Survival skills for the start up CFO

difference between coaching and mentoring

Being CFO of an established enterprise is one thing – managing the finances of a start up entirely another.

There is no firm census of the number of start ups in Australia and in any case a blurring exists between start ups and any other new small business. What tends to distinguish a start up from a small business is that the former is generally digital and fast growing, but with a high risk profile.

Whatever their absolute number start ups are enjoying a boom period.

For example, Sydney’s Start Up Hub, funded by the NSW Government to the tune of $35 million will eventually be home to 2,500 start up employees. The city is already ranked 17th in the world for start up ecosystems by the Startup Genome index. Melbourne and Brisbane have similarly vibrant start up communities, and there are pockets of start up activity right around the nation.

Managing the financials of such enterprises demands specific skills according to KPMG entrepreneur-in-residence Alan Jones, who also works with tech accelerator BlueChilli. In the early days start ups tend to invest in technical skills rather than financial smarts, and when they do eventually seek out finance executives; “A lot of Aussie startups smash together CFO with COO role, or sometimes it’s CEO/CFO – it’s also common to outsource CFO to a third-party provider,” said Jones.

 They often “inherit a hell of a mess,” with financial data spread across different digital or cloud silos, but have only around a quarter year to fix the mess before investors start asking questions.

Jones said that being a start up CFO is not for the faint hearted. “People will be watching you with envy. They want to spectate and see if you succeed or fail.”

Damien Singh, is head of finance at Canva – an Australian start up “unicorn”, valued at more than $1 billion by its early investors.

Singh’s background is in audit but he says success in start ups needs more than technical skills.

“Accountants are quite a pessimistic bunch. You have to make sure that you don’t default to the no position – but make sure all the possible outcomes are known.” Singh has rolled out a high level risk framework to support Canva’s decision making process and says that a key part of his role is educating the founders about finance and risk.

He has also had to grow his team from three people to 15 in two years, and seeks people prepared to roll up their sleeves and get things done.

Besides the technical requirement to ensure a start up’s books are in order, finance teams need to ensure reports are filed on time, taxes are paid and R&D rebates claimed, and also to navigate fund raising, employee share ownership planning, and ultimately trade sales or share market floats.

Clare Hallam is a start up equity and growth structure coach – a CFO for hire in effect. She traces her experience with start ups back a decade when she signed on as a once a month book keeper to tech incubator Pollenizer before rising through its executive ranks.

She says that start up CFOs need to manage three pillars of the business – the numbers, equity and people. “You need enough of a skill set to guide the business to understand the difference between cashflow and P&L. the founders are predominantly focused on their runway.” Profitability often takes a back seat to cashflow.

Over time however Hallam said it was important that financial advisors steered start up founders through issues such as investor reporting, employee share ownership planning, capital raising and financial modelling to help navigate risks.

“You have got to be able to work with ambiguity and get comfortable with things working at a very fast pace.

“You probably won’t have a big team so pull your sleeves up and do some of the book keeping. And you need an open and learning mind because what works in a large organization may not be applicable in a small startup where the focus is surviving next week.”

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