4 Steps For Hiring Your First Finance Leader For Your Startup
In today’s macro environment, founders are realizing just how important it is to have a strong finance leader working alongside them. For founders without this trusted partner, hiring the right person is mission-critical for their business to weather this downturn.
Recently, we’ve spoken with a number of founders who are hiring for their first Chief Financial Officer or VP of Finance and they’re asking us questions like, “what should this role look like?” For example, we worked with Greg Kirber, CEO of PartsTech (an OpenView portfolio company), to bring on their first finance leader, CJ Gustafson.
Greg knew the business needed a strategic leader who could add a level of maturity to the business’ financials. CJ’s background in private equity, FP&A, and investor relations made him a great fit for their team. It was helpful that Greg had clear expectations of what was required for this role and approached the search with an open mind, which ultimately led the team to meet with CJ and bring him on board as their first-time CFO.
As an executive recruiter on the talent team here at OpenView, I understand just how much the role of the finance leader has evolved and covers more than just cash management, especially at an early stage startup. Here are the steps we run through with founders to help them find the right finance leader for their startup.
Step 1: Identify what type of finance leader you need today
Historically, there are two types of financial leaders, the operations-focused leader and the strategic leader. However in today’s landscape there are many profiles for a finance hire ranging from “the engineer” to “the change agent.”
Our word of advice: try not to get caught up in all the buzzy titles of what this hire should look like. Instead ask yourself this grounding question: what does the business need today from this person? The answer will tend to skew towards one or the other—an operations-focused finance leader or a strategic finance leader. In a perfect world, this person would be a balance of the two but these types of candidates are even harder to come by. So it’s helpful to dig into what your business needs today.
For example, do you need your books closed quicker? Do you need more in-depth financial planning and analysis? Is your cash management in a healthy place? If you are asking these types of questions, the answers typically fall under the operational leader. Traditionally, an operations-focused finance leader will come from an accounting or auditing background. Their FP&A skills are sharp and they will know the ins and outs of a balance sheet.
As a founder, are you asking questions like:
- What KPIs do we need to focus on in order to maximize profitability?
- How do we increase net margins with our current customer base?
- What changes can we make to our business model?
- Should we be looking to make an acquisition within the next two years?
If so, chances are you are looking for someone with a strategic leader profile. A strategic finance leader’s background is not as black and white as the operational leader, we’ve seen strategic finance leaders go through rotational programs, come from consulting, investment banking or even from Venture funds or Private Equity.
Take CJ Gustafson’s background, for example. He started his finance career in PwC’s M&A practice, then went on to join a private equity firm before jumping into operator roles at Veeam Software and Snyk. He came from a strategic finance background, rose up the ranks through FP&A and touched other functions like investor relations.
A balance of the two profiles is the most ideal candidate, but finding a perfect finance leader that aligns with both of these profiles is like finding a unicorn. That’s why I advise founders to focus more on the needs of their business today to ensure they are able to find a candidate that meets those needs.
The right finance leader has the potential to grow with the company as it scales, even if they haven’t done that before. Additionally, you can switch to the other profile as a business matures, layer in an additional leader, or build a team around the hire.
Step 2: Figure out what seniority levels makes the most sense right now
This brings us to our next question, what level of seniority is right for your business? There are a few different levels when it comes to your first finance leader. We have seen founders hire director level, vice president level, and chief financial officers as their first finance hire. There is no right answer in terms of title and leadership. So, instead we go back to the question: what does your business need today?
For Series A companies, we most typically see senior director, head of, and vice president level hires. These types of candidates are used to operating with leaner teams and have an ability and willingness to be in the weeds.
As a business matures and raises additional capital to become a Series B-C, we typically see vice president and c-level titles and levels of leadership. These candidates have experience with building out teams and functions and tend to be more removed from the day-to-day tasks of closing the books. They also know how to report to a board and keep key stakeholders informed on the most critical parts of the business.
That said, you may want to consider the price associated with the level of leadership. For example, a CFO may require a higher level of cash and equity to come onboard.
It also depends on how hands-on you want this person to be within the business. If your first finance leader needs to be in the weeds and closing the books themselves in the first six months, a 3x CFO is going to be less inclined to do so.
Regardless of titles and level of leadership, the scope of the CFO/VP Finance role is broadening. Historically, this role was focused on closing the books and managing a balance sheet. But that’s changed. When we talk with founders these days about what they’re looking for in this role, they often describe this candidate as being a business partner to them. So, what does this really mean?
Step 3: Use this as an opportunity to re-think your role as founder
Early stage founders often have an overloaded reporting structure, which could be restructured with the addition of a finance leader. Most founders look to the finance leader to span across business units and take some of those direct reports over from the founder.
In some cases, we have seen financial leaders oversee IT, operations, and/or HR in addition to finance. For founders, this is extremely beneficial, and for potential candidates it’s appealing to be viewed as a partner to the founder or CEO. When the PartsTech team was hiring CJ, the ability to be a partner to Greg was one of his main reasons for him joining the team.
When hiring for this role, make sure to think about what, if any, additional business units will be reporting into this leader.
We recommend founders start by asking what projects and areas of the business are the most strategic use of their time. Then, founders can target candidates capable of taking over those other responsibilities. If a candidate is going to oversee HR, IT and Operations, these types of candidates should have managed one or two of these functional areas before. Be mindful that managing a team of 20 across three departments is very different from managing a team of three people in the finance department.
Step 4: Tap your network for potential candidates
We know just how challenging it is to recruit, hire, and bring onboard the right person for this role. You can take our experience and follow these steps to help you get closer to finding the right fit candidate.
While these steps can help you start, it goes without saying that you will want to start networking to find this unicorn for your business. Founders should be networking early and often with other founders for advice—as well as candidates.
So when the time comes, you’ve got a bench of talent and people you’ve built relationships with to bring onboard. Likewise, if they are not the right fit, they may know someone who is.
Prioritize time for networking, and lean on your early investors and your team for connections to talent. Here at OpenView, we spend a majority of our time making these connections and fostering relationships with leaders, even when there isn’t a role open in the portfolio. Many times, we see these introductions result in full time employees, advisors or even board members.
So here’s the TL;DR on how to hire your first finance hire:
- Focus on what your business needs today first and foremost. You’re building a business–and growing quickly. You’ll need someone who you can trust to execute.
- Talk to finance leaders from different backgrounds to understand which style of leader makes the most sense for right now.
- Make sure you’re aligned with market compensation benchmarks. If you’re not sure where to access benchmarks, ask your investors. We help the founders we work with determine the appropriate range based on their stage.
- Think about how your role as founder could change for the better with this new hire. Ask yourself, what takes up too much of your time today?
- Reflect on your own strengths and weaknesses and use that to inform the type of person for this role. Find ways for this leader to best compliment you.
- Always be networking. A shared connection from someone in your network could be the source of finding your finance unicorn.
- Lean on your investors and your network to help you find and connect to top talent. You’re not in this alone.
Whether it’s placing an executive hire or connecting you to a top-tier CMO, our talent team helps you remove hurdles to unlock growth. Learn more about the OpenView Expansion Team.
Note: PartsTech is an OpenView portfolio company. For a full list of OV portfolio companies, visit our Portfolio page.