This is a guest post from Rob Krolik, General Partner and CFO at Burst Capital.
There are currently more than 60 active CFO searches for startups in Silicon Valley. Despite the importance of the role — particularly for later stage startups eyeing IPOs — it’s a notoriously tough one to fill.
Why? Because there’s a lack of experienced financial talent in the Valley. There are many people out there who are excellent at financial modeling, but being a successful CFO — especially one getting ready to go public — requires a much broader skill set. You need to understand the nuances of business taxes, cash management, how to speak to a board and investors, etc. The challenge is that professionals of this caliber and breadth of experience typically opt for jobs at established companies rather than risking it with a startup.
To help solve this talent gap, I recently hosted a workshop at Sapphire Ventures to expand and sharpen the skills of promising finance professionals who some day could take on the CFO role at a Sapphire portfolio company.
Below are a few of my tools and tips I shared to get up to speed as a CFO before you’re in the hot seat.
What do startup CFOs need to know today?
After serving as Yelp’s CFO and leading the company through its IPO, and holding CFO positions at Move, eBay, Shopping.com, and DigitalThink, I took time to consolidate what I had learned. I broke down what I believe the core skills of a CFO to be into fifteen disciplines:
- Financial Planning and Analysis (FP&A)
- Treasury Management
- Investor Relations
- Internal Auditing
- Business Systems
- Working with a Board of Directors
- Stock Administration
- The IPO Process
- Scaling the Organization
From there, I developed a curriculum to give technology finance professionals more practical, hands-on exposure to these topics than what they’ve experienced in their current roles. Although many people want to jump straight to the IPO module, I’ve found they get far more value from the other topics. That’s because since so few companies actually go public, it’s essential for finance leaders to have the tools to steer an organization through day-to-day events like presenting to the board, developing a framework for FP&A, and imposing revenue and expense discipline for greater scale. Foundational topics like this are where the real value lies. That includes things like:
Working with the Board
It’s not always easy to collaborate with board members — particularly venture-capital board-members, who may be pressuring for an exit. As CFO, you have to balance their expectations with an accurate portrayal of your company’s progress. This includes being able to clearly identify revenue growth (or stagnation), illustrate the strength (or weakness) of cash flows, and highlight when and how fundraising would be most helpful.
With many new CFOs being sharp on the math but less experienced in management situations, brushing up on the best presentation methods and modes of communication are absolutely key.
A framework for financial planning & analysis
CFOs must be the masterminds behind a company’s financial architecture. They have to forecast the next year or two, create a budget, and monitor working capital, with a particular focus on cash. No amount of fundraising will help in the long-term if these day-to-day tasks aren’t smooth. As the workplace evolves — with more employees working remotely and operations becoming more distributed — financial planning is an increasingly complicated endeavor. The tools and systems of the past are giving way to new methods like cloud-based services, shared documents, and virtual cards for reimbursement. Staying up-to-date is more important than ever for CFOs to add value.
Scaling the organization
Finance doesn’t exist in a silo. For a company to be successful, everything from hiring and employee development, to new product rollouts should be grounded in financial analysis. A CFO needs to know the nuts and bolts of the other departments to help with that analysis. This understanding of the core business functions is key to developing a more integrated strategy with the right tools and processes needed for rapid growth.
Many CFOs start with expertise in one or two areas — such as accounting or FP&A; however, it’s important for the successful CFO to have a breadth of tools at your disposal. To transition a young company to a more mature place, you must have a strong foundation in a range of disciplines. From there, you can always continue adding to your toolkit when situations require it. Have you ever needed to build out offices space, sign tax returns, evaluate whether the current team in place for a $20 million business will be right for the organization when it is $200 million, implement systems such as accounting, stock administration, or expense reimbursement? Focus on People, Process and Systems is critical to scaling the organization.
Build your CFO network
Unlike founders, CEOs, and even COOs, up-and-coming CFOs don’t always have good sounding boards or mentors to turn to. I know firsthand how hard it can be to find peers to discuss particularly sensitive topics.
Through my seminars, I’ve built up a network of up-and-coming startup CFOs. Attendees leave with a consistent crew they can freely turn to with questions — ranging from the best insurance brokers to managing a finance team, to thornier topics like balancing a CEO’s financial optimism with reality.
This group has been invaluable for many participants. No one is able to succeed in isolation, and the network affords them a community for working through challenges together. I believe that connecting with other CFOs (or potential CFOs) at young companies is essential for success. Knowing when and how to ask for help and perspective from other finance professionals can make the difference between a unsuccessful or successful organization.
Never stop learning
All financial professionals need to brush up from time to time. Our field is continuously evolving — with SaaS metrics now required alongside revenue and profits, companies exploring new calculations for employee equity, and private companies like Uber opting to disclose financial statements like public companies — it’s critical to stay on top of new developments.
That’s one reason I developed my core learning curriculum, and why Sapphire Ventures invited me to share these lessons with others who aspire to hold the CFO title.
Are you a Finance professional interested in future educational opportunities hosted by Sapphire Ventures? Provide us with your contact information here and we’ll let you know about upcoming events and opportunities.
Opinions, figures, or calculations presented in this publication are those presented by the author only. They do not purport to reflect the opinions or views of Sapphire Ventures. Additionally, no material presented in the post reflect official statements or recommendations by Sapphire Ventures, nor does Sapphire guarantee any accuracy made in regard to statements or claims within the blog.