Think & Grow Managing Partner, Dan Spencer, chats to Damon Hauenstein, CFO at Weel, to help aspiring finance leaders break into and navigate the start-up world. They also discuss how start-ups can attract people with the right skills and attributes to help them scale.
This is your first CFO role in a fast-growth tech business. How are you finding it?
I have to say, my initial impression of the CFO role was that it was going to be much more compliance-based and procedural in nature. But, this role is actually very strategic.
You spend a lot of time being a trusted partner to the CEO or founders of the business, helping them solve problems and scale the business.
I’d come from an advisory background, so I spent a lot of time looking at companies outside in. It’s great to finally be on the inside solving problems day-to-day and seeing those solutions right through to the end. I’m no longer just working on the periphery as you do when you’re an advisor. It’s an exciting time to be here with the changes happening around us and in tech.
There are two routes to become a CFO: accountancy and investment banking. What are some of the differences in characteristics of the CFO role that you’ve noticed?
I’ll share some career anecdotes to help answer this.
Many people believe that the natural path to CFO is through accounting, with a CA or CPA qualification. So, I found it harder to find my career path without that qualification because many hiring managers go straight for them. This is also because recruiters tend to look for these qualifications from a compliance perspective.
However, in this role, and I expect other start-up CFO roles, they tend to put a lot more value on the strategic elements. It’s worked out very well for me because with my investment banking role it was all about strategy, often taking a helicopter view of a business.
We are also seeing a shift in the market regarding CFO roles, and businesses looking for more leaders that fit your profile and background. From your interview process, is there any advice or insight you can share that you feel helped with your placement?
The obvious one is networking. I networked with peers and contacts who had made a similar transition. The most valuable ones had a similar background (investment banking) and seniority level to me, and they were pivoting across to being a CFO in a tech business. They knew the challenges and the things that worked well for them.
I was surprised by how much time people made to talk me through their experiences and process. Not to mention the amount of connections they introduced me to. I found those conversations really shaped what I was looking for and how to approach the search.
Have you noticed any differences in the role of the CFO in a tech business vs a non-tech business?
In the tech sector, there’s a lot of expectation on the CFO to manage a company’s growth potential. Growth, growth, growth is the only thing you talk about with investors. It does change the lens you view metrics and budgeting through. You’re always asking, “what will help this company grow?”
In a non-tech company, you spend more time focusing on what will generate profit rather than growth. Some of that has changed and moderated in recent times, as equity and market valuations have corrected and capital has become a little more constrained.
So, there’s a greater emphasis on how much cash you’re burning, sustainability and ways to extend the runway further, as opposed to simply making more profit.
What are the essential soft skills for a CFO in a fast-growth environment?
Empathy is the first one that comes to mind. In a fast-growth environment, you spend more time with the wider team, as opposed to sitting in an ivory tower sending off messages to the team to go and execute. You’re actually on the ground executing with the team. So, building those relationships is valuable to get that support back from the wider team to execute on your strategy.
You don’t have the luxury of more capital or a large army to get things done. You need to build close bonds and productive relationships with people.
You touched on it earlier, but how important is that CFO and CEO/founder relationship in a start-up? How do you ensure a tight partnership?
The single most important thing to do before taking on a CFO role in a fast-growth tech company is your due diligence. When I think about all the people I know who have made a similar transition to a CFO role in a fast-growth company, the element that’s contributed the most to whether they thrive or move on is that founder relationship.
I’d say it’s the biggest factor between success and failure in that role. My advice is to:
What’s the role a CFO plays with regard to retaining staff?
As a CFO, you’re looking at the numbers daily. You are going to be involved in those talent discussions, which means you need to understand the details of the business’ compensation budget.
That means knowing what human capital is crucial to execute on the business’ strategy and priorities, and where the knowledge or skills gaps and strengths are. Being across all of those things is important.
Good talent is always expensive. The cost of replacing good talent is huge. We are in an environment where people are talking about cutting perks to extend their cash runway. But keeping those people engaged in what you’re doing and committed to the cause is super important at a time like this. Continuing to invest in those functions is ultimately beneficial. We’ve had really low attrition after continuing to spend money on perks and benefits because we know those people will deliver for the business.
As a CFO you don’t have time to be across every micro decision. So, if you’re able to set up processes and a cultural environment where people act like owners and are responsible for their own spending without you, the CFO, needing to be involved in that approval process, it’s worth it. Everyone wins.
Educating the team on business priorities, how budgets operate and how the finance function operates helps people make better decisions and feel more empowered in their role, too.
What economic indicators do you think CFOs in fast-growth tech roles should be looking out for over the next 12 months?
The obvious one is valuations because in an environment where valuations are elevated, everything’s easier.
Inflation is also a big one. Your own input costs go up and your suppliers pass on their cost increases. Service providers are pushing through 10% price increases. Wage inflation puts pressure on you. Then looking at your own business model, understanding what your own ability is to pass through your increase costs.
The last one is the health of the underlying customer that you service and what challenges and opportunities they’re seeing and observing.
We’re hearing a lot about the preparation of the inevitable rebound. We’ve felt this decline in the market which continues to go down, but history has taught us that confidence does come back into the system. What advice do you have for CFOs to take advantage of this and move quickly when the time comes?
Learning to run a business in a tight economic environment is probably the best training to run a business in a growing economic environment. Get your business processes, procedures, systems and platforms all set up to hum in this environment, where things are tough. That should make it easier to bounce back quickly when the rest of the economy grows.
How does the CFO role evolve when a start-up or fast-growth tech business goes from outsourced accounting to an in-house CFO?
That kind of transition is different for every business. Being the CFO of a business selling to CFOs, it’s been incredibly important for me to share my own experiences with the wider business as we continue to build our product and grow our customer base.
It also depends on what stage you’re in and what the company goals are. For example, is it a strategic role or do you just need to just tick the boxes and get your accounts out? You should also consider the capabilities across the wider executive team and whether a CFO needs to fill any gaps you have.
What advice would you give to CFOs looking to build out their team within a start-up?
Three months after I joined Weel, we hired a Financial Controller. It’s allowed me to step up and focus on other challenges, new sets of problems and dedicate the necessary time to the founders — as opposed to being involved in the day-to-day operations. So, I would say having somebody to sort out the foundations for you will ensure that the business gets more value out of their CFO.
How can a CFO be more supportive of growth and marketing?
I’d say for any business function, it’s beneficial to spend time with the wider team. I spent a lot of time with our Head of Marketing, Adriana, to understand what she wants to achieve and what the team’s metrics and KPIs are (and then how the finance function can help with those).
I would say there’s a lot of financial forecasting skills that sit within the finance function. So being able to help other teams with that skill to assist them in forecasting budgets can be very valuable in executing their own strategies.
Thanks to Damon Hauenstein, CFO at Weel and Think & Grow Managing Partner, Dan Spencer.