When is the right time for a startup to add a CFO to their team?
Written by Cilff Scheffel on Jul 31, 2018
For the past 25 years, I have worked with early stage, venture-backed startups in a variety of technology fields as a search consultant. Over this time, the environment has become increasingly competitive and complex, but one constant has been the need for management talent who can deal with the chaos, focus on the priorities, and create a sense of order. One of the keys to getting this equation right is a qualified CFO.
Recently in a conversation with Jeff Epstein, an Operating Partner with Bessemer Ventures and former CFO of Oracle and DoubleClick, we reflected on how often we are asked the question, “When is the right time for a startup to add a CFO to the team?" This question comes from CEO’s, venture investors, and others within the venture talent community.
To help answer this question from an analytical point of view, rather than opinion, we decided to dig into the data and review 25 recent CFO searches. We found that companies typically hire a CFO for the first time, on average, when they reach:
Revenue of $25m, and
Revenue growth rate of 111%.
While not specifically related to the timing of the CFO hire, we found:
The CFO was awarded, on average, stock options of 1.2% of the company.
16 of the 25, or 56% received 100% stock acceleration for Change of Control, double trigger.
This report digs deeper into this question and analyzes a group of tech startups on the timing of their CFO hire – when and why.
Cliff is a partner in the technology practice at Lancor, focusing on a wide variety of sectors including software/SaaS, e-commerce, adtech, media, consumer internet and semiconductor. Cliff brings expertise in serving venture-backed operating and investment companies to Lancor’s national CFO practice. He has completed hundreds of CFO searches for VC backed companies and over 30 CFO/Administrative Partner searches for VC and PE investment firms.