Startup finance structure : Build successful teams
The Importance of Finance Department Structure for Business Growth?
When stepping into a new role as Chief Financial Officer (CFO), one of the first areas to review is the finance department's structure. Whether you inherit an existing team or need to build one from scratch, the finance department's structure is pivotal for the success and growth of a business. ?
In this article, we highlight how the structure of a finance team changes as your business scales and how you can assess your current?finance department's structure to ensure it is optimized to support the desired growth plans. Whilst getting the structure of the team right can feel complex, it significantly influences the company's financial health and strategic direction.?
Understanding Finance Department Structures?
The structure of a finance department varies depending on several factors, including the Founding teams background and involvement in finance, industry, company size, geographic locations, centralization of operations, and what key milestones are ahead alongside the realistic growth trajectory for the business.
Our team have over 70 years' experience in helping?seed / bootstrapped startups?to?Pre-IPO?scaleups build out their finance function, so we have seen a vast range of different finance structures and in this article have highlighted the ones we most commonly see. Of course, each startup is unique, therefore if you do not see a structure here that relates to your individual circumstances, we would be happy to provide you with confidential guidance for your team. ?
Seed Finance Structure?
?At the Seed stage?the finance team is often comprised of an outsourced accountancy firm or bookkeeper to manage a range of essential financial tasks. These services help ensure the company's financial operations are handled accurately and efficiently, allowing the founders and core team to focus on growing the business.??
Budgets at this stage of the business are generally small, therefore it is highly unlikely to see a full-time finance hire brought in-house. However, if strategic guidance from a senior professional is required, a Fractional Finance Leader is typically considered. This is most likely if the company is building up to a key milestone, such as a fundraise or geographical/product expansion and requires occasional support from someone who has been there and done it previously. You can find out about the?benefits?of hiring a Fractional CFO here. ?
Occasionally, we will support Seed startups with a full-time finance hire, as they are?past the point of trying to “create” a business and are instead busy “running a business”. These startups know they need someone on board, as they are craving more information from the data, to ensure they understand their runway, have a regular view of cashflow, and have an appropriate budget and financial plan to make the right strategic decisions. ? ?
Series A Finance Structure?
At the Series A stage, the finance team is often compact, with individuals managing multiple processes.?The structure is straightforward to accommodate the company's limited resources and needs, at this point the main focus is on developing their product and gaining initial traction. ?
Considering whether you need a more experienced CFO over a Finance Director can relate to your industry and revenue model, your founding teams skillset (and involvement in fundraising), your realistic growth trajectory, and the key milestones ahead.????
Industry sectors such as Marketplaces, E-commerce, Consumer Products, Retail, FinTech, some portion of SaaS ventures are likely to be international, high volume, low value transactional businesses with important FinOps processes to consider.?Meaning a hands-on Financial Controller / Head of Finance might be needed before you hire a CFO and if you need a CFO to deliver on key milestones then they will need headcount support to manage the?Financial Operations & Reporting.? ? Whereas, some industries such as AI, HealthTech, BioTech, AgriTech, InsurTech, FinTech will have significant R&D, Regulatory Approval or Product Development milestones to hit before launching let alone getting paying customers.?Therefore, there will be high stake decisions to be made regarding fundraising, capital allocation and strategic planning that will require an experienced VP Finance or CFO hire, before building out a team when needed.?
Unsure as to whether your company needs a CFO or Finance Director? Watch our insightful discussion with Seedrs, in which we dive into the different types of finance profiles that Founders can consider when they look to establish their first finance function.
Series B?Finance Structure?
?After a Series B fundraise, startups usually begin to scale their operations?which requires a more structured finance team to support the desired growth and attract further investment.? Hopefully at this stage, the finance team will be enhancing financial planning and analysis,?providing the company and investors with detailed reporting and supporting the leadership team with?visibility of data driven numbers and scenario planning and modelling.?
We have highlighted in the diagrams above the most common varieties of finance team structures in businesses of this size. There are several factors that affect how complex the structure of a team this size can be, such as industry/revenue model, founders' expertise, key future milestones and budget allowance. Understanding your company's current requirements, as well as the future 6-12month requirements, is key to building a finance function that can scale with the business, not just meet the immediate demands. ?
At this stage, the CFO or VP of Finance will be overseeing the strategic direction and financial health of the company, whilst managing an optimized team. Supporting them is the Financial Controller?/ Finance Director, who will oversee specific financial functions and manage operational financial processes.?
Series C Finance Structure?
By?Series C, the startup experiences significant growth, and the finance team becomes more specialized and segmented. Each function within the finance department is usually divided into sub-functions managed by different leaders.?The requirement for a strong CFO/VP of Finance to lead the finance function is far more prevalent now with an increasing number of internal reports and executive responsibilities. ?
This stage demands advanced financial planning and strategic partnerships, detailed financial analysis and reporting, and support for large-scale operations and potential public offerings.?Hence why experts specializing in tax, reporting, strategic finance and business intelligence, along with a Finance Director reporting directly into the CFO. ?
It is worth pointing out we have seen many other functions report directly to the CFO at this stage such as HR, Legal, Property, IT, BI and Operations.?
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Series C+ Finance Structure?
Onwards from the Series C+ stage, the company is typically?well-established, requiring a highly?focused?and layered finance team due to its complexity and scale. The finance department is divided into various sub-functions, each overseen by distinct leaders, ultimately headed up by an experienced CFO, who can navigate?the increased internal reports, executive responsibilities, and strategic financial decisions required at this level. ?
