Navigating the Role of a Startup CFO: Essential Insights and Strategies

Why your startup needs a CFO

Not every startup needs a part-time or outsourced CFO - but if you do, you REALLY need one! Your part-time Chief Financial Officer should be an experienced financial professional who helps your startup set your financial and operational strategy, create and track important KPIs, run your financial systems and reporting, and manage your cash flows and spending.

The best startup CFOs also help with fundraising and investor relations, although the CEO/founder should always be the one primarily engaging with potential investors.

Does your startup need a CFO?

To determine if your startup needs a CFO, ask yourself the following questions:

• Is my startup having problems with basic bookkeeping and record keeping?
• Are my basic financial statements in order?
• Do I have detail on KPIs such as customer churn, customer acquisition cost, etc.?
• Do I know when my company will run out of cash, and have an understanding of my current burn rate and spend categories?
• Do I have a board approved budget that shows me a roadmap of how my startup will achieve its goals?
• Does my team have projections and guidance on who and which employees they can hire to meet the company’s goals?
• Am I experiencing issues negotiating the financial details of customer or vendor contracts?
• Have I prepared the diligence materials that a prospective investor will need to make an investment decision?
• Do I have a strategic and financial vision on my long-term pricing, revenue growth scenarios and spending plans?

If you’ve answered “no” to Questions 1 and 2 indicate that you need a good outsourced startup bookkeeper, possibly bundled with a controller. Questions 3 and 4, you should consider hiring someone to help with financial modeling or part-time FP&A. Questions 5 and beyond indicate that you need CFO level help, which, for many startups, can be achieved by hiring a part-time finance professional who understands the industry your business operates in.

What do fractional startup CFOs cost?

A fractional CFO can be an important asset to a startup. They assist with financial modeling and decisions, preparing for board meetings, and handle operational details. Getting part-time CFO really helps the management team.

Typically fractional CFOs have three to four clients and charge one of two ways: An hourly rate, like $250-$350 per hour, or a fixed monthly fee. Those with fixed monthly fees normally allocate one full day per week to your startup.

What type of finance professional do you need?

Understanding whether your startup needs a CFO or a Controller is a crucial step in building a strong financial foundation, and can help you avoid brining in someone who is the wrong fit for your company.

Figuring out which role you need depends on your current financial needs and strategic goals. If your startup requires meticulous day-to-day financial management, compliance oversight, and robust internal controls, a Controller might be the right choice. Controllers ensure financial accuracy and help build a solid accounting foundation.

On the other hand, if your startup is at a stage where strategic financial planning, fundraising, and investor relations are critical, a CFO could provide the leadership needed to drive growth and scale your business. CFOs bring a strategic perspective, helping to shape long-term financial strategies and manage capital effectively.

For a detailed comparison to help you make an informed decision, visit our CFO vs Controller page. This resource outlines the key responsibilities and skill sets of each role, guiding you to determine the best fit for your startup’s specific needs. Whether you’re looking for strategic financial guidance or day-to-day financial oversight, we can help you find the perfect fit for your team.

I’m going to break this up into three parts, because I believe there are at ways to look at a CFO…

At what point does a self-funded startup need a CFO?

I’ll view “self-funded” as akin to a bootstrapped small business. The term startup tends to designate high growth companies that have been backed by angels or VCs. Being a self-funded small business - in my humble opinion - is much more difficult. You may not be as flush with cash as VC funded startups, but you also haven’t given away any equity/power in your company. So when should a small business hire a CFO? Only when they a) need one and b) can afford one. At this point, all you likely need is a financial model. If you’re in need of securing debt/equity investment, reporting to a board of directors, or expecting an acquisition… then consider hiring an interim CFO. A full time CFO will run you 240K+.

At what point does an angel or VC funded startup need a CFO?

At least 3 months before a new fundraising round. There’s a lot of preparation that goes into process, and a startup CFO will be essential as the CEO is often hair-on-fire busy courting potential investors. A CFO will build the financial model, track KPIs, prepare the financials, and will leverage angel/VC relationships. After the fundraising round, an interim CFO’s workload decreases dramatically. CFO level work then focuses on benchmarking the financials and KPIs to the financial model that was presented to the investors, and providing detailed reports of this progress at the quarterly board meetings. Intermittent startup CFO requests include advising on equity compensation, venture debt, investor relations, etc. If you’re raising a Series A, B, or C round, an interim CFO can help. Past Series D, a startup usually hires a CFO to manage the now growing accounting department. If you’re thinking about an IPO in the near future, you’ll need a full time CFO.

At what point does a public company need a CFO?

Before the company goes public! These are the true heroes, and the real embodiment of a CFO. They face relentless pressure from the CEO, Employees, Shareholders, and Wall Street. Their decisions can make and break the company… and the lives of thousands.

Startup CFO FAQs

What does a startup CFO do?

The main responsibilities of a startup’s CFO are to:

• manage the startup’s financial reporting
• build and maintain the startup’s projections and budget
• execute capital raises, like venture capital rounds
• handle legal and negotiations for the CEO, such as leases, insurance, etc

The CFO should be helping translate the company’s metrics into insight that the rest of the management team can use to make strategic decisions - important decisions like when to make additional hires, when to ramp up sales or marketing spend, how potential contract will impact unit economics, etc.

what does a good startup cfo do

Should seed stage startups have a CFO?

Most seed stage startups do not need a full time CFO. While it’s tempting for a “business” founder to take a Chief Financial Officer title, this is probably not the most important role for most seed stage companies to have filled with a full time person (COO may be a better title for that business founder).

