Startups are not your average small businesses – the key differentiation being their potential for high growth. While more traditional businesses may have the primary purpose of providing an income and a lifestyle for their owners, startups are all about achieving fast growth with innovative solutions to modern problems, driven by repeatable and scalable business models, and backed by big funding.
This in turn requires a finance expert versed in the fast-paced and dynamic world of startups, and their nuanced needs and challenges. These include support with financial and business strategy, fundraising, R&D tax credits, product launches, new markets, acquisitions and exit strategies. These companies need a board-level financial expert, leader and collaborator.
‘What's unique to the types of startup we work with is that they will go through multiple rounds of funding'
The role
Often working on an interim basis with a portfolio of startup clients, in this context the CFO is a trusted adviser and business partner. Discussions will be at board level as an integrated member alongside a founder and their operations team, if they have one.
The CFO acts as a sounding board and adviser providing a sense-check on KPIs. They help companies stay on top of working capital, taxes and cashflow, ensuring a business performs at its best. They will advise on tax credits and government grants made available by governments globally to promote innovation and sustainable business.
Ultimately, the role is less about transactions and reporting, and far more about being a partner by recommending ways the business can improve top-line growth or profitability, depending on where it is in its journey.
A major consideration for high-growth enterprises is funding, which can come via venture capital, acquisitions (often via trade sales) or going public, with IPOs increasingly a realistic option (see Deliveroo, for example). These can be intense processes in which the CFO will be relied upon to perform due diligence and work alongside teams of stakeholders, including the founder, as well as investors and their corporate development teams.
‘What's unique to the types of startup we work with is that they will go through multiple rounds of funding. They might start their journey with us with 10 people in the business, then grow to have hundreds of millions in the bank and 100+ plus employees,’ says Wesley Rashid FCCA, co-founder and CEO at Accountancy Cloud.
Key skills
The startup world can be a very dynamic and unstructured environment; therefore a broad skillset is required. Founders are forward focused, always problem solving and trouble-shooting, and the CFO will be expected to play a role in this. Therefore, being commercially savvy is vital. ‘It's this understanding that allows a CFO to speak the same language as the founder and gain trust,’ says Rashid.
This is followed by being a strong business partner, which only comes with experience. Being able to work with a business and relay its position now and where it will be in three, six or 12 months is incredibly valuable.
The startup world can be a very dynamic and unstructured environment; therefore a broad skillset is required
A CFO also needs to be highly technologically competent. ‘When you're dealing with an influx of data and information, and different applications, you need the ability to bring it all together. It's really important that you’re able to work with tools and integrate them in a way that will save time and improve the visibility a client has over their performance,’ adds Rashid.
Getting in and getting on
A foundation like the ACCA Qualification goes without saying, but it’s a track record of delivering success that will stand out. The role is strategic and outcomes-driven, not transactional, so being able to prove in previous roles or in your portfolio that you've achieved X in cost savings, Y in revenue growth or supported Z amount of funding will make you an attractive asset.
‘These are really key measures of success and they demonstrate that a person knows what success looks like, has the ability to work in unstructured situations and dynamic environments, and can problem solve in such an environments,’ says Rashid, who looks for CFOs with a base level of financial consultant or CFO experience.
CFOs can develop a portfolio of clients that they see through their various stages of growth. Some may take on more commercial duties and double-up as COO. Others can build reputations based on successes in fundraising, M&A, new markets and product launches or strategy.
