Clara Chua | 17 January 2022
What are the key roles of a CFO in a tech startup?
The job descriptions in startup companies are not always easily defined. While carrying the importance of finance, a successful CFO is to play a value-creator role in building a dynamic tech company. Usually appointed to build the finance structure, verify general compliance, and prepare necessary statements – the startup would have matured enough and require more formalised roles, responsibilities and operations to keep progressing.
DigitalCFO Asia spoke with Jason Kwek, Finance Director at Speedoc, to find out more about the priorities of a finance leader in a tech-startup and how does the experience differ from leading in a multi national corporation (MNC).
Startup VS Corporate
A startup CFO would require more hands-on and involvement with the daily happenings of the company. It goes well-beyond managing finances such as the responsibility for the planning of growth, developing new relationships, driving measurable value and influencing higher management by driving metrics and presentation of results. There is a crucial need to balance the role of being an enforcer for the CEO against being a trusted advisor to the rest of the higher management.
In general, resource limitations are a lot more pronounced relative to mature companies. This makes attracting talent a challenge, especially in a market where tech salary inflation is high. Where financial management is concerned, the balancing short-term working capital and long-term growth needs also demands a lot more energy and attention from the CFO. Of course, the fun of making it all work against seemingly impossible is what keeps us going!Jason Kwek, Finance Director at Speedoc
In comparison to one from a larger organisation, which more focus would be on investor relations, deal-making, governance and financing of the different departments. A well established company would expect their CFO to deliver immediate value and play a part in long term objectives.
Specific Startup CFO Qualifications
According to the ex-president of PayPal, Jeff Jordon, there are a few key capabilities to put in mind while filling this important position:
- Ensure the potential CFO is knowledgeable in all aspects of the role, including treasury and tax functions, control responsibilities, A/P and A/R, and fundraising. Ideally these tasks will be delegated across various people initially, but they will all fall under the scope of the CFO.
- A CFO should be equally skilled in their ability to assess a startup’s current financial state to ensure that day to day decisions are made based on accurate data as well as experience in future planning and projections.
- To differentiate a great CFO, their main goal is to work with leaders and employees to advance the company further. By acting as a true leadership partner rather than simply outsourcing their tasks to someone with a limited financial background can truly make a big difference.
- Someone who has experience in leading an audit process, managing transactions, and being responsible for other critical financial processes in previous positions.
- Being a strong communicator. Understanding the numbers is one aspect, but the importance is in communicating these to employees, executives and the board. There has to be that ability in translating and adapting the language effectively for everyone.
Jason believes that the priority of this role would be to provide the business with sufficient liquidity and financial resources to achieve its strategic objectives, along with ensuring that processes and infrastructure are also evolving with the growth of the business so that the startup can sustainably scale and grow.
The Next Step
Startups have the pressures of short-term survival to worry about, they may often forget about long-term issues such as managing debt and investing proceeds. A trained CFO would have the ability to develop and implement strategies from how to deal with rough financial periods to the best ways to handle explosive growth.
In the beginning it is also expected for the CFO to personally do the daily finance work. However to work as a strategic leader, delegating day-to-day operations would provide time for strategy planning and execution. The process of hiring and onboarding will not only take significant time but effort as well. Choosing a strong and trustable financial controller would be an important decision and a great next step in creating a finance team.
According to Jason, besides the usual suspects like AI and enterprise tech, a world that is transitioning to a covid-endemic world has also driven more activity in the health-tech sector. Consumers are more open to tech-enabled digital healthcare solutions, and this has created opportunities for start-ups to challenge traditional healthcare models. For example, Baxter International, Cardinal Health and Global Medical Response are leading a $110 million investment into the technology company Medically Home to advance a new healthcare delivery model that delivers “advanced care” typically available inside a hospital into patient homes.
Once a dependable team is formed and is working closely, another role that a CFO has is partnering with the CEO in growing the business. This results in formulating a company’s strategy varying from capital allocation, sales compensation strategy, pricing strategy, process improvements and fundraising.
Lastly, investing in digital technology will be vital in managing complexity and driving productivity. While automated reporting and analytics will allow more time to be dedicated to forecasting and analysis, its effectiveness depends on the accuracy, availability, and consistency of data.