The Importance of Finance Teams in Fintech Startups
Many financial technology startups face inevitable challenges that can lead to failure. A common pitfall is the neglect of their finance team. During previous fundraising booms, some startups took years before making their first financial hire, a decision criticized by finance leaders in the fintech space.
Strategic Hiring: The First CFO Matters
Adam Swiecicki, the former CFO of Brex and current CFO of Rippling, advocates for prioritizing strategic finance experiences. In a recent podcast with Kleiner Perkins, he emphasized that hiring someone with a strong finance background should be the first step for any fintech startup. He suggests looking for a “generalist Swiss army knife” who has experience in banking or private equity. This hire can serve as a valuable thought partner for the CEO and spot growth opportunities early on.
The Role of a CFO in Startups
Michael Miao, a former Deutsche Bank investment banker and now vice president of finance at Glean, agrees with Swiecicki. He stresses that finance functions in startups extend beyond basic accounting. CFO roles involve critical thinking and the ability to interpret complex data, a skill he refers to as being a “general financial athlete.” Miao recommends proficiency in tools like Google Sheets to manage financial data effectively.
Hiring Trends: Split CFO Models
Startups are increasingly adopting the model of “split CFOs” – part-time finance leaders who manage several startups simultaneously. This approach, however, has drawn skepticism. Kirsty MacDonald from JamJar Investments noted at the Sifted Summit that hiring full-time financial managers is more effective. She believes in enticing top talent with exciting and challenging roles in fintech.
The Allure of Equity Compensation
For many professionals transitioning from banking to fintech, the opportunity to receive equity is enticing. However, the later one joins a startup, the lesser the equity stake. According to Peter Walker from Carta, the initial hire often represents about 1.5% of the company’s equity, a figure that plummets to just 0.3% by the sixth hire. This highlights the necessity of hiring elite finance professionals early in the startup phase.
Conclusion: Prioritizing Finance in Fintech
If fintech startups aspire to strengthen their financial operations, they must heed the advice of experts like Swiecicki and Miao. Early hiring of skilled finance professionals isn’t just beneficial—it’s essential for long-term success. By focusing on strategic finance roles, fintech startups can pave the way for sustainable growth and innovative solutions.
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