~ by Nehal S
Executive Summary
Fundraising has traditionally been seen as the job of the CEO, the person who is typically thought of as the “face” of the company, whereas the COO is more internal facing and handles all internal matters such as operations, accounting, HR, and IT to start. The issue with this work split is that some CEOs, especially those coming from tech, science, or creative backgrounds do not have the knowledge or know how on how to master fundraising as per the expectations of a venture capital firm. VC firms are becoming increasingly hard to get in touch with and even if you do get in touch with them, speaking their language and convincing them can be difficult. This is where a fractional CFO can be a great asset to your team.
What is a Fractional CFO?
A Chief Financial Officer (CFO) holds the mega-responsibility of ensuring your startup is utilizing the funds it receives well. As the startup world has evolved, a seasoned CFO also now has experience in fundraising and helping create financial models and valuations which include critical ratios on unit economics particular to your industry that VCs care about.A fractional CFO is a part-time CFO who inserts themselves in your company and can help you with your greatest need – if its fundraising, they will help you create these financial models andalso represent your company in investor meetings. If your needs are around funds management post a fundraising round, a fractional CFO is the one who can help your company develop controls within your system which ensure that every cent is accounted for and will be explainable to your investors, who you want to keep happy.
What is a Fractional CFO’s input to a Fundraising Round?
A fractional CFO can help prepare key financial documents and ensure a sound data room. They can also help answer critical unit economics related question during pitches to valuable investors and provide investors. Here are some of the key financial documents, which any startup should have in their data room should have in place ahead of a pre-seed round: Incorporation certificate, capitalization table, product demo, market research, supplier/end user testimonials, management and advisory board profiles, business plan, financial model and valuation, and pitch deck. As you progress from one round to the next, the data room requirements tend to get increasingly arduous.
Work with Nehal S
“Solving niche challenges Founders face”.
Illustrator: Lisa Williams (Instagram: @artist_llw)
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