In this size business, the Head of People can now report to the CFO to ensure alignment between financial strategy and human resources. This alignment is critical for managing the costs associated with talent acquisition, retention, and development. By having the Head of People under the CFO, the company can better integrate workforce planning with financial planning, optimize employee-related expenses, and ensure that HR strategies support the company's overall financial goals. This structure also facilitates more effective budget management and strategic allocation of resources towards talent initiatives that drive growth and efficiency.?
Key Considerations for a New CFO?
As a new CFO, understanding and structuring the finance department should be part of your initial 90-day plan. So far, we’ve outlined the potential structures you could implement but here are some other essential things to consider?
Alignment with Business Goals - Ensure the finance team structure aligns with the company's strategic objectives. For instance, if the company's strategic objective is to increase profitability through cost reduction, you might prioritize the finance team's focus on budgeting, expense tracking, and financial analysis to identify areas for cost-saving initiatives.?
Industry and Company Size - Tailor the structure based on the industry and the size of the company. For example, a large multinational corporation operating in the technology sector may require a more intricate organizational structure with specialized teams, for areas such as tax compliance, international finance, and risk management. Whereas, a small startup in the retail industry may have a simpler structure with fewer layers of hierarchy.?
Centralization vs. Decentralization - Decide whether a centralized or decentralized model suits your company better. In a centralized structure, key financial functions such as budgeting, financial reporting, and treasury management are managed by a central finance team, providing consistency and control over financial operations. Conversely, a decentralized structure delegates financial responsibilities to individual business units or departments, allowing for greater autonomy and responsiveness to local needs.?
Remote vs. In-office Work - Consider whether your team will work remotely, in-office, or a hybrid model. Is your finance department equipped with robust remote collaboration tools? If so, you will be able to thrive in a remote work environment, otherwise a team that relies heavily on face-to-face interactions for brainstorming and problem-solving may prefer an in-office setup.?
Outsourcing vs. Insourcing - Determine which functions to outsource and which to keep in-house. Outsourcing certain functions such as payroll processing, IT support, or tax preparation can free up internal resources, reduce costs, and access specialized expertise. Conversely, critical functions like financial planning and analysis, strategic decision-making, and internal controls are typically kept in-house to maintain confidentiality, control, and alignment with organizational goals.?
Fractional vs Full-time Support:?Hiring fractional finance leaders allows the company to access expertise in specific areas without the commitment and overhead costs associated with full-time hires. Integrating fractional support into the finance function enhances resource optimization, fosters innovation, and accelerates decision-making, ultimately driving greater value for the company.?
Another consideration is the budget you have available for the different salaries finance leaders request - If you wish to understand the difference in compensation benchmarking for these senior roles, you can learn more in our UK Startup Salary Guide and NY Startup Salary Guide. ?
Evolving Role of the CFO?
The role of the CFO is constantly evolving and through our years of experience we’ve seen a gradual shift in the key priorities that they are being brought on board to deliver. Historically, CFOs focused on mitigating risks and ensuring compliance. Today, CFOs are viewed as the co-pilot to the CEO, driving financial growth and contributing to the business strategy.?Hence why they need to be educated on the impact they have when building out their finance team.
Since the start of 2021, we have had two distinct periods where the type of CFO we are being asked to find has been significantly different and we are moving slowly into the third phase.? ? From 2021 to Mid 2022 there was a major focus on raising capital and exploring every possible avenue of expansion & growth. So, Startups & Investors were looking for CFOs with a background in M&A, Strategy, Investment Banking, International expansion, Fundraising or Corporate Finance. Then from mid 2022 to early 2024 the significant focus for CFOs was?on cashflow management to extend runway and drive towards profitability. Therefore, a lot of Startups & Investors were?looking for experienced CFOs who have previously navigated challenging economic markets, led restructures, and have the character to challenge the business to make tough decisions.?
As we move into this third phase, the required skills from a CFO will also be reflected in the requirements they have in their team. Therefore, understanding what Founders and Investors want from the CFO 3.0, means you can build a team to support and reflect that. ?
If you are a senior finance leader aspiring to become a strategic business partner in your company, you may want to consider our Future CFO accelerator course that we run in partnership with GrowCFO. There are many paths you can take to reach the CFO position and through the Future CFO Programme you will gain the skills and support to help you get there with confidence.??
How is technology playing a part in the structure of finance teams???
A report by Versapay and PYMNTS found that nearly 93% of U.S. firms with at least $25 million in revenue are incorporating digital technologies into their accounting operations. This trend is transforming finance functions such as accounts receivable (AR) and accounts payable (AP), which traditionally involved significant manual work. As automation reduces the need for extensive staff in these areas, CFOs can build finance teams that can focus more on strategic planning and less on manual tasks. Historically rigid finance structures are becoming more agile and flexible, emphasizing the importance of autonomy and adaptability among finance professionals.?
Conclusion?
Understanding how to structure the finance team at each stage of business growth is crucial for the performance and success of the business. From the lean teams at the Seed stage to the highly specialized structures in Series C+ companies, aligning the finance team structure with the company's growth phase ensures optimal financial health and supports strategic objectives. As automation and technology continue to evolve, finance teams must also adapt to become more agile and efficient. ?
If you need support to assess or build your finance function, we welcome the opportunity to have a confidential conversation with you about the team you need for today and to reach future milestones.
As an expert in partnering with early-stage tech start-ups, feel free to get in touch if you require advice or are keen to hire that first or even second person for your finance function.
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