Quite simply, a good CFO can be the difference between your company being a real company and not being one.
What do I mean by that?
A CFO creates a financial model when you start, but this is a living and breathing document. It changes as you grow, get revenue, lose or gain clients, add employees – anything really.
It’s a forecast in one sense, but it also needs to be adjusted based on the reality of your business.
Heres a hypothetical situation (that is unfortunately all to familiar to the VCs out there:)
A company hires someone to do their Financial Model when they get funding. This model is designed for two years of runway on a $2M investment.
Money from the VC is deposited into the bank, and away they go.
As the team is running lean, they don’t bother to have a CFO or even a bookkeeper on staff, because theres apps for payroll and you can get Xero and Stripe so they’ll be all good to take money in and pay it out.
Wow there’s this awesome new office that opened up right downtown and it has access to a gym and a roof pool and free dry cleaning and they even allow dogs!!!! At $15000 a month how could we not!!!
Dude theres this amazing programmer from google we have to have. He’s a steal at $175K + equity.
Everyone else is offering free lunches, lets make it free sushi!!!!
Somewhere around the one year mark, they start to wonder why their company credit cards stop working. They check the bank and, hmm, it’s drained out. What could have happened?!
They call the person who created the model and complain that they did it wrong.
Not everyone is like this – but some are.
Having someone there who can keep you on track financially is actually more important in my opinion than having a CTO.
I would actually place the order of importance in an early stage tech company at this:
- CEO – create the vision, and find a way to finance it
- CFO – keep the money flowing
- CMO – find your customers and determine their needs
- CTO – build something your customers want within the scope of the vision
Originally Posted: https://www.quora.com/What-are-some-examples-of-where-a-good-Chief-Financial-Officer-can-have-a-major-impact-on-a-tech-startup
Originally Posted On: 2016-03-18