How to hire a CFO to scale your startup

How to hire a CFO to scale your startup

/ /

The average tenure for Chief Financial Officers (CFOs) in North America is shrinking, with 59 percent of CFOs who took part in a recent FTI Consulting survey spending fewer than five years at a single company as of 2022. 

While this marks a sharp departure from just a decade ago, it’s not altogether surprising when considering the current economy and job market. 

At virtually every step of the corporate ladder, roles and responsibilities are shifting. This comes as businesses evolve to support not just new ways of working—namely, remote and hybrid models—but opportunities to restructure and take advantage of the latest non-dilutive government funding for innovative startups.

Over the course of this corporate evolution, the role of the CFO has been elevated to essentially act as the corporate Number 2, if not right-hand of the Chief Executive Officer (CEO). This is especially true for businesses that are on a rapid growth trajectory, as the CFO must be able to adeptly manage and balance the company’s financials to meet aggressive scaling targets. 

Of course, every business is unique, and there are specific considerations that executives must bear in mind when seeking out a financial leader for their business. To break down these nuances, Boast AI’s CEO Alok Tyagi recently sat down with Richard Cheung, CFO of Attabotics, who brings a wealth of experience navigating the startup space to this informative #InnovatorsLive conversation. 

In this post, we’ll break down some of these key takeaways, including not just what makes a great CFO, but level-setting for founders what they need to show potential candidates navigating the increasingly competitive job market.

Who should be a startup’s first key financial hire?

It’s important that founders understand, first and foremost, that a CFO is not always the first financial hire they should make. While individuals who are hired at an early stage may eventually take on the mantle of CFO, the title really depends on what the company can afford and the goals for the role.

A Series A startup, for instance, often requires a financial controller (as opposed to a full-fledged CFO) to manage day-to-day financial operations. These activities may include management of accounts receivable, payroll, tax prep and compliance, to name just a few key functions.

Once a company is at Series B or beyond, the scope of their financial lead expands to require a full-fledged CFO, if not a Director of Finance. This expanded role calls for an individual who can be more strategic about managing the company’s financials while taking on external-facing responsibilities. These might include building out a world-class, in-house finance team to accelerate fundraising scoping, defining a Financial Planning and Analysis (FP&A) structure, and even exploring merger and acquisition (M&A) opportunities. 

In a nutshell, as the needs of the business evolves, the CFO is often on the front lines of planning and implementing key changes across the organization. 

What tasks should the CFO own to help a company scale?

When it comes to the specific activities and outcomes that a CFO should be responsible for as a company grows, duties are really split between Internal and External functions.

Internal functions relate to establishing the infrastructure and strategies that in-house stakeholders must leverage to ensure the business is on a healthy financial trajectory. This includes choosing an Enterprise Resource Planning (ERP) mechanism to streamline reporting, as well as defining the previously mentioned FP&A model.

This goes a step further as the CFO is tasked with managing capital allocation broadly. This means the CFO decides what areas of the business require investment (ie. allocating resources to innovative R&D projects to accelerate the product roadmap) or, alternatively, divestment (ie. offloading costly vendor relationships that aren’t delivering). 

As for External CFO functions, the responsibilities tend to fall into 3 areas, which include:

  1. Fundraising: For technology and SaaS companies in particular, most will need to continue raising capital to build out their platform for the long haul.
  2. Liquidity events: CFOs will need to keep all reporting material up to date to ensure a smooth transition if a company goes public or is ultimately sold. 
  3. Scoping M&A opportunities: The CFO will often do the bulk of due diligence in vetting opportunities for mergers and acquisitions. 

What should founders look for when hiring a CFO for the first time?

Fundamentally, founders need to be sure that they have clear goals in mind for what they want their CFO to accomplish. Understanding not just the current status of their startup’s financials (ie. Series A versus more mature organizations) but the 3-, 6- and 12-month milestones that the business is aiming to achieve. 

As Richard explained to Alok, however, there are less tangible considerations that need to be weighed in the interview process. These are:

  1. Fit: Is there chemistry between the CFO candidate and the founder, board and management team? Does the candidate have experience in this specific sector or industry?
  2. Strength: Does the candidate have the requisite experience for the desired outcomes of their tenure? For instance, have they proven adept at fundraising if they are applying to join an early-stage startup? 
  3. Motivation: Does the candidate’s future goals align with those of the company? In startups, for instance, the CFO role tends to be more of a “lifestyle” position and can be heavily involved in all facets of the business. Is there passion there that aligns with the candidate’s on-paper experience?

Building on this criteria to probe even deeper, CEOs can ask candidates questions like: What would your last couple of bosses say about you? What did you accomplish versus what you were hired to do in the past? Or, even more to the point, Why did you leave your last few positions?

And while asking these questions is key, founders should also be prepared to answer a bevy of questions from potential candidates. After all, CFO titles are in high demand, and with a growing number of CFOs willing to leave organizations after a short tenure, Executives are wise to make a case for long-term commitment if they find an ideal candidate. 

Questions CEOs should be prepared to answer

As such, CEOs need to be sure they have the three following tenets of their business well defined ahead of the interview process.

  1. What is the company’s Business Outlook?: What’s your vision? Total adjustable market? The product’s competitive advantage? Financial position; ie. follow-on financing? Where do you wanna be in 5 years; Stay private through M&A? Go public? Sell the business—and, if so, who would the potential buyers be?
  2. What will be the CFO’s top priorities?: What should be accomplished within 6-12 months? Will the CFO have freedom to make key changes? What are the current financial priorities?
  3. What does the team look like?: What teams will ultimately report to this role? Is it IT? HR? Corporate development? Legal? Any gaps to be filled in the management team? Corporate culture too! 

Locking in all of these considerations is more than just a matter of “making a case” for potential CFOs to join a founder’s startup. It’s necessary due diligence for all fast-growing, innovative businesses that will pay off in spades once CFOs start developing capital strategies to extend the businesses runway. 

To learn more about how founders can take advantage of non-dilutive funding options to fuel their growth, check out our recent blog, Funding your startup with government grants.

Subscribe to Our Newsletter


Boast Logo