Monday, September 29, 2014

Joining A Startup As CFO Is A Good Path To The Top

Every investor is looking for the “dream team” of executives to put money on. Often I find that experienced investors scan ahead to the management page of a business plan, even before they read the product description. That’s how important the people are. The Chief Financial Officer (CFO) role is usually considered second only to the CEO, because financials are critical.

In fact, about 25% of CFOs make it to the CEO position, although not necessarily in a single step, like Indra Nooyi, PepsiCo's CEO. The latest Crist Kolder report finds that the percent of female CFOs, as well as CEOs, continues to rise and is at an all-time high.

"It's not often, if ever, that we get a client saying, 'We've got to have a CEO who has been a CFO,'" says Kolder. "It's more the reality that CFOs are better prepared than ever for taking the role of CEO." Here are some key attributes of CFOs who fit the dream team definition, based on an old article by Mark Macleod from StartupCFO:

  1. “It’s all in the details” - A professional accounting designation (CA, CPA) is the foundation. A few years ago it was all the rage to have MBAs in the top finance role. These days, with Sarbanes-Oxley and all the new SEC regulations, an MBA does not begin to cover the accounting, process, and tax knowledge needed to steer a company’s finances.

  2. “Let’s make a deal” - The dream team CFO not only runs the deal process for fundraising, but should also bring deal flow into the company. They should have a track record of originating and closing equity deals, and should have a long list of potential financing sources that are willing to take their call. Also you want someone who can stretch your funding by knowing which expenses to cut without harming your business.

  3. “Time to get organized” - Your CFO should take a leading role in bringing operational excellence into your company. It means installing just the right amount of process, reporting and structure. Not so much that it slows you down, but enough so that you smoothly run and grow the engine.

  4. “What happens in the company stays in the company” - Your CFO should be a trusted advisor to the CEO and other executives. Running a company can be lonely. Your CFO can be a key, objective source of advice and counsel as you make the big and the small decisions.

  5. “Jack of all trades” – Able to perform other duties (e.g., human resources, technology, legal, and information technology) as needed. It will be a long time before you have in-house counsel, and you can’t afford an outside law firm for every NDA to sign. So, choose a CFO who is very comfortable with legal documents, as well as finance.

  6. “Been there, done that” - Building a software company is much different than a manufacturing one, or services. The differences are just as apparent in the financials as they are in technology. You need someone who knows the ropes in your industry.

  7. “I have a dream” - The startup road is guaranteed to be long and hard. Investors look for someone who loves the challenge, looks and sounds like he can weather the storm, will always see the bright side despite adversity, and never gives up.

The job of a startup CFO is very different from one at a “big” company. The latter is much more of a hands-off role focused on investor relations, deal making (financing, M & A), governance, reporting and other back office matters. In stark contrast, the startup CFO is much more hands-on and integrated into the day-to-day of the business.

As you probably noticed and Mark points out, only one of these CFO attributes actually deals with accounting. The reality is that companies are increasingly looking for leadership from their CFOs. If you are looking for funding, as well as a good career path to a CEO down the road, consider this one.

Marty Zwilling

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3 comments:

  1. Excellent article. There are two types of finance professionals out there, 1) the accountant/CPA-type, and 2) the strategic finance manager/CFO-type. As a founder, you want that second type of CFO on your side. You want someone who can think strategically. Someone who can translate quantitative analysis into executable management strategies. CPAs typically don't have this skill as they think in the past. That is not to say that they are not important, but if I am a founder, I want someone who thinks in the future, not the past. Maria from speedyloansearch site

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  2. Really helpful article. CFO not only raise funds of the company but also also manages the business flow through their creative tactics. Their actions determine the future of the company. They have a good control of the business prospects. They are the Chief Future Officer of the company.

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  3. Excellent post Martin. This gave me a clear idea of CFO. It is crucial for a CFO to focus on the affairs of company to boost up decision making skills and be more driven to the business growth. A CFO needs to be an analytic wizard which adds more value to his skills and decision making power. I am going to share one article of Scholastic which will provide you essential information on the same.
    Source: http://cxoamerica.org/finance/what-it-takes-to-be-a-cfo-infographic/

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