CFO interview: Early Stage Start-ups

By Conny Lim


What you should understand before leading the finance function in an early stage Start-up?

Start-ups are constantly on a lookout for fundraising. In fact, "smart founders have adopted a new mantra: 'Always be fundraising,' written by Paul Martino in a Fortune commentary, "To optimize the seed process, Always Be Fundraising."

In most cases start-ups start with seed money and a short runway. The money raised by start-ups for the first time is the seed money. Considering income and expenses staying constant, the length as to how long a company can survive is the runway. Most founders tend to look only at burn rate (the gross spending or net loss), cash flow and runway (2 - 3 months). Some lack the time and professional discipline for proper financial management. Others are not wired to care about profits and bottomline.

This slack or inexperience is bound for a journey of red flags for a business’s long term sustainability and survival. And definitely raising the eyebrows for any trained financial and accounting professionals. What these founders actually need is to have a CFO in place to build the structure and processes for the healthier number crunching. And the founders can be freed to focus on product development, customer acquisition and other revenue-generating activities.

Read on if you are a finance professional keen on moving into an early stage company.

For this article, I (CL) had the pleasure to interview two finance professionals who have moved from MNCs to early stage companies:
Sarah Bak (SB), Head of Finance at Airmaker, an incubator and
Lilian Teo (LT), ex-CFO of Liquid Group, a Fintech start-up in Singapore.

CL: Describe the state of the early stage company when you first joined them.
SB: Airmaker has been operating for 7-8 months with some systems in place. It was a start-up at its infant phase still building its team and corporate network.
LT: I joined Liquid Group at a phase when the company was still developing its App, and building up its team and business models.

CL: What were your key responsibilities?
SB: I was involved in setting up processes and managing the incorporation of several start-ups.
LT: Besides my financial duties, I also worked closely with the tech team to develop the prototype and provided support to the merchant acquisition team.

CL: Why did you join a start-up?
SB: My spouse was previously on an overseas assignment, and we just returned from the overseas posting. The opportunity with Airmaker came timely which offered a 4 day work week. I gladly took on for a start.
LT: There is a hype on Fintech and tech start-up. I joined Liquid Group for its business idea was attractive and interesting, very much aligned to my career plans, to be part of this up and coming sector.

CL: How is working in the start-up compared to the MNCs you have worked with previously?
SB: Decision making is much swifter due to a flatter organisation structure. Where there were multiple levels of reporting in an MNC, here in start-up, each team member has greater autonomy as he/she owns a department/area of business.
LT: Proper corporate structures are in place at MNCS where we collaborated with different departments, and we made plans 2-3 years in advance. In a start-up, the environment is unstructured as we need to be nimble and decision-making lead time is faster.

CL: What are some of the challenges besides the lack of processes, resources and systems?
SB: MNCs has a wealth of internal resources to go to for advice and support while in a start-up, it requires effort/ research on our own.
LK: A start-up has to react very quickly to its operating environment in order to capture the market, and requires relatively more marketing effort to create market awareness compared to MNCs which have already built its brand name.

CL: How do you deal with the limited funding?
SB: All companies face the same issue. A business’s sustainability will have to depend on internally generated funds for the long run.
LT: Always work on your cash flow position and prioritise your outgoing funds whilst working closely with business partners on the revenue side.

CL: Would you stay in this space or move back to the corporate world? Why did you make this decision?
SB: I’m only 4 months into this space. I’ll stay and see how this evolves.
LT: Both have their respective attractions and challenges. Besides a start-up could also possibly exist in a MNC environment. I would not exclude myself from another start-up opportunity.

CL: What are the highlights of working in early stage companies?
SB: To be able to participate in ops (operations?) meeting. To be able to contribute in steering the direction of the business and/or its execution to a certain degree.
LT: I enjoy the fast pace and the opportunity to dip my hands in different aspect of the business in addition to my finance functions.

CL: What advice would you give to other finance practitioners who want to move into this space? What would be the biggest misconception about working in a start-up?
SB: Anticipate change and be proactive in learning and contributing. Working in start-up doesn’t mean it’s a loose setting with no structure. Many times, we need to be more pro-active in setting targets and deliverables. The working environment or working culture may seem ‘cooler’ with more flexibility but it doesn’t mean the pace of work is any slower than a MNC.
LT: Mindset. You need to think like an entrepreneur who is willing to take calculated risk, and forget about increment and bonus. The biggest misconception about working in a start-up is the wrong impression and expectation. Nowadays, it seems to be an ‘in’ thing to work in a start-up and a ‘cool’ place to work especially for the younger generation, but working in a start-up requires one to put in more effort and requires a lot of initiative as everyone is almost fire-fighting daily, sometimes you are very much on your own to handle a situation.

CL: It is important to hire a CFO with an entrepreneurial spirit to manage risk, build some structure and stand up to the Founder/CEO when the need arises. He/she should be able to plan ahead for a longer term period instead of 2-3 months which is common for many start-ups.

Don’t wait too long to hire one!

Feel free to reach out to me at [email protected] if you have questions.