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.