Hiring Your Finance Team: A Blueprint for Getting the Order Right

👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics, my weekly newsletter where I unpack how the world’s best CFOs and business experts use metrics to make better decisions.

This is a question I get from business leaders across all stages.

Here’s the blueprint for hiring (and scaling) your finance team.

The rise of specialized SMB fintech tools and platforms (e.g., Mercury, Gusto, QuickBooks Online) have made it easier for early-stage startups to manage finances without in-house staff.

I once heard of a company (OK, it was FitBit) who used QuickBooks through $300m in revenue. That’s gotta be a world record!

Anecdotally, I’ve heard of tech companies relying on fractional support through $25M in ARR. That’s certainly the top end, but it shows that you can rely upon fractional support for longer, allowing the company more headroom to make critical hires within G&A for HR and Recruiting.

The days have changed where you bring a heavy handed accounting hire in-house first. Accounting can remain a flex resource if you find the right firm.

The world has shifted priorities from traditional finance roles to more strategic, data-driven positions that can support rapid scaling and fundraising efforts, and bridge the gap between finance and ops.

This person should come from a finance, biz ops, or investment banking background. They’ll need to be great at financial modeling and can help the founder incorporate data into decisions. They’ll also be instrumental in helping to raise the Series A or B round.

A quote from a VC friend below:

Don’t get me wrong - I love me some accounting. In fact, I show a heavy investment at later stages. It’s just the timing that matters if you want to get your finance function humming on all cylinders.

The Head of Finance is probably equivalent to a Director level at most later stage companies, with a hunger to move up the ranks, build something, and push the pace. There’s potential for this spot to get filled by the “first business hire” we previously touched on. To succeed, they ideally have some sort of FP&A background to mature the short term and long term operating model.

After picking a Head of Finance, their first job is typically to usually hire an Accounting Manager. That role will be their closest business partner in the early days, establishing a rhythm of how cash enters and leaves the building.

The full blown “Controller” role is being hired less and less early on. Instead firms are waiting until later (as we address below) to hire a VP of Accounting.

If the Head of Finance comes from an FP&A background, they can usually be a player coach for a while, building out the operating plan and doing the variance analysis themselves. But eventually they’ll want the support of an FP&A Manager to help them scale the budgeting process and ensure department heads have enough ad hoc support.

I should also mention that the Head of Finance’s role involves not just hiring but also setting up the right financial infrastructure, including choosing the right financial software stack that can grow with the company. This is usually around the time the systems start to become more numerous and complex. Speaking of that…

You need different types of CFOs for different stages.

This is often something CEOs don’t like to talk about.

The first CFO needs the “build shit” type of execution, with a mop the floors mentality. This CFO can operate at jet speed to scale the business, and has enough story telling chops to fundraise.

This person is typically brought in from the outside, rather than promoted up from the Head of Finance.

In fact, from talking to my friend Eddie Ackerman, a finance operating partner at Thomvest, a whopping 84% of CFOs are hired from outside the company. This trend, anecdotally speaking, is often due to the rapid growth of startups, which leaves little room for nurturing internal talent to meet the demands of a Series C-level company. But some good news for those looking to make the leap to CFO - only 45% of the CFOs sampled had previously held a CFO role. This suggests that if you’re aspiring to be a CFO, applying for the role externally, especially if you possess the necessary experience, might be the most strategic approach.

Sometimes this initial CFO can learn and develop into the public company CFO, but in the vast majority of cases, someone with a playbook to get the company public market ready is brought in.

I’ve heard by several VCs that the unwritten rule of thumb all board members agree on, $75M in revenue is when you bring the first CFO. It’s a weird number I don’t really understand, to be honest.

I tend to think it can happen as early as $10M or $15M in revenue if:

As a company becomes more mature and the focus changes to cost efficiency, procurement is required to bring an Enterprise buying muscle. There are expensive pitfalls of not having a solid procurement strategy by the Series D stage, especially in tech companies where software and vendor costs can balloon quickly.

At this stage you start to notice how the cultural fit of finance hires evolve as the company scales, with early-stage employees needing to be more adaptable and hands-on, whereas later-stage employees may require more specialization and experience in a public company environment.

The public company CFO has relationships with the street and usually comes in 6 to 12 months before going public. It’s typically someone with an investor relations or capital markets background, whereas traditionally we saw more hires from Big 4 Accounting.

This CFO role is more about hiring the right people for specific roles (e.g., Tax, Technical Accounting, Financial Systems) and telling the company’s equity story, rather than pure execution.

A note on global firms - for startups considering international expansion, hiring a Director of Treasury or a Tax Director even earlier is a must.

Roles become increasingly specific (and incrementally expensive) as the company’s focus shifts to compliance, investor relations, and managing public market expectations. It’s common to add more C level execs to the CFO’s department, which may include tenured accounting, compliance, and legal professionals. CFOs usually become the keeper of all “back office” departments, and many times even own all the data reporting - from production, to sales, to financial.

There’s no single way to hire your finance team. But there are a million ways to get it wrong. This is a blueprint to hopefully getting it right. Keep in mind that different business models (e.g., marketplaces vs SaaS vs eCommerce) will call for slightly different ordering depending on revenue recognition and operational complexities.

A big thanks to Ivan Makarov, Partner at a16z, for reading drafts of this piece.