Start-Ups Need Financial Executives to Break Through

by FEI Daily Staff

As a company grows, leaders play a key role in setting broader strategic goals and establishing financial and non-financial milestones.

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CFOs and senior financial executives are they key ingredient for successful start ups looking to break through in a highly competitive and frothy market, according to a new report from the Financial Executives Research Foundation (FERF). FERF’s research, sponsored by Protiviti, found these leaders play key roles in not only managing a young and fast-growing company’s finances, but also in setting broader strategic goals and establishing and achieving financial and non-financial milestones. Further, as companies grow, the need for this financial and strategic acumen becomes more acute.

Investor interest remains strong in the start-up economy. According to the National Venture Capital Association, venture capital investments totaled $69.1 billion in 2016, the second-highest amount (behind only 2015) in the past 11 years. More than 7,350 companies raised capital in 8,136 reported transactions

But all that capital floating around, financial executives are often the "adults in the room" looking out for the long-term interests of the organization.

“It’s very much like raising children,” says Mark Borman, a board member at several companies, who says he began working with start-ups after a series of corporate positions ended with mergers or acquisitions. “A one-year-old startup requires a lot of care and investment to get it to grow to the next stage of life. A five-year-old has another set of issues to grow it to become a successful adult company.

Other key findings include:

  • CFOs are critical to raising capital, either through venture capital funding, private investments or private equity investments
  • Establishing sound reporting systems and tools can allow for improved reporting metrics and communication to investors
  • CFOs are playing an essential role in setting and monitoring company strategy, and maintaining balance between investing in growth, building market share and preserving capital for future opportunities
The report is based on interviews with 17 subject matter experts on financial management best practices, company management and Board advisors, across industries. The report is available by visiting the online FERF bookstore.