The Flight Path to Startup Success
Charting Your Course from the Back Office
Preface
In the fast-paced world of startups, prioritizing product development, customer acquisition, and scaling operations is pivotal. Yet, amidst the hustle, one aspect often overlooked is the establishment of a solid back office infrastructure. As we'll explore in this conversation, having efficient systems in place for financial management, compliance, and operational support is not just a nicety – it's a critical component for long-term success. From managing cash flow to fostering strong partnerships between teams, the strength of a startup's infrastructure can ultimately determine its ability to navigate challenges, seize opportunities, and thrive in a competitive landscape.
In this edition of F is for Founders I got the chance to chat with Alex Wittenberg, CEO of airCFO, an accounting, finance, people operations, and tax partner for startups. Our conversation focuses on how to set up a strong back-office infrastructure for your startup and the priorities to keep in mind as the company evolves. Alex and his team have partnered with over 300 top venture-backed startups, taking them through financing rounds and M&A transactions.
What should founders look for when they’re choosing a finance partner?
When picking a finance partner, look for those who've been in the trenches with startups at all phases and have the flexibility to tweak their offerings to meet your unique needs. It's about finding a partner who's not stuck in their ways but instead crafts solutions that fit your specific situation. Partner with a team that's all in on using tech to streamline processes. This approach should be a non-negotiable for startups, as it makes the most of an early-stage company’s limited time and resources. Go for a partner armed with deep know-how, a flexible mindset, and a talent for harnessing the latest tech to empower your startup's rise.
When you start a company, what should be the highest priority, and what should be the priority as it evolves?
Don’t get too caught up in building a complex back office right away – it’s a bit much for the beginning stages and not the best use of your time. Stick to the essentials: set up a straightforward accounting system (we prefer QuickBooks Online) to keep the IRS off your back. Layer on tools like Mercury, Ramp, and maybe Gusto or Rippling for handling payroll and finances. These tools cut down on your administrative burden, letting you focus on the bigger picture. The goal is to keep your financials tidy with the least amount of hassle, all while keeping a close eye on your spending and cash runway. This approach will keep you on track financially without bogging you down in details that can wait until you’ve validated your concept.
When does a founder go from doing basic setup themselves to working with airCFO?
Founders typically engage with airCFO when they raise their first round of funding, which could range from a pre-seed round to a friends and family round. This transition often occurs when the company secures a significant amount of funding, such as between $500k to $2 million. At this stage, founders may realize the need for professional financial services to manage their growing financial complexities and ensure compliance. airCFO offers services tailored to startups at this stage, providing support with financial management, bookkeeping, and strategic planning. The monthly cost for airCFO's services typically ranges from $300 to $500, making it an accessible option for startups looking to streamline their financial operations and focus on growth.
When should founders consider bringing in a CFO in-house?
It really depends on the type of business a founder is building. A ‘straightforward’ B2B SaaS startup can probably get by with the support of a fractional CFO through their Series B or even further, while a startup with a complex business model might want to hire their first Finance leader after their Series A. One key thing to consider: a CFO will not be effective without access to a clear set of financials, so it’s important to make sure your systems are clean & organized before expecting a Finance leader to make an impact on your business.
What can founders do to be good partners to their back office team?
To be good partners to their back office team, founders should consider them a part of their in-house team. It’s the little things: being responsive and communicative when the back office team requires information, and being a reasonably pleasant person to work with. By following this ‘golden rule’, a founder will have a much more productive relationship with their back office team and a better experience all around.
Where do you see founders make mistakes the most often?
One common mistake founders often make is ignoring or deprioritizing the development of internal infrastructure within their companies. This oversight can be particularly prevalent during the “Launchpad” phase, where there may be a rush to get products or services to market quickly. However, neglecting to build out essential internal systems and processes can handicap the company's ability to operate efficiently and reduce its chances of long-term success. Understanding the ins and outs of the company's operations through robust infrastructure allows founders to make better-informed decisions and actively contribute to the company's success. Even tasks as seemingly mundane as producing monthly financial reports can have a significant impact on the company's ability to track performance and make strategic decisions. You can’t go wrong if you set up your back office optimally!
Are there any AirCFO resources you would recommend founders use to get started?
Yes! Check out our back-office roadmap here. This is a great resource to have in your back pocket, especially for those who haven’t yet raised funding but are on their way. It’ll help you set up your processes so by the time you are ready to work with airCFO (or a finance partner), you’ve got everything set up!
About airCFO:
airCFO is an accounting, finance, people operations, and tax partner for venture-backed startups. We’ve helped 300+ companies raise nearly $2B in funding and supported founders from Day 1 through to exit. Our team helps you know what's ahead and keeps your back office in order so your team can focus on what they do best.
If you would like to connect with airCFO about partnering, schedule a call here.