Startups are known for their dynamic and evolving nature, often navigating through rapid growth and various operational challenges. As financial management plays a crucial role in a company’s success, it becomes essential to consider the right timing when to bring in expertise in the form of a Head of Finance or a Chief Financial Officer (CFO).
Currently hiring Head of Finance and CFO roles for startups at different stages, I look to discuss the appropriate timing to hire a Head of Finance or a CFO. The right CFO to assist in capital raising exercises is a different CFO for later stage growth and scale and is often again a different CFO that we see when an exit strategy is executed.
Seed Stage: Product Formulation
This is when a startup is in its infancy, typically focusing on product development and securing initial funding. At this early stage, hiring a full-time finance executive might not be necessary, as the founders can handle basic financial tasks such as budgeting, bookkeeping, and financial projections. However, it’s beneficial to seek external advice from consultants or part-time financial professionals to ensure accurate financial planning.
Early Stage: Series A and B
This is when a startup begins to gain traction, generating some revenue and attracting additional investments. This is when they need a dedicated finance professional. Hiring a Head of Finance who possesses a strong understanding of financial operations can help the company establish robust financial systems, manage cash flow, and streamline financial processes. This individual can provide insights into financial performance, assist with fundraising efforts, and support the management team in making informed strategic decisions. Most venture backed businesses, in fact over 70%, will hire a fully fledged Finance Lead at this stage.
Growth Stage: Series C, D and Beyond
Sixty percent of companies will look to hire a professional CFO at this stage of their company’s growth. There will be a ‘view to an exit’ from the company, founders, and investors alike at this stage, and seeking a CFO that can manage the balance sheet effectively and work with later stage, more sophisticated investors towards a liquidity event is key to the company’s strategic plan. This is the most critical strategic inflection point the company faces. This is where the greatest wealth creation event occurs for investors and staff. A well-qualified CFO that navigates the alternative paths to this outcome is critical. These CFO’s are also in the highest demand.
Later Stage
During the late or mature stage, a startup has achieved a significant market presence and stable revenue streams. This phase often involves international expansion, diversification of product offerings, and strategic collaborations. A CFO becomes indispensable in managing complex financial operations, optimizing capital structure, and ensuring compliance with regulatory requirements. In all instances this CFO has a higher commercial, transformational, and strategic acumen that can build, navigate, and execute a medium- and longer-term strategic plan of strategic growth and shareholder return.
Each startup’s journey is unique, and it’s important to assess your company’s specific needs, resources, and growth trajectory when making these critical hiring decisions. Feel free to reach out to me if you have any questions.
