FinTech Platforms & Fractional CFOs: A Synergistic Relationship for Start-Ups

With more venture capital money available than ever before, start-ups have better resources to scale fast. And while pure topline growth used to be sufficient to keep VC investors happy, in recent years (and particularly since the start of the pandemic) most investors are also looking to ensure leaders have controls on gross margin, EBITDA, and the balance sheet, even in seed-stage businesses. This is why founders, especially those with more marketing or tech-first pedigrees, will turn to a fractional CFO (from firms like Rainbow CFO) if they don’t have a finance team member in-house to help with P&L ownership, budgeting, forecasting, and process/infrastructure implementation. 

A fractional CFO is a consultant that works with start-ups part-time to manage their financial wellness including budgeting, forecasting, setting up processes and systems, and overseeing its accounting function (whether in-house or also outsourced). Fractional CFOs are focused on go-forward strategy and “what will happen,” and typically work in parallel with an outsourced accounting firm, focused on owning actuals or “what already happened.” This powerful combination of resources is no longer a nice to have, but rather an expectation and requirement by savvy investors looking for proper management of their portfolio companies.

• Expertise at a fraction of the cost of a full-time hire

• Fresh eyes with insight into similar companies and P&Ls

• Existing relationships with banking and lending institutions

• Blunt accountability unbiased by the threat of losing a job

• Experience with the latest FinTech platforms and automation solutions

FinTech platforms and automated solutions allow a fractional CFO to be successful part-time in ways that just wouldn’t have been possible ten years ago.

FinTech is one of the hottest areas of tech right now, with SaaS platforms automating every dimension of finance including accounting, banking, FP&A, accounts payable, accounts receivable, and even debt financing. Options like this allow even a part-time CFO to oversee all areas of a company’s finance function and to: 

• Quickly review and approve payments

• Collect and follow up on receivables

• Forecast and manage cash

• Manage the cap table

• Secure interim funding solutions for start-ups in between rounds 

These solutions (think: QuickBooks, Rho, Carta, Bill.com, CashFlowTool) in your finance tech stack, paired with the expertise of a fractional CFO, offer leaders a truly transparent finance function with just a few hours of support per week.

While these recent developments in FinTech are incredibly valuable to fractional CFOs, fractional CFOs are actually just as critical to SaaS platforms providing user feedback, comparing against competitors, and bringing viable solutions to their clients. With paid ad costs through the roof this year, offering trials to finance experts to gain traction can be a far less expensive customer acquisition vehicle.

Fractional CFOs become trusted advisors to their clients, so if fractional CFOs truly love a tool, the adoption rate by their clients will far exceed that of cold calling and paid ads. As the world moves away from a strictly W2 workforce and manual accounting processes, the collaboration between these two groups will accelerate innovation exponentially, and costs to companies will come down dramatically.

For founders with limited resources and unsure of where to start, a fractional CFO paired with the right tools can enable the transparency needed to scale a business. In fact, this arrangement can in some cases be even more beneficial than leaping into hiring a full-time CFO right away. As someone who has worked as a full-time CFO, as I look back at my days as in that full-time capacity I realize now that I was: 

01

Focused only on one set of financial statements

02

Pulled into the weeds of any problem that had a dollar sign attached to it, distracting me from the 30,000-foot view

03

Had to conduct time-consuming RFP processes for new tools and services

04

Forced to play into internal company politics as a full-time employee seeking job security

05

Had to start from scratch in pursuing financing options whenever a cash need would arise

06

And, my time wasn’t scarce, so therefore not optimized

One year into my fractional journey and I’ve seen the light. The fractional CFO model is one that truly works optimally for clients, freelancers, SaaS tools, banks, VCs, and lending institutions. Such optimization is rare to find in the business world. It’s fueled by the progress being made in FinTech year after year and with the tools I’ve outlined, without which managing a company’s finance function on a part-time basis would be nearly impossible. Going forward, companies can leverage automation and part-time resources better than ever before to improve efficiency and achieve greater results.