Series A Isn’t Your Next Milestone
Every startup comes with a series of milestones. I use the word “series” almost ironically given how often I see milestones exclusively discussed in reference a company’s next series of financing. Though your next fundraise, KPI goals reached, and products developed represent huge milestones in your startup’s journey - one milestone I don’t see discussed with the same frequency and intensity is key hires. Why is this important?
It goes without saying that hiring your first CFO represents a large shift in the caliber of your finance department - though this is an easy position to ignore for very early-stage founders, and understandably so. If you are 6 months past your Series Seed raise and have 12 months of cash on-hand based on your current spend, that 18-month goal of launching a product strongly suggests that you have no room to expand beyond your current operating budget. And that absolutely may be the case. But even so, the inevitability of needing a strategic financial expert in your corner comes sooner than most would like to admit. A CFO cannot be written off as a part of your Series A milestone or a position you can think about once you have secured additional funding. Key hire milestones require intentional and early planning.
Practically, planning can start by looking at the market rate for the position you are looking to fill. Consider what you think your needs are (though a viable candidate will tell you what they are in the interview) and the associated cost with the hire. This does not just come down to salary. You, as the founder, will need to take the time to familiarize them with the business, train them, and allow for a couple of weeks before they are fully integrated. The direct costs may be that you have 2 less months of cash runway due to your new CFO’s salary, but the indirect cost may be a month less of your attention towards your product launch. Though this may be a daunting undertaking, knowing your new hire’s initial impact on your bottom line and company’s progression is essential. Learning the skills or engaging a service provider to create a cash model or multi-scenario runway analysis would be your clearest progression to accurately create a roadmap to that CFO hire. Once again, this may burden you, as the founder, with additional time or monetary requirements. Even so, the value of this process cannot be understated.
Now that you have measured the impact of this hire, timing is the only question that remains. Does filling this position make sense to pursue once more funding is received? Perhaps - if your industry demands your focus be placed on R&D and your window is tight enough. The question you may want to consider is - what is the value this hire offers before my Series A raise? A strategic financial partner can reduce operational burn, identify untapped revenue streams, and refine your ledger to withstand the intense due diligence process of institutional investors. If a founder’s primary resource is their continued focus on the product, consider the amount of diverted focus can be lost preparing for a fundraise. 2 months less cash and 1 month spent onboarding a new hire may be far less expensive than you think. Not to mention the confidence instilled by having a CFO at your side when asked about margins, lifetime value (LTV), and customer acquisition costs (CAC) by potential investors during your next fundraise period.
Though the trade-off of focusing on a key hire may be producing a minimum viable product that is less developed than hoped for - investors know that people are the engine of all companies. Having acquired an adept leader that can speak the language of your potential investors could very well make more of a difference than an ironed-out product. Don’t ignore the milestone of each hire, as this will ultimately be your business’s most common and most impact milestones throughout its journey.
