AlbionVC recently hosted an event with our friends at Altima (CFO search specialists) featuring a panel of 3 experienced CFOs from different backgrounds discussing the evolution of the CFO role from early to late stage. The conversation covered a lot of ground and we wanted to summarise some key insights here. The role of the CFO continues to be ever more important, especially in the current macro environment, and we hope this post will be helpful for both founders and CFOs.
How the CFO role evolves from Series A to Series D+
The CFO role undergoes a significant evolution as a company progresses through different stages of growth. In the early stage of a company’s life cycle, when it is just starting out with limited revenue and resources, the CFO often needs to build the financial infrastructure from scratch. This includes implementing financial systems, processes, and handling day-to-day financial tasks. The CFO plays a hands-on role in everything from accounting to payroll and treasury management. As the company grows, the CFO’s responsibilities shift to building a finance team capable of handling these operational tasks, allowing them to focus more on strategic financial planning, fundraising and governance. In the final stage, one could say that the CFO transitions from being “in the business” to “on the business,” collaborating closely with the leadership team, particularly the founders, to drive the company’s overall strategy and growth. This evolution reflects the CFO’s journey from a financial operator to a strategic leader.
Indeed, as the company matures and navigates through various growth phases, the CFO’s role becomes more complex and multifaceted. They not only oversee the financial aspects of the business but also actively contribute to strategic decisions, revenue generation, and customer relations. This transition highlights the CFO’s ability to adapt to the changing needs of the company, from establishing financial stability in its early days to later becoming a key player in shaping its long-term vision and success. This also underscores the importance of CFOs as versatile leaders who play a crucial role in guiding companies through their growth trajectories.
The benefits of hiring a CFO early
Hiring a CFO early in a company’s development can bring numerous benefits. In the initial stages, when a company is just getting off the ground, having a CFO on board provides a strong foundation for financial stability by ensuring that the company’s financial operations, reporting and planning are well-organised early on. This early financial discipline can prevent costly mistakes and mismanagement further down the road. A CFO can help the founders and leadership team make informed financial decisions, mitigating financial risks and optimising resource allocation, which is especially critical when resources are scarce in the early stages.
Another significant advantage of hiring a CFO early is their ability to contribute to strategic planning and business development. While the CFO’s primary focus in the early days might be on financial operations, they can also play a vital role in shaping the company’s growth strategy. By providing financial insights and analysis, they assist in identifying growth opportunities, securing funding, and navigating the challenges of scaling the business. Moreover, having a CFO on board from the outset can instill investor confidence and make it easier to attract external funding, as they can vouch for the company’s financial soundness and provide a clear financial roadmap. In summary, hiring a CFO early not only establishes a strong financial foundation but also enhances the company’s strategic capabilities, positioning it for sustainable growth.
The Founder/CFO relationship
The Founder/CFO relationship is a critical dynamic that influences a company’s growth and success. In the early stages of a company’s life cycle, when resources are limited, the CFO often collaborates closely with the founders to establish financial systems and processes. This partnership is crucial to allocate resources effectively and set a solid financial foundation for the company’s growth. A good working relationship is characterised by mutual trust and a shared vision for the company’s future.
As the company evolves and grows, the Founder/CFO relationship transforms. The CFO’s role expands beyond financial operations to become a strategic partner to the founders. The CFO’s financial expertise complements the founders’ vision and entrepreneurial drive, allowing for a well-rounded approach to business development. This partnership is essential in navigating the challenges and opportunities that arise during the company’s growth journey.
The dynamics of the CFO role in today’s market
The CFO role has evolved significantly from the traditional perception of CFOs as mere financial gatekeepers. Today’s CFOs are strategic partners and key decision-makers within organisations. They no longer operate solely in the back office, crunching numbers and managing finances. Instead, they actively collaborate with the leadership team and founders, contributing to overall business strategy and growth. CFOs are instrumental in driving revenue growth, managing key customer accounts, and overseeing sales and go-to-market strategies.
Moreover, the modern CFO role extends beyond financial matters to include a broader understanding of technology and automation. There is a growing emphasis on automating core financial processes, which underscores the CFO’s role as a driver of efficiency and innovation. CFOs are increasingly responsible for leveraging technology to streamline financial operations, enhance data analytics, and support informed decision-making. This expanded role highlights the evolving skill set required of CFOs today, which encompasses financial expertise, technology acumen, strategic thinking, and effective communication.
2023 has been dubbed year of the CFO by some to highlight how the CFO role is even more key in the current macro environment focused on efficiency, optimisations and runway extensions. A good CFO is a true right hand to founders, complementing their ambition and drive to enhance a company’s strategic capabilities and growth.