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Finance Insights

Startup CFO: The Modern, Value-Creating Finance Leader

Patrick Whatman, Spendesk
Patrick Whatman Spendesk

The role of startup CFO isn’t always easily defined. Today’s CFOs come from a wide range of backgrounds, with different skill sets and expertise.

But one thing is clear. The CFO is no longer there simply to guard cash flow and set the rules. While the position has finance at its heart, the most successful CFOs are value creators, helping build dynamic companies.

Today, the best CFOs are Swiss Army knives, in charge of everything from legal and HR teams, fundraising to expense policies. In many growing companies, they literally keep the lights on and the wi-fi flowing. They’re multi-disciplined, quick to adapt, and know how the business is run.

In this article, we’ll look at what’s really expected from modern startup CFOs. We’ll also hear from some who’re leading thriving finance teams from the front.

For more on the subject, check out our recent guide:

What is a startup CFO?

In a typical organization, the Chief Financial Officer (CFO) is the third-highest ranking leader, after the CEO and COO. But startups are anything but typical.

In most startups, the CEO will be a founder and therefore already in place. Unless a co-founder has a particular finance background, the CFO won’t join for several years. The other founders often have product or technical skills, and there are very few “finances” to speak of the beginning, so no real role.

Instead, the startup CFO is usually brought in to build the finance function, ensure general compliance, and prepare the company for fundraising. More on each of these shortly.

Startup CFO responsibilities

The startup CFO has their hands in a wide range of functions and responsibilities. Very early on, you may have no other finance talent within the company. So everything from accounting to planning falls on your shoulders.

It’s a big job, and you’ll have a seemingly endless list of goals and objectives from day one. But slowly, as your team grows along with your experience, you’ll have built a more sustainable, reliable company from the inside.

So what does a CFO do in a startup? Let’s look at the broad areas of responsibility startup CFOs have ownership over. Eventually you’ll have people to handle each task and oversee key processes, but they all still fall within your scope.

The finance function

We’ve written a whole series about the role of the finance function in modern businesses. Its most critical obligations fall into two main categories:

  • Capturing financial data - also known as accounting and controlling.

  • Analyzing financial data - including forecasting, budget management, and organizational learning. This is typically known as FP&A (financial planning and analysis).

While most of the finance team’s tasks involve either gathering and recording information, or analyzing and exploiting it. But this broad distinction is typically broken down into more recognizable categories:

  • Accounting and tax

  • Controllership

  • Cash or spend management

  • Forecasting and financial planning

  • Reporting

Most startups begin by outsourcing accounting and tax. You won’t have enough sales and costs to justify a full-time member of staff. And it’s just easier to let a part-time expert handle it.

The size and complexity of accounting and controllership will also depend on the nature of the business. SaaS companies, for instance, tend to have a low number of relatively large payments. They have a regular cadence and don’t involve a lot of manual processing. Direct-to-consumer companies, on the other hand, may involve huge numbers of small payments all over the world. Booking these and dealing with global tax authorities will require more investment in the accounting function.

In the end, the exact nature of your finance function depends entirely on company size, industry, and your business model.

Nevertheless, the first job for most startup CFOs is to ensure that finance is being managed at all. And then it’s time to start shaping the function and welcoming team members.

Human resources & office management

The CFO is also typically responsible for the “People” function in a company. Employee payroll will be one of your largest expenses, after all.

This can be quite a departure from the norm for some new CFOs, especially those coming from an accounting or pure finance background. But for many modern companies with good systems in place - and good management - HR doesn’t have to occupy too much mental space.

Of course, during the COVID crisis CFOs suddenly found themselves with significant challenges. In one CFO Connect survey, many respondents cited “HR expertise” as being a key competency they were missing during this tricky time.

And some realized that their companies were ready for this new challenge. “I think we now realize that working remotely was completely feasible and actually much more powerful than we thought,” says Spendesk CFO Fabien Dawidowicz. “We have plenty of ways now to get in contact and it's a good way to see the future of our offices.