A part-time CFO or experienced accounting CPA firm is a better fit for most seed (and most Series A startups) because they can be an experienced, frugal way to get the output that you’d expect from a CFO without the cost.

What to look for in an outsourced CFO?

Not every fast-growth company needs an outsourced CFO, but when it’s time, it’s time! Here are some of the key items to look for when hiring a senior finance professional on a contract basis:

• Look for someone who knows your stage - a company gearing up to get ready for a $100 million venture raise is very different from a company with more modest capital needs
• If you operate in a speciality industry, you may need a specialist. Some industries, such as biotechnology or technology hardware manufacturing, have unique capital and cash flow needs. Finding an outsourced expert can help you craft a financial strategy unique to your business.
• Get someone who can provide the right amount of attention for the foreseeable future. Fractional CFOs are in high demand, and finding someone who has enough time to dedicate to your business can be a challenge. Working with someone who doesn’t have the bandwidth to give you the attention you probably need maybe a mistake.
• Choose a partner who will compliment your leadership and management style. For example, if you’re not a details-oriented CEO, finding a finance leader who is comfortable diving into the details may be best.

Startup CFO Services

Expect your outsourced Chief Financial Officer to help with the following

• closing the monthly books and managing financial reporting
• manage the budgeting process and the financial projections, including keeping track of the company’s expected cash out date
• fund raising logistics, advice and coordination, including supplying investors with financial and other due diligence material
• contract negotiation for items like new leases, large vendor contracts, etc.
• manage the company’s cash and cashflow/burn, and make recommendations around hiring or changing the burn rate.

Basically, a startup CFO’s services will include anything and everything the company needs to help translate the founders’ vision into realty from a financial lens.

Outsourced CFOs near me

A common question we get is “how to I find an outsourced CFO near me?” Kruze works with outsourced CFOs near most major tech centers in the United States, including San Francisco, Silicon Valley, Southern California, New York, Austin (Texas), Boston (Massachusetts) and more. If you are looking for an outsourced CFO near you, see if Kruze can help you!

A strategic CFO partnership

Based on your startup’s needs, Kruze Consulting can provide the services of an entire in-house financial team at a lower cost than staffing your own finance department. As a Finance as a Service (FaaS) provider, Kruze can provide you with CFO and executive-level services, giving your startup the crucial financial reporting and strategic advisory services you need. Our seasoned financial experts can support your startup throughout all stages of its growth, and we have the systems and infrastructure to quickly onboard your company and provide you accurate, reliable, and timely financial services.

Should startups hold exit interviews with departing CFOs?

When a startup’s VP of Finance or CFO decides to move on, board members and investors should conduct an exit interview. Such interviews provide invaluable insights into the inner workings of the company, potential areas of concern, and possible operational improvements. It’s not just about identifying issues; it’s about understanding the myriad reasons behind a finance professional’s departure, whether due to internal disagreements, better opportunities, or something more dangerous. At the heart of the matter, VCs and board members bear fiduciary responsibilities. Their duty is to ensure the startup’s financial infrastructure remains intact and that operations are seamless. The departure of a financial figurehead, like a CFO, can be indicative of deeper operational issues or even potential fraud. Hence, holding exit interviews becomes crucial. While it may not be necessary for the entire board to be involved, at least one member should be. The insights gained from these interviews often transcend pure finance, shedding light on the broader operational aspects of the startup. Therefore, it’s imperative that exit interviews become a standard procedure, ensuring the well-being and transparency of the startup ecosystem. Whether it’s a full-time CFO or a fractional one, understanding the reasons behind their departure is paramount for the future success and stability of the business.

Who is responsible for hiring the startup CFO?

The final decision on who to hire as the Chief Financial Officer (CFO) is often made by the startup’s CEO. However, this choice is seldom made in isolation. Given the critical nature of the role, the board of directors usually plays an influential role in the selection process. This collaborative approach is crucial for several reasons:

• Board members will likely want a rapport with the CFO to gain unfiltered insights during challenging times.
• The board seeks to ensure transparency, verifying that issues are not being downplayed or concealed.
• Having another point of contact within the startup, besides the CEO, can serve as a useful channel for communication and de-stressing.

Advice from other team members like the operations team and key personnel such as the Vice President of Finance, Controller, and Staff Accountants is often sought during the CFO hiring process. Since this hire touches so many parts of the team, it makes sense for key members to have a say in the hiring process.

Startup CFO advisors 101

When hiring a startup CFO advisor, a founder should look for someone who has experience working with early-stage companies and understands the unique challenges they face in their particular industry and aligned with their specific business model (i.e. SaaS, AI, biotech, etc.). The CFO advisor should have a strong background in finance and accounting, as well as a deep understanding of startup metrics and venture capital funding. They should be able to provide strategic financial guidance, help with budgeting and forecasting, and assist with fundraising efforts. Additionally, the CFO advisor should be able to manage and analyze the day-to-day financial tasks such as bookkeeping, payroll, and tax filings - they probably shouldn’t be tasked with those responsibilities, since they are time consuming and can be done more cheaply by a provider like Kruze, but they should take on the day to day management of them, saving the founder a lot of time. It is not necessary for a CFO to have a CPA or CFA, but having these certifications can demonstrate a higher level of expertise and credibility. Ultimately, the most important factor is finding an advisor who is a good fit for the specific needs and goals of the startup.