If a VP of Finance or CFO is leaving a startup, should a venture capitalist or board member conduct an exit interview?
The simple answer is “Heck, yeah!”. You should absolutely be holding at least one exit interview with that finance professional as they leave the company. The reason is that you never know what you are going to find out. It is important that you, as an investor or board member, know what might be causing people to leave and if there are underlying issues.
Internal Disagreement or Dishonesty
One of the reasons the CFO or VP of Finance might leave is that they do not get along with the startup’s CEO or founder. This is something you should try and understand, as it could be indicative of dishonest behavior. It could also be because of disagreements over the correct way to operate, recognize revenue, or the current cash position.
Furthermore, if you have a CFO or VP of Finance leaving your startup, it’s also important to consider if there were any warning signs that the CFO/VP of F could not communicate their concerns with the board because the CEO was blocking that contact.
Other reasons for them leaving could be because they are burnt out, or they were offered a better opportunity. Whatever the reason, it’s always good to know about it. Fundamentally, you want to find out in case of potential fraud or something strange going on underneath the covers at the company.
And you want to know if anything underhanded is occurring as soon as possible, because the sooner you know about it, the easier, and less embarrassing, it is to fix.
VCs and Board Members are Both Fiduciaries
Another reason it’s vital that board members and VCs hold these exit interviews is because they both have fiduciary responsibilities. The board is a fiduciary and has a major vested interest in making sure the financial infrastructure and operations are run correctly.
And VCs are fiduciaries for their limited partners’ capital. They sit on the boards as a fiduciary and it is very important they pay attention to these issues.
Although it doesn’t require the whole board to hold any exit interview/s, at least one person on the board should definitely do an exit interview with a departing CFO or VP of Finance.
Operational Feedback
Exit interviews also provide an opportunity to gather feedback on the company. You often find that finance professionals are very good at visualizing a business, its cash flow, who works with who, and what is important. This means they will most likely have a lot of operational feedback or improvements to offer.
It might also be the reason for them leaving, as that person may not have been able to get any changes they wanted to make done. This could also be worth knowing.
Always Hold Exit Interviews
The bottom line is, whenever a finance professional leaves the company, make sure you conduct an exit interview so no question is left unanswered. It could end up greatly benefiting the startup. Investors should also consider conducting interviews with part-time or fractional CFOs who leave, other than in an instance where a full-time professional is taking over.
If you have any other questions on exit interviews, valuations, startup investing, startup accounting, taxes, or venture capital, please contact us. You can also follow our YouTube channel and check our blog for additional information on accounting, finance, HR, and taxes for startups!