As the company grows, you’ll eventually have a People or HR team in place to handle the day-to-day issues that come with hiring humans. But the CFO will likely remain ultimately responsible for this crucial area.

Legal

As part of their goal of mitigating risk and ensuring compliance, the CFO also tends to run the Legal team in a company. You’re certainly not expected to be a practicing lawyer, but you should be able to create legally compliant processes, and guidelines to keep employees from stepping outside boundaries.

And in many startups, this arrangement continues for years. As Ada Johnson, VP of Finance at Heap, explains, “legal can be rolled into finance for a pretty long time. I think they're really closely related, especially in tech where a lot of the legal work we do is customer contracts. So the economics of that goes through finance.”

Eventually you may bring in an in-house lawyer. And you’ll certainly engage a firm for any fundraising, mergers and acquisitions.

But the smaller, more classic legal issues that pop up will fall on your team’s plate. Soat the very least, CFOs need to have a taste for propriety, and an eye for legal risks.

Operations

In many smaller companies, the CFO is actually the CFOO - Chief Finance and Operations Officer. And at first, many CFOs will be tasked with overseeing not only financial operations, but wider intra-company processes as well.

This can include selecting and installing key sales and marketing software - Salesforce, for example. It might also mean creating clear performance review processes, selecting OKRs and KPIs (performance metrics), and instilling effective team planning.

Because the CFO usually has a data background and strong procedural knowledge, they’re seen as the person to lead on new processes. They’re also best placed to ensure that these are compliant, efficient, and on-budget.

Eventually, some of these tasks will be moved onto other team members. But you’ll always have to think about financial operations, including choosing the best finance tools and creating the company expense policy.

The evolving CFO role

As Spendesk CEO, Rodolphe Ardant has to think carefully about what he expects from any CFO he hires. And even in a relatively short period of time, those expectations have changed.

“In the two companies I worked in before Spendesk, the finance team was really there to be the bad cop, to set up processes everywhere. Playtime is over - it’s time to get serious.

“But I’ve seen a change in this. Now they’re a real part of the business, working with marketing and sales and helping them to see the financial perspective of their plans and projects. Finance teams have analytical skills and knowledge that are valuable and need to be shared.”

Where the CFO was once the financial hawk, closely monitoring every cent in and out of the company, new descriptors are now more common. They’re seen as value creators and close business partners. And more than simply numbers experts, startups need strategists and even visionaries.

Whether the CFO joins the company on day 1 or several years in, startup CEOs and investors are looking for entrepreneurs - people who understand and care passionately about growth.

Sound fiscal principles are important, but the CFO is expected to impact more than just the books.

Key traits in a startup CFO

It’s a given that you’ll have significant management experience and mastery of finance fundamentals.

So what are the soft skills and added extras that successful CFOs should be able to demonstrate? Our experts give us some of their biggest value-adds.

Be a strong communicator

“It’s one thing to understand the numbers,” says Charly Kevers, CFO at Carta. “But if you can’t communicate these to employees, executives, and the board, you’re not very good at your job. The only reason I still have a job is that the board feels that I’m relaying information effectively.”

“That’s the biggest difference between a good finance person and a good CFO. It’s that ability to translate the numbers effectively for everyone, to be able to adapt your language depending on who you’re talking to.”

Stand out as a leader

Leslie Boudreaux, Founder at BVOH Search & Consulting, knows what to look for in a modern startup CFO. “For any type of executive finance person, the people that stand out have incredible leadership instincts and it comes through when they talk about their own work and their team. They're able to inspire and build the next generation of finance talent, and you can tell that they don't feel like they have to do everything themselves.”

“They counterbalance their own weaknesses with the strengths of the people that they put around them.”

Fit within the company culture

Audibene’s Oliver Ottens is leading a company through hyper-growth. “As CFO, I feel personally responsible for promoting our non-corporate attitude. Finance teams are often seen as non-creative, or even as police within an organisation. That’s not the spirit of the company and I’m passionately in favor of this.”

