Recruiting a CFO with Venture Capital Experience

Venture capital investing is changing. The landscape is becoming more grounded with increasing regulatory scrutiny making the industry harder to manoeuvre. There are a growing number of non-traditional investors entering the market, offering companies the opportunity to access funding at a new scale with the deal-making process becoming more commoditised and increasingly competitive. It’s why organisations are increasingly choosing to recruit a CFO with VC experience to steer the ship.

This appointment can feel like an odd match. CFOs operate on data, rules, and guarantees – while the venture capital industry deals in growth and faith. Concepts that seem at odds with the natural ethos of CFOs. However, this is exactly why companies are choosing to bring CFOs on board who have prior experience working with private investors.

VC deals are increasingly becoming time pressured with deal sourcing and due diligence falling short due to the work involved. It often results in poorly made investments based on little information or with less favourable terms or less control for the organisation in question. Strategies that focus on compounding returns lack the analytical tools required to provide the financial transparency that both the company and investors need.

Enter the VC CFO. They’re uniquely positioned as the CEO’s second in command to act as a bridge between the venture capitalists and the company’s leadership team. They are uniquely positioned to consult traditional financial intuitions and venture capitalists alike.

CFOs with venture capital experience will be familiar with all seven stages of the VC lifecycle, from pre-seed to exit. They’re uniquely positioned to guide companies through the process from stage one with an exit-focused mindset that protects the company’s value or drives growth value for a better investor story.

At FD Capital, we connect companies with CFOs who have a proven track record of working with venture capital. We’re exploring the importance of recruiting a CFO with venture capital experience, the challenges they face, and why you might want to consider hiring a fractional CFO.

CFOs are vital players in the world of venture capital. They have one of the most demanding and challenging roles within their company and maintain a high-level view of the organisation. CFOs with venture capital experience will know how to extract value from their company, both for their organisation’s benefit and to create a more attractive investor story.

These CFOs will still be responsible for tracking KPIs, overseeing the company’s financial health, and executing the investment deal with the venture capitalists. They operate at a fast pace, matching the needs of stakeholders on all sides. Venture capitalists will typically engage more with a company’s CFO than its CEO, expecting them to provide financial transparency while offering a fresh perspective on the organisation that includes not being afraid to challenge the status quo.

CFOs with venture capital experience are acutely familiar with the challenges faced by companies that are privately funded. Their unique insights make them a leader within their organisation, driving change and growth for the benefit of both the company and its investors. They’ll act as a collaborative CFO, engaging with stakeholders and articulating the company’s vision and exit strategy.

CFOs who work for companies funded by venture capitalists face a unique set of challenges. Their position requires them to ensure that the company is operating at its maximal efficiency while taking a greater operational role to ensure technological investments produce optimal value generation.

Most venture capital investments have a holding period of 5 to 7 years, requiring CFOs to be forward-thinking in their strategy. Stakeholder management is vital for CFOs within venture capital-funded organisations, feeding into their strategy and execution. It’s not uncommon for these CFOs to come from consultancy and entrepreneurial backgrounds, providing them with the unique assortment of soft skills and hands-on experience required to face the challenges involved with venture capital funding.

The role of CFO is evolving at record speed and its visible within companies that are funded by venture capital. A venture capital CFO is a ‘Chief Future Officer’. It’s their responsibility to oversee the strategic and operational future of the company to ensure a successful exit and positive investor story.

SaaS companies and start-ups seeking venture capital investment are increasingly recruiting interim and fractional CFOs to bring a forward-thinking approach to their organisation. These CFOs are required to provide data-driven insights and strengthen the financial structure and reporting of the company ahead of pitching to venture capitalists.

CFOs sit at the heart of a company’s strategy. They’re uniquely positioned as one of the only individuals to engage with every department within the organisation while working with internal and external partners. A CFO provides credibility to organisations, both with traditional financial institutions and private equity investors.

The work of a CFO includes future-proof the organisation and ensuring that the company is evolving with technological and industry evolution. Today’s CFOs are increasingly becoming digital natives, leveraging AI and automation to put the most efficient systems in place to create leaner organisations.

Funding can make or break a start-up or SME. SaaS companies and those within emerging industries increasingly rely on their CFO to provide financial credibility and stability to potential investors. Most venture capitalist firms will require a company to have a CFO on board before pitching to them. A CFO with venture capital experience will make your company more attractive to potential investors by ensuring them that you have the right management and leadership in place.

CFOs with VC experience will ensure that regulations are met and will act as financial translators, providing transparency on the company’s finances to the VC firm, while ensuring that their organisation is getting the best deal by showcasing as much value as possible.

Data will make or break a venture capital deal. The increasing pool of venture capitalist firms means that data is becoming an even more vital component in the decision-making process. Data and financial transparency are integral to winning over venture capitalists.

CFOs with venture capital experience will enter a company by examining its current financial reporting practices and determining whether data is being gathered appropriately. Venture capitalists want access to real-time data and forecasting, while CEOs also require this information to ground their decision-making process.

A CFO will want to implement data transparency throughout their company, ensuring that their organisation is operating as a well-oiled machine with every penny accounted for with adequate cash flow management. Data forecasting can ensure that the CFO is able to accurately translate the company’s value and potential to venture capital firms to secure the best investment terms possible.

CFOs are venturing outside their finance department to engage with every aspect of the business to ensure that data is being gathered and processed effectively. This function is driving more VC CFOs to engage with technological support, including investing in AI and automation to make data gathering and analysis less labour-intensive. It provides more value to the company and creates more robust financial forecasting while enabling the company to be proactive in its strategy.

Venture capitalists also want to see CFOs who are data-driven and can provide financial transparency on behalf of their company. This level of transparency enables portfolio management to be more data-driven on the part of venture capital firms. They’re able to make more informed decisions when making new investments and can term the viability of follow-on investments by analysing data following pre-determined KPIs.

CFOs who invest in data transparency can incorporate more effective reporting to their venture capital investors and ensure that the company continues to receive favourable terms throughout the lifespan of the investment.

VC CFOs are driving incremental change within the industry as more non-traditional investors enter the space, putting pressure on the industry. Data transparency can help to foster trust between a company and its venture capitalist investors, enabling the CFO to act as a bridge and communicator between the two.

Not every company will want to recruit a CFO with venture capitalist experience on a full-time contract. Hiring a part-time CFO can be a more cost-effective option, particularly for organisations that are preparing their company for exploring venture capitalist fundraising.

Start-ups and SMEs aren’t always able to hire a full-time CFO due to financial restraints. C-suite executives come with a premium salary, making a part-time position the ideal way to invest in a CFO without the burden of a full-time C-suite salary.

The CFO will provide credibility to the business, regardless of whether they’re operating on a full-time or part-time basis. The company also has the freedom to decide whether to transition the CFO to a full-time contract as part of the terms of their venture capitalist agreement once the investment is secured.

Here are three key benefits of recruiting a part-time VC CFO: