The Evolving CFO (Skills Required for a PE-Backed Business)

FinTech, InsurTech, BioTech, AgriTech, HealthTech – whatever Tech sector your involved in, you can be sure you’re in one of the most ground-breaking and evolving industries. Ambitious start-ups and scale-ups are using technology to drive innovation across all business sectors, from production to improving tools with AI. Consequently, these businesses attract significant PE/VC investment. With this increased funding comes additional challenges, and an experienced CFO is pivotal for long-term success.

The Evolving Role of the CFO

The role of the CFO is changing. Investment needs to be managed correctly, vital decisions must be made based on data-driven forecasts, and robust long-term plans need to be developed with an agile approach.

Below, we’ll look at how the CFO is evolving, particularly for modern tech businesses. We will highlight some of the traditional skills that remain vital, and some fundamental skills required in a fast-growth business:

Traditional Skills

All the skills above are, and always will be, key for a growing business. The tech industry is exciting and fast-paced, but start-ups and scale-ups need solid financial foundations to ensure sustained long-term growth. Here’s a breakdown of each skill a CFO needs to support a business’s growth ambitions:

• Accounting: Reliable accounting and financial control are central to any business, particularly evident when fundraising is required. Maintaining positive cash flow and full transparency to investors, having organised financial accounts and records for review by external stakeholders, provides confidence and credibility.
• Budgeting: Accurate and effective budgeting provides the ability to maximise financial resources and increase profitability. This allows the business to prioritise resources, manage outgoings, and clearly know its financial position, enabling growth with confidence.
• Fundraising: Investment is key for any growing business. CFOs need to be able to secure funding, manage relationships, and understand complex contracts to benefit the business, ultimately driving significant growth.

Modern Skills

The responsibilities outlined above remain crucial. However, modern tech companies are constantly pushing for innovation, pursuing additional growth, and managing increased PE investment. This requires adaptable and dynamic finance leaders. Here are some key areas of expertise that CFOs need in a PE-backed business:

• Financial Reporting: Highly detailed and accurate financial reports allow companies to monitor performance and identify opportunities and risks. Providing full analysis on revenue, expenses, liabilities, etc., is vital for financial stability. Consistent reporting keeps the business focused on key objectives and leads to effective decision-making.
• Financial Modelling and Forecasting: This provides the ability to map out various financial scenarios, identifying opportunities and risks. Using financial data models (utilising historical data and new financial insights), scenario planning and risk analysis can show growth trajectories and potential exit options for PE backers.
• Data Analysis: While data analysis has always been key within the role of CFO, it now needs to be taken a step further. CFOs have to remain agile and use data to inform both short and long-term thinking. Constantly reviewing key metrics on efficiencies and performance is essential.
• Understanding the Tech Landscape: Although obvious, CFOs need to have a deep knowledge of their sector. New tech businesses can be very complex, and start-ups/scale-ups need experienced professionals for critical business decisions. Effective CFOs must understand the relevant sector regulations, dynamics of partners and vendors, while being able to drive growth in very competitive markets.
• Business Leadership and Management: CFOs are expected to grow an effective and efficient finance team, work proactively with recruitment partners, provide support and training, and improve and streamline financial processes to increase productivity.

Conclusion

The tech industry is evolving at a rapid pace, and the role of a tech CFO is evolving equally quickly. While traditional skills remain important, new start-up and scale-up businesses need a CFO who can lead fundraising, manage and use complex data, drive growth, and establish a high-performing team.

With an agile CFO in place, your company will take advantage of increased investment, maximise profitability, and generate long-term growth.

If you’re a start-up or scale-up business and you’re keen to build out your finance team, reach out to Scott Eccles for expert support.

scott.eccles@iconicresourcing.com