The Many Hats of a Startup CFO

Why Large Companies Should Be Ecstatic to Hire From Small Firms

The other day as I was crawling under a desk and fishing ethernet cable through a tiny crevice in the wall, I thought, "I've been a CFO for a long time."

I shouted through the wall to our chief operating officer, who was similarly crawling around on the floor in the next office, "Do you see it yet?"

I felt a tug on the cable, and the hard part was done. It was time to plug in the new VoIP phones and get to work. I stood up, brushed off my business casual khakis and fired up the computer. There were journal entries to be made, checks to cut, payroll to enter, and I had to put the finishing touches on our five-year plan before an afternoon meeting with our bank.

When I finished my MBA 20 years ago, I dreamed of one day becoming a chief financial officer. Now I've held that title for longer in my professional career than not. Contrary to what I thought when I first entered the business world, the title didn't come with a free subscription to the Wall Street Journal and access to the corporate jet. I suppose that might have been the case had my career taken a different path, but I opted early on to enter the never-boring world of startup companies. 

The startup world isn't for the faint of heart or unmotivated. If your professional goal is to watch the clock and collect a paycheck, probably best to find a different line of work.

From my first professional gig with a startup telecommunications company through a long stint in retail, entertainment, and a couple of tech ventures, I have spent the past two decades moving from one startup to another. I've been fortunate enough to be part of a few that went on to be purchased by larger companies or private equity firms, and have gained the valuable experience of riding a couple out on the other side of the spectrum. 

I've watched as these companies moved from steady burn rates to cross over into EBITDA-positive territory to cashflow positive to highly profitable. I've been part of close-knit management teams who grew with the companies from the early days where the founders and managers literally knew every single customer by name to adding more locations than could reasonably be visited in a week.

Like anyone who's founded or worked in a startup, I've spent long nights in the office, grabbing an hour or two of sleep on the couch in the otherwise-never-used break room before getting up to start the next day. 

The startup world isn't for the faint of heart or unmotivated. If your professional goal is to watch the clock and collect a paycheck, probably best to find a different line of work. But for those who love a challenge and find great joy in the hard work of building something from concept to creation there is no more rewarding career path.

But the greatest professional advantage to working in a startup is that unless your startup is funded like WeWork, there isn't a cache of bench players and underlings to pass the work off to.

Need to file articles of organization for your business? That's something to figure out. Need to set up a chart of accounts? Let's pass that off to Marie in accounting. Wait ... there is no Marie. And there is no accounting department. It's just you. Have an angry customer who wants a refund and another who won't pay his bill? If you want to keep both customers you need to figure out how to make the first one happy and get the second one to pay. 

Need to figure out a commission plan for your sales team? Surely our chief revenue officer will handle that. Except there is no chief revenue officer. Paid time off policy? That's you, too. Short term disability, worker's comp, forecasting cashflow, restoring an internet outage, driving to the bank to make a deposit, taking out the trash, developing a marketing budget, wire framing the website, setting up accruals, and sometimes filing your business taxes -- all you.

(Side note: Of all the items listed above, the only two I might discourage if at all possible are setting up the legal entity that is your business and filing your taxes. Those are two areas where it's better to hire an expert than to attempt to figure them out on the fly.)

The larger point is that in a startup environment, while you may have a lofty title that starts with a capital C, it's going to take a great deal of work before you can think about finding the time to even read the "What's News" section of the Wall Street Journal. But when it comes to the public image of the company, as a senior officer in a startup you have to not only look the part, but to also perform the role as if you have no other distractions or responsibilities. While titles are cheap in the startup world, the accompanying responsibility is no less significant than the same role in larger companies.

As a chief financial officer for a startup, you have an obligation to protect the investments that have been entrusted to your business. You have to develop a realistic, accurate, and attainable financial model and be able to report your results to bankers and investors, who for the most part don't care if you were up all night repairing a piece of equipment or finalizing website updates. 

Whether raising money or reporting financial performance to existing investors, you're expected to understand your business and your sector. Investors, bankers and board members expect you to be able to explain budget variances and report on industry trends. While the far-reaching responsibilities of a startup CFO don't afford much time for industry research, there is no better way to learn on a deep level the fundamentals of your business than to delve deeply into every aspect of it.

Which (finally) brings me to the point of this missive. I was talking the other day to a longtime friend who recently sold the startup he helped build and is looking to move into a finance role in a larger company in the same industry. He had a great interview with the CEO, and during their conversation he started to visualize how well he would fit in the new company, and how he could make an impact. Then at the end of the interview, the CEO thanked him for his time and added that his only hesitance in hiring him was that he had "too much time in startups."

This statement sounded patently absurd to me. Too much time in startups? This sounds like the mindset of someone who's never built a company -- someone who's so far removed from the day-to-day operation of his business that he has no concept of the value of the actual hard work that gets done on the front lines of a company.

If I were hiring someone for a financial (or any) role at a large firm, I would be ecstatic to hire someone who came from a startup environment. Whether that person was leaving a successful venture or one that didn't make it, the one thing I would know about that person is that she isn't afraid to roll up her sleeves and get to work.

Don't get me wrong. I value and appreciate the importance of high level, strategic thinking, and why sometimes you have to get out from among the trees to truly see the forest. But if I get the opportunity to hire someone who's battled her way through the trenches vs. someone who's been riding a desk for 10 years, I'm going to pick the front line guy every time.

Consider the responsibilities of a chief financial officer in a startup firm. She or he has to perform the traditional role of finance guru plus establish investor and banking relationships -- usually before the company has any kind of track record. They have to be able to articulate the business idea and financial plan in such a clear way that investors are willing to put up money on faith (and probably some personal guarantees) alone. Beyond that, the startup CFO has to develop the path to profitability, drive measurable value, and put in place the metrics and tracking tools that enable management and investors to evaluate the performance of the business. 

These are all tremendous skills that would be of great value to larger firms, where the chief financial officer generally takes a more hands-off approach to the business and focuses exclusively on financing, governance, reporting and deal-making. That obviously is not to say that CFOs of large companies are soulless ogres who don't understand how the rest of the world lives. Far from it. Most CFOs in large companies have put in their time climbing the ranks through that company and know their positions very well.

But to suggest that climbing the ranks from within is the only path to senior financial leadership in a large company is shortsighted and deprives companies of the potential for a fresh injection of new thought from candidates who may not fit the historical mold, but have proven themselves in the trenches of startup warfare, developed a sincere appreciation for the hard work that goes in to every level of financial planning and analysis, and have (out of necessity) expanded their knowledge base beyond traditional finance.