CFOs Wanted: Startups Lack Strong Financial Hands

Many startups were unable to access their funds during SVB's demise in part because they lacked CFOs.

Milo, the digital home-lending offering for global consumers, is hiring a chief financial officer (CFO). The startup’s recruiting ad on LinkedIn explains that the Miami-based company needs a hands-on CFO. Among a long list of skills, the applicant must be able to develop a strategy to raise capital, identify KPIs, and continuously build control systems to preserve company assets.

The Floridian startup, created in 2018, has survived without any such financial wizard. Still, the recent collapse of the Silicon Valley Bank (SVB) on which it heavily relied suggests that financial competency is essential.

Skilled CFOs would have encouraged their companies to diversify their banking accounts and not just rely on SVB. They would have educated their boards of directors on risk vulnerability and the viability of current funding sources. That’s at least what a recent mid-March Gartner survey suggests. In response to recent bank failures, 28% of 250 CFOs polled by the consultancy declare that they plan to diversify deposits across more banks. It is a “matter of urgency,” says Alexander Bant, Gartner’s chief of research.

CFOs at early-stage companies are rare. The Wall Street Journal estimates that 80% of startups don’t have a CFO. The position is seen as too expensive by many startups. And filling that slot hasn’t been a priority until a few months ago. Instead, the focus was to grow their businesses as quickly as possible.

The SVB misadventure reframed the debate. Stories of young founders anxiously awaiting funds transfers to other banks are revealing. When SVB failed, Rebundle’s CEO discovered that wiring thousands of dollars from its only bank wasn’t simple. Havoc Shield’s CEO needed an emergency board meeting to approve the temporary transfer to another account.

Many founders didn’t expect a downturn in the financial market. Investment capital was so quickly raised that they didn’t have contingency plans. As a result, they didn’t bother with fulfilling the position years before an IPO was launched. “A Series A startup doesn’t need a CFO,” insists Vanessa Kruze of Kruze Consulting, an expert in startup resources. Nevertheless, they should “consider hiring a part-time CFO before a new fundraising round.”