By Dave Rosenberg, Head of Marketing, EMEA, Oracle NetSuite 

The number of ambitious startups continues to grow, with hundreds daring to turn their dreams into reality. In the first quarter of 2021, nearly 100 startups were founded every hour in the UK. 

Competition for funding is fierce, and with countless startups entering the race, VC firms are allowed to be picky. So, how can entrepreneurs give themselves the best chance to secure funding in the current market?  

Startups need to make each investor pitch count, and a huge part of this requires them to get their financial ‘ducks’ in a row. Whilst founders may have great ideas, they might not be as in tune with finances as they need to be. 

The obvious solution would be to hire a CFO, but that can seem like a cost difficult to justify. 

Enter the fractional CFO: a part-time financial expert.

Hiring a fractional CFO – someone who manages finances for numerous companies as required – makes a lot of sense. The cost is more manageable, and their expertise can be brought in as necessary for crucial business milestones. 

Fast-growing startups are investing in fractional CFOs to help them tidy up their financial processes, prepare for funding rounds, or assist in their next development stage. Here are three reasons why hiring a fractional CFO can bring huge benefits to a startup. 

1. Investor Credibility 

Startups need to be able to juggle both financial leadership and infrastructure to secure quality investments and continue to grow. The initial ability to manage finances with one bookkeeper is often short-lived – startups need a true accounting function that can offer investors accurate insight into the state of the business. 

Investors have high expectations and are sticklers for details: How does the company handle deferred revenue? Can you account for equity? What are the costs of R&D, sales, and marketing? 

More than ever, startups are beginning to utilise the expertise of the fractional CFO to help set up the right accounting system for continued growth and success. 

2. An Impressive Financial Model

A lot of founders often (understandably) direct their energy into developing their products and building sales rather than deep diving into customer churn, profit and loss trends and robust growth plans. It is imperative to understand your skills and recognise when you might need some assistance.

Most fractional CFOs can be expected to have a huge amount of past experience from multiple organisations and will bring valuable insights and skills in venture capital and private equity. This makes them ideally placed to enable superior planning, forecasting and fundraising, meaning board-level insights without the need for a full-time CFO that comes with associated costs and sometimes a board seat too.

3. Successful Long-Term Growth 

A Fractional CFO’s extensive knowledge can also be applied from an objective stance and be exactly what those who are emotionally involved in a startup need to revise current strategies during different phases of business maturity.

For instance, the freemium approach is regularly used to draw customers in at the pre-revenue stage; the fractional CFO may then help to push a new subscription model or product line for continued growth. 

Emotional investment can make it difficult to be subjective when making big decisions too, so be open and embrace their advice when it comes to preparing forecasts, new models to rescale or revisiting your total addressable market. 

A Rightful Boom in Popularity

The fractional CFO is not yet completely mainstream, but they are increasingly in demand. Investors are after transparency, reassurance, and returns; in a time when opportunities are plentiful, but markets remain unpredictable.

The influx of startups is not showing signs of slowing down, and a fractional CFO is a great idea for those with big plans at crucial times of development for maximum growth.