But it helps to have your books in order.
Firstly, some context.
A few days ago, a founder reached out to me with a searching question. Their startup is looking for venture funding, and they are considering hiring a full-time CFO to help them. Is that needed?
The answer is categorically: no. You don’t need a CFO to raise a seed or pre-seed round. Only once you start to raise bigger rounds (Series A+), you’ll need someone to focus full-time on the finances.
So what do you need?
- control of your actuals
- a solid understanding of your projected burn rate
Solid accounting is the foundation
Firstly, you need a good bookkeeper to keep your books tidy. Payroll. VAT / Sales Tax. Issuing invoices, chasing receivables and paying suppliers. Yes – founders can do that. But every hour you spend doing that is an hour you don’t spend obsessing over how to serve customers. So get someone good to help you out on a part-time basis.
And don’t go for the lowest cost. Any $ you squeeze will come back to haunt you – when you least have time. Trust me, better to pay a few hundred $ more per month, and make sure your books are in order.
Having a good financial plan
If you raise money from investors, you must know your planned burn rate.
This means having a solid grasp of your planned costs.
But it’s not complicated. You can figure it all out in a simple spreadsheet.
The elements are:
- Staff costs (current and planned hires) + an uplift for tax and benefits,
- An allocation for AWS,
- A bit of travel expense,
- A line for software
- Some legal, accounting and insurance fees, and
- An allocation for your favourite coworking space.
By all means: add in your revenue projections and tie everything together in a P&L. But no need to overdo this. The important thing is that you have a good grasp of your burn rate, so you can project your runway. More complexity sometimes gets in the way of the key insights.
FD / CFO? Start with part-time
Once you are going, it’s a good idea to get a part-time Finance Director. Tax credits. Annual accounts. Forecasts. KPI tracking. With the right support, finance and accounting can be super helpful tools. So don’t hesitate to bring someone in for a few days a month to help take care of your financial matters.
And then, once you’ve scaled to Series A and a meaningful raise, it’s time to build out a proper finance team. Including a good CFO.
Until then – keep it lean!