of these organizations are not a not-for-profit. They are for-profit organizations. So I think that has to be one of the values that has to be kept in mind when you start something.

11:54I think a lot of people don't want to face it and they don't want to talk about it. Money has this weird thing with a lot of people where they, like you said, they want to, you know, okay, money is coming in. I'm going to spend money, but I don't even want to look at it. I don't want to look into my bank account. I don't want to look at my profitability. These are things that I think a lot of people just for some reason, they have a relationship with money that is sometimes negative. When you look at profitability for companies, is there a certain percentages or is it totally dependent on industry or is it EBITDA?

12:29Like what do you find some of the most successful companies? What are they looking at? So before I answer that question again, I'm sorry, your conversation really brings certain things to my mind, which are real life examples. So we have seen in our practice, we do a lot of service evaluations. So one of the areas, because a lot of companies are now going into cloud and they go into technologies like AWS and Azure and GCP, which is Google. So without really realizing, they subscribe to a lot of services they are not using. They're configuring a lot of services that they're not using. They have lots of capacity that they're not using.

13:12And before they know it, instead of paying probably$5 ,000 a month, they're paying$15 ,000 a month. And that's not, you know, it's not visible because your credit card gets debited for that amount. And at the end of the year, if you see, you've burned a lot of money which you could have saved, right? So now this was one of the digressions I took. But every small piece of expense has to be monitored. Right now, definitely there are certain industry benchmarks where your gross margin and your EBITDA are definitely the drivers. But again, you know, it also depends on in your life cycle where you are.

13:58Right. So now these days, again, depending on the industry, if it is capital heavy industry, obviously your profit margins are thinner. if you're a technology company, the expectations are that your profit margins will be higher in terms of multiples. But again, where are you in your life cycle also defines what should be your appropriate benchmark. But bottom line is, whatever you're doing today, you should definitely have a goal in mind that in the journey of one year, three years, five years, at what point do you think you want to stabilize your organization, stop bleeding money, and start making money, right, for yourself and for your stakeholders.

14:44And your employees these days are your biggest stakeholders as well, right? So monitoring every spend, monitoring with KPIs as to every dollar you spend on advertising, whether you're making revenue. So I think it's not about just looking at the broad numbers. It's about looking into the story of each number, which is very, very important. And for that, you need a good CFO or good virtual CFO, if you can't afford a CFO, who can read the numbers and say, oh, this number is this, but it is telling this story. The story is that compared to sales, this is huge overspent. Or compared to the projections of next three years, this is not something where you want to spend your focus and energy.

15:33So every number tells a story and you need a storyteller. Yeah, and I appreciate that because I think many of us that have companies, we want to exit someday and we want to get the best multiple. And all of these things I can imagine if you're talking three, four, five, 10 years out could add up to a tremendous amount of money. So thank you for sharing that. I am very, very scared and very curious around cybersecurity risk management. I think a lot of us heard about this story where this, you know, a CFO's voice was copied, calls the CEO, tells them to send money. The CEO sends money, but it was deep fake.

16:13And I'm hearing a lot of a lot of this stuff could materialize and get as, you know, AI is getting better and better at copying video and audio. I imagine risk management and cybersecurity on top of hacking and all these other things is just going to become even bigger. How are you looking at this? 100%. I think this is a real risk. A 100 % real risk because it's thought about the agents and the enhancement in artificial intelligence itself. But pure speed of the new, you know, computing, compute technology that you're getting is it's a good marriage. So you have the technology which works with speed of light.

17:01And then you have the agents of the artificial intelligence and the data underlying, supporting all these activities available to you. And I think that with every growing day, there's going to be exponential risk which comes with it. So I feel we all have to be very vigilant. We have to, again, understand what is of greatest value within our organization, whether it is intellectual property, whether it is our data, whether it is our unique processes. So first of all, you have to kind of take account for all the important and valuable assets that you have, that you think if they go away, it'll be very hard for you to come out of that the best.

17:54As much as, you know, sending a$100 ,000 check by, you know, somebody making a CFO, you know, somebody calling an accountant saying that they're the CFO, you can still, you know, recover from that, probably from the damage. But if your client information is lost, you lose the credibility and you can go down in a day. You're working with a very large bank as a service provider and a huge amount of data is lost, say, I don't want to name a bank just for the sake of it, but for example, if there's a leading bank and you lose a credible amount of information for them and they are on Wall Street Journal, that is damaging.

18:40That is like RIP, right? So bottom line is the organizations have to understand that this is a real fact. This is coming. You can't close your eyes and say it's not going to hurt or bother you because every organization has something which is of importance to them, right? So early on, try to put defense in depth. Defense in depth means that to reach the final gate of your price possession, there should be at least five or six hops, right? So you can know early on that something is going wrong, whether it relates to segregation duties, your two-factor authority. I mean, I'm just giving small examples here.

19:21two-factor authentication or unique username and password and things like that. But they may look very easy solutions, and you expect that it should be in place. But having worked for 25 years, sometimes assumption doesn't work. And there are people with a lot of capabilities. They have the weakest password. So bottom line is, at some point, at least annually, one should take account of what is important and is it protected enough or not. And then, you know, employee training, because as I say, the weakest link in the chain is human. Because 90 % or 80%, I don't have the statistics, but most of the breaches happen because a human didn't follow the common sense or, you know, was stressed or overworked and they picked up a wrong caller, you know, clicked on a round button and the help broke, right?

20:19So bottom line is that a continuous training of your people and defense in depth with technology is definitely going to help. Yeah, the people doing the bad things are getting even more creative, making things look even more realistic. Yeah, I got one from my supposed bank. It wasn't even from my bank and they wanted me to log in. I'm like, I did check like three times like, wait, is this my bank? I don't think this is my bank. I even had to Google search, like, is this how it should look? So this is, I mean, it's only going to get even more challenging. So I'm glad you bring up, make sure that you, one, work with a great organization, and then two, make sure you teach your staff, your employees on what, you know, what they should be looking for.

21:01I just have to add one thing there. So day before yesterday, I got an email from my regular recruitment agent saying, you know, here's an incredible candidate. And generally, she used to send PDF of the resume. Here's a link, click, and the resume is there. And I responded back saying, you know, we don't click the links. Is it for real? And the response came, yes, it is real. This is how we started operating now. we don't send attachments, we send links. I didn't open the link. And today she sent a mail, my account has been hacked, please do not click the link. It was so real, and it was so personable, because somehow all my correspondents in the past, they would have looked at it, so they knew in what tone I and her speak.

21:55So the email looked absolutely coming from her. so the fact that they even responded back to you that's scary i mean yeah because now they could use like chat gbt to create some sort of gpt language that sounds like her sounds like you wow that see man this this is happening every day um so thank you i'm never going to click a link ever again so sanjay i appreciate that um but i think a lot of people need to get in touch with you and and i'm sure a lot of people are going to want to find out more information so how can they do so? They can reach me on my email, which is sanjayichara at savassociates.ca.

22:33I'm also on LinkedIn. Daniel, probably you can put that on your website and reach out to me on LinkedIn and I'll be happy to have a conversation anytime with like-minded people, 100%. Well, Sanjay, this is great. It really is, I think, the lifeblood to the success of any organization, whether it's in the beginning or middle or later stages of the company. So thank you so much for sharing this insights and your story today and joining us on Founders Story. Thank you very much. I can't be more grateful.