What's a CFO!?
Startups begin with the spark of an idea, the development of a concept, and a series of steps that lead to launch. At some point during the startup process the excitement of future value, expected earnings, or some other financial goal gets discussed. Having a co-founder focused on how the team will achieve that financial goal is critical in seeing it through. This is the quintessential role of the startup Chief Financial Officer (CFO).
The job of a startup CFO is very different from that of a “big” company. The latter has a focus on investor relations, business development, deal making, governance, reporting, and other back office matters. In contrast, the startup CFO is very present in day-to-day operations playing a key role in guiding the business and learning what works for the team.
A professional accounting designation is a great foundation for the role but not entirely necessary for startup; the reality is that companies are increasingly looking for leadership from their CFOs. Experience and a deep network that can be called on for the tax knowledge needed to steer a company’s finances, and legal knowledge to structure and safeguard the company, can be equally valuable. Finance, fundraising, tax, share structure, liabilities, risks, non-disclosure agreements, etc., are not common knowledge of most startup founders. The CFO should educate the co-funders on the importance of these items and take responsibility for ensuring that they are in place.
The CFO is often considered the “moneyman” or “moneywoman” but their sights need to be set on much more than dollars alone. Constantly analyzing the company from the inside and out, and asking questions like: What should be prioritized? What are the costs? How will we pay for them? What can be cut, shifted, or increased? This is because, when investors ask about performance there must be clear communication of performance, whether positive or negative, and progress on the company’s strategic objectives. The ultimate goal is to build, maintain, and grow investor confidence.
The CFO should know how to bring just the right amount of operational excellence into the company, meaning to implement the right amount of process, reporting and structure; not so much as to slow down the company, but enough to ensure things run smoothly and growth is constant. CFOs also have a fairly direct relationship to the HR through liability management, and IT from a process and systems viewpoint.
For many startups, the goal is to be financed and eventually bought out. This road is guaranteed to be long and hard. Ultimately, investors are looking for a team that can deliver against their financial plans. Having a CFO that is capable of weathering the challenge and can guide the team through the highs and lows of the fundraising process while being transparent and candid with the co-founders is invaluable. These qualities and areas of focus lay the framework for what’s next, the financial strategy.