“So I have to foster this within our team, hire people who’re entrepreneurial rather than corporate, and support this culture. I intentionally avoid hierarchical processes, for example. And I don’t stay hidden in my office - I move around, talk with other teams, and sit wherever feels right on the day.”

“These little things keep the company open, transparent, and help us move quickly when challenges come up.”

Act as a true business partner

“Whatever the role of the finance team member - accounting, treasury, FP&A - they need to deeply understand the problems we’re trying to solve in order to be the best business partners they can be.” Charly Kevers believes in the bigger picture for finance teams.

“We’re not just trying to follow process, close the books, and do a forecast. Is what we’re doing serving the business and moving the business forward? Do we understand what our company is solving and how we can help?

“We only have a role if there’s a business to serve.”

Aim for maximum impact

“You’ll probably be aware of the 80/20 principle,” says Oliver Ottens. “The last 20% of the job takes 80% of the time. So forget about the 20% for now. Do a rough job of this and make changes if you need to.”

“If something isn’t essential and is going to take a huge amount of time and effort to implement, get to it later. Scaling up is all about finding big growth drivers - for finance and for the rest of the company.”

Show ability as an outward-facing CFO

“Outward-facing CFOs are typically more strategic,” says Leslie Boudreaux. “They don't always come up through a traditional internal finance and accounting, CPA, MBA background. A lot of times they come from investment banking or somewhere where they're in a client facing influencing role, but they still have that analytical acumen.”

“Inward-facing CFOs are more managing the financial statements, tax, audit, treasury, FP&A, risk. They're more focused on the internal workings of finance, with really accurate financial statements, forecasts, all of the internal mechanics to support that fiduciary responsibility of the company.”

“I don’t want to belittle inward-facing CFOs, but the ability to be the external face of the company alongside the CEO is very appealing to investors and founders.”

Focus on opportunities more than risk

“At audibene we don’t worry so much about risk,” says Oliver, “we focus on opportunities. Due to this approach, we’ve paid penalties and had higher expenses on a few occasions - most notably taxes.”

“But the value we created for our shareholders was significantly higher than these payments along the way. So we tried to stay compliant and would never truly risk the future of the business, but if we had to make these payments along the way they were always worth it.”

When does a startup need a CFO?

This is a big question for almost every business. And it may be disappointing to read that there’s no one right answer. In many cases, a CFO is brought in leading up to a major fundraising round - often the Series A or B.

As the figures increase, investors want to see that the company is on sound financial footing and has scalable processes in place. In this case, the CFO will often come in to square the books and ensure that there are no truly troubling risks in the near future.

But that’s just one scenario, albeit a fairly common one. Many startups don’t seek venture capital at all, and so aren’t building up to a big fundraising round. So the real answer is likely, “whenever the financial and legal work become serious enough.”

As Jean-Baptiste Cousin of SMASH Group says, “I'm totally convinced that sooner is better.”

“Your CFO ensures that you have smart processes for everything administrative, legal, HR, and finance (of course). This is going to benefit pretty much any business. So, even at the very beginning, it’s could be useful to have someone part-time.”

The startup CFO wears many hats

As is hopefully clear, startup CFOs have a huge range of responsibilities. You have control over finance, legal, HR, operations, and you’re critical during fundraising (which we’ve covered amply elsewhere).

Perhaps most importantly, you’re a member of senior leadership. Your attitude, philosophies, and work ethic feed the rest of the company. It’s a big role, and is certainly never boring.

Spendesk CFO Fabien Dawidowicz sums it up perfectly: “the CFO is the most exciting role in business! To build a successful finance strategy you have to really understand a business at a fundamental level. What keeps it running and what levers will help it grow?

“In a startup, it’s even more exciting. You can have a lot of influence on the direction of the company and can help to build something great.”

Grab our guide to the changing nature and importance of the startup CFO, and how to make sure you succeed in the